Objective function: It is what OIS is tasked to determine to be “best possible” for the firm. Different objective functions allow the firm to compare different approaches to firm value. They include:

• • Profit
  • Revenue: This sacrifices profit as it includes fulfilling demand that is unprofitable
  • Customer relationship: Quoting Marketing and Firm Value, Hanssens et al, Foundations and Trends in Marketing, pages 39-40. “…monetizes the expected value firm’s customer relationships as proxy for the firm’s future financial outlook”  Also, see “Modeling Customer Lifetime Value,.
  • Economic Value Added: Used to evaluate firm’s economic performance. It is based on the concept of shareholder value. It is computed by subtracting the company’s cost of capital from its net operating profits.