After regarding the financial statements, what is the real worth of the company? To answer this, one needs to get an idea about the underlying value of the business.


This type of understanding from management requires more than simple bookkeeping or calculation of profits and use of resources. Financial management concerns itself with additional value such as what the firm has actually created and built up in the business.


Two very important management theorists who have proposed modern thought which is discussed openly today include the following:


Peter Drucker said that the proper goal of a firm should be to to create value for customers, employees (knowledge workers)and distribution partners.


He proposed management by objectives as a way of using goals to modify decision-making and way to encourage managers at all levels to create business value.


Michael Porter was an advocate of using the value chain. Each activity within the business should be designed to increase the value of that product or service.