[Verse 1] ROI tells us profit over assets invested But it's missing something we've neglected Cost of capital, the rate we pay To finance operations day by day Without this truth, our view's distorted Real value creation gets contorted [Chorus] Residual Income, RI shows the way Operating profit minus cost we pay EVA takes it further with a twist WACC and adjustments can't be missed Beyond the hurdle rate we climb That's when we're adding value over time [Verse 2] RI equals operating income clean Minus capital charge, you know what I mean Take invested capital, multiply it through By required return rate, that's what bankers do If positive, we're beating expectations Creating wealth through our operations [Chorus] Residual Income, RI shows the way Operating profit minus cost we pay EVA takes it further with a twist WACC and adjustments can't be missed Beyond the hurdle rate we climb That's when we're adding value over time [Bridge] EVA's more sophisticated still Adjusts for R and D and goodwill Operating leases, restructuring costs GAAP distortions that get us lost Economic profit, that's the goal Value creation for the whole [Verse 3] ROI can mislead with percentage games High returns but small dollar claims RI and EVA show dollar amounts Every single penny that really counts Aligning managers with shareholder dreams Performance measures that support value schemes [Chorus] Residual Income, RI shows the way Operating profit minus cost we pay EVA takes it further with a twist WACC and adjustments can't be missed Beyond the hurdle rate we climb That's when we're adding value over time [Outro] When capital costs are factored in That's where true performance begins RI and EVA light the path To economic value through the math
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