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Economic Margin – EM

Economic Margin is defined as a measure of profitability of a company on an economic index which sets up and identifies the total net earnings of a company above or below the cost of its installed capital. All the companies are generally analyzed in the S&P500 Index which is obviously based on their historical, current and future Economic Margin to have a watch on the companies and also to check which firms have the best average of past, present and will have the best profitability for the future. According to a research done on various companies it was noticed and identified and accordingly the two least profitable and the two most profitable companies from each sector of the business were listed and are therefore shown. It has been found that as a reference, the average earnings of a big firm in corporate America is 0 (zero) Economic Margin, which is also called as “break-even business”. The research has also shown that companies which have continuously positive EMs which are also expected to increase their EMs in the future approaches to outperform firms which have negative or declining EMs.[ad#ad-4]

Wealth Creation Report (WCR) is also a representation of a historical Economic Margin (EM) levels, Asset Growth, and Relative Market Performance of a company. WCR is always shown on a graph. This can be better understood to a person who has a regular check on examples of AFG’s Wealth Creation Report and this would really help the investors providing them an edge in the stock selection. This can only be done if the person has a true understanding of a company’s economic profitability and its economic margin (EM). Having the above knowledge about the company and its index will definitely improves the strategy for wealth creation that a company should follow as well as it would help to increase economic margins which automatically leads to out performance of the market whereas the under performance of the market is result of decrease of economic margins.

Written by: Matt

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