 performance measurement is an important job of any CFO at any modern day corporate firm. It affects the way people behave. In any contemporary society, the company's shareholders want to align performance measurement with their wealth maximization. Now, this alignment of performance measurement with the shareholders wealth maximization is an easy task but its implementation is much more difficult. There are a number of performance measures that any CFO can select to determine performance of the management of the company but the selection is subject to the policy and environment of the company. The first performance measure in this regard is the earnings based measure. Here we see two different measures. The first is earnings per share or the EPS and the second is the earnings per share growth rate or the EPS growth rate. There is a shortfall with this measure that it does not contain any balance sheet information meaning thereby if we determine EPS we see that the variables used in the computation of earnings per share come from an income statement but they don't come from balance sheet or we cannot relate this measure with any item from the balance sheet like we cannot use the amount of capital at the variables of total assets in relation with this income statement based performance measure. Another drawback is that if two different companies with different amount of capital earn the same amount of earnings the market value for both of the companies will be the same. Earning per share is a short run phenomena because it can be determined for a quarter for a half year or for a full year. Empirical evidence shows that earning per share has no association with total returns to the shareholders. According to these drawbacks we can say that earning per share is an inadequate performance measure. Dear students on the screen you can see a comparison of earnings and DCF based computations on the blue circles you can see that incomes for both of the companies are same from 500 for individual year to total of 3000 but in red circle you can see that the discounted cash flows based information is somehow different for company at the upper bound is yielding a value of 808 but the value for the lower bound company is 1296 the difference is due to the discounting which is creating 60 percent more value for the firm but earnings are same for the both. Then we have return based measure in this regard first we have return on invested capital return on invested capital or ROIC is a comprehensive performance measure at this measure is the combination of two key value drivers the first is the operating margin which is the computation of two other variables that is a bit and the sales if we divide a bit over sales the result is the operating margin the second key value driver is the capital turnover ratio which is the division between sales and the capital this ROIC allows any corporate manager to harvest the company's capital as much as he can this means that by reinvesting the amount of capital re-utilizing the amount of capital in the business assets ROIC can be increased with the higher level of sales in this way the corporate manager does not feel a need for the additional amount of capital so the management can increase return on invested capital to increase the spread between ROIC and the WEG because there is no control of management on the company's WEG it is an external phenomena but the manager and the management has a complete control on yielding more and more ROIC another benefit of ROIC is that it can respect all the lines on the income statement and on the balance sheet dear students you can see on the screen that ROIC is divided into two computations and the first portion is the operating margin and the second is the capital turnover ratio when we see operating margin we can see that the tree goes into the income statement variables and when we see the capital turnover ratio we can see that the tree goes into the balance sheet variables so these are the variables that can be used in order to reinvest the capital and raise the ROIC for the firm second mirror is the return on equity or ROE relatively it is a weaker performance measure because it can artificially be increased by corporate management an example to increase artificially the ROE is that if the management of a firm acquires an other firm that is wholly financed on debt its earnings are below its cost of capital but above its cost of debt now what will happen three implications will be there at first ROE in this company will be increased then the higher risk factor due to the wholly debt based company will be there and finally the lower market value of the company's share will be existed in the market