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Full-Text Articles in Organizational Behavior and Theory
Investing In A Better Job, Michael Sack Elmaleh
Investing In A Better Job, Michael Sack Elmaleh
Michael Sack Elmaleh
Investing time and money to attain "something" that allows a person to earn more in future wages is economically rational, if the present value of the additional future wages exceeds the present value of the investment cost in time and money to attain that "something". In our market economy, these attained "somethings" include college degrees, vocational and professional certifications, and equity ownership in small closely held businesses. Most small closely held businesses require the full time active management of the owner. Little or no free cash flow would be available to the investor if they chose to hire a non …
Distinguishing Owner Compensation From Profit In Closely Held Companies: In Search Of A Responsibility Premium, Michael Sack Elmaleh
Distinguishing Owner Compensation From Profit In Closely Held Companies: In Search Of A Responsibility Premium, Michael Sack Elmaleh
Michael Sack Elmaleh
The application of the income method of valuation requires that owner compensation be distinguished from free cash flow. The “proper” parsing of compensation and free cash flow can be the largest point of contention in contested valuation disputes. The preferred method of parsing is the substitution method which says that the proper allocation should be based on the wage that would have to be paid to a non owner employee. In this article I argue that owner employees carry additional responsibilities that are not normally borne by non owner employees. These additional responsibilities require that a premium be paid the …