Lipton has about 50 branded product lines, each of which has a product-line income statement. For many years, the company had used trading profit as a key measure of performance. In recent years, however, other measures have been used, and now a radically different product-line P&L (profit and loss) has been proposed. The new “economic profit” is computed by using a capital charge on assets and inflation-adjusted depreciation. The product-line managers are confused and upset. See also “Thomas J. Lipton, Incorporated (A)” (UVA-C-0914) and “Thomas J. Lipton, Inc. (B)” (UVA-C-0957).
Darden Business Publishing – University of Virginia