There is a corporate life cycle which requires changing metrics

 

Professor Aswath Damodaran of NYU is one of the best practical minds in finance today. He has developed ideas on the life cycle of the corporation which I find very compelling. The corporation, while supposed to have infinite life, will behave like the rest of us with a life cycle. There are view corporation that age well. Corporation often do not have the capacity to change and thus they wither and age on an old idea. Even with a good idea, corporations will change and thus need to have an adjustment on the metric that work best for valuation. The chart above provides some insight on the changing metrics during the life of the corporation.