1173 Posts Found

Resource reallocation isn’t just a bold strategic move on its own; it’s also an essential enabler of the other strategic moves. Companies that reallocate more than 50 percent of their capital expenditures among business units over ten years create 50 percent more value than companies that reallocate more slowly.

Content: Quotation | Authors: Carolyn Dewar, Martin Hirt, Scott Keller | Source: McKinsey Quarterly | Subject: Finance

Any business can — and should — classify their customers’ value chain into value-creating, value-charging (monetizing) and value-eroding activities.

Content: Quotation | Authors: Renato Mendes, Thales S. Teixeira | Source: Harvard Business Review | Subjects: Customer Related, Finance, Management, Marketing / Sales

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A new approach to analyzing capital-intensive resource investments—Dynamic Decision Management—views projects as adjustable sequences of decisions.

Content: Article | Authors: Christian Loy, Hanjo Arms | Source: Kearney | Subjects: Finance, Management

New research shows that companies that know how to shift critical resources where and when they’re needed share common traits. Rigor is the first one.

Content: Article | Authors: Massimo Garbuio, Tim Koller, Zane Williams | Source: McKinsey Quarterly | Subjects: Finance, Management

Traditional zero-based budgeting is often a paralyzing experience, and yields only temporary benefits. Done right, ZBB can permanently lower your company’s cost base without losing focus on profitable growth.

Content: Article | Authors: Carlos Higo, Daniel Mahler, Esteban Bowles | Source: Kearney | Subject: Finance

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ost executives care about creating long-term shareholder value but haven’t had the right tool to track it. In a recent paper published in Strategic Management Journal, Wharton management professor Nicolaj Siggelkow and Phebo Wibbens, assistant professor of strategy at INSEAD, introduce a new performance measure called LIVA – Long-term Investor Value Appropriation. In the following opinion piece, Siggelkow and Wibbens explain why they developed LIVA … [ Read more ]

Content: Article | Authors: Nicolaj Siggelkow, Phebo Wibbens | Source: Knowledge@Wharton | Subject: Finance

Buybacks are under attack as a short-term stock price manipulation scheme, allowing insiders to cash out at inflated stock prices. This manipulation hypothesis predicts that, as a result of buybacks, companies will underinvest, undermining long-term performance and shareholder value. Recent research tests this hypothesis using an international sample that contains approximately 10,000 buyback announcements made by U.S. firms and 10,000 made by non-U.S. firms … [ Read more ]

Content: Article | Author: Theo Vermaelen | Source: INSEAD Knowledge | Subject: Finance

Strong management teams spend less time obsessing over the current income statement and more time focusing on a different report: the forecast. Not all forecasts are built alike, however. We find that a great forecast has five attributes.

Content: Article | Authors: C. Fritz Foley, Mark Khavkin | Source: Harvard Business Review | Subject: Finance

I’ve seen senior executives become entranced by profitability, resource production, asset utilization, top-line revenue, and any one of a number of other measures. As a result, they take their eye off cash. The outcome is predictable: The income statement strengthens while the balance sheet weakens and, ultimately, the company falters because it can’t pay its bills.

Content: Quotation | Author: Liz Sweigart | Source: strategy+business | Subject: Finance

If cash is king, why is it treated as a by-product rather than a focus? I argue that the most important thing to look at in evaluating business performance is cash accessibility, or the ability of a company to use its free cash when and where it needs it. Businesses may have cash tied up in different places for a variety of reasons — often … [ Read more ]

Content: Quotation | Author: Liz Sweigart | Source: strategy+business | Subject: Finance

Although executives intuitively know that taxes are important to the company’s ultimate profitability (and income available to shareholders), they don’t often evaluate these costs as part of the restructuring effort. Rather, they treat taxes as a cost of compliance, after the major decisions are made. Consequently, they are likely either to create tax inefficiencies or to miss opportunities to put their companies in a better … [ Read more ]

Content: Quotation | Authors: Deniz Caglar, John Ranke | Source: strategy+business | Subjects: Finance, Taxation

You can sometimes develop discrete measurements of what a company’s intrinsic value might be under different operators by conducting due diligence for a merger or acquisition. But even in the absence of a potential transaction, you should still assess the hypothetical intrinsic value of your businesses if they were operated by someone else. This can help you establish strategies that maximize value. If one of … [ Read more ]

Content: Quotation | Authors: Aaron Gilcreast, Larry Jones | Source: strategy+business | Subjects: Finance, Management, Strategy

Total shareholder return is typically analyzed as the sum of price appreciation and dividend payouts over a given time period. But this analysis is problematic, because both of these component metrics represent the allocation, not the source, of created business value. They don’t explain what created the value that drove the share price higher or generated the cash needed to pay a dividend.

The actual drivers … [ Read more ]

Content: Quotation | Authors: Aaron Gilcreast, Larry Jones | Source: strategy+business | Subject: Finance

Intrinsic value is a forward-looking measure of the fundamental worth of a business. Defined as the present value of future cash flows generated by assets, it is a truer reflection than shareholder returns of the value of your strategies and your ability to execute them. When you use intrinsic value instead of TSR to guide decision making, you are less likely to worry about the … [ Read more ]

Content: Quotation | Authors: Aaron Gilcreast, Larry Jones | Source: strategy+business | Subject: Finance

Share price matters, as do your shareholders. But your share price is, by its nature, an output: a complex, rolled-up reflection of company performance, conjecture, fickle asset-class preferences, risk appetite, ownership mix, supply–demand equilibriums, and fluid expectations held by millions of shareholders who can change their minds in a millisecond. Good luck trying to manage that.

Moreover, your share price is subject to a more fundamental … [ Read more ]

Content: Quotation | Authors: Aaron Gilcreast, Larry Jones | Source: strategy+business | Subject: Finance

Addressing anchoring bias can lead to more accurate budget forecasts, better budget conversations, and more dynamic resource reallocation.

Content: Multimedia Content | Authors: Dan P. Lovallo, Sean Brown, Tim Koller | Source: McKinsey Quarterly | Subjects: Finance, Management, Organizational Behavior

With tax rules changing and interest rates set to rise globally, companies need to organize their operations around a new value equation.

Content: Article | Author: Liz Sweigart | Source: strategy+business | Subjects: Accounting, Finance