1173 Posts Found

[Dividends and buybacks matter because] it’s a sign of companies not having the confidence to invest in the long term and instead handing the cash right back to their shareholders now. There’s nothing wrong with giving cash to shareholders. That’s what you’re supposed to do if you’re a company. But the idea that you would give all your current cash back to shareholders rather than … [ Read more ]

Content: Quotation | Author: Rodney Zemmel | Source: McKinsey Quarterly | Subject: Finance

Ostensibly about Bitcoin, this is an excellent finance/economics article that explains the differences between assets, currencies, commodities and collectibles and the difference between trading (pricing) and investing (valuing).

Content: Article | Author: Aswath Damodaran | Subjects: Economics, Finance

It is nearly impossible to make the big moves that successful strategies require if resources are thinly spread across all businesses and operations. Our data show that you are far more likely to achieve a major performance improvement when one or two businesses break out than when every business improves in lockstep. You have to identify those breakout opportunities as early as possible and feed … [ Read more ]

Content: Quotation | Authors: Chris Bradley, Martin Hirt, Sven Smit | Source: McKinsey Quarterly | Subjects: Finance, Strategy

When your company establishes a credible long-term strategy — including a way to play in the market and the capabilities to deliver — it sets up a high level of certainty. In valuation terms, your market value (your shareholders’ expectations) will more closely reflect your intrinsic value (the profits you consistently create). This is a tremendous source of strength, but it also triggers the paradox … [ Read more ]

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

An object lesson in financial mismanagement and miscalculation from the fallen Toys “R” Us.

Content: Case Study | Authors: Eliza Ronalds-Hannon, Lauren Coleman-Lochner, Matthew Townsend, Susan Berfield | Source: Bloomberg.com | Subject: Finance | Company: Toys “R” Us

Businesses with different financial profiles can tax managers and put performance at risk. When divesting isn’t an option, here’s how to manage the conflicts.

Content: Article | Authors: Dan P. Lovallo, Tim Koller, Zane Williams | Source: McKinsey Quarterly | Subjects: Finance, Management, Strategy

When it comes to corporate financial performance, we typically think in absolute terms, measuring ROA in percentage points. We are less accustomed to thinking of corporate performance in relative terms, but knowing a company’s relative performance is essential to setting and achieving performance improvement targets and, eventually, exceptional performance.

Content: Article | Authors: Michael E. Raynor, Mumtaz Ahmed, Rob Del Vicario | Source: Deloitte Review | Subjects: Best Practices, Finance, Management

Valuing companies is as important as it is dangerous. A miscalculation or faulty method can prove quite costly in negotiations and investing. Moreover, there is no single, foolproof method, and absurd results are often obtained, such as those cited by IESE’s Pablo Fernández in his document cataloging 204 mistakes in company valuations. The author organizes the common mistakes into seven groups – covering errors in … [ Read more ]

Content: Article | Author: Pablo Fernández | Source: IESE Insight | Subject: Finance

Given all the data and practical experience that supports working on [organizational] health, companies’ obsession with the P&L alone continues to puzzle us. It’s right that leaders manage their P&L meticulously, but why not do the same for their health? In fact, why not measure health frequently throughout the year, since it’s a leading indicator of performance, whereas financial results are a lagging one? Similarly, … [ Read more ]

Content: Quotation | Authors: Chris Gagnon, Elizabeth John, Rob Theunissen | Source: McKinsey Quarterly | Subjects: Finance, Management, Organizational Behavior

Standard cost-cutting programs typically start with a directive to reduce the previous year’s spending levels. As a result, executives naturally focus on the largest expense categories—the tallest trees in the forest. Xero-based budgeting (ZBB) instead asks everyone to rebuild their budgets from the bottom up, with no carryover from the preceding year. This process identifies many small pockets of waste that add up to big … [ Read more ]

Content: Quotation | Authors: Allison Watson, Carey Mignerey, Kyle Hawke, Matt Jochim | Source: McKinsey Quarterly | Subjects: Finance, Management

Shareholders are not the only ones to benefit from the value created by a firm. Employees, customers and suppliers reap rewards, too. Introducing a new tool to measure value creation dynamically, over time: the Value Creation and Appropriation (VCA) model. IESE’s Roberto Garcia-Castro and co-authors discuss its practical implications for firm strategy.

Content: Article | Authors: Marvin B. Lieberman, N. Balasubramanian, Roberto García-Castro | Source: IESE Insight | Subjects: Finance, Management, Strategy

Although activist investors are successful at improving margins, they struggle to drive growth. We analyzed 55 companies over the past 10 years in which shareholder activists had a significant impact on company governance and strategy, and compared their performance to that of their industry peers. (The aims of activist actions included business focus, board composition, business restructuring, director election, focus on growth, board representation, general … [ Read more ]

Content: Quotation | Authors: Joseph Duerr, Larry Jones | Source: strategy+business | Subjects: Corporate Governance, Economics, Finance

When embarking on cost-cutting programs, many consumer companies adopt a hands-off posture toward what they consider strategic functions—those they see as core to the business—and focus instead on finding back-office efficiencies. Companies have repeatedly searched for savings in their cost centers and support functions by implementing lean techniques as well as through more transformative changes such as automation and outsourcing. The core functions, on the … [ Read more ]

Content: Quotation | Authors: Camilo Becdach, Lauren Ratner, Shannon Hennessy | Source: McKinsey Quarterly | Subjects: Finance, Management

Make a commitment to the function that knows your company best.

Content: Article | Authors: Andy Ruggles, Mark Schofield, Michael Shehab | Source: strategy+business | Subjects: Accounting, Finance, Taxation

If paying excessive CEO salaries is the most maligned use of corporate funds, stock buybacks may well take second place. Conventional wisdom is that CEOs buy back stock to manipulate the short-term stock price. They fund the buyback by cutting investment, and so firm value suffers in the long-term. As Senator Elizabeth Warren argued, “stock buybacks create a sugar high for the corporations. It boosts … [ Read more ]

Content: Article | Author: Alex Edmans | Source: Harvard Business Review | Subjects: Corporate Governance, Finance, Management, Strategy

When firms invest too heavily in buying back shares, there is likely to be trouble ahead.

Content: Article | Authors: Michael Olenick, Robert Ayres | Source: INSEAD Knowledge | Subjects: Corporate Governance, Finance, Management, Strategy

New research examines fair market value of startups worth over $1 billion and finds huge discrepancies in their purported worth.

Content: Article | Authors: Ilya Strebulaev, Shana Lynch | Source: Stanford University | Subjects: Entrepreneurship, Finance

The challenge of resource allocation is determining where the resources will bring the most value, how much money and talent to redistribute, and how to put those shifts effectively into action.

Content: Article | Author: Yuval Atsmon | Source: McKinsey Quarterly | Subjects: Finance, Management

Many consumer Internet business executives are loyalists of the Lifetime Value model, often referred to as the LTV model or formula. Lifetime value is the net present value of the profit stream of a customer. This concept, which appears on the surface to be quite benign, is typically used to compare the costs of acquiring a customer (often referred to as SAC, which stands for … [ Read more ]

Content: Article | Author: Bill Gurley | Subjects: Customer Related, Finance, Marketing / Sales

Shareholder primacy is causing secular stagnation.

Content: Article | Author: Robert Ayres | Source: INSEAD Knowledge | Subjects: Economics, Finance, Management