A detailed crash course in business management for value
creation
Corporate Value Creation provides an operations framework
that management can use to optimize the impact decisions have on
creating value by growing revenue and profitability. Designed to
assist professionals without a strong business or financial
education, this book provides a thorough understanding of the
qualitative and quantitative aspects of managing a business for the
purpose of value creation. Readers will find detailed information
on financial reports, valuation, modeling and forecasting, and
more, including discussion of best practices that functional
management can embrace to leverage performance. The final chapter
reviews key concepts and helps the reader tie them all together by
using a step-by-step approach to build or modify a business plan
that includes a complete set of financial statements. In addition,
each chapter includes case studies or exercises so that the reader
can practice using the material covered in the chapter.
Corporate Value Creation can also be used as a handbook
for managers who are looking for information on specific topics
that range from developing financial statements to manufacturing
management, to internet marketing and much more. In most cases,
individual topics can be reviewed without reading the entire book.
Finally, for the manager who wants to quickly understand what's
involved in running a successful business, each chapter begins with
the key takeaways from that chapter in a section called
"Nuggets".
Fundamentally, creating value is as simple as making more money
- but therein lies the rub. Effective management of business
growth involves a complex interplay of productivity, capital, debt,
and margins, and finding the most efficient balance can be
challenging. For managers who need a deeper understanding of the
forces at work, Corporate Value Creation is a thorough,
detailed guide but it is also valuable for managers who are looking
for information on a specific topic or simply wanting to understand
at a high level what's involved in running a successful
business.
Autorentext
LAWRENCE C. KARLSON currently serves on the board of directors of a number of public corporations. He has broad experience investing in and building the corporate value of companies of all sizes, both public and private, through internal growth and acquisition. Since his retirement, Mr. Karlson has served on numerous boards and led various committees, including audit, finance, corporate governance, and compensation committees in these organizations. He has also provided consulting services to a wide range of companies in Europe and the United States.
Zusammenfassung
A detailed crash course in business management for value creation
Corporate Value Creation provides an operations framework that management can use to optimize the impact decisions have on creating value by growing revenue and profitability. Designed to assist professionals without a strong business or financial education, this book provides a thorough understanding of the qualitative and quantitative aspects of managing a business for the purpose of value creation. Readers will find detailed information on financial reports, valuation, modeling and forecasting, and more, including discussion of best practices that functional management can embrace to leverage performance. The final chapter reviews key concepts and helps the reader tie them all together by using a step-by-step approach to build or modify a business plan that includes a complete set of financial statements. In addition, each chapter includes case studies or exercises so that the reader can practice using the material covered in the chapter.
Corporate Value Creation can also be used as a handbook for managers who are looking for information on specific topics that range from developing financial statements to manufacturing management, to internet marketing and much more. In most cases, individual topics can be reviewed without reading the entire book. Finally, for the manager who wants to quickly understand what's involved in running a successful business, each chapter begins with the key takeaways from that chapter in a section called "Nuggets".
Fundamentally, creating value is as simple as making more money but therein lies the rub. Effective management of business growth involves a complex interplay of productivity, capital, debt, and margins, and finding the most efficient balance can be challenging. For managers who need a deeper understanding of the forces at work, Corporate Value Creation is a thorough, detailed guide but it is also valuable for managers who are looking for information on a specific topic or simply wanting to understand at a high level what's involved in running a successful business.
Inhalt
Preface xiii
Acknowledgments xvii
Foreword xix
Chapter 1: Basic Concepts 1
Introduction 2
Financial Statements 2
The Income Statement 3
The Balance Sheet 10
The Cash Flow Statement 18
Required Revenue for a Given Level of Net Income 24
Case Study: Advanced Solar Systems Corporation 27
Chapter 2: The Envelope Equations 35
Introduction 36
ROCE and NiROCE 36
Net Investments 39
Investment Rate 42
Incorporating the IR and NiROCE into the Expression for Net Income 43
Incorporating IR into the Expression for Cash Flow after Investing Activities 45
NI and CFaIAA Sequential Year-by-Year Analysis 46
NI and CFaIAThe General Model 49
Estimating Growth Rates of Cash Flow after Investing Activities and Net Income 52
Growth Rate of CFaIAg with Constant IR and NiROCE 52
Growth Rate of Net Income (NIg) 54
Net Income Growth Rate (NIg) with Constant IR and NiROCE 54
Envelope Equations Methodology for Estimating Net Income, Cash Flow after Investing Activities, and Growth Rates 56
Required Revenue Revisited 66
Growing the Net Income 71
Case Study: American Technology Corporation 71
Chapter 3: The Weighted Average Cost of Capital 81
Why Is a Company's Weighted Average Cost of Capital Important? 82
Weighted Average Cost of Capital Defined 83
Operating and Capital Leases 84
Weighting of the Components of Capital Structure 84
Market Value of Debt and Equity 85
Impact of Taxes on the Weighted Average Cost of Capital 87
Estimating the Cost of Debt and Equity and the Capital Asset Pricing Model 88
General Equations for Estimating the WACC for a Company with One Class of Debt and Equity 90
Levered and Unlevered Betas 90
Estimating Beta for Non-Public Companies or Business Units 93
Significance and Uses of the WACC 95
Origin of the Coefficients Used in Calculating a WACC 96
Multiple Hurdle Rates 100
Introduction to Present Value 110
Case Study: Omega Corporation 115
Chapter 4: Introduction to Valuation Models 123
Introduction to Estimating Value 126
Valuation ConsiderationsLessons Learned 166
Most Frequently Used Single-Stage Valuation Models 167
Multi-Stage Valuations 167
Equivalence of the Post-Forecast-Period Models 176
Impact of 1/(k g) on the Perpetual Growth Model 180
Considerations of the Terminal Value Multiplier as Implied by the Equivalency Equations 182
Case Study: NexgenSonics and the Power of Discipline! 183
Chapter 5: ROCE and Cash Flow Analytics 195
Introduction 196
Basic Drivers of ROCE 197
Some Practical Aspects of Managing Return on Capital Employed 209
…