The Operational Filter


Now that we've tested the Strategic Alternative with the economic and strategic filters, we move to the operational aspect of the SWAV. A number of tools are used to analyze financial performance. Measurement of management performance (using the DuPont Model) and value creation using intrinsic value models (discounted cash flow analyses) will be demonstrated. The drives of shareholder returns: profit margins, efficient utilization of assets, and leverage are then presented. How to assess your management of 1) the income statement to increase cash flow and 2) the balance sheet to increase asset turnover (utilization of assets) will be illustrated. By understanding these tools you will be in a position to increase return on assets. This discussion will also show you how the use of leverage (change in the amount of debt used to finance corporate investments) can help to further optimize return to shareholders.

The use of activity-based costing to obtain meaningful information for decision making will be described. Most financial reporting systems and standard costing systems simply don't do the job, particularly in today's competitive environment. They look backward and are general ledger and transaction–orientated. Accordingly, focus will be on the application of ABC/ABM Models to quantify resources consumed and the real cost of each activity. ABC (activity-based costing) models help businesses understand the true costs of doing business. ABM (activity-based management) models are systems that use ABC techniques to help managers improve the financial performance of their businesses by identifying ways to reduce the costs to production, customer service, and sales channels. I will also look at the estimation of the true costs of production and determination of real, measurable benefits.

Examination of operational drivers is key in addressing both short- and long-term impacts of Strategic Alternatives on shareholder value.




Translating Strategy into Shareholder Value. A Company-Wide Approach to Value Creation
Translating Strategy into Shareholder Value: A Company-Wide Approach to Value Creation
ISBN: 0814405649
EAN: 2147483647
Year: 2003
Pages: 117

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