Shareholder Value Creation Value-based - Value Insight文档.pptVIP

Financial Management Consultants Shareholder Value Creation Value-Based Management The Presentation What drives international investment decisions … How is shareholder value created … How to measure value … How to manage value … International Competitiveness Regardless of what you think about the merit of stakeholder claims relative to each other, one thing is certain: if suppliers of capital do not receive a fair return to compensate them for the risk they are taking, they will move their capital across national borders in search of better returns. If they are prohibited by law from moving their capital, they will consume more and invest less. Either way, nations who dont provide global investors with adequate returns on invested capital are doomed to fall further behind in the race for global competitiveness and suffer a stagnating or decreasing standard of living. ShareholderValue Creation Responsibility of Management Company mission statements proclaim Management will create shareholder value Creating shareholder value An accepted principle Uncertainty as to its definition Greater uncertainty on how to achieve it Conflicting Interests Value Creation Defined Sustained increase in dividend income Sustained increase in share price(capital gains) Combination of both Only Cash Matters to Shareholders Measuring Value? Valuation Defined A valuation is a process of arriving at a value of an asset The value of an asset is the present value of expected future benefits, usually represented by cash flows Discounted Cash Flow (DCF) Valuations The advantages of DCF valuations are: It is based on cash flow Risk is accounted for in the discount rate It recognises the time value of money Future capital requirements (both fixed and working capital) are taken into account Business Value Future free cash flow Discounted to PV Discount rate = WACC Free Cash Flow A?measure of financial performance calculated as operating cash flow minus capital expenditures. Free