Download
1 / 32

Corporate Performance - PowerPoint PPT Presentation


  • 134 Views
  • Uploaded on

Corporate Performance. Corporate Performance Measured. Market Value Added. What is it?. Why is it useful?. Defined:. MVA: Discussion. Consider AT&T and Home Depot Similar MVA, Different Market-to-Book Ratio Why?. TABLE 4.3. Economic Value Added. What is it?. Why is it important?.

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about ' Corporate Performance' - jensen


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript


Market value added
Market Value Added

What is it?

Why is it useful?

Defined:


Mva discussion
MVA: Discussion

Consider AT&T and Home Depot

Similar MVA, Different Market-to-Book Ratio

Why?

TABLE 4.3


Economic value added
Economic Value Added

What is it?

Why is it important?

Why is it called residual income?

Defined:


Eva discussion
EVA: Discussion

TABLE 4.4

Consider Coca-Cola and Google

Similar EVA, Different Return on Capital

Why?

* Operating Income = Net Income + After-tax Interest; ROC = Return on Capital


Book rates of return
Book Rates of Return*

What do they measure?

Return on Capital:

Return on Assets:

Return on Equity:

*Book Rates of Return are also referred to as Accounting rates of Return


Calculating return on capital
Calculating Return on Capital

Lowe’s Return on Capital

Lowe’s Balance Sheet (in $m)


Calculating return on assets
Calculating Return on Assets

Lowe’s Return on Assets

Lowe’s Balance Sheet (in $m)


Calculating return on equity
Calculating Return on Equity

Lowe’s Balance Sheet (in $m)

Lowe’s Return on Equity


Financial ratios and shareholder value
Financial Ratios and Shareholder Value

Shareholder value depends on good investment and financing decisions.

Financial Ratios help measure the success and soundness of these decisions.


Efficiency ratios
Efficiency Ratios

OR*

How does this ratio measure efficiency?

How does this ratio measure efficiency?

* Either equation is a legitimate way to calculate the asset turnover ratio


Efficiency ratios1
Efficiency Ratios

How does this ratio measure efficiency?

How does this ratio measure efficiency?

How does this ratio measure efficiency?


Calculating an efficiency ratio
Calculating an Efficiency Ratio

Lowe’s Balance Sheet (in $m)

Lowe’s Asset Turnover Ratio


Profitability ratios
Profitability Ratios

How does this ratio measure the firm’s profitability?

When is this ratio potentially more useful than just profit margin?

Note: ROC, ROA, ROE and EVA are also typically considered profitability ratios.


Calculating a profitability ratio
Calculating a Profitability Ratio

Lowe’s Balance Sheet (in $m)

Lowe’s Operating Profit Margin


Leverage ratios
Leverage Ratios

How does this ratio measure leverage?

How does this ratio measure leverage?


Measuring leverage
Measuring Leverage

How does this ratio measure leverage?

How does this ratio measure leverage?

How does this ratio measure leverage?


Calculating a leverage ratio
Calculating a Leverage Ratio

Lowe’s Balance Sheet (in $m)

Lowe’s Times Interest Earned Ratio


Measuring liquidity
Measuring Liquidity

How does this ratio measure liquidity?

How does this ratio measure liquidity?


Liquidity ratios
Liquidity Ratios

How does this ratio differ form the current ratio? Why might a financial manager prefer it?

How does this ratio differ from the current ratio? Why might a financial manager prefer it?


Calculating a liquidity ratio
Calculating a Liquidity Ratio

Lowe’s Balance Sheet (in $m)

Lowe’s NWC to Total Assets Ratio


The dupont system
The DuPont System

What is it, and what is it used for?


The dupont system roa
The DuPont System: ROA

Asset

Turnover

Operating Profit

Margin



The dupont system roe
The DuPont System: ROE

Leverage

Ratio

Debt

Burden

Operating

Profit

Margin

Asset

Turnover



The role of financial ratios
The Role of Financial Ratios

Table 4.8

Comparability





ad