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Managerial Finance MSc21 Sergio Paya
CLASS 1 CLASS 2 CLASS 3 CLASS 4 CLASS 5 CLASS 6 CLASS 7 CLASS 8 CLASS 9 WRAP-UP CLASS
2 4 6 7 11 13 16 19 23 27
1
Managerial Finance MSc21 Sergio Paya
Class 1
1 – Finance 2 - BVD – FVD – value creation ( Financial value drivers – Business value drivers) 3 - Strategy and industry 4 - Shareholder value creation vs triple P What is finance? Shareholders give equity capital once Hardly ever they make new shares, like for example: When the company is in financial trouble When the company is when they want to make a big investment (big acquisition) Shareholders make money from the company by: DPS Dividend per share Company can do stock buy back from shareholders
2
Managerial Finance MSc21 Sergio Paya Pushing up value per share (value creation) -> objective of nowadays companies -Driven by: - Financial parameters (financial value drivers) -Revenue growth (return on invested capital) - Business value drivers Triple P – People – Planet – Prosperity (profit) - Environmentally footprint – Society at large gets a fair deal - People – making sure the employees get a fair deal ( not abused) Acc bs Div A Inventories Account receivable Fixed assets P.P.E. Intangibles (Patents) Goodwill Accounts payable Invested capital: Costly WACC D/D+E x rd x (1 – taxrate) + E/D+E x re After-tax average Interest rate
D = All the interest bank loans re= required rate of return = cost of equity = required rate of return demanded by shareholders rd = interest rate re>rd (Inventories + accounts receivable) - accounts payable = networking capital (NWC) ROIC target = WACC WACC + extra If a company wants to raise the ROIC, ebit has to go up, nwc down, ppe down.
3
Managerial Finance MSc21 Sergio Paya
Class 2
Companies can have the same revenue growth but different ROIC. A lower ROIC means that a company needs to invest more to achieve the same revenue. Could be a result of poor planning, labor restrictions and many other reasons.
CLASS 1 CLASS 2 CLASS 3 CLASS 4 CLASS 5 CLASS 6 CLASS 7 CLASS 8 CLASS 9 WRAP-UP CLASS
2 4 6 7 11 13 16 19 23 27
1
Managerial Finance MSc21 Sergio Paya
Class 1
1 – Finance 2 - BVD – FVD – value creation ( Financial value drivers – Business value drivers) 3 - Strategy and industry 4 - Shareholder value creation vs triple P What is finance? Shareholders give equity capital once Hardly ever they make new shares, like for example: When the company is in financial trouble When the company is when they want to make a big investment (big acquisition) Shareholders make money from the company by: DPS Dividend per share Company can do stock buy back from shareholders
2
Managerial Finance MSc21 Sergio Paya Pushing up value per share (value creation) -> objective of nowadays companies -Driven by: - Financial parameters (financial value drivers) -Revenue growth (return on invested capital) - Business value drivers Triple P – People – Planet – Prosperity (profit) - Environmentally footprint – Society at large gets a fair deal - People – making sure the employees get a fair deal ( not abused) Acc bs Div A Inventories Account receivable Fixed assets P.P.E. Intangibles (Patents) Goodwill Accounts payable Invested capital: Costly WACC D/D+E x rd x (1 – taxrate) + E/D+E x re After-tax average Interest rate
D = All the interest bank loans re= required rate of return = cost of equity = required rate of return demanded by shareholders rd = interest rate re>rd (Inventories + accounts receivable) - accounts payable = networking capital (NWC) ROIC target = WACC WACC + extra If a company wants to raise the ROIC, ebit has to go up, nwc down, ppe down.
3
Managerial Finance MSc21 Sergio Paya
Class 2
Companies can have the same revenue growth but different ROIC. A lower ROIC means that a company needs to invest more to achieve the same revenue. Could be a result of poor planning, labor restrictions and many other reasons.