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The business book. The
ultimate resource. Shareholder
value analysis SVA. Without you
of the company by looking at the returns against the stockholders and is
based on the view that the objective of the company's directors is to
maximize the wealth of the stockholder. SVA is a
method of financial analysis that measure shareholder value by estimating the
total net value of the company based on present and future cash flows and
dividing this figure by the value of its shares. Advantages. Long-term
financial view, based strategic decisions. Offers a
universal approach. Forces the
organization of focus on the future. Disadvantages. Accurately
estimating. Developing
and implementing can be a long process. Communicating
the approach can be difficult. Requires more
complete information than traditional measures. Checklist. 1. Understand and calculate the company's
shareholder value. Understand
its implementations. Total
business value has three components. Present value
of cash flows, future. Residual
value of future cash flows, beyond the planned period. The weighted
average cost of capital. 2. Gain top management commitment. Need to
commit. 3. Identify the company's key value drivers
and set targets. Setting
performance targets. Assign
responsibility to individual managers. Reviewing the
company's financial performance against competitors. Developing
strategic plans. A process of
trial and error. Fundamental
to managing, controlling and making improvements in the business. 4. Communicate the approach and train staff. Managers need
to understand the broad concept of creating shareholder value. Managers need
to understand the importance of identifying, controlling in improving the
performance of value drivers and the key factors that influence them. Might have
resistance. Managers need
to be fully trained. 5. Change the company's information systems
to monitor and measure progress. The systems
usually need to be revised. Managers must
measure and monitor information about the company's key value drivers and
targets. 6. Change managers financial incentive
packages. Reward
performance that add shareholder value (within realistic time periods). 7. Monitor and review progress. Continuous
monitoring and redefinition of targets as circumstances change. Appraisals,
performance reviews, management meetings, and key decision should all focus
on progress so far achieved and actions required to continue building
shareholder value. Without
consistent emphasis on value creation, managers might continue to focus on
targets that have become irrelevant or actually harmful to the long-term
value of the business. Summary. Take time to
understand. Review
internal systems. Be patient. Do not cut
corners. Don't be half
hearted or hesitant. Thought
starters. Have you set
realistic goals. Have you
explain the new approach to the company's stockholders. Have you
examine your company strategies, procedures, and processes. End of data. |
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