Corporate Performance Measurement   106-slide PPT PowerPoint presentation slide deck (PPT)
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PERFORMANCE MANAGEMENT PPT DESCRIPTION

Explore a comprehensive framework for corporate performance measurement, authored by industry experts. Dive into Economic Profit, MVA, and CFROI for actionable insights. Corporate Performance Measurement is a 106-slide PPT PowerPoint presentation slide deck (PPT) available for immediate download upon purchase.

Corporate performance evaluation has evolved from the 1960s focus on ROE to the current variations of economic profit that measure impact on shareholder value. Both ROE and EP are business metrics, tools used to measure the performance of the business. Focusing on EP instead of ROE decreases the likelihood of destructive behavior by managers. End goal of EP exercises is consistent with traditional focus of maximizing shareholder value. All economic profit measures deduct charge for use of equity capital from accounting's typical net income or profit after tax to reflect the opportunity cost associated with equity investments.

This document provides a comprehensive framework for evaluating corporate performance, integrating key metrics like Market Value Added (MVA), Economic Profit (EP), and Cash Flow Return on Investment (CFROI). It delves into the intricacies of these measures, offering a detailed breakdown of their components and how they can be applied to real-world scenarios. The inclusion of the DuPont formula and BCG’s TBR calculation ensures a robust analysis of both publicly-listed and privately-held firms.

The case study on Diageo illustrates practical application, highlighting the importance of asset utilization and the impact of different business models on profitability. By examining the Glen Ellen system, the document underscores the significance of efficient capital allocation and the potential pitfalls of ignoring capital requirements. This real-world example provides valuable insights into how theoretical concepts can be translated into actionable strategies.

For executives looking to enhance their understanding of corporate performance measurement, this document offers a wealth of knowledge. It not only covers the theoretical aspects, but also provides practical exercises and solutions, making it an indispensable resource for anyone aiming to maximize shareholder value. The detailed analysis and step-by-step approach ensure that users can effectively implement these strategies within their own organizations.

Got a question about the product? Email us at support@flevy.com or ask the author directly by using the "Ask the Author a Question" form. If you cannot view the preview above this document description, go here to view the large preview instead.

MARCUS OVERVIEW

This synopsis was written by Marcus [?] based on the analysis of the full 106-slide presentation.


Executive Summary
This Corporate Performance Measurement presentation provides a structured approach to evaluating corporate performance through advanced metrics such as Economic Profit (EP), Market Value Added (MVA), and Cash Flow Return on Investment (CFROI). Authored in a consulting-grade format akin to McKinsey, Bain, or BCG-quality, this deck equips corporate executives and consultants with the tools to assess and enhance shareholder value. By utilizing these frameworks, users can identify value creation opportunities, align management incentives, and make informed strategic decisions.

Who This Is For and When to Use
•  Corporate executives focused on performance measurement and shareholder value enhancement
•  Financial analysts and consultants evaluating business performance metrics
•  Strategy teams assessing resource allocation and investment decisions
•  Management teams looking to align incentives with economic value creation

Best-fit moments to use this deck:
•  During strategic planning sessions to define performance metrics
•  When evaluating investment opportunities and their impact on shareholder value
•  In workshops aimed at aligning management incentives with corporate goals
•  For training sessions on advanced performance measurement techniques

Learning Objectives
•  Define key corporate performance measures including MVA, EP, and CFROI
•  Explain the significance of these measures in driving shareholder value
•  Calculate MVA, EP, and CFROI using real-world examples
•  Analyze the implications of performance metrics on management behavior
•  Develop strategies for improving corporate performance based on these metrics
•  Apply case studies to illustrate the practical use of performance measures

Table of Contents
•  Executive Summary (page 2)
•  Objectives (page 6)
•  Background (page 8)
•  Performance Measurement Framework (page 13)
•  Market Value Added (MVA) (page 22)
•  Economic Profit (EP) (page 38)
•  Cash Flow Return on Investment (CFROI) (page 73)
•  Exercises - MVA (page 83)
•  Exercises - Economic Profit (page 93)
•  Case Study - Diageo (page 101)

Primary Topics Covered
•  Performance Measurement Framework - A structured approach to evaluating corporate performance using advanced metrics to assess value creation and destruction.
•  Market Value Added (MVA) - A measure of the market's expectations of future economic profits, calculated as the total market value of a company minus invested capital.
•  Economic Profit (EP) - A metric that accounts for the opportunity cost of capital, providing insight into value creation over time.
•  Cash Flow Return on Investment (CFROI) - An adjusted return on investment measure that uses cash flows to evaluate management performance against the firm's cost of capital.
•  Exercises - Practical applications of MVA and EP calculations to reinforce learning and application of the concepts.
•  Case Study - Diageo - An analysis of Diageo's performance metrics to illustrate the application of corporate performance measures in a real-world context.

Deliverables, Templates, and Tools
•  MVA calculation template for assessing market value against invested capital
•  EP calculation framework to evaluate economic profit and its implications
•  CFROI analysis tool to compare cash flow returns against benchmarks
•  Case study analysis framework for applying performance measures in strategic decision-making
•  Exercises for practical application of MVA and EP metrics
•  Performance measurement dashboard template for ongoing tracking and assessment

Slide Highlights
•  Overview of the evolution of corporate performance metrics from ROE to EP
•  Detailed breakdown of MVA calculation using both operating and financing approaches
•  Visual representation of the relationship between EP and MVA over time
•  Case study insights on Diageo's performance metrics and strategic implications
•  Framework for understanding the impact of economic profit on managerial decision-making

Potential Workshop Agenda
Introduction to Corporate Performance Measurement (30 minutes)
•  Overview of key concepts and objectives
•  Discussion on the importance of performance metrics

MVA and EP Calculation Workshop (60 minutes)
•  Hands-on exercises calculating MVA and EP
•  Group discussion on findings and implications

Case Study Analysis: Diageo (45 minutes)
•  Review of Diageo's performance metrics
•  Group discussion on lessons learned and applications

Wrap-Up and Q&A (15 minutes)
•  Summary of key takeaways
•  Open floor for questions and further discussion

Customization Guidance
•  Tailor the MVA and EP calculation templates to reflect specific industry benchmarks and company data
•  Adjust case study examples to align with the audience's industry context
•  Incorporate company-specific terminology and metrics into the performance measurement framework
•  Modify the workshop agenda to focus on the most relevant performance metrics for the organization

Secondary Topics Covered
•  Historical evolution of performance metrics in corporate finance
•  Comparison of traditional metrics like ROE with modern measures like EP
•  The role of management compensation in aligning with performance metrics
•  Industry-specific considerations for applying performance measures
•  Challenges and limitations of using EP and MVA in practice

FAQ
What is the primary purpose of Economic Profit (EP)?
EP measures a company's profitability after accounting for the opportunity cost of capital, providing insight into value creation over time.

How does Market Value Added (MVA) differ from traditional performance metrics?
MVA reflects the market's expectations of future economic profits, while traditional metrics like ROE focus on past performance without considering capital costs.

Why is Cash Flow Return on Investment (CFROI) important?
CFROI offers a more accurate assessment of investment performance by using cash flows rather than accounting profits, allowing for better comparisons against the firm's cost of capital.

How can these performance measures be applied in strategic decision-making?
These metrics can guide resource allocation, investment decisions, and management performance evaluations, aligning corporate strategies with shareholder value creation.

What are the key challenges in implementing these performance metrics?
Challenges include data availability, the complexity of calculations, and ensuring alignment between management incentives and performance outcomes.

Can these metrics be customized for different industries?
Yes, MVA, EP, and CFROI can be tailored to reflect industry-specific benchmarks and operational realities, enhancing their relevance and applicability.

How do you calculate MVA?
MVA is calculated by subtracting invested capital from the total market value of the company, which includes both debt and equity.

What is the significance of using EP in evaluating management performance?
Using EP aligns management incentives with shareholder interests, encouraging decisions that create long-term value rather than focusing solely on short-term profits.

What role does the case study on Diageo play in this presentation?
The Diageo case study illustrates the practical application of performance metrics, showcasing how they can inform strategic decisions and highlight areas for improvement.

Glossary
•  Market Value Added (MVA) - The difference between the market value of a company and its invested capital.
•  Economic Profit (EP) - A measure of profitability that accounts for the opportunity cost of capital.
•  Cash Flow Return on Investment (CFROI) - A performance metric that evaluates cash flows against investments.
•  Total Shareholder Return (TSR) - A measure of the total return to shareholders, including stock price appreciation and dividends.
•  Weighted Average Cost of Capital (WACC) - The average rate of return a company is expected to pay its security holders to finance its assets.
•  Net Operating Profit After Tax (NOPAT) - A company's operating profit after taxes, excluding the effects of capital structure.
•  Return on Equity (ROE) - A measure of financial performance calculated by dividing net income by shareholders' equity.
•  Return on Assets (ROA) - A measure of profitability that indicates how efficiently a company uses its assets to generate earnings.
•  Capital Charge - The cost of capital used in calculating economic profit.
•  Investment Appraisal - The evaluation of the profitability and risk of an investment.
•  Shareholder Value - The value delivered to shareholders as a result of the company's ability to generate profits.
•  Performance Metrics - Quantitative measures used to assess the performance of a business or its components.
•  Financial Analysis - The assessment of a company's financial statements to understand its performance and make informed decisions.
•  Strategic Planning - The process of defining a company's direction and making decisions on allocating resources to pursue this direction.
•  Value Creation - The process of increasing the worth of a company through various means, including operational efficiency and strategic investments.
•  Management Incentives - Compensation structures designed to align the interests of management with those of shareholders.
•  Operational Efficiency - The ability of a company to deliver products or services to its customers in the most cost-effective manner.
•  Resource Allocation - The process of assigning available resources to various uses in a way that maximizes value.
•  Financial Metrics - Quantitative measures used to assess a company's financial performance.
•  Consulting-Grade - A term used to describe high-quality, professional-grade materials typically used in consulting practices.
•  Stakeholder - Any individual or group that has an interest in the success of a company, including shareholders, employees, customers, and suppliers.

PERFORMANCE MANAGEMENT PPT SLIDES

Break-Even Analysis: Debt vs. Equity Financing

DuPont Formula: Dissecting Return on Equity

Linking Income Statement to Dividend Policy Decisions

Transforming Wine Production: Outsourcing Strategies

Framework for Calculating Cash Flow Return on Investment

Client TSR Performance vs. S&P 500 Analysis

Industry-Specific Accounting Adjustments for Performance Measurement

Impact of ROE on Selection and Opportunities

Framework for Analyzing Corporate Performance Drivers

Top UK Sectors by Market Value Added (1998)

Harnischfeger Industries Consolidated Balance Sheet Overview

Working Capital Analysis for Harnischfeger (1996)

Framework for Assessing Economic Profit in Corporations

Balancing Information Complexity for Optimal Value Creation

Framework for Economic Profit Balance Sheet Analysis

Strategic Initiatives Driving New World Wine Success

Framework for Economic Profit and Discount Rate Calculation

Understanding Economic Profit in Corporate Performance

Strategic Framework for Evaluating Corporate Performance Metrics

Framework for Corporate Performance Measurement Metrics

Source: Best Practices in Performance Management, Value Creation PowerPoint Slides: Corporate Performance Measurement PowerPoint (PPT) Presentation Slide Deck, Documents & Files


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