Comparative Analysis: Full vs. Incremental Value Approaches PPT
This PPT slide, part of the 105-slide How to Develop a Business Case PowerPoint presentation, outlines 2 distinct approaches for comparing financial scenarios against a baseline: the Full Value Approach and the Incremental Value Approach. Each method serves a specific purpose and is applicable under different circumstances, emphasizing the importance of selecting the right approach to avoid data misinterpretation.
The Full Value Approach is designed for scenarios where the impact on the entire organization, such as shareholder value, needs to be demonstrated. This method is particularly useful when the business case is intended to support broader business planning or budgeting efforts. Here, costs and benefits are calculated as total values, encompassing all cash inflows and outflows associated with each scenario compared to the baseline. The example provided illustrates this by showing total benefits and costs for 2 scenarios, highlighting a net benefit that reflects the overall financial impact.
On the other hand, the Incremental Value Approach focuses on the differences in cash flows between the proposed scenarios and the baseline. This method is best suited for situations where the proposed action is viewed as an investment, or when the incremental costs and benefits are relatively small compared to the overall figures. The example under this approach breaks down incremental benefits and costs, providing a clearer picture of the net benefit derived from each scenario.
Understanding these 2 methodologies is crucial for decision-makers. Choosing the wrong approach could lead to misleading conclusions and potentially poor strategic decisions. The slide effectively communicates the nuances of each method, enabling executives to make informed choices based on their specific needs and the context of their analysis.
This slide is part of the How to Develop a Business Case PowerPoint presentation.
EXPLORE MORE SLIDES FROM THIS PRESENTATION
EXPLORE MORE PRESENTATIONS ON
Business Case Development Shareholder Value Business Planning Business Case Purpose
Flevy is the world's largest knowledge base of best practices.
Leverage the Experience of Experts.
Find documents of the same caliber as those used by top-tier consulting firms, like McKinsey, BCG, Bain, Deloitte, Accenture.
Download Immediately and Use.
Our PowerPoint presentations, Excel workbooks, and Word documents are completely customizable, including rebrandable.
Save Time, Effort, and Money.
Save yourself and your employees countless hours. Use that time to work on more value-added and fulfilling activities.
