Comparative MVA and Market-to-Capital Analysis PPT

This PPT slide, part of the 54-slide Value Creation Framework PowerPoint presentation, presents a comparative analysis of Market Value Added (MVA) and market-to-capital ratios for Sears and Wal-Mart as of December 31, 1997. It highlights the financial market's perception of future performance relative to the capital invested in each company.

For Sears, the market value is reported at $42.5 billion, with invested capital at $30.7 billion. This results in a market value added of $11.8 billion, leading to a market-to-capital ratio of 1.4. This indicates that for every dollar of invested capital, Sears is generating $1.40 in market value, suggesting a relatively modest performance in terms of market perception.

In contrast, Wal-Mart shows a significantly higher market value of $101.3 billion against an invested capital of $32.1 billion. The market value added for Wal-Mart stands at $69.2 billion, yielding a market-to-capital ratio of 3.2. This figure illustrates that Wal-Mart is perceived to generate $3.20 in market value for every dollar of invested capital, showcasing a stronger market performance compared to Sears.

The stark difference in these metrics between the 2 companies emphasizes the varying levels of market confidence and perceived future growth potential. Stakeholders can glean insights into how effectively each company is leveraging its capital to create value, which may influence investment decisions or strategic planning. Understanding these figures is crucial for executives aiming to enhance their company's market perception and financial performance.

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