ROIC Disaggregation for Financial Performance Analysis PPT

This PPT slide, part of the 54-slide Value Creation Framework PowerPoint presentation, presents a framework for analyzing a company's financial performance through the lens of Return on Invested Capital (ROIC). It emphasizes the importance of disaggregating ROIC into its fundamental components to identify potential areas for improvement. The structure of the slide is hierarchical, featuring a ROIC Tree that breaks down the calculation into 2 primary factors: operating margin and capital turnover.

The operating margin is defined as EBITA divided by revenues, indicating how efficiently a company generates profit from its sales. This segment further dissects into 3 critical components: Cost of Goods Sold (COGS) as a percentage of revenues, Selling, General & Administrative (SG&A) expenses relative to revenues, and depreciation costs. Each of these elements provides insight into operational efficiency and cost management.

On the other hand, capital turnover is calculated as revenues divided by invested capital. This part of the tree highlights how effectively a company utilizes its capital to generate sales. It includes metrics such as Net Property, Plant, and Equipment (PP&E) over revenues, working capital relative to revenues, and other assets including goodwill.

By employing this ROIC disaggregation approach, executives can pinpoint specific areas that may require strategic adjustments or operational enhancements. The slide effectively illustrates how a detailed analysis of these components can lead to actionable insights, ultimately driving better financial performance and shareholder value. The clarity of this framework makes it a valuable tool for decision-makers looking to optimize their company’s financial health.

This slide is part of the Value Creation Framework PowerPoint presentation.

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