IN DEX
163
accounting approach to profit improvement
18–19
accounting rate of return 88–9
acid test measures
for debtors 80–1
for liquidity 78, 79
acquisitions, and shareholder value 106–7, 146
allocation of capital see capital allocation
Amazon 9
Anglo-Saxon business model 18, 44
AOL Time Warner 46–7
Apple 119
assets
forecasting asset allocation 22–4
and liquidity 12, 13, 54
balance sheet forecast 66
bank collapses 52 3
Black Swan events 63, 110, 153
British Airways 122, 141–2
Cadbury Schweppes 71
capital
and cashflow 100–1
forecast 68
see also working capital
capital allocation 5, 6, 21–4, 36–40, 72–3
and acquisitions 46–7
choosing between projects 73
defining 37
enhancing 148–9
and financial risk 62
forecasting 72–3
asset allocation 22–4
interventions 134–5
and investment costs 37
language of 120–1
managing 109, 112–13
success and failure in 59–61, 152
measuring 87–90
and organisational capacity 21–2
and shareholder value 70
strategic fit 72
capital approval 139
capital asset pricing model (CAPM) 26
capital expenditure, forecasting 66
capital intensity 6, 78, 79–80
capital investment 4, 10
depreciation on 9–10
Carrington Event 153
cash
clarity of 11
managing cash and deposits 10, 103
cashflow 4, 5, 6, 44, 46
adjustments to 9–11
choices 68
decisions 135–6
analysing 142–3
policy options 143–4
and employees 116
forecasts 66, 68, 78
interventions 133, 134
management 100–1, 112
costs and rewards of 30–1
risks of failure 30
success and failure in
50, 51–3, 61, 150
overtrading 8
and profit 8 9
questions to ask 126–7
and shareholder value 14–15
trading 11, 12, 68, 69, 100
collaboration, and profit improvement 119–20
company voluntary agreements 144
conflict of timing, maximising shareholder
value 33, 34
cost-cutting 108–9
credit and cashflow management 30
credit crunches 31–2
creditors 101, 103
current liquidity ratio 78, 79
customer service 46
customers 4, 126
and cashflow decisions 143
debtors
management of 102
measures for 80–1
Index
IN DEX
164
decision trees, and financial risk
assessment 95–7
decisions 135–42
analysing 142–3
capital approval 139
cashflow 135–6
characteristics of investment
decisions 140
hard to evaluate 140–1
liquidity 136–8
profit improvement 138–9
and risk assessment 141
shareholder value 138
Dell Computers 87
Deming, W. Edwards 35, 58–9
deposits 103
Dillons Bookstores 18–19, 55–6, 85–6
discounted cash flows, measuring
shareholder value 84–5
disposals, and shareholder value 107
distortion of business aims, maximising
shareholder value 33, 35
EBITDA (earnings before tax, interest,
depreciation and amortisation)
86, 152
economic shocks, and financial risk
assessment 92–3
efficient market hypothesis 15–17
employees 116–18
and cashflow 116
and liquidity 116–17
measuring labour cost 86
and profit improvement 116, 118
and shareholder value 18, 44, 117–18
Enron 10–11
Eurostar 131–2
executive intervention 125–54
make or break decisions 135–42
need for 132–5
questions to ask 126–32
external collaboration 119–20
failure see success and failure
feedback loops 20
finance and liquidity 69–70
financial gearing 27, 74
financial risk 5, 6, 24–8, 50, 73–6
dealing with 149
decisions 141
gearing 26 7, 63, 90, 93–4,
109, 132
reduction 149
identifying 73–6, 74, 93
individual risk-taking 40–1
inherent risk 24–5
insurance transactions 41
managing 109–10
reasons for 40–1
rewards of 42
success and failure in
49–50, 61–2, 152–4
measuring 90–7, 113
decision trees 95–7
and economic shocks 92–3
external and internal risks 97
Gaussian distribution 25, 90, 91, 93
Monte Carlo simulation 95
Normal Distribution Curve 91, 92
reasons for 40–1
Z-scores 90, 94–5
parameters of 25
planning to deal with 73, 74, 75
questions to ask 131
specific risk 28, 109
talking about 121–2
financiers 4, 126
and cashflow decisions 143
forecasting 66, 68
asset allocation 22–4
unknowable events 23–4
errors 38
Foyles 45–6
FRSSE (Financial Reporting Standards for
Smaller Entities) 10
GAAP (Generally Accepted Accounting
Principles) 10
Gaussian distribution 25, 90, 91, 93
gearing 26–7, 63, 74, 90, 93–4, 109, 132
reduction 149
GEC 49 50, 136–7
hoshin kanri process 20, 108
inherent risk 24–7
insolvency petitions 143–4
insurance transactions 41

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