Criticial Finance Issues: Financial Times Briefing

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