Financial Times Handbook of Corporate Finance, 2nd Edition

6

VALUE MANAGED VS EARNINGS MANAGED COMPANIES

IntroductionThe pervasiveness of the value approachCase study: Compass GroupWhy shareholder value?Three steps to valueEarnings-based management’s failingsReturn on capital employed (ROCE) has failingsFocusing on earnings is not the same as valueHow a business creates valueThe five actions for creating valueConclusionNotes

Introduction

The first few chapters of this book linked together the objective of shareholder wealth maximization and acceptance or otherwise of proposed projects. This required knowledge of the concepts of the time value of money and the opportunity cost of investors’ funds placed into new investments. If managers fail to achieve returns at least as high as those available ...