January 2007
Intermediate to advanced
304 pages
8h 45m
English
Content preview from Strategic Corporate Finance: Applications in Valuation and Capital StructureBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.
THE VALUE OF RISK MANAGEMENT
Enterprise risk management can enhance firm value in many ways. ERM can reduce the volatility of assets and cash flows, leading to enhanced strategic liquidity, a lower cost of debt, increased debt capacity, and improved transparency.2
Strategic Liquidity
Cash flow volatility can lead to delays or even cancellation of strategic investments to help bridge cash shortfalls. This will impair growth prospects and future cash flows, reducing intrinsic value. Through risk management, a firm can reduce, or even eliminate, the probability of a cash shortfall that defers or reduces strategic investment. This enhances forward visibility and liquidity, improving managers’ ability to plan for the level of investment required (through a business cycle) to execute their strategy and build shareholder value.
For example, Merck has been a popular risk management case study where successful management of FX and interest rate risk helps to ensure strategic liquidity for the continuation of their multibillion dollar R&D investment program. The net economic exposure that gets hedged is based on an evaluation of natural offsetting exposures, volatilities and correlations, and the cost of hedging.
The Cost of Debt
Risk management can reduce cash flow volatility and the unsystematic portion of total risk, enhancing credit profile, debt capacity, and cost of debt. Unlike beta and the cost of equity, these elements of weighted average cost of capital (WACC) are influenced by ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Read now
Unlock full access
More than 5,000 organizations count on O’Reilly
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.Julian F.
I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.Addison B.
I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.Amir M.
I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.