【課件】貝恩－業(yè)績?cè)u(píng)估-英文版

1、Author: Patrick Cote,Contributors: Kate McGreevy Julian Critchlow,bc,Corporate Performance Measurement,April 1999,Copyright© 1999 Bain & Company, Inc.,2,CorporatePerformanceMeasurement,,,Executive

2、 SummaryObjectivesBackgroundPerformance Measurement FrameworkMarket Value Added (MVA)Economic Profit (EP)Cash Flow Return on Investment (CFROI)Exercises MVAEconomic ProfitCase Study - Diageo,,Agenda,3,Corporate

3、PerformanceMeasurement,,,Corporate performance evaluation has evolved from the 1960s focus on ROE to the current variations of economic profit that measure impact on shareholder valuemany firms have devised their own va

4、riations of economic profitStern Stewart’s Economic Value Added (EVA)TM is best known of these measures Holt/BCG’s Cash Flow Return on Investment (CFROI) is a similar concept presented in % return formatBoth ROE an

5、d EP are business metrics, tools used to measure the performance of the businessseparate from fundamental business drivers, the actual factors that influence shareholder value, and output measures the backward-looking r

6、ecords of overall company performanceFocusing on EP instead of ROE decreases the likelihood of destructive behavior by managersBy evaluating managers based on EP, manager behavior can be altered such that only project

7、s that add value (with NPV>0) are undertaken, which does not always occur with ROE,,Executive Summary (1 of 2),4,CorporatePerformanceMeasurement,Executive Summary (2 of 2),,,End goal of EP exercises is consistent with

8、 traditional Bain focus of maximising shareholder valueBain has measured historical performance with Total Shareholder ReturnStern Stewart devised Market Value Added (MVA)TM as means of measuring market expectations of

9、 EP that managers will add in the futuremanagers’ objective should be to maximise MVAAll economic profit measures deduct charge for use of equity capital from accounting’s typical net income or profit after tax to ref

10、lect the opportunity cost associated with equity investmentsStern Stewart has trademarked EVATM by specifying adjustments to make to EP,,5,CorporatePerformanceMeasurement,,,,Agenda,Executive SummaryObjectivesBackgroun

11、dPerformance Measurement FrameworkMarket Value Added (MVA)Economic Profit (EP)Cash Flow Return on Investment (CFROI)Exercises MVAEconomic ProfitCase Study - Diageo,6,CorporatePerformanceMeasurement,Objectives,,,T

12、here are three objectives of the Corporate Performance Measures Module:,To define the most popular measures of corporate performanceTo explain the significance of these measures in the corporate environment and potentia

13、l applications in Bain’s strategy workTo outline calculations of each performance measure,7,CorporatePerformanceMeasurement,,,,Agenda,Executive SummaryObjectivesBackgroundPerformance Measurement FrameworkMarket Valu

14、e Added (MVA)Economic Profit (EP)Cash Flow Return on Investment (CFROI)Exercises MVAEconomic ProfitCase Study - Diageo,8,CorporatePerformanceMeasurement,,With the rise of conglomerates, most companies focused on Re

15、turn on Equity, or ROE, as their primary measure of performance led most managers to undertake acquisitions solely to manipulate accounting figures,1960s/70s,1980s/90s,With the increased focus on delivering shareholder

16、value, managers have accepted systems that measure the change in value managers realised equity is not freeeconomic profit (EP) meets these needs by telling managers where value has been created and where it has been d

17、estroyedAs aligning interests between owners and managers has become more important, tying management compensation to EP provided a popular solution,Corporate performance evaluation has evolved from the 1960s focus on R

18、OE to the current variations of economic profit (EP) that measure impact on shareholder value,Background,Corporate Performance Evaluation,9,CorporatePerformanceMeasurement,,Bain was the first of major consulting firms to

19、 focus on creating shareholder valueTo achieve this, Bain has used the output measure of Total Shareholder Return and the accounting measures of ROE and ROIModified accounting measures, such as EP, provide an alternati

20、ve means of measuring the creation of shareholder value,Background,Relevance to Bain,10,CorporatePerformanceMeasurement,,To illustrate the role of corporate performance measures and resource allocation to strategy work,

21、an examination of Marakon’s “program” is usefulMarakon applies the following program, which can take several years to complete, to all of its clients:assess the economic profit of all customer segments and product line

22、scompare company performance to industry performanceinvestigate three or more strategies for each business every planning cycleshift resource allocation from economically unprofitable products/customers to economicall

23、y profitableleads to yield loss for Marakon and clients since additional scenarios frequently evaluated,Marakon has made economic profit (EP) the central focus of the ‘program’ they apply to every case,Background,Link t

24、o Strategy,11,CorporatePerformanceMeasurement,,EVA is a registered trademark of Stern Stewart,A century ago, Alfred Marshall explained that for a company to have genuine profits, the profits must be sufficient to cover t

25、he cost of capital as well as the firm’s operating costsStern Stewart has re-packaged the concept into EVA?, which is essentially a more palatable form of the same ideaMcKinsey has been using economic profit for many y

26、earsBCG uses Cash Flow Return on Investment (CFROI) for a similar analysisTo avoid infringing upon Stern Stewart’s trademark, many consulting firms have developed their own terms for the same concept,How new is Economi

27、c Value Added? (EVA?)?,EVATM is one variation of EP,Background,Economic Value Added,12,CorporatePerformanceMeasurement,,,,Agenda,Executive SummaryObjectivesBackgroundPerformance Measurement FrameworkMarket Value Ad

28、ded (MVA)Economic Profit (EP)Cash Flow Return on Investment (CFROI)Exercises MVAEconomic ProfitCase Study - Diageo,13,CorporatePerformanceMeasurement,Measures,,* For a discussion of WACC and discount rates, please

29、see the Investment Appraisal Module in the BVU,Description:,EVA/MVA?,EP,and CFROI are modified accounting measures used to measure the performance of the business,Inputs/ Measures:,,,,Fundamental Business Drivers,Busines

30、s Metrics,Output Measures,Primary business-specific factors influencing shareholder value,Tools used to measure performance of business,Backward-looking measures of overall company performance as viewed by market,Operati

31、ng profitsvolumepricecostsFinancial Cost of Capital Employedfixed assetsworking capitalWACC*,Accounting ROEROAModified accountingEVA?/MVA?EPCFROICVA,Total Shareholder Return (TSR)Total Business Return (TBR

32、),Framework,14,CorporatePerformanceMeasurement,,The fundamental business drivers provide a framework for identifying the sources of shareholder value creation or destruction,,,,,,,,,,,,,Shareholder Value Creation/Destruc

33、tion,Operating Profit,Cost of Capital,Volume,Price,Costs,Working Capital,WACC,Fixed Assets,X,+,X,,,Direct costsmateriallabourIndirect costsSG & ADepreciation,Average selling price,# of units sold,Weighted averag

34、e cost of capital based on market values of debt and equityUse after-tax cost of debt,Current assets less current liabilities,Property, plant & equipmentIntangibles,LIFO vs FIFODepreciation estimates,Cost of equit

35、y for private firms,Intangible measurement,Components:,Issues:,Framework,Fundamental Business Drivers,15,CorporatePerformanceMeasurement,* Sometimes referred to as Return on Investment (ROI),ROE measures returns to share

36、holders, while ROA measures returns to investors of all forms of capital,,,,Formula:,Measures:,ROA,Profitability of all capital employed, including debt,Uses:,Return on Assets (ROA)*,Return on Equity (ROE),Net Income,Ass

37、ets,,=,ROE,Net Income,Equity,,=,Profitability of equity invested in business (net equity issued plus retained earnings),Returns of enterprise as a whole,Returns to shareholders,Framework,Accounting Business Metrics,16,Co

38、rporatePerformanceMeasurement,,The DuPont formula is used to separate ROE into its components in order to assess the performance of the business,,,,ROE,Net Income,Equity,,=,Net Income,Sales,,=,Sales,Assets,,Assets,Equity

39、,,X,X,,,,ROS,Asset Turnover,Leverage,ROE,=,Profitability,Asset Turnover,Leverage,X,X,=,,ROA,Framework,Accounting Business Metrics - DuPont Formula,17,CorporatePerformanceMeasurement,* EVA=EVA with depreciation added back

40、,Many consulting companies attempt to brand the modified accounting business metrics they use,,,,Economic Profit,Measure,Consulting Companies,Bain McKinseyMarakon (through Value-Based Management)LEK,EVA ? / MVA ?,Ster

41、n StewartAT KearneyAccounting firms,BCG,HoltBCG,Cash Value Added* (CVA),Cash Flow Return on Investment (CFROI),Framework,Modified Accounting Business Metrics,18,CorporatePerformanceMeasurement,,,* only backward -looki

42、ng,The modified accounting business metrics, which include EP, enable relatively accurate levels of corporate performance measurement at lower levels of decision making in the organisation,,,,Accuracy as Measure of Corpo

43、rate Performance,Level of Decision Making,High,Low,Low,High,MVA?,Modified Accounting Business Metrics,,,TSR*,ROE/ROA,Fundamental Business Drivers,,EP/EVA?/CFROI,,Role in Organisation,Framework,19,CorporatePerformanceMeas

44、urement,* Adjusted for all stock splits and assuming all dividends reinvested,While TSR calculates return to shareholders for publicly-listed companies, BCG’s TBR calculation estimates equivalent returns for privately-he

45、ld firms,,,,Total Shareholder Return (TSR) in CAGR Format,Market value of share at end of period *,Market value of share at beginning of period,=,Total Business Return (TBR),=,Estimated market value of shares of privatel

46、y-held company at end of period*,,,,,number of years,,1,number of years,,1,,1,,1,Estimated market value of shares of privately-held company at beginning of period*,Framework,Output Measures,20,CorporatePerformanceMeasure

47、ment,,Bain’s client stock performance slide is calculated using TSR, which is used to measure the shareholder value created,,,,Framework,Output Measures,21,CorporatePerformanceMeasurement,,,,Agenda,Executive SummaryObje

48、ctivesBackgroundPerformance Measurement FrameworkMarket Value Added (MVA)Economic Profit (EP)Cash Flow Return on Investment (CFROI)Exercises MVAEconomic ProfitCase Study - Diageo,22,CorporatePerformanceMeasureme

49、nt,,Market Value Added (MVA),Invested Capital,Goal of Managers should always be to create more shareholder value, or maximise MVA,Total Market Value of Firm(includes all debt and equity),,Bain’s focus has always been to

50、 help the management of the firm to maximise shareholder value, which is equivalent to maximising MVA,Market Value Added,Definition (1 of 2),23,CorporatePerformanceMeasurement,,MVA equals the total market value of the co

51、mpany less invested capital or net assets. Either the Operating or Financing Approach can be used, but Bain typically uses the Operating approach,Note: *Short-term non-interest bearing liabilities,Operating Approach (Ty

52、pically used by Bain),Financing Approach,,,Market Value Added,Definition (2 of 2),24,CorporatePerformanceMeasurement,,The first step required to calculate Net Assets with the Operating Approach is to identify excess cash

53、, which is total cash less cash required in the operating cycle,Note: *Short-term non-interest bearing liabilities,Amount ($),Market Value Added,Operating Approach - Excess Cash,25,CorporatePerformanceMeasurement,Next, T

54、he working capital requirements are the firm’s net investments in the operating cycle, or the net amount of short-term investment required to fund operations,Amount ($),WorkingCapitalRequirements,,Market Value Added,Op

55、erating Approach - Working Capital Requirements,26,CorporatePerformanceMeasurement,When calculating MVA, Net Fixed Assets is defined as Net PP&E plus other Investment (tangible and intangible). The third and final s

56、tep to calculate Net Assets is Net PP&E, which is the amount of long-term investment required to fund operations,Amount $,Net PP&E,,Market Value Added,Operating Approach - Net Fixed Assets,27,CorporatePerformance

57、Measurement,,Market value added (MVA) reflects the markets expectations of the EP managers will add in the future,Percent of Total,MVA is the market’s expectation of discounted future EPs,,Market Value Added,Link to EP,2

58、8,CorporatePerformanceMeasurement,,After extensive work by a diligent Bain team, Acme Industries is expected to generate $25M in economic profits next year, which is expected to grow at 3% forever. If the cost of capita

59、l is 13% and the invested Capital is $100M, what is the MVA and the market value of the company?,Market Value Added,Link to EP - Example,29,CorporatePerformanceMeasurement,,After extensive work by a diligent Bain team, A

60、cme Industries is expected to generate $25M in economic profits next year, which is expected to grow at 3% forever. If the cost of capital is 13% and the invested Capital is $100M, what is the MVA and the market value o

61、f the company?,MVA = PV of EPs,= $ 25 M,13% - 3%,,= $ 250 M,,= MVA + Invested Capital,= $ 250 M + $100 M,= $350M,,Market Value of the Company,Market Value Added,Link to EP - Solution,30,CorporateP

62、erformanceMeasurement,,EP measures managers’ performance in the past, since it represents the market value added created over one year,Note: *Assumes Invested Capital Constant,Market Value Added,Link to EP (1 of 2),31,Co

63、rporatePerformanceMeasurement,,EP is used to evaluate manager performance because the change in MVA over a period of time is measured,Goal of company’s managers should always be to maximise MVAWhen managers make any inv

64、estment decisions, if the project is:value-creatingNPV >0MVA increasesvalue-destroyingNPV <0MVA decreasesReason that EP is the focus of most attention is because MVA is a stock or wealth measure, so MVA will

65、 show how much value has been added at that point in timeEP measures the amount of value added over a period of time, which is far more useful when measuring manager performance,Market Value Added,Link to EP (2 of 2),32

66、,CorporatePerformanceMeasurement,,,Which UK sectors would you expect to have the highest market value added?and the lowest?Which UK companies would you expect to have the highest market value added?and the lowest?,M

67、arket Value Added,Actual Performance,33,CorporatePerformanceMeasurement,,,Banks, integrated oil and drugs were the UK sectors with the highest market value added,Source: Stern Stewart, Sunday Times,Sector Market Value Ad

68、ded (Sept 98),Market Value Added,UK Sector Performance - 10 Best,34,CorporatePerformanceMeasurement,,,Distributors, print and packaging and construction had the lowest market value added in the UK,Source: Stern Stewart,