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Exploration of Alternatives and profit optimisation
Exploration of alternatives & profit optimization
Shareholder value maximization is the ultimate measure of a company’s success.One of the fundamental goals of administrators especially owner-managers, is to maximize their shareholder value and the worth of their business. While some might claim that over emphasis on monetary value is harmful to other stakeholders such as labour and the environment a stronger case can be made that stakeholder positions are actually improved by companies that keenly manage value.
Successful companies are ones that maximize shareholder value, enjoy higher overall efficiency and competition and are able to raise more favourable financing. These companies create employment, reward workers at levels that minimize dissatisfaction and enhance job security as demand for their products and services is higher. Customers will receive higher quality goods than their competitors at an economical cost and debt holders have better overall security and eagerly lend even more capital. This cycle becomes self-propelling that creates thrust within companies which strengthens the various stakeholder positions.
Firstly it is important to remember that a company's value is future-oriented in nature. It is equivalent to the present value of its potential future cash flow stream discounted by the market's required rate of return. Increased shareholder value should focus on approaches that maximize long-term cash flows. Managers should also concentrate on areas that probable purchasers will consider in making acquisition decisions.
Companies maximizing their value have clearly-defined strategic plans that are forward looking and focused on long-term success. They have identified what businesses they wish to be in, and how they will win in that particular industry. The strategy is effective when the vision is shared throughout the organization and a sense of unity and cohesiveness within the company is created.
The shareholders’ value are largely inspired by the value drivers such as:
Cash Tax Rate
Incremental Capital Expenditure
Investment in working capital
Cost of Capital
Competitive Advantage Period
We work closely with companies to evaluate each of the difficult issues impacting the value drivers and provide solutions for the same.