tailieunhanh - FINANCIAL ANALYSIS: TOOLS AND TECHNIQUES CHAPTER 11

CHAPTER 11 VALUATION AND BUSINESS PERFORMANCE. Throughout this book, we’ve stressed that managers must primarily focus their decision making about investments, operations, and financing on the creation of economic value for the company’s shareholders. | 9 27 01 11 31 AM Page 57 CHAPTER 11 VALUATION AND BUSINESS PERFORMANCE Throughout this book we ve stressed that managers must primarily focus their decision making about investments operations and financing on the creation of economic value for the company s shareholders. Now let s put shareholder value into a broader context by examining the key concepts of value and relating them to successful business performance. Earlier we discussed such categories as the recorded values reflected in a company s financial statements the economic values represented by the cash flows generated through capital investments and the market value of shares or debt instruments. In each case value was viewed in a specific context of analysis and assessment but not necessarily against the full dynamics of management strategies and decisions that underlie the performance of any business. We ll discuss the meaning of value in a variety of common situations where valuation is required. We ll not only define several concepts of value in more precise terms but also once again use some of the now familiar analytical approaches that can be applied to the process of valuation. Foremost among these of course is the present value analysis of future cash flows the main subject of Chapters 7 and 8 which is the common underpinning of modern valuation principles and shareholder value creation. In the final chapter we ll integrate the various concepts into an overview of value-based management returning to the systems approach first discussed in Chapter 2 and using it to provide a consistent perspective of successful value creation. We ll begin here with some basic definitions of value as found in business practice. Next we ll take the point of view of the investor assessing the value of the main forms of securities issued by a company and the point of view of the creditor judging the value of the company s obligations. Finally we ll discuss the key issues involved in valuing an .