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13. Summary

This book is about finance, what it means from a practical point of view and particularly the links with strategies that lead to successful outcomes.

Understanding the principal financial statements, balance sheets, income statements and cash flow statements is essential, whatever your role. The questionnaires and checklists that follow are aimed at helping you revise the essential issues in finance and financial statements, and how financial information links with objectives and strategy, thus helping you become more effective in your role:

- What are your company objectives - where do you fit in?

- Strategies both financial and physical to support objectives

- Links between the book's chapters and strategies

- Are your strategies coordinated and aligned?

- Aphorisms.

What are your company objectives - where do you fit in?

Here are possible company objectives - these are objectives, not strategies. The objectives have been classified as long, medium and short term, although there will be crossover between the time ranges.

Long term (and sustainable)

- Deliver shareholder value by making returns and reinvesting -organic growth.

- Deliver shareholder value by making returns and deliver by reinvestment and paying out dividends.

- Deliver shareholder value by acquisition (risky if you over pay).

Short or medium term

- Deliver shareholder value by fixating on share price - EBIT/EPS or EBITDA (but earnings may be at the expense of the longer term).

- Deliver shareholder value by gearing or leverage (but is the borrowing cost supportable?).

Short term

- Expand your sales, products and services.

- Cut costs ruthlessly.

- Deliver shareholder value by realizing assets.

Strategies both financial and physical to support objectives

Financial

Physical/practical

Objective: maximize ROI

Increase margins

Be in the right business or sector

Cut costs

Find a high-margin business in a growth sector

Be efficient - maximize utilization and throughput

Obtain cheaper finance

Invest only the minimum capital necessary in fixed assets and working capital

Gear up or leverage the business -but this must reach a limit

Objective: maximize cash flow

Invest as little as possible

Outsource - utilize others' assets

Sell off under-used assets

Change terms of trade with customers and suppliers

Reduce working capital

Financial

Physical/practical

Objective: maximize sales volumes

Reduce the price - cut the margin

Deliver the products or service the market wants

Maintain the price - increase costs of marketing etc

Objective: maximize profit or margin

Increase price

Deliver real or perceived quality

Cut costs

Add 'value'

Drop low-margin business

Objective: minimize costs

Cut costs

Better procurement Outsourcing

Remove non-contributing costs

Be austere

 
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