Revised Checklist on Shareholder Value Analysis now available

We are pleased to announce the he publication of a revised Checklist on Shareholder Value Analysis (SVA).  SVA is one of a number of methods used as a substitute for traditional business measurements. It involves calculating a company’s value through its returns to shareholders, and is based on the view that company directors’ main objective should be maximising company shareholders’ wealth. The principle underlying shareholder value is that companies add value for shareholders only when their equity returns exceed equity costs. Once the amount of value is calculated, improvement targets can be set and shareholder value can be used as a performance measure.

Proponents of SVA suggest that traditional financial methods for calculating business value (e.g., earnings per share, growth in profits or return on equity) are cost-based, bear little relation to the economic income generated during a period, are too short-term and too focused on past results. SVA is focused on measuring and managing cash flows over time, and provides a longer-term view on which to base strategic decisions. It is a universal approach not subject to particular accounting policies, and applicable internationally, and across sectors. In short, SVA enforces a focus on the future, on customers, and especially, on the value of future cash flows. Estimation of future cash flows, however, can be extremely difficult to complete accurately, and this can lead to incorrect or misleading figures forming the basis for strategic decisions. This checklist introduces the financial calculations involved in carrying out SVA and advises on its implementation.

CMI Members: download this Checklist for free:  http://www.Managers.org.uk/mgtdirect