1、医疗行业贝恩业绩评医疗行业贝恩业绩评估估bcCorporate Performance MeasurementLON Executive Summary Objectives Background Performance Measurement Framework Market Value Added(MVA)Economic Profit(EP)Cash Flow Return on Investment(CFROI)Exercises MVAEconomic Profit Case Study-DiageoAgenda2医疗行业贝恩业绩评估bcCorporate Performance M
2、easurementLON 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 variations of economic profitStern Stewarts Economic Value Added(EVA)TM is best known of these
3、 measures Holt/BCGs Cash Flow Return on Investment(CFROI)is a similar concept presented in%return format Both ROE and 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
4、 measures the backward-looking records of overall company performance Focusing 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 projects that add value(with NPV0)are undertaken,which doe
5、s not always occur with ROE Executive Summary(1 of 2)3医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON Executive Summary(2 of 2)End goal of EP exercises is consistent with traditional Bain focus of maximising shareholder valueBain has measured historical performance with Total Shareholder ReturnSter
6、n Stewart devised Market Value Added(MVA)TM as means of measuring market expectations of EP that managers will add in the futuremanagers objective should be to maximise MVA All economic profit measures deduct charge for use of equity capital from accountings typical net income or profit after tax to
7、 reflect the opportunity cost associated with equity investmentsStern Stewart has trademarked EVATM by specifying adjustments to make to EP 4医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON Agenda Executive Summary Objectives Background Performance Measurement Framework Market Value Added(MVA)Econom
8、ic Profit(EP)Cash Flow Return on Investment(CFROI)Exercises MVAEconomic Profit Case Study-Diageo5医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON Objectives There are three objectives of the Corporate Performance Measures Module:To define the most popular measures of corporate performanceTo explain
9、the significance of these measures in the corporate environment and potential applications in Bains strategy workTo outline calculations of each performance measure6医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON Agenda Executive Summary Objectives Background Performance Measurement Framework Marke
10、t Value Added(MVA)Economic Profit(EP)Cash Flow Return on Investment(CFROI)Exercises MVAEconomic Profit Case Study-Diageo7医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON With the rise of conglomerates,most companies focused on Return on Equity,or ROE,as their primary measure of performance led most
11、managers to undertake acquisitions solely to manipulate accounting figures1960s/70s1980s/90sWith the increased focus on delivering shareholder value,managers have accepted systems that measure the change in value managers realised equity is not freeeconomic profit(EP)meets these needs by telling man
12、agers where value has been created and where it has been destroyedAs aligning interests between owners and managers has become more important,tying management compensation to EP provided a popular solutionCorporate performance evaluation has evolved from the 1960s focus on ROE to the current variati
13、ons of economic profit(EP)that measure impact on shareholder valueBackgroundCorporate Performance Evaluation8医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON Bain was the first of major consulting firms to focus on creating shareholder valueTo achieve this,Bain has used the output measure of Total S
14、hareholder Return and the accounting measures of ROE and ROIModified accounting measures,such as EP,provide an alternative means of measuring the creation of shareholder valueBackgroundRelevance to Bain9医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON To illustrate the role of corporate performance
15、measures and resource allocation to strategy work,an examination of Marakons“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 linescompare company performance to indus
16、try performanceinvestigate three or more strategies for each business every planning cycleshift resource allocation from economically unprofitable products/customers to economically profitableleads to yield loss for Marakon and clients since additional scenarios frequently evaluatedMarakon has made
17、economic profit(EP)the central focus of the program they apply to every caseBackgroundLink to Strategy10医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON EVA is a registered trademark of Stern StewartA century ago,Alfred Marshall explained that for a company to have genuine profits,the profits must b
18、e sufficient to cover the cost of capital as well as the firms 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 yearsBCG uses Cash Flow Return on Investment(CFROI)for a simila
19、r analysisTo avoid infringing upon Stern Stewarts trademark,many consulting firms have developed their own terms for the same conceptHow new is Economic Value Added (EVA)?EVATM is one variation of EPBackgroundEconomic Value Added11医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON Agenda Executive Sum
20、mary Objectives Background Performance Measurement Framework Market Value Added(MVA)Economic Profit(EP)Cash Flow Return on Investment(CFROI)Exercises MVAEconomic Profit Case Study-Diageo12医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON Measures*For a discussion of WACC and discount rates,please see
21、 the Investment Appraisal Module in the BVUDescription:EVA/MVA,EP,and CFROI are modified accounting measures used to measure the performance of the businessInputs/Measures:Fundamental Business DriversBusiness MetricsOutput MeasuresPrimary business-specific factors influencing shareholder value Tools
22、 used to measure performance of business Backward-looking measures of overall company performance as viewed by marketOperating profitsvolumepricecostsFinancial Cost of Capital Employedfixed assetsworking capitalWACC*Accounting ROEROAModified accountingEVA/MVAEPCFROICVATotal Shareholder Return(TSR)To
23、tal Business Return(TBR)Framework13医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON The fundamental business drivers provide a framework for identifying the sources of shareholder value creation or destructionShareholder Value Creation/DestructionOperating ProfitCost of CapitalVolumePriceCostsWorkin
24、g CapitalWACCFixed AssetsX+XDirect costsmateriallabourIndirect costsSG&ADepreciationAverage selling price#of units soldWeighted average cost of capital based on market values of debt and equityUse after-tax cost of debtCurrent assets less current liabilitiesProperty,plant&equipmentIntangibles LIFO v
25、s FIFODepreciation estimatesCost of equity for private firmsIntangible measurementComponents:Issues:FrameworkFundamental Business Drivers14医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON *Sometimes referred to as Return on Investment(ROI)ROE measures returns to shareholders,while ROA measures retur
26、ns to investors of all forms of capitalFormula:Measures:ROAProfitability of all capital employed,including debtUses:Return on Assets(ROA)*Return on Equity(ROE)Net IncomeAssets=ROENet IncomeEquity=Profitability of equity invested in business(net equity issued plus retained earnings)Returns of enterpr
27、ise as a wholeReturns to shareholdersFrameworkAccounting Business Metrics15医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON The DuPont formula is used to separate ROE into its components in order to assess the performance of the businessROENet IncomeEquity=Net IncomeSales=SalesAssetsAssetsEquityXXRO
28、SAsset TurnoverLeverageROE=ProfitabilityAsset TurnoverLeverageXX=ROAFrameworkAccounting Business Metrics-DuPont Formula16医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON *EVA=EVA with depreciation added backMany consulting companies attempt to brand the modified accounting business metrics they useE
29、conomic ProfitMeasureConsulting CompaniesBain McKinseyMarakon(through Value-Based Management)LEKEVA /MVA Stern StewartAT KearneyAccounting firmsBCGHoltBCGCash Value Added*(CVA)Cash Flow Return on Investment(CFROI)FrameworkModified Accounting Business Metrics17医疗行业贝恩业绩评估bcCorporate Performance Measur
30、ementLON *only backward-lookingThe modified accounting business metrics,which include EP,enable relatively accurate levels of corporate performance measurement at lower levels of decision making in the organisationAccuracy as Measure of Corporate PerformanceLevel of Decision MakingHighLowLowHighMVAM
31、odified Accounting Business MetricsTSR*ROE/ROAFundamental Business DriversEP/EVA/CFROIRole in OrganisationFramework18医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON *Adjusted for all stock splits and assuming all dividends reinvested While TSR calculates return to shareholders for publicly-listed c
32、ompanies,BCGs TBR calculation estimates equivalent returns for privately-held firmsTotal Shareholder Return(TSR)in CAGR FormatMarket 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 privately-held company at e
33、nd of period*number of years1number of years111Estimated market value of shares of privately-held company at beginning of period*FrameworkOutput Measures19医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON Bains client stock performance slide is calculated using TSR,which is used to measure the shareh
34、older value createdBai n cl i ent sS&P 500 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98N ot e:M et hodol ogy and dat a at t es t ed t o by Pri ce W at erhous e LLP t hrough D ecem ber 199805001,0001,5002,0002,5003,0003,500Poi nt C hange i n Indi ces (1980=0)FrameworkOutput Measures20医疗行业
35、贝恩业绩评估bcCorporate Performance MeasurementLON Agenda Executive Summary Objectives Background Performance Measurement Framework Market Value Added(MVA)Economic Profit(EP)Cash Flow Return on Investment(CFROI)Exercises MVAEconomic Profit Case Study-Diageo21医疗行业贝恩业绩评估bcCorporate Performance MeasurementLO
36、N 020406080100%Market Value Added(MVA)Invested CapitalGoal of Managers should always be to create more shareholder value,or maximise MVATotal Market Value of Firm(includes all debt and equity)Bains focus has always been to help the management of the firm to maximise shareholder value,which is equiva
37、lent to maximising MVAMarket Value AddedDefinition(1 of 2)22医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON MVAInvestedCapitalST NIBL*NetAssetsExcessCashWorkingCapitalRequirementsNet FixedAssets(nodistinctionbetweentangibles andintangibles)Short-TermDebtLong-TermDebtShareholdersEquityMarket Valueof
38、 Company(Debt&Equity)Total AssetsNet AssetsInvested Capitalor Capital Employed020406080100%MVA equals the total market value of the company less invested capital or net assets.Either the Operating or Financing Approach can be used,but Bain typically uses the Operating approachNote:*Short-term non-in
39、terest bearing liabilitiesOperating Approach(Typically used by Bain)Financing ApproachMarket Value AddedDefinition(2 of 2)23医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON OperatingCash Total CashCash Required inOperating CycleExcess CashThe first step required to calculate Net Assets with the Oper
40、ating Approach is to identify excess cash,which is total cash less cash required in the operating cycleNote:*Short-term non-interest bearing liabilitiesAmount($)Market Value AddedOperating Approach-Excess Cash24医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON Operating CashPrepaid Expenses andOther
41、Current AssetsInventoriesReceivablesAdvance PaymentsAccountsPayableAccruedExpenses and Other CurrentLiabilities Total Investmentsin Operating CycleLiabilities Implicitin Operating CycleNet Investmentsin Operating CycleNext,The working capital requirements are the firms net investments in the operati
42、ng cycle,or the net amount of short-term investment required to fund operationsAmount($)WorkingCapitalRequirementsMarket Value AddedOperating Approach-Working Capital Requirements25医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON When calculating MVA,Net Fixed Assets is defined as Net PP&E plus othe
43、r Investment(tangible and intangible).The third and final step to calculate Net Assets is Net PP&E,which is the amount of long-term investment required to fund operationsNet FixedAssetsProperty,Plant and EquipmentAccumulatedDepreciationOtherInvestmentsAmount$Net PP&EMarket Value AddedOperating Appro
44、ach-Net Fixed Assets26医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON Market ValueAdded(MVA)InvestedCapitalPV of EPsBeyond Year 5PV of EPYear 5PV of EPYear 4PV of EPYear 3PV of EPYear 2PV of EPYear 1Market Value of theCompany(Debt+Equity)Market Value Added(MVA)020406080100%Market value added(MVA)re
45、flects the markets expectations of the EP managers will add in the futurePercent of TotalMVA is the markets expectation of discounted future EPsMarket Value AddedLink to EP27医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON After extensive work by a diligent Bain team,Acme Industries is expected to g
46、enerate$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 of the company?Market Value AddedLink to EP-Example28医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON After extensive wo
47、rk 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 capital is 13%and the invested Capital is$100M,what is the MVA and the market value of the company?MVA=PV of EPs=$25 M13%-3%=$250 M=MVA +Invested
48、 Capital=$250 M +$100 M=$350MMarket Value of the CompanyMarket Value AddedLink to EP-Solution29医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON EP measures managers performance in the past,since it represents the market value added created over one yearNote:*Assumes Invested Capital Constant Market
49、ValueAdded*TodayMarket ValueAdded*Last YearEconomic ProfitOver Last YearMarket Value AddedLink to EP(1 of 2)30医疗行业贝恩业绩评估bcCorporate Performance MeasurementLON EP is used to evaluate manager performance because the change in MVA over a period of time is measuredGoal of companys managers should always
50、 be to maximise MVAWhen managers make any investment decisions,if the project is:value-creatingNPV 0 MVA increasesvalue-destroyingNPV 0 MVA decreasesReason that EP is the focus of most attention is because MVA is a stock or wealth measure,so MVA will show how much value has been added at that point
