Turning vision into value explains financial and accounting information to managers who have no
prior knowledge of the subject. The central theme of the book is the measurement and creation
of economic value in an organisation. Starting with a clear explanation of the core accounting
principles, the book examines the measures of economic value, with particular emphasis on Return
on Net Assets (RONA) and Return on Equity (ROE). It explains why these two measures are important
and expounds the underlying levers that drive RONA and ROE in the structured framework known as
the DuPont model. The matrix of performance measures is then extended to include the concept of
sustainable growth. Since growth is such a significant factor in creating value, considerable attention
is given to understanding the consequences of too much or too little growth in a business.
The final section of the book integrates the earlier material into an understanding of corporate valuation. Economic concepts relating to the time value of money, discounting and the cost of capital are discussed, with the objective of understanding valuation and the value creating process. Two approaches are presented: the traditional discounted cash flow approach and the economic value added (EVA®) approach.
The book includes several examples, problems and case studies and a sophisticated Excel® spreadsheet on CD-Rom which can be customised to analyse and value a business.
"This superb volume takes the mystery out of finance. It's a must for both finance professionals and all non-financial business managers. After reading the book one is left with the enduring thought that, yes, the principles of finance really are simple." - Prof. Colin Firer, Graduate School of Business, Cape Town
Mike Ward is the Director of the Graduate School of Management and the ABSA professor of Finance at the Gordon Institute of Business Science (GIBS), University of Pretoria. He was the Director of the Wits Business School from 1998 to 2003. He teaches finance and value creation in South Africa and abroad, and has published research papers both locally and internationally. He is on the editorial board of the Investment Analysts Journal.
Allan Price originally trained as an architect, winning multiple awards for his work. After completing an MBA, he became convinced that finance ought to be presented and taught more simply. This led him to teach finance in South Africa, the UK and Russia. He has also been instrumental in the development of various financial software products. He is currently pursuing his career as a corporate finance consultant and property developer.
PART 1: THE BASICS
Chapter 1 The income statement
Chapter 2 The balance sheet
Chapter 3 Cash flow
PART 2: THE OPERATING GROWTH AND VALUE DRIVERS
Chapter 4 Profitability
Chapter 5 Activity
Chapter 6 Return on net assets (RONA) and return on total capital employed (ROCE)
PART 3: THE STRATEGIC GROWTH AND VALUE DRIVERS
Chapter 7 Return on equity (ROE)
Chapter 8 Growth and dividend policy
PART 4: MARKET VALUATION
Chapter 9 Economic value added (EVA®)
Chapter 10 Market value added (MVA®)
Chapter 11 Valuation
Appendix 1 Outside shareholders' interests and preferred dividends
Appendix 2 Financial statements used in Chapter 5
Appendix 3 Adjustments to assets, capital and NOPAT: Chapter 9
Appendix 4 Sustainable growth rates comparing EBIT and NOPAT
Appendix 5 Sustainable growth rate using the EBIT model, applied to Y1
Appendix 6 Present value factors
Appendix 7 Annuity present value factors
Medical World (Pty) Limited
Visioneering Technology Limited
Pick 'n Pay Stores Limited
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