Measuring and Managing the Value of Companies – by McK.&Co
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To gain a better understanding of the organization, it’s interesting to break down ROIC into components and analytically compare it with competitors. For example, as shown in the image, Costco has a lower operating margin compared to its competitors, yet it manages to create higher value due to its significantly better asset productivity. Additionally, in…
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Reorganizing the Profit and Loss Statement for NOPAT Calculation Just as the balance sheet is reorganized to calculate Invested Capital, the profit and loss statement is reorganized to calculate NOPAT. McKinsey recommends organizing the operational part of the profit and loss statement at the EBITA level, not at EBITDA or EBIT (see table). Why? EBITDA…
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One Aspect I Appreciated About McKinsey’s Approach to Organizational Valuation Technology One aspect I appreciated about McKinsey’s approach to organizational valuation technology is the method of reorganizing financial statements. Below, in the photo, the reorganized balance sheet is presented. In the reorganization process, operational assets and liabilities are arranged first, followed by non-operational items, and…
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Do you know what gives your organization a competitive advantage? The most significant measure of competitive advantage is ROIC (Return on Invested Capital), and here’s why: ROIC = (1+tax rate) * [Unit Price – Unit Cost] / Invested Capital This formula looks at two aspects of an organization – operational margin and investment. Regardless of…
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