Chapter 2 Flashcards
(16 cards)
Value
The monetary worth of a product or asset,it can be created by production or by commerce
Essence of commerce
Create value through arbitrage across time and space
Stakeholder approach to business
Business enterprise as a coalition of interest groups where top management’s role to balance the different and conflicting interests
Shareholder capitalism
Companies’ duty is to produce profits for owners
Dominant drivers
Fullfilment of a vision,desire to make a difference in the world
2 types of return
Normal return to capital(rewards investors for the use of their capital),economic profit(the price surplus available after all i puts have been paid for)
Value of the firm
It is the NPV of the returns that the asset generates,the relevant returns are the CF to the firm
CF approach
Deducts capital at the time when the capital expenditure is made
EVA approach
Charging capital as it is consumed
Modiliagni and Miller
The value of companys assets must equal the value of the claims against those assets
Phases and gates approach
The dev.processes are split into distinct phases,at the end of which the project is reassessed before being allowed through thr gate-option to continue,abandon,amend,wait the project
Scalability
The potential to scale up or replicate a business
Growth option
Allow a firm to make small initial inv. in a number of future business opportunities,but without commiting to them
Flexibility option
Design of projects of plants that permit adaptation to different circumstances
Platform investment
Investment in core products or techn. that create a stream of additional business opportunities
Strategic alliances and joint ventures
Limited investment that offer options for the creation of whole new str.
