Value : The Four Cornerstones of Corporate Finance

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  • Edition: 1st
  • Format: Hardcover
  • Copyright: 11/9/2010
  • Publisher: Wiley
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Value is intended to give managers an accessible and short guide to first the foundations and then the applications of corporate foundations. Not bogged down in math equations or heavy analysis, the book is a much more qualitative approach to what the authors consider a lost art. The first section discusses the four foundational principles of corporate finance: 1. Value is driven by growth, ROIC, and the sustainability of these; 2. Share price is driven by expectations for future performance; 3. Price is driven by the value conceived by others; and 4. One must use the pizza principal to decide whether value has really been created. The pizza principal says you can get more pizza by either making the pie bigger or by taking a share of other pies. The second section applies the theory of value creation to our economy. The authors argue that real value creation comes from innovation and competitive advantage, which manifests into high returns on capital and growth. In the third section of the book, the authors discuss ways to maintain and grow value through mergers, acquisitions, and portfolio management. The final section addresses how to ensure that your company has the right governance, performance measurement, and internal discussions to encourage value-creating decisions.

Author Biography

McKINSEY & COMPANY is a global management consulting firm that helps leading private, public, and social-sector organizations make distinctive, lasting, and substantial performance improvements. With consultants deployed from more than ninety offices in over fifty countries, McKinsey advises companies on strategic, operational, organizational, financial, and technological issues.

TIM KOLLER leads the firm's research activities in valuation and capital market issues. He advises clients globally on corporate strategy, capital markets, M&A, and value-based management. Tim is a coauthor of Valuation: Measuring and Managing the Value of Companies.

RICHARD DOBBS is a director of the McKinsey Global Institute, the firm's business and economics research arm. He advises Korean and other Asian companies and governments on strategy, economics, and M&A issues. Richard is an associate fellow of University of Oxford's Saïd Business School.

BILL HUYETT advises clients in healthcare and other technology-intensive industries on corporate strategy, M&A, product development and commercialization, and corporate leadership. Bill is active on several not-for-profit boards in basic life sciences research.

Table of Contents

About the Authorsp. ix
Prefacep. xi
Acknowledgmentsp. xv
The Four Cornerstones
Why Value Value?p. 3
The Core of Valuep. 15
The Conservation of Valuep. 29
The Expectations Treadmillp. 41
The Best Ownerp. 51
The Stock Market
Who Is the Stock Market?p. 63
The Stock Market and the Real Economyp. 73
Stock Market Bubblesp. 89
Earnings Managementp. 103
Managing Value Creation
Return on Capitalp. 119
Growthp. 139
The Business Portfoliop. 153
Mergers and Acquisitionsp. 169
Riskp. 183
Capital Structurep. 197
Investor Communicationsp. 209
Managing for Valuep. 223
The Math of Valuep. 237
The Use of Earnings Multiplesp. 241
Indexp. 245
Table of Contents provided by Ingram. All Rights Reserved.

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