【正文】 s 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 in time –EP measures the amount of value added over a period of time, which is far more useful when measuring manager performance Market Value Added Link to EP (2 of 2) 31 CorporatePerformanceMeasurement bc Corporate Performance Measurement LON ?Which UK sectors would you expect to have the highest market value added? –and the lowest? ?Which UK panies would you expect to have the highest market value added? –and the lowest? Market Value Added Actual Performance 32 CorporatePerformanceMeasurement bc Corporate Performance Measurement LON B a n k s I n t e g r a t e d O i lD r u g sM e d i aF o o dM a n u f a c t u r e r sT e l e c o m sR e t a i l e r sG r o c e r sE l e c t r i c i t yD r i n k s1 0 2 . 59 4 . 38 9 . 34 2 . 93 8 . 73 6 . 13 3 . 81 8 . 51 7 . 2 1 6 . 802550751 0 0163。s Equity is the accountant39。70K 7% (163。 will be economic profits 163。100K, but could only finance 70% with debt and required equity for the remaining 30%, how much aftertax profit would you require to breakeven? –assume tax rate = 40% –assume cost of equity = 15% BreakEven Example 70% Debt / 30% Equity Revisited Economic Profit 46 CorporatePerformanceMeasurement bc Corporate Performance Measurement LON ?If you could buy the same factory for 163。3B of market value destroyed was the worst of Britain?s 200 largest panies Source: Stern Stewart, Sunday Times Company Market Value Added (Sept 98) 1998 EVA? (163。Author: Patrick Cote Contributors: Kate McGreevy Julian Critchlow bc Corporate Performance Measurement April 1999 Copyright169。 0 . 5 B British Steel?s 163。E q u i t yN e t A s s e t sI n v e s t e d C a p i t a l o r C a p i t a l E m p l o y e d 0204060801 0 0Economic Profit Balance Sheet Note: NIBL= Noninterest bearing liabilities In order to develop the EP balance sheet, shortterm noninterest bearing liabilities must be removed and adjustments for accounting distortions must be made ?Shortterm NIBL are removed from the EP balance sheet since capital returns are not expected on the amounts owed (. wages payable) ?EP Balance Sheet Net Assets amount may be much larger than the traditional accounting value after adjustments for accounting distortions (., adding internallygenerated intangible assets) are made Regular Balance Sheet EP Balance Sheet Financing Approach Operating Approach Economic Profit 43 CorporatePerformanceMeasurement bc Corporate Performance Measurement LON Dividend Policy The traditional linkage of the Ine Statement and Balance Sheet is the connection between ine and retained earnings or dividends ?Ine attributable to shareholders (EBIT Interest Tax) ?Cash “in” from shareholders perspective ?Cash “out” from shareholders perspective Net Ine Retained Earnings Dividends Management Decision Reinvest it in the Company Distribute it to Shareholders Ine Statement and Balance Sheet Traditional Link (1 of 2) Economic Profit 44 CorporatePerformanceMeasurement bc Corporate Performance Measurement LON Economic Consequence The traditional linkage of the Ine Statement and Balance Sheet is the connection between ine and retained earnings or dividends = Retained Earnings = Net Ine Dividends Revenue Costs Ine Statement Balance Sheet Assets Liabilities Current Assets Net Fixed Assets Other Assets NIBLs Debt Equity Ine Statement and Balance Sheet Traditional Link (2 of 2) Economic Profit 45 CorporatePerformanceMeasurement bc Corporate Performance Measurement LON ?If you could buy the same factory for 163。7K with 100% debt financing ? Any aftertax profits beyond 163。30 15%) (1 40%) 163。s estimate of the value of the shareholder39。 1 2 5 B Banks, integrated oil and drugs were the UK sectors with the highest market value added Source: Stern Stewart, Sunday Times Sector Market Value Added (Sept 98) Market Value Added UK Sector Performance 10 Best 33 CorporatePerformanceMeasurement bc Corporate Performance Measurement LON O i le x p l o r a t i o nC h e m i c a l sM o t o r E n g i n e e r i n gH o u s e h o l dG o o d s / T e x t i l e sW a t e rH e a l t h c a r eM i n i n gD i s t r i b u t o r sP r i n t a n d P a c k a g i n gC o n s t r u c t i o n4 . 6 4 . 0 3 . 52 . 7 2 . 4 2 . 2 1 . 8 1 . 61 . 1 0 . 902550751 0 01 2 5 Distributors, print and packaging and construction had the lowest market value added in the UK Source: Stern Stewart, Sunday Times Sector Market Value Added (Sept 98) Market Value Added UK Sector Performance 10 Worst 34 CorporatePerformanceMeasurement bc Corporate Performance Measurement LON S h e l lG l a x o W e l l c o m eL l o y d s T S BS m i t h K l i n eB e e c h a mU n i l e v e rBPH S B CZ e n e c aD i a g e oB a r c l a y s6 9 . 54 1 . 63 0 . 6 3 0 . 02 8 . 42 3 . 41 8 . 41 5 . 31 4 . 31 3 . 50204060163。 8 0 B Shell?s 163。s investment in the pany –total assets less total liabilities Key Observations Balance Sheet Makeup What do we own? Assets NIBLs Debt Shareholder39。 163。 is required to breakeven with 30% equity, pared to 163。Equ ityA s s e t s L i a b i l i t i t e s S h a r e h o l d e r s 39。B) () () n/a Market Value Added UK Company Performance 10 Best 35 Corpor