...CASE STUDY FOR FINANCIAL MANAGEMENT CASE 4: The Battle for Value, 2004: FedEx Corp. vs. United Parcel Service, Inc. VALUE CREATION AND ECONOMIC PROFIT I. OUTLOOK OF CASE 4 Case 4 mentions about the competition between two leading companies in package- delivery market. FedEx which is the largest foreign presence in China, with 11 weekly flights, serving 220 Chinese cities, so the company’s volumes in China had grown by more than 50% between 2003 and 2004. UPS which is the world’s largest package-delivery company and dominant parcel carrier in US, serving 200 cities in 2003. FedEx had virtually invented customer logistical management, and was widely perceived as innovative. Historically, UPS had reputation for being big, bureaucratic and an industry follower. Two companies have their own market, an individual characteristics, and inconclusive. Thus, not only based on the development and operation of the two companies, the analysis also relied on the special purpose financial ratios ( especially Economic Value Added (EVA), an effective measure and rapid for firm within an industry) to find which company has more competitive advantage. II. INTRODUCTION 1. FedEx corporation: [pic] FedEx, formally known as Federal Express, started delivering packages and freight on April 17, 1973. The company was...
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...Abstract Economic Value Added (EVA) is a value based performance measure that gives importance on value creation by the management for the owners. Profit maximization as a concept is age-old, wealth maximization is matured and value maximization is today’s wisdom. Stern Stewart’s EVA raises storm in corporate world and gives a new way to think about rewarding management. Usability of EVA largely depends on the quality of accounting information system, as traditional information system will not provide sufficient information to compute true EVA. Thus, EVA is required to be tailored in line with accounting system, management philosophy and the degree of demand of such a system. In this paper, an earnest effort has been made to explain theoretical foundation of EVA with its origination, definition, ways to make it tailored, adjustments required, scope and some other related issues. The methodology used is a type of theoretical mining of logics resulting a step-by-step process required for EVA implementation. As corporate house plans to move from traditional to value based performance measures, EVA would yield good result and the paper may become helpful to them to comprehend the methodology. Keywords: Value Based Performance Measure, Tailored EVA, Residual Income (RI), Accounting Distortions, Shareholders’ Value, Value Based Measure, Market Value Added, True EVA 1. Introduction Economic Value Added (EVA) is the financial performance measure that comes closer than any...
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...Business Policy & Strategy BUS 490 -- Examination One -Each student will be asked to answer four of the following five questions. You are allowed to use no more than a single sheet of 8.5”x11” paper (one-sided) to answer each question (Four pages in total). You may use an additional sheet of paper for any chart, table, or illustration that would support your answer. Please do not put your name or other form of identification on any of the sheets that you submit. In addition, please do not staple the pieces of paper upon submission. The completed exam is due on October 4, 2013 by 5:00 pm. If you have any questions, please do not hesitate to call. 1) Please define the term economic value in your own words. Next, describe how a firm gains a sustainable competitive advantage other the other members of the strategic group. Finally, explain how two firms that generate different levels of perceived benefit for a product (Firm A generates a high level and Firm B generates a low level) can have the same competitive position. You may use a mathematical formula to support your position. 2) Please describe the general environment for companies that produce confectionary treats (e.g., candy bars). Please use the seven categories that were discussed in class, and have two items for each category. Use may use bullets points and structure the format so that it follows the template for your Individual CEO Project that is on Campus Connect. 3) Please describe the external threats for Barton...
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... Rhonda Roberts, Ricardo Salinas, Elizabeth Urquidez, Deandre Wakefield ECO 365 March 09, 2015 Matthew Anger Mergers and Joint Ventures Introduction - DEANDRE The ability for a business to grow and remain competitive there are occasion where Joint Ventures and or Mergers may become necessary. It can be quite daunting to reach an agreement to work together in the right format of legal entity. Partnerships of this type can help to achieve specific goals. Economic variables lead way to many reasons of offsetting cost and losses. In this essay we will cover the different types of mergers and the effects of joint ventures. Research methods will results in recommendations of each type and how this effects the distribution of products and or services. Horizontal Mergers Vertical Mergers - RHONDA Conglomerate Mergers Differences Between Mergers and Joint Ventures - DEANDRE Starting a business is a big step to developing your brand. The market will argue that running a business is even harder. Economic challenges make it difficult for the entry to be more than a small business at first. Partnerships with other firms, organizations, and investors are a few options to make the transition a little more reassuring. There are two options after finding the right source are joint venture or merger. Options being provided include a varying degree of collaboration between the two businesses. (Small Business, 2015) Firms decide on a legal structure and the concept for...
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...1. 1995- TWA Flight Wreckage caused an increase in airport security increasing ticket prices and wait time. 2. 1996- The terrorist attack disrupted an international event which generated thousands of business transactions during the Centennial Park Bombing. 3. 1997- President Clinton barred federal funding for any research on human cloning. This would slow the introduction of new medicines developed from human cloning research. 4. 1998- iMac was launched in 1998 and today it has become one of the most popular desktop computers in the world. 5. 1999- Mobile wireless file sharing came into the picture with the invention of Bluetooth technology. It was not fast like cable transfers, but it was a major step towards mobile data sharing and was immensely popular for wireless headsets. 6. 2000- Trek Technology and IBM began selling the first USB flash drives commercially in 2000 that changed the way the world stored information. 7. 2001- September 11, 2001 terrorist attacked the World Trade Center and the Pentagon. This major event created much uncertainty in the stock market. 8. 2002- Starbucks entered into licensing agreements with National Fair Trade organizations to sell Fair Trade Certified coffee in countries where Starbucks does business. 5,886 stores were opened this year. 9. 2003-Invasion of Iraq Operation “Iraqi Freedom” commences. This generated uncertainty over the Middle East oil supplies. 10. 2004- Created in 2004, Facebook became the world’s largest social network...
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...7 Economic Value Added (EVA) 7.1 What is EVA? • EVA ™ is a measure of performance similar to residual income, except the profit figure used is ECONOMIC profit and the capital employed figure used is ECONOMIC capital employed. This is because it is argued that the profit and capital employed figures quoted in the fillclncial statements do not give the true picture and that the accounting figures need to be adjusted to show the true underlying performance. • Th e bCl sic concept of EVA is that performance should be measured in terms of the value added during the period. It is a measure of performance that is directly linked to shareholder wealth. EVA calculation Net operating profit after tax (NOPAT) Less economic value of capital employed x WAee EVA Decision rule: accept the project if the EVA is positive. 7~ ~. VVh ~.t . !~..~.9..~~.r.~................................... 0 • • •••••••••• ••• • COlltrol'(lblePAT Add back non-cash items such as: 8ccollilting depreCiation n O fl-C Cls h expenses interest paid net of tax Add back items that add value such as: qoodwill 8mortisation development and advertising costs operating lease interest cost • ••• • •• • • • • •• ••••• • •• •• •••• • • • •• • x x X X x X X Deduct: econ o mic depreciation impairment to the value of goodwill amortisation of development and advertising costs =NOPAT (X) (X) (X) X •• ...
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...Introduction It is important for every business to measure and evaluate how well it performs in relation to its objectives and goals. The primary goal of every business is to generate value for the business. The desire to achieve these goals directs scare resources to products that are deemed profitable; however, value is generated not only from profitable products but rather through the effective use and management of resources. Value can be viewed as maximizing wealth of shareholders, and or improving the quality of life. The desire for businesses to generate value has resulted in using and developing different performance measurement, sometimes centered on the wrong financial measurement, and strategy. Businesses today only look cash strategies, and sometimes operational goals, and ignore the main reason for existence, which results in rewarding employees and even management for the wrong achievement instead of procedures and strategies that actually added value to the business. If the main goal is to generate value then, it follows that measuring performance must be geared toward this, and not solely on profitability. This paper will discuss the importance Economic Value Added (EVA) in measuring performance of a business. It will also look at how it is calculated and possible disadvantages Definition and History It is normally to see many businesses use the profit base measurement as their primary measure of evaluating the performance of its organization, however, this...
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...CAPITOLUL II. VALOAREA ECONOMICĂ ADĂUGATĂ (EVA) ………………………… 8 1. Valoarea economică adăugată şi managementul bazat pe valoare ………………….. 8 2. Implementarea sistemului EVA ……………………………………………………. 11 3. Calculul valorii economice adăugate ………………………………………………. 15 4. Factorii determinanţi ai valorii economice adăugate ………………………………..20 5. Model de analiză a valorii economice adăugate …………………………………… 23 6. Avantaje și limite ale valorii economice adăugate …. ……………………………...25 7. Îmbunătăţiri ce ar putea fi aduse metodei …………………………………………...29 BIBLIOGRAFIE I. NOȚIUNI INTRODUCTIVE PRIVIND MANAGEMENTUL BAZAT PE VALOARE I.1. Nevoia apariției managementului bazat pe valoare Pe măsura dezvoltării în timp a companiilor, mediul economic și concurenţial a devenit tot mai complex şi activitatea firmelor s-a diversificat fiind nevoie de noi instrumente şi tehnici manageriale mai performante care să permită firmelor să depăşească obstacolele din ce în ce mai numeroase şi mai costisitoare. În acest context, managementul tradiţional, bazat pe analiza şi interpretarea datelor contabile, şi-a dovedit incapacitatea de a evalua şi de a exprima, într-o manieră cât mai clară şi cât mai corectă, performanţele reale ale companiilor. Astfel, s-a impus o schimbare în atitudinea managerilor. Aceştia tind să mute accentul dinspre maximizarea veniturilor întreprinderii înspre maximizarea valorii create pentru acţionari, dinspre folosirea cu precădere a datelor contabile înspre folosirea...
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...Value-Based Purchasing to Address Failing Markets University of South Florida The healthcare industry, specifically the patients receiving care, have been subjected to a service based industry where they must pay increasing costs for services and customer service has essentially taken a back seat. The implementation of Value-Based Purchasing (VBP), as outlined in the Patient Protection and Affordable Care Act (PPACA), has now addressed this concern. The move from a prospective payment industry to a value based industry is to benefit the patient while holding providers accountable for usage of procedures and tests, and providing increasingly higher quality of care to their patients. Due to the high volume and high expenditures specifically in hospitals, there is a new type of approach being taken when it comes to patient care in acute care settings. The prospective payment system (PPS) was established in the 1980’s in conjunction with Medicare’s Diagnostic Related Groups (DRG) system. This was established due to the rising costs of to the social security administration (Mayes, 2006). During this time hospitals were placed under pressure to accept the new payment system and structure due to an exponential rise in Medicare expenditures. To give perspective on the growth of expenditures to Medicare enrollees, in 1972 Medicare had approximately 21 million enrollees and expenditures approximated $7 billion dollars. In 1982, Medicare enrollees amounted to 30 million and expenditures...
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...Jason Coojacinto, Sid Guanio, Kelvin Ong IEFINMT ER1 1. What is EVA? What are the advantages and disadvantages of using EVA as a measure company performance? Economic Value Added (EVA) is basically an estimate of a company’s economic profit. It is known to focus on managerial effectiveness in a year which represents the residual income that is in excess after taking out the cost of all capital not considering the charge for equity capital. An advantage of using EVA to appraise performance is that it takes into account all costs inclusive of the cost of equity capital. The disadvantage faced when using this is the workability of the calculations this require. It is difficult to find the correct cost of equity, EVA is known to be irrelevant for some companies, and lastly is that the EVA value of a big company, which is less efficient than a small company, would still turn out to be greater than that of the small company. 2. Please examine the historical performance of Coca-Cola and PepsiCo in terms of EVA. What trends do you observe? What are the factors behind those trends? What do you think are the key drivers of EVA? Comparing the historical performance of Coca-Cola and PepsiCo with EVA, it seems that the EVA of Coca-Cola is more stable compared to PepsiCo. However, PepsiCo rises faster than Coca-Cola because it’s EVA surpassed Coca-Cola in year 2000 even if it’s EVA from 1994-1997 was negative. Factors behind those trends | Coca-Cola | PepsiCo. ...
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...Internet Value Chain Economics Gaining a deeper understanding of the Internet economy W hen considering the technological innovations of the past 50 years, the Internet is probably the one that has had the greatest impact on everyday life in developed economies. Nearly six out of 10 Americans now shop online and more than four out of 10 bank online. Twenty hours of video are uploaded to YouTube every minute, while 5 percent of all time online is spent on the social networking site, Facebook. The Internet has also changed the way in which businesses operate—today, 64 percent of C-level executives conduct six or more searches per day to locate business information. The Internet has been a source of great good—as evidenced by the role played by Internet-based mapping and communications in the relief effort following the recent Haiti earthquake. The Internet also has shown a negative side—more than 97 percent of all emails are spam, while more than 70 percent of Americans fear online identity theft and 57 percent feel that their personal privacy has been greatly diminished by the Internet.1 Behind these statistics and headlines, however, there remains a low level of understanding of how the Internet economy works. Who are the different players involved in the Internet, beyond the flagship names? How is the industry structured and how concentrated is it? How do players make money and how do revenues flow across the value chain? Is the industry attractive in terms of growth...
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...Research | What are the cultural and economic values of the Basilica of the Holy Blood that the cultural tourists in Bruges attach to? | Tutor: Greetje KrijgsheldGroup: TM2LMembers: a. Tran Huy Thuc: 322938 b. Tran Le Viet Thao: 331287 c. Elena Loredana Sandu: 294594 | 1/14/2015 1/14/2015 Table of Contents Chapter 1: Introduction 3 Introduction 3 Problem statement 3 Overview of the report 3 Chapter 2: Literature review 5 Cultural heritage 5 Basilica of the Holly Blood visitor 6 Needs and demands 6 Cultural values (Intrinsic values) 6 Cultural values subsist the economic value 6 Economic value 7 Direct consumption 7 Indirect consumption 7 Beneficial externality 8 Economic value’s measurements 8 Contingent valuation method 8 Travel cost method 8 Choice modelling 9 Chapter 3: Research design/Methodology 10 Conceptual model 10 Research questions 12 Research method 12 Population and sampling 13 Limitations of the research 13 Chapter 4: Results and analysis 14 Research question 1 14 Research question 2 14 Research question 3 16 Chapter 5: Conclusion and recommendations 19 Appendices 20 Questionnaires matrix 20 SPSS 20 Reference list 26 Chapter 1: Introduction Introduction The Basilica of the Holy Blood is a Roman Catholic basilica in Bruges, Belgium and was originally built in the 12th century as the chapel of the residence of the Count. The uniqueness of the Basilica of Holy Blood lies in its...
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...* Tracking the economic value of the embedded technology: Future outlook and trends: The Embedded Digital Technology use in our everyday life is highly significant. To some estimate, around 98% of all the programmable digital devices are in some way embedded which includes the digital devices which embedded under the humans skin. Both current and future studies and trends suggests to a dramatic potential for a much bigger growth. All the future outlooks of this technology points to a much wider use based on both enhanced functionality and cost reduction. “There are now more embedded devices than people on earth. As chips and wireless communications become universal and inexpensive, an enormous potential is created for new applications and novel ways to support our society and people’s lives” said Viviane Reding The former European Commissioner for the Directorate General Information Society & Media. This study by author Geomina Turlia and conducted with the support of European Commission, focused on the inter-linked between macro and micro approach to the technology so it can support the importance of the proposed overall methodology when looking into the economic value of the embedded devices in general. However, it is as important for implementation purposes to also use other supported tools like using a European National Accounts Data so finding the correct economic value can be refined specifically when more needed sectorial or thematic studies can be further conducted...
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...under control and maintain profitability. However, it is important to balance cost-controls with long-term growth. * The 5-year measurement cycle provides an adequate horizon for management decision-making and should motivate managers to take on projects that add long-term value to the firm. * Although the exact calculation of the performance factor was not described in detail, the plan appears to be fairly straightforward and easy to understand for both managers and stakeholders. Furthermore, the inputs of the performance factor are common metrics and its calculation is likely a weighted average of these factors. The bad * With respect to the valuation of equity securities of a private firm, the American Institute of Certified Public Accountants has established guidelines for private firms using stock-based compensation plans to derive market value of equity. The guideline recommends three approaches: a market or relative valuation approach; an income or DCF-based approach; and, an asset replacement cost approach. Instead of hiring a third-party valuation specialist, or using this guideline themselves, Braddock management estimated the market value of equity by multiplying the book value per share (BVPS) by a...
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...In corporate finance, Economic Value Added or EVA, a registered trademark of Stern Stewart & Co., is an estimate of a firm's economic profit – being the value created in excess of the required return of the company's investors (being shareholders and debt holders). Quite simply, EVA is the profit earned by the firm less the cost of financing the firm's capital. The idea is that value is created when the return on the firm's economic capital employed is greater than the cost of that capital; see Corporate finance: working capital management. This amount can be determined by making adjustments to GAAP accounting. There are potentially over 160 adjustments that could be made but in practice only five or seven key ones are made, depending on the company and the industry it competes in. NOPAT is profits derived from a company’s operations after cash taxes but before financing costs and non-cash bookkeeping entries. It is the total pool of profits available to provide a cash return to those who provide capital to the firm. Capital is the amount of cash invested in the business, net of depreciation. It can be calculated as the sum of interest-bearing debt and equity or as the sum of net assets less non-interest-bearing current liabilities (NIBCLs). The capital charge is the cash flow required to compensate investors for the riskiness of the business given the amount of economic capital invested. The cost of capital is the minimum rate of return on capital required to compensate investors...
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