capstone-week11-12 - Housekeeping Lastweek: Thisweek:...

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Housekeeping Last week: Target case introduction John Allison talk This week: In labs: Finalize details on Target case Video: The secret life of garbage Next week Midterm II Note: We DO have lecture next week!
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Midterm course evaluations In general, pretty positive  Some overall positive themes Structure Lab instructors Hands-on format Some challenges: Clear expectations on the Target case Slow down a little Stick with “not tricky” exam style (Ties?)
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Topic: Strategic Control
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Strategic Control How do we know if it’s working?
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Strategic Control Measure (performance) Compare (to objectives) Act (to correct problems) What gets measured, gets done… What gets measured right, gets done  right
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Strategic Control Is an exercise in figuring out how we  define measuring things right What’s the goal? What’s the metric? There are some common ones
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Strategic Control KSF’s (PLF, sales ft 2 , occupancy rates) Financial ratios Liquidity  Activity  Leverage  Profitability  Simple, but useful probes In isolation, over time, over industry
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Ratios:  Liquidity    Current Ratio: Quick Ratio: Current assets - inventory ---------------------------------- Current liabilities Current assets ------------------------ Current liabilities
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Ratios:  Activity    Asset turnover: Sales ---------------- Total assets Inventory turnover: Sales ---------------- Inventory
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Ratios:  Leverage    Debt ratio: Total liabilities ------------------- Total assets Debt to equity: Total liabilities ---------------------------- Total common equity Times interest earned: EBIT ---------------------- Interest expense
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Ratios:  Profitability    Return on assets: Net income ------------------- Total assets Return on equity: Net income ---------------------------- Total common equity Return on sales: Net income ---------------------- Total sales
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Strategic Control KSF’s Financial ratios Liquidity (Quick ratio) Activity (Inventory turnover) Leverage (D/E) Profitability (ROE, ROS, ROA) Simple, but useful probes. In isolation, over time, over industry
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Strategic Control Alternative measures: EVA (Economic Value Added) Altman’s Z The Balanced Scorecard (later on)
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Economic Value Added (EVA)    After-Tax Operating Profit - Cost of Capital = Value Created (Destroyed)
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Economic Value Added (EVA)    After-Tax Operating Profit - Cost of Capital = Value Created (Destroyed) Question:  How many of you would invest in a stock  (equity) if its expected rate of return was 0%?
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Economic Value Added (EVA)    After-tax Op Profit Minus Cost of Capital Equals EVA AB $1,756 Op profit 11.3% .67 eq @ 14.3%
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This note was uploaded on 09/16/2011 for the course MAN 4720 taught by Professor Staff during the Spring '08 term at University of Central Florida.

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capstone-week11-12 - Housekeeping Lastweek: Thisweek:...

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