Financial strategy - Essay Example

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Financial strategy

In the recent past, companies are adopting the value based management approach which is a formal systematic approach used in managing companies with an aim of achieving the objective of maximizing value creation and shareholder value (Chapman, Hopwood, & Shields, 2009, p. 1248). Value based management focuses on the key drivers of value thus helping companies achieve their objectives (Starovic, Cooper, & Davis, 2004, 2004, p.15-17). Increasing focus on core competencies has forced companies to outsource some services to ensure that they remain relevant in terms of their revenues and expenditure in comparison with their competitors. Knowing a company’s position is important because it is useful in defining and redefining strategies to improve profit margins and to capitalize on company’s strengths to enhance shareholder value creation (Starovic, Cooper, & Davis, 2004, 2004, p.10-17). Various methods have been used to measure the shareholder’s value but the most commonly used are the profitability analysis, Strategic Profit Mode (SPM), and the Economic Value Added (EVA) method. ...Show more

Summary

SHAREHOLDERS VALUE By Institution Date Shareholders Value Shareholder value is the measure of a company’s success in the extent to which it enriches shareholders through management’s ability to grow earnings, dividends and share price. The management is increasingly under pressure to increase shareholder value and minimize the arising agency conflicts between shareholders and the management (Bick, 2009, p…
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