Using economic profit as a powerful company
A conference organised by Valletta Fund Management
Valletta Fund Management recently organised a conference on "Using
Economic Profit as a Powerful Company Valuation Tool". The conference,
held at the Hilton, was addressed by John P. Laschenski, a management
consultant, accountant and business educator based in Rochester, New
York and was attended by a number of distinctive guests from the local
financial sector - namely stockbrokers and banks.
In his address, Mr Laschenski combined theoretical analysis and practical
techniques, with an emphasis on real-world applications related to companies
listed on the Malta Stock Exchange.
Mr Laschenski described how many believe that creating new measures
of success in the marketplace is the primary job of today's Chief Executive
Officer whilst various factors like earnings, market share, brand recognition
and product range can cause the market value added grow up. Mr Laschenski
explained that the size of the company's return on invested capital
(ROIC) and whether the company's invested capital is growing are the
two fundamentals for company's economic growth. In this regard, the
strategic goals for any enterprise may be established through appropriate
use of the so called economic profit model.
During a discussion about mergers and acquisitions, Mr Laschenski pointed
out how nowadays, merger and acquisition activity around the world is
very intense and has grown substantially over the last five years. He
explained that the financial structure of an acquisition is carried
out parallel to the undertaking of a capital project.
Speaking about the objectives of the conference Charles Borg, VFM General
Manager, commented, "The event created a forum of discussion for
a clear understanding of what really produces shareholder value in todays
business. Moreover, we strongly believe that this conference, the first
of its kind in Malta, has been an extremely useful and informative event
designed to focus on the issues and trends in equity valuation providing
a clear opportunity to gain new insights in this field and how it relates
to our business organisations."
The conference discussed and evaluated the use of financial measurement
and management systems such as free Cash Flows, Economic Value Added
and Economic Profit as well as the use of these cash based measures
to evaluate business performance and relate it to stock market performance.
Such a forum should generate a better understanding of today's organisations
best practice in value based management in.
The topics discussed included How managing shareholders value
has emerged as the primary job of todays CEO, The
economic profit or EVA model and the evidence for its validity
and Using economic profit to run a business: strategic objectives
and executive compensation.
Mr Laschenski creates and leads financial and accounting seminars throughout
the United States, Canada, Europe and the Middle East. Before founding
his own consulting firm, Mr Laschenski designed and managed the development
of computer systems for IBM Corporation and was a financial executive
at Xerox Corporation.