Why We Need to Update Financial Reporting for the Digital Era

Harvard Business

In our recent HBR article , we argued that financial statements fail to capture the value created by modern digital companies. and (ii) how can digital firms improve their financial reports to communicate sources of value creation in their businesses? Business students have traditionally considered net present value, payback period, and hurdle rates as necessary tools to determine which project to select. Martin Konopka/EyeEm/Getty Images.

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Why You Should Crowd-Source Your Toughest Investment Decisions

Harvard Business Review

Most companies – including the movie studios in Hollywood – over-rely on basic tools like discounted cash flow and net present value. In highly uncertain contexts, the best tool is often “case based decision making” — developing a set of analogous situations (like the previously released movies), determining the results achieved in those cases, and then assessing how similar each case is to the decision at hand.

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What Private Equity Investors Think They Do for the Companies They Buy

Harvard Business Review

” PE firms typically take three types of value increasing actions — financial engineering, governance engineering, and operational engineering. These value-increasing actions are not necessarily mutually exclusive, but it is likely that certain firms emphasize some of the actions more than others. (We In operational engineering, PE firms develop industry and operating expertise that they bring to bear to add value to their portfolio companies.

Still Many Ways to Skin a Capital Cost

Harvard Business Review

When executives evaluate a potential investment, whether it's to build a new plant, enter a new market, or acquire a company, they weigh its cost against the future cash flows they expect will spring from it. To make sure they're comparing apples to apples, they discount those future cash flows to arrive at their net present value.

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