Which MBAs Make More: Consultants or Small-Business Owners?

Harvard Business

The value of that carried interest, of course, depends on the performance of the business, its size, amount of debt used to finance the acquisition and the eventual pricing of a subsequent sale. million EBITDA company for 4x paying $6 million and using 50% debt financing. Entrepreneurship Career planning Digital ArticleHBR STAFF. Compensation is, of course, more than money.


Still Many Ways to Skin a Capital Cost

Harvard Business Review

To make sure they're comparing apples to apples, they discount those future cash flows to arrive at their net present value. Estimating the rate at which to discount the cash flows — the cost of equity capital — is an integral part of the exercise, and the choice of rate has a significant effect on estimates of a project's or a company's value. Finance Strategic planning CAPM

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Warren Buffett's 2010 Shareholder Letter: What to Expect

Harvard Business Review

Establish "an unbending standard of performance" : Since 1965, Buffett has annually compared Berkshire's compounded growth in book value per share to the growth in the S&P 500 (plus dividends). But why compare apples (book value) to oranges (share price and dividends)? Buffett explains that book value is the best proxy for "intrinsic value," the net present value of all estimated future cash flows. billion more than their total tangible book value.

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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.


How CMOs Can Get CFOs on Their Side

Harvard Business Review

This lack of an analytical approach has traditionally formed a barrier between marketing and finance. CFOs are more interested in capital investment estimates, net present values, and a clear outline of the trade-offs of any investment. Creating transparency into its operations is the starting point for marketing to help CFOs understand where and how value is being gained or lost, which makes budgeting discussions much more productive. Finance Marketing


Stop Focusing on Profitability and Go for Growth

Harvard Business

Today, the average cost of equity capital sits at close to half that: just 8% for the roughly 1600 companies comprising the Value Line Index. So, in real terms, debt financing is essentially free. The ready access to low-cost capital should change the way business leaders think about strategy, and in particular the relative value of improving profit margins versus accelerating growth. But when capital costs are low, the time value of money is low.

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Why Quants Should Manage Your Supply Chain Risk

Harvard Business Review

In an uncertain and volatile world, risk management — a previously unsexy subject for many managers who created annual updates or reviews of their company's risk management plans — is now a front-burner issue for many. Let's start by defining what we mean by risk, which is simply the possibility of more than one outcome (of unequal values) to a given future state. The possibility of more than one future outcome can very easily generate a cost in the present.