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Performance Measurement

Strategy Driven

Supplementing profits with ROIC and revenue growth is a step in the right direction to ensure that the profits a business earns are actually creating value, not simply over-consuming capital that another company could better deploy. However, profits, ROIC, and revenue growth are backward looking.

ROIC 62
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Death Knell for the Category Killers?

Harvard Business Review

Retail store asset productivity has been in decline since the recession of 2007 and we believe that this trend will accelerate over the coming years. For mass market retailers who understand this and react quickly, this upheaval is survivable. Bricks and Mortar store productivity declines will likely accelerate over the coming decade.

ROIC 11
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CEOs Don’t Care Enough About Capital Allocation

Harvard Business Review

The results can be impressive: if your firm’s return on invested capital is 8% and you have an 8% cost of capital, a 1% improvement in ROIC will increase firm value by 19%. There are just two ways to increase ROIC: improve operating profit (by increasing revenues or cutting costs) or invest capital more wisely.

CEO 8
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How Companies Can Use Investors to Their Advantage

Harvard Business Review

He asked one former major investor for a reaction to the company’s prediction (accompanying poor quarterly results): “that the [current] market contraction will bottom out soon and our profits will improve.” It would implement targets linked to shareholder value, including ROE and ROIC.

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What If Companies Managed People as Carefully as They Manage Money?

Harvard Business Review

Based on our research , inspired employees are three times more productive than dissatisfied employees, but they are rare. A veritable alphabet soup (ROA, RONA, ROIC, ROCE, IRR, MVA, APV, and the like) exists to measure our financial capital. Energy, too, is difficult to come by. There you have it.