By: Corporate Excel Training  11-11-2011
Keywords: Forecasting, Value Drivers, Sensitivity Analysis

ValueGenerator is a unique top down tool used to identify and quantify the key drivers of corporate value creation.

ValueGenerator can best be described as a strategic corporate financial performance analysis and forecasting software application.

The fundamental purpose of ValueGenerator is to provide the CEO and key executives of a company with an effective strategy tool to improve shareholder value.

It is based on the premise that the single biggest responsibility and the first priority of management is to increase shareholder value.

It is a rapid deployment, top down tool used to identify and quantify the key drivers of corporate value creation.

It is specifically designed to provide answers to the following questions:-
  1. What components of performance optimise the creation of shareholder value?
  2. What strategy is needed to bridge the gap between current returns, dividends and share price and the vision relating to these issues for 5 years hence?
  3. What is the dividend capability based on free cash flows?
  4. What are the key drivers of RONA (Return on Net Assets)/ ROCE (Return on Capital Employed) /ROE (Return on Equity)?
  5. If dividend distribution is a key driver of share prices (shareholder value), what effect do undistributed earnings have on share price?
  6. What annual compound growth rates are achievable, and what effect will these have on working capital, cash flows and RONA/ROE?
  7. What is the internal sustainable growth rate based on current profitability, activity and cash flows?
  8. What effect will gearing (leverage) have on shareholder returns (ROE)?
  9. Is the business performance really adding value in relation to the WACC (Weighted Average Cost of Capital) - Economic Value Added (EVA analysis)?

As such, its initial focus is the analysis of appropriate periods of recent historical financial performance.

This analysis identifies the key components of the two operating drivers of all companies, namely:

  1. Operating Profit % (EBIT/PBIT)
  2. Activity (Velocity)

    Operating Profit and Activity combine to generate Return on Net Assets % (RONA). It then demonstrates the impact of various strategic drivers on shareholder returns (ROE%):-

    1. Interest
    2. Tax
    3. Gearing/Leverage

The analysis is provided by a range of analytical techniques, such as:-
  1. Altering/amending operating drivers of profitability and activity
  2. Multiple goalseek
  3. Corporate financial ratios
  4. Breakeven analysis
  5. Sensitivity analysis
  6. Net and free cash flows
  7. Ranks value drivers
  8. WACC % - based on the company's business activity, industry and capital structure
  9. Valuations, including PV of Free Cash Flows, IRR and NPV, Cash Flow return on Investment (CFROI)
The analytical functionality can be applied to both historical and forecast financial performance
Having produced an exhaustive and detailed analysis, the program then provides the user(s) with forecasting capability, to quantify the financial impact of alternative strategies.

A variety of alternative forecasting techniques can be applied.

Analytical options include Auto (9 options), Price/Volume/Cost, GDP & Inflation and company specific customised forecasts.

Forecast periods are user defined.

Alternative forecasts can be stored as different scenarios.

Comparison of up to 48 alternative scenarios is possible.

User friendly - easy to use - Screen/ menu /wizard driven - Rapid deployment.
To be the best top down strategic corporate financial analysis and forecasting program available to corporate decision makers (ERP/ accounting system independent).

  1. Enables users to set up corporate structure by subsidiary, branch, division, or department. Each entity is established as a separate "business unit".
  2. More than one corporate tree is possible. i.e. Alternative trees may be created by region and product line.
  3. Multiple corporate trees allow cross sectional business evaluation
  4. Corporate tree structure may be "collapsed" at desired sub-level to show aggregate performance of "business units" contained in the particular sub-level.
  5. Individual "business units" may be added or removed from a corporate tree.
  6. "Compare" function allows comparison of different "business units" in a corporate tree, or different corporate trees. Enables easy comparison, benchmarking and analysis of differences.
  7. Individual corporate trees or "business units" may be imported or exported from corporate tree structure

  1. Program contains 11 standard templates:
    1. Four trading company templates
    2. Five manufacturing company templates
    3. One financial company template
    4. One services company template
  2. Each template comprises detailed income statement, balance sheet, results and ratios
  3. Templates are customisable to specific company formats and descriptions using Customising wizard
  4. Users may switch templates to permit alternative views / analysis. e.g. CFROI and GAAP cash flow
  5. Templates are used to input / import key data in the form of financial statements
  6. Non financial data (statistics) can be incorporated
  7. User defined performance scorecards can be created

Two types of flow chart are automatically populated:
  1. Operational
  2. Strategic (EVA)
Operational Flowchart structure includes:
  1. Summarised income statement- revenues, cost of sales, gross profit, overheads
  2. Profits before Interest & Tax - value and PBIT %( first operating driver)
  3. Summarised balance sheet - current assets, current liabilities, working capital, non current assets, total net assets
  4. Activity (second operating driver)
  5. Return on Net assets( Capital Employed)
  6. Interest, Gearing, based on actual debt to capital ratio) Tax, Profit retention and sustainable growth
  7. Chart converts into Net cash Flow
  8. Drilldown capability exists in flowchart, as does formula access
  9. Chart options convert income statement into %ages, and Balance sheet into Day sales

Strategic (EVA) Flowchart structure includes:

  1. Summarised income statement- revenues, cost of sales, gross profit, overheads & tax
  2. Net Operating Profits before Interest & afterTax - value and NOPAT %
  3. Summarised balance sheet - current assets, current liabilities, working capital, non current assets, total net assets
  4. Opening capital turn
  5. Economic Return on Capital Employed (EcRoce %)
  6. WACC %,Strategic Leverage, based on target debt to capital ratio) Opening Economic value, Profit retention, and affordable growth
  7. Chart converts into Freecash Flow
  8. Drilldown capability exists in flowchart, as does formula access
  9. Chart options convert income statement into %ages, and Balance sheet into Day sales

  1. Shows impact on key operating results of changes to operating drivers, income statement and balance sheet.
  2. Shows impact on strategic results of changes to strategic drivers, value parameters, income statement and balance sheet.

  1. Standard forecasting options include:
    1. Auto forecasting - 9 options
    2. Manual forecasting - detailed forecasting of revenues volumes, prices, costs, overheads, capex
    3. GDP and inflation based forecasts
  2. Customised forecasting based on company specific drivers

  1. Multiple goal seek options include:
    1. Profitability
    2. Activity (Asset turn)
    3. Return on Net Assets % (RONA %)
    4. Net Operating Profit after Tax (NOPAT)
    5. NOPAT %
    6. Economic Return on Capital Employed (EcRoce %)
    7. EVC opening
    8. User defined goalseek
  2. Each option permits simultaneous alteration of goal seek components in variable increments

Facility exists to create EVC incentive scheme based on EVC value created.
Analysis options include:
  1. Fund flow statement and net cash flow reconciliation
  2. Sensitivity analysis - both operational and strategic. Shows impact of changes in price, volume, cost of sales , overheads, other operating income, interest, taxation, current assets, current liabilities, non current assets, and WACC% on key operating results.
  3. Ratios, including Profitability, Activity, Liquidity, Gearing and Market
  4. Breakeven - current, PBIT and Operating cash levels
  5. Performance summary
  6. Cash analysis
  7. Ranks value drivers

  1. Valuation options include:
    1. Present value of Economic Values Created
    2. Present value of Free cash flows
    3. IRR and NPV
    4. Cash Flow Return on Investment (CFROI)
Users have options of setting period range, discount rates, opening investment and residual values
  • 14 Prebuilt graphs exist
  • Users have option of creating user defined graphs

Printing options include:
  1. All flow charts (operating, strategic, net cash and free cash)
  2. Income statement and balance sheet
  3. Performance summary
  4. Capital structure
  5. Notepad
  6. All ratios

Extensive help function available on all issues.
Comprehensive tutorial (over 1,x100 HTML screens) covering all aspects of corporate performance.
Complete book on corporate finance for executives "Turning Vision into Value" embedded electronically in program.

Keywords: Forecasting, Sensitivity Analysis, Value Drivers,

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