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Disney to Loose $200 Million on a Movie Flop

admin — Tue, 20 Mar 2012 17:38:48 +0000

Walt Disney has announced today it estimates to trash approx. $200 million on the movie John Carter. This would make the sci fi Carter movie probably the largest loss making movie of all times.

The production costs exceeded $100 million, whereas the movie had revenues to date of $198 million, which Disney shares 50-50 with the cinema operators. John Carter received bad reviews.
It looks to me that the movies are getting bigger and bigger…risks for the producers.

US Indexes Down due to China Worries

admin — Tue, 20 Mar 2012 17:17:02 +0000

After 10 days of almost consecutive gains, US stock exchages indexes started to point mildly down. S&P went down TO 1,406, only 10% below the 1,550 plus record from 2007. All the analists say this id due to a weaker demand of raw materials from China, which in turn is slowing down…in exports.

In truth, this is not a big worry for at least one reason – the Chinese Communist Party is trying hard to get more purchasing power for the locals. Increasing the minimum wage and offering a minimal pension of 500 yuan should generate more consumption in a huge market craving for aspirational merchandise. To me it looks like a smart strategy.
So maybe one day soon the Chinese market will become larget than Europe – who knows?

Funny Side Post About Online “Gurus”

admin — Thu, 01 Mar 2012 16:50:04 +0000

I was today reading about the “famous” marketeer Tim Lowe. He showcases a photo with his two English expensive cars in front of a mansion on the homepage and pretends to have helped lots lots of customers to develop their business online. All good here, you know, we are all billionaires on paper, at least with 1929 Deutsche Marks (finance guys will get it).
So I go through his website full of testimonials and figures. Greed is good and he got 19 Million quids (aka sterling pounds revenues) with his listbuilder bla bla bla… And then some things strike me and I started to laugh by myself in front of the computer screen. Let us see if you laugh at these too:
- the website has many pages but no comment possibility – how can such a successful entrepreneur not let the others to freely express his opinions on his terrific adventures in the online marketing domain?
- there is one page on the website called “Tim Lowe Scam” – which just makes you wonder;
- and then the cherry on the pie which made me outburst in laugh – can you believe that this fantastic online marketeer has a website with a page rank of…. 2?
Dixit.

Business Book Review – “Handbook of Corporate Performance Management” – by Mike and Pippa Bourne

admin — Thu, 01 Mar 2012 16:11:22 +0000

Measuring corporate performance has become a hot topics for the boardrooms lately. There is a strange opinion stream that underlines that the correct management tools can actually add value – as opposed to the strategy purists which think that only the 5 P’s of marketing can add value to a company. I myself am often confused, even in practice, since the proofs for each side of the argument are plenty. After all, what is the purpose of a complex management structure beyond controlling and optimizing the business? Is it also to create value by designing, implementing and monitoring a chosen strategy?
“Handbook of Corporate Performance Management” takes this side exactly. A company can add value for the shareholders by shrewdly choosing one type of strategy and implementing it in a proper manner. In this direction, “Handbook of Corporate Performance Management” takes the logical process approach, or that of the scientific management. (This is actually expected from such an academic book on the company performance, right?).
Don’t be misled by the appellative handbook – this is not the usual 1,000 pages tome that we are used with from Finance. You will not fall asleep only reading the summary, on the contrary. “Handbook of Corporate Performance Management” is concise and written on a succinct manner, without making quality compromises. I would have not called it a handbook, but rather a quick reference manual, but well this was not my choice. “Handbook of Corporate Performance Management” goes beyond a list of do’s and don’ts, so I guess that the name reflects an internal struggle too from the editors to correctly position it on the market.
My favorite chapter was “Creating a culture of high performance”, since I am a strong believer in the power of the empowerment. It was capturing many interesting facts, which often are on the companies’ policies but not followed (so well worth reminding) – be it that you need a strong recruitment policy or that you need to create a culture fit with your objectives. I think that many entrepreneurs would have an easier time growing their businesses if they would spend some time in advance thinking about this topic (rather than offering all the employees share packages, especially in the IT sector where corporate culture seems to matter more and more).
All in all, an interesting side-lecture if you want to take a break from the heavy-figures finance books. Again, a nice job from Wiley Professional which has published this book.
Summary:
Preface xi
Acknowledgements xiii
Introduction xv
1. Performance and the Role of Measurement 1
1.1 Introduction 1
1.2 What is good performance? 1
1.3 Whose perspective? 1
1.4 Making comparisons 2
1.5 Present success and future sustainability 3
1.6 How is performance delivered? 3
1.7 The roles of a performance measurement system 5
1.8 The focus of measurement 7
1.9 The role of management and leadership 9
1.10 In summary 10
Further reading 10
2. Practical Tools for Measuring Performance 13
2.1 Introduction 13
2.2 Elements of a performance measurement system 13
2.3 The Balanced Scorecard 15
2.4 The Performance Prism 19
2.5 Objectives and success maps 20
2.6 Designing measures 24
2.7 Summary 30
Further reading 31
3. Designing the System 33
3.1 Introduction 33
3.2 A four phase life cycle 33
3.3 Design 34
3.4 How is this done in practice? 34
3.5 The debate 35
3.6 Developing the success map 37
3.7 Developing the measures 39
3.8 The next stage 40
Further reading 40
4. Managing Implementation 41
4.1 Introduction 41
4.2 Phases of implementation 41
4.3 Why does implementation succeed or fail? 41
4.4 Hurdles and blockers 45
4.5 Steps to successful implementation 46
4.6 Conclusion 48
Further reading 48
5. Assessing and Managing Change 51
5.1 Introduction 51
5.2 Change in context 51
5.3 Assessing resistance to change 53
5.4 Return on management 54
5.5 Assessing likelihood of implementation 55
5.6 Conclusion 58
Further reading 58
6. Target Setting 59
6.1 Introduction 59
6.2 Why do you set targets? 59
6.3 Ten common problems 60
6.4 The target setting wheel 62
6.5 Closing remark 65
Further reading 65
7. Linking Rewards to Performance 67
7.1 Introduction 67
7.2 Pitfalls 67
7.3 Linking rewards to performance 71
7.4 Examples 75
7.5 Summary 78
Further reading 78
8. Managing with Measures – Statistical Process Control 81
8.1 Introduction 81
8.2 Variation and our reaction 81
8.3 Statistical process control 83
8.4 Performance and performance improvement 91
Further reading 92
9. Using Measures – Performance Reviews 93
9.1 Introduction 93
9.2 The Performance planning value chain 93
9.3 Performance reviews 99
Further reading 104
10. Using Measures to Manage – Challenging Strategy 105
10.1 Introduction 105
10.2 Company examples 105
10.3 Testing success maps in practice 109
10.4 Testing in theory and practice 113
10.5 Behavioural issues 117
10.6 Conclusion 118
Further reading 118
11. Keeping Your Measurement Process up to Date 119
11.1 Introduction 119
11.2 Keeping the process up to date 119
11.3 When do you update targets? 119
11.4 Revising measures 122
11.5 Reviewing the measures in line with your success map 123
11.6 Reflecting on your strategy 124
11.7 Challenging strategy 125
11.8 Overcoming barriers to updating your system 126
11.9 Summary 133
Further reading 133
12. Measuring Performance of People 135
12.1 Introduction 135
12.2 Essential elements for high performance 135
12.3 Measuring employee satisfaction and engagement 136
12.4 Performance appraisals 141
12.5 HR performance measures 145
12.6 Acting on results 147
Further reading and sources of information 147
13. Measuring Customers 149
13.1 Introduction 149
13.2 What are you measuring? 149
13.3 Using customer feedback 157
13.4 Summary 160
Further reading 161
14. Measuring Process Performance 163
14.1 Introduction 163
14.2 A process framework 163
14.3 Process measurement 164
14.4 Key process measures 165
14.5 Summary 169
Further reading 169
15. Measuring Competence and Resource Development 171
15.1 Introduction 171
15.2 Defi ning terms 171
15.3 Why measure resource and competence development? 172
15.4 A framework for displaying the relationship between resources and competences 176
15.5 Conclusion 183
Further reading 184
16. Measuring Financial Performance 185
16.1 Introduction 185
16.2 A shareholder perspective 186
16.3 Key shareholder ratios 189
16.4 Accounting ratios 191
16.5 Management ratios 194
16.6 Conclusion 196
Further reading 196
17. Measuring Sustainability 197
17.1 Introduction 197
17.2 What are ‘sustainability’ and ‘corporate responsibility’? 197
17.3 What are the benefits? 199
17.4 Building sustainability into your business 201
17.5 Conclusion 206
Further reading and sources of information 206
18. Creating a Culture of High Performance 209
18.1 Introduction 209
18.2 Creating the right environment 209
18.3 Creating the right culture 210
18.4 Recruiting the right people 212
18.5 What motivates? 214
18.6 Dealing with underperformers 215
18.7 Understanding your influence 216
18.8 Direction setting and engagement 217
18.9 Communication 218
18.10 Conclusion 219
Further reading 219
19. Leadership Vignettes 221
19.1 Introduction 221
19.2 Paul Woodward – Chief Executive, Sue Ryder Care 221
19.3 PY Gerbeau – Chief Executive, X-Leisure 223
19.4 Richard Boot OBE – IRC Global Executive Search Partners 225
19.5 David Child 227
19.6 Baroness Sally Greengross 229
19.7 Charles Carter 231
19.8 Nigel Bond – CEO, Domino Printing Sciences 232
19.9 Mark Lever – CEO, National Autistic Society 236
19.10 Mike Ophield 239
19.11 Andy Wood – Chief Executive, Adnams plc 242
20. Bringing It All Together 245
20.1 Introduction 245
20.2 Performance measurement 245
20.3 Performance management 246
20.4 Performance leadership 248
Further reading 251

Credit Insurance Defaulted on Greece

admin — Thu, 01 Mar 2012 15:22:19 +0000

Nothing seems to work anymore as it used to do in the past. There was a time, not long ago, when a credit default swap was always issued by a smart bank and had always a counterparty which was not so smart to underwrite it. Usually the counterparty was AIG, or some other big insurer who thought it could manage any imaginable risk. But the International Swaps and Derivatives Association just changed this rule today, by deciding that the CDS was not triggered yet, despite the huge decline of 90% in the last months. The debt of Greece now stands at “only” $3.2 billion and is basically covered by no insurance or other type of derivative. This makes the sellers and the consulting banks to look very smart, since they do not have to pay anything… yet.
Actually the various rounds of debt reductions have made only a couple of winners so far – namely the Greek government and the Goldman Sachs and other intermediaries who have already cashed in their advisory fees long time ago. Imagine this – wouldn’t you like to run a big corporation, borrow $32 billion, do whatever you want with it and then get away with only 10% of it because you “are too big to fail”?
Hmmm, I would like to be a government like this one. And take the population on the streets if somebody tries to corner me and ask for the WHOLE amount of money back…

Interesting US Elections – Will The Businessman Win?

admin — Wed, 29 Feb 2012 09:52:58 +0000

We are still on an early stage of the US elections, yet the battle is hot. Mitt Romney, the ex-Bain executive, famous for his jobs creation/destruction yin yang, is spearheading the Republican army. Still, since his victories are not decisive, but rather marginal, which saps the Republican convictions that he is the right candidate. Actually this is the core question – is Mitt Romney good for United States at this stage?
On one hand, he claims he has created in his business career more than 100,000 jobs via its decisions. This is a good thing for an economy still at the bottom of the recession after several years of financial crisis decline. Never mind these jobs were created mostly in retail – or that they added millions of dollars for the Bain’s shareholders. The point should be taken – and so the consequences
On one hand, his business experience is far from qualifying him for the top spot of the world superpower that US is. He is rather a classical type of politician, not the heavy hand that US sometimes needs. Well, this might actually be a benefit for a country who far too often slammed the fist on the table demanding his will to be obeyed. But at the end of the day, his global business experience is far from replacing a global political game experience.
We are too early to predict Romney’s success or failure. Never mind, he will be a very interesting change for the US, should he win. Whilst Obama brought a major change by listening to the masses and promoting leftist measures, Romney might bring a much needed balloon of oxygen for the struggling US businesses. And at the end of the day this could make a major differences because “it’s all about the money”, right? Maybe..

Investing Book Review – “International Financial Statements Analysis”

admin — Tue, 28 Feb 2012 10:16:53 +0000

Investing Book Review – “International Financial Statements Analysis” by
Thomas R. Robinson, CFA, Hennie van Greuning, CFA, Elaine Henry, CFA, Michael A. Broihahn, CFA

This week I managed to finish reading another monster book in finance – “International Financial Statements Analysis” which is specifically targeted for the CFA (Chartered Financial Analysts) students and professionals. To be honest, I was impressed when I first looked at this book – it looked very dense, and packed with various topics which had a vague resemblance with some of my studies I had in the past. At least on the surface… So at first I was very curious – what did it contain?

“International Financial Statements Analysis” is one of the few investment books that delivers exactly what is written on the cover. This is actually a handbook on how to analyze to the last level of detail the financial statements, based on the IFRS (International Financial Reporting Standards) principles. In other words, this is both a financial analysis book and a tome on the International Accounting Standards (IAS) – one could even say that in substance this book is an IFRS manual reverse engineered. No wonder that Sir David Tweedie endorsed it upfront – this is a great tool which anticipates the longed for projects of converging the US and the UK accounting standards.
Even “International Financial Statements Analysis”’s summary reflects the IFRS structure. Just for your broad idea, here’s the book’s summary listed shortly:

Foreword xvii
Preface xix
Acknowledgments xxiii
Introduction xxv
CHAPTER 1 Financial Statement Analysis: An Introduction 1
CHAPTER 2 Financial Reporting Mechanics 25
CHAPTER 4 Understanding the Income Statement 113
CHAPTER 5 Understanding the Balance Sheet 165
CHAPTER 6 Understanding the Cash Flow Statement 215
CHAPTER 7 Financial Analysis Techniques 259
CHAPTER 8 International Standards Convergence 323
CHAPTER 9 Financial Statement Analysis: Applications 349
CHAPTER 10 Inventories 389
CHAPTER 11 Long-Lived Assets 419
CHAPTER 12 Income Taxes 469
CHAPTER 13 Long-Term Liabilities and Leases 505
CHAPTER 14 Employee Compensation: Postretirement and Share-Based 555
CHAPTER 15 Intercorporate Investments 605
CHAPTER 16 Multinational Operations 657
CHAPTER 17 Evaluating Financial Reporting Quality 723
For those wishing to drill through various analytical techniques involving lots of advanced mathematics, “International Financial Statements Analysis” might not be appropriate. But for the ones who are trying to grasp the complexity of getting together comprehensive financial reporting standards, this book is impressive. As an ACCA (Association of Chartered Certified Accountants) member, I can only appreciate how nice this handbook can be for a CFA professional who wants to drill through the world of finance quickly and efficiently. In a sense, “International Financial Statements Analysis” is the ultimate reference manual for drilling through the practicalities of the IFRS – and does a nice job here.

Once again, nice job from the Wiley Professional Publishing House, who made this book accessible for the finance-hungry masses. Keep going!

Requirements for Payday Loans Minimal, Despite Economic Conditions

RaduH — Mon, 13 Feb 2012 13:53:06 +0000

While the economic situation in the United States does not look good for much of 2011, at least one bright spot is how those individuals with jobs can get online loans with relative ease.
The basic requirements for payday loans if you have employment are simple: verify that you have a job and a bank account. This is a factor enabling many who lack a good credit history, and therefore access to credit charge cards, to still be able to weather emergencies without loss.
Here is how payday loans companies make it possible for the working man or woman to get a fast infusion of cash, borrowed against a future paycheque:
• No credit history questions – It is understood by payday loans companies that the borrower may well have a poor credit history. But that factor is calculated into the costs of the loans as well as how they are processed and repaid. By making the repayment schedule top of mind – most loans are repaid in one or two paycheques – the borrower is actually given a chance to improve their credit payment record.
• No collateral required – The more dangerous loan a person can take is when they must offer an item of value (auto, antique, jewellery) for collateralizing a loan. A failed repayment would mean loss of that item, often at a price of pence on the pound. The promise to repay is the near-term paycheque date.
• Be employed – This is an essential, as is being a resident of the U.S.A, be 18 years of age and have a bank account.
The importance of the bank account is based on how quickly the payday loans are delivered to the borrower. Upon completion of an application, the borrower can expect the money to be deposited electronically within an hour.
To any creditor of the borrower, his or her access to payday loans has to be appreciated. Like everyone else, they want to receive their cash as soon as possible.

“Valuation – Measuring and Managing the Value of Companies” (by Tim Koller, Marc Goedhart and David Wessels) – a Financial Book Review

RaduH — Fri, 13 Jan 2012 15:02:44 +0000

It is hard at least not to have a look at this book if you find it on a library shelf. This is valid for multiple reasons:

- “Valuation – Measuring and Managing the Value of Companies” is a book written from a practical perspective by McKinsey practitioners (among the best in the world in the non-bank investment advising for M&A’s)

- The book covers almost any aspect of the corporate valuation, from a stock market perspective to an internal projects point of view;

- “Valuation” comes inside the rigorous “Wiley Finance” collection where you can expect a detailed approach on most of the finance topics.

These said, my expectations were quite high – also the promises made were substantial. And after all, I was just curious why “Valuation” is the bestselling guide on corporate valuation.

The book has a logical system building approach. It starts from the foundations of value, where the authors try to dispel some of the misconceptions about how to measure the worth of a company (e.g. the permanent focus on revenues compared to cash flows). Then it moves on to the core valuation techniques, with lots of explanations and examples. Afterwards, the reader is armed with the key techniques and from the page 348 the book goes into the realm of the practical value measurement. “Valuation – Measuring and Managing the Value of Companies” digs into the stock market and the intrinsic value measures, then looks at how corporate managers manage their companies for increases in value. The book even contains a special chapter on special situations, such as valuing banks or cyclical companies.

“Valuation – Measuring and Managing the Value of Companies” is a technical finance book – do not expect to go through it during your late evenings and as a supplementary reading. Its benefits are quite substantial – as a corporate finance practitioner myself, I appreciated the twists and turns the book took in going into the fine details of what happens in reality. This should help a lot when meeting with various situations – and when you want to perform your due diligence correctly and unbiased.
On the other hand, this is an American book – the approach is often global, ignoring the peculiarities of different cultures. Although a great deal of effort is put into considering multiple stakeholder perspectives, I found that there was some extra work to be done here. At last (but not at least), the book tried to be an objective assessment tool, which does not work always in practice. The latest advances in behavioral finance are often quite intriguing and worth considering. This is not a bad thing – and after all, why would we need anymore the McKinsey consultants if we would apply exactly the recipes from the book and get the best results?
All in all, I found this book a highly informative supplement to the repetitive and theoretical courses of corporate finance.
So much about the book itself. Here’s the content of it and… enjoy.

The book was published by Wiley Finance.
Table of contents:

About the Authors.

Preface.

Acknowledgments.

Part One Foundations of Value.

1 WhyValueValue?

2 Fundamental Principles of Value Creation.

3 The Expectations Treadmill.

4 Return on Invested Capital.

5 Growth.

Part Two Core Valuation Techniques.

6 Frameworks for Valuation.

7 Reorganizing the Financial Statements.

8 Analyzing Performance and Competitive Position.

9 Forecasting Performance.

10 Estimating Continuing Value.

11 Estimating the Cost of Capital.

12 Moving from Enterprise Value to Value per Share.

13 Calculating and Interpreting Results.

14 Using Multiples to Triangulate Results.

Part Three Intrinsic Value and the Stock Market.

15 Market Value Tracks Return on Invested Capital and Growth.

16 Markets Value Substance, Not Form.

17 Emotions and Mispricing in the Market.

18 Investors and Managers in Efficient Markets.

Part Four Managing for Value.

19 Corporate Portfolio Strategy.

20 Performance Management.

21 Mergers and Acquisitions.

22 Creating Value through Divestitures.

23 Capital Structure.

24 Investor Communications.

Part Five Advanced Valuation Issues.

25 Taxes.

26 Nonoperating Expenses, One-Time Charges, Reserves, and Provisions.

27 Leases, Pensions, and Other Obligations.

28 Capitalized Expenses.
29 Inflation.
30 Foreign Currency.
31 Case Study: Heineken.
Part Six Special Situations.
32 Valuing Flexibility.
33 Valuation in Emerging Markets.
34 Valuing High-Growth Companies.
35 Valuing Cyclical Companies.
36 Valuing Banks.
Appendix A Economic Profit and the Key Value Driver Formula.
Appendix B Discounted Economic Profit Equals Discounted Free Cash Flow.
Appendix C Derivation of Free Cash Flow,Weighted Average Cost of Capital, and Adjusted Present Value.
Appendix D Levering and Unlevering the Cost of Equity.
Appendix E Leverage and the Price-to-Earnings Multiple.
Index.

How to Loose $1.2 Billion – Without Excuses

RaduH — Thu, 08 Dec 2011 13:17:25 +0000

I was today reading a Financial Times article about the collapse of MF Global, a global broker dealer. If you did not know the story, here’s a short history:
On October 31st MF Global reviewed that the company lost $1.2 billion from various trades going the wrong direction. The problem was that no warning was issued in advance, making the sudden collapse a shock.
What is interesting is that Mr. Corzine, MF’s previous chief executive, maintains that “I simply do not know where the money is”. Apparently, multiple separation of trading rules were breached and the money in these trades disappeared…
Mr. Corzine’s testimony of today in front House Committee on Agriculture will be enlightning (if he decides to say anything, given his wish to prevail on the 5th amendment). However, it also highlights some equally unbelievable possibilities:
- either the trades (especially the millisecond electronic trades that now most of the brokers undertake) are uncontrollable sometimes (which we testified twice this year with the flash crashes)
- either the money were hidden by the company and the personnel is not willing to disclose,
- either some other (equally unbelievable) possibility.
I am very curious to hear what the characters involved have to say about this and how the story will unfold. Until then, I still hold my belief that at such scale it is possible that something went terribly wrong… or terribly well for somebody else.