In today’s briefing:
- Challenge Is to Simultaneously Reduce Cash on Hand and Achieve Profitability over Cost of Capital
Challenge Is to Simultaneously Reduce Cash on Hand and Achieve Profitability over Cost of Capital
- Managers self-analyze the factors that lead to P/B of below 1x, as companies fail to appreciate their growth potential and to ensure profitability in excess of their cost of capital.
- This seems to be dilemma in that companies’ failure to realize sufficient profitability, along with insufficient growth investments, prevents them from sharing the image of corporate value growth with investors.
- Managers believe that the first step is to improve ROE by reshuffling business portfolios and promoting profitability improvement, but reducing excess cash and increasing shareholder returns should be pursued simultaneously.
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