Dec 122007
Much of what we know about strategy comes from research into why some firms are more profitable than others – but investors value growth in cash flows [see chapter 1 of Strategic Management Dynamics]. An article in McKinsey Quarterly ‘How to choose between growth and ROIC‘ [return on invested capital] confirms the importance of this issue and shows how investors benefit from growth, depending on companies’ profitability.
[...] Published by Kim Warren March 23rd, 2009 in Strategy Tags: . I made a strong case in a previous post that strategy research should have been asking how strong firms grow cash flows, not deliver profit [...]
[...] ratios and urges bench-marking to identify cost-reduction targets. As McK-Q itself has noted, raising ROIC and delivering cash-flow growth are not the same, and frequently [...]