The Financial Institute of Corporate Treasurers in Poland or Finansowy Instytut Skarbnikow Korporacyjnych, a public interest organisation promoting education and best practice in the use by businesses of banking products and financial instruments, has now relaunched its website here – and some of the content on this website will be shared over there and vice versa. Subcribers to FISK can access the password protected content on this website, for example, such as the recent article on the use of factoring to achieve the unlocking of otherwise disallowable tax cash flow benefits.
The new FISK website is crammed with information about best Treasury Management practice and on it also you can register for the seminars and courses, a new virtual treasury college leading to FISK’s certification as a Corporate Treasurer, on the way learning techniques which will both save and earn money for your organisation.
I was recently asked whether there was any value in a loss-making business that had had a good reputation for 30 years.
Put very simply, and almost as a philosophical maxim, the sum of the value of an enterprise is equal to the sum of the NPVs of its projects (including as one project the liquidating of its assets, if that’s what it has to do). If it has no projects, it has no value. If it has only or overwhelmingly negative NPV projects, then it has negative value. Even the case of Woolworths shows you that a name that we all grew up with cannot prop up negative NPV projects for long. Therefore the way to assess value is to make a business plan for all the projects based on assumptions analysed down to the smallest level logically appropriate, with values ascribed to those assumptions which are objective and as researched as possible, and then to run PV calculations on the business plan.
Sure, someone will come along and say “Hey, that’s too complex. What something is worth is what someone else would be willing to pay for it. This I know, for the IFRS tells me so” – but in the final analysis what that other person is willing to pay will only be based on what he thinks he can make from it in the terms stated above, less his margin for risk of buying it. No business person actually buys at the value in use, they want to make a profit on buying it at less than that, but their perception of the ultimate value should be based on the sum of the NPVs of the projects. Read more…