Corporate Restructuring Towards Competitive Strategy
It is very important for a leader, to assess and evaluate whether the business unit under his control is really profitable. There are several ways to assess a Strategic Business Unit (hereinafter abbreviated to SBU). One of them, and commonly used is to calculate the present value of expected cash flows can be generated from the SBU is concerned. The present value of those cash flows is the value of the SBU.
Below are the stages of the calculation with the model of discounted cash flows (discounted cash flow model), which among other things I got from her book pack, titled “Values-Based Corporate Restructuring. Towards Competitive Strategy “(2004: 83-105). SBU assessment phase consists of 10 stages, which in outline as follows:
a. Stage 1: Set the base “FCFE” (Free Cash Flow for Equity)
FCFE is the abbreviation of Free Cash Flow for Equity, which means, the cash flow to shareholders’ rights, which in principle can be withdrawn by the shareholders. At this stage FCFE starting calculate the base year, is where the company will sell the SBU is concerned, or during which the company will buy a company to be SBU. Or when a company wants to know the value of the SBU, although no firm plans make buying and selling SBU is concerned.
b. Stage 2: Calculate FCFE customized.
Need to be adjusted to reflect FCFE FCFE actually generated from normal operations. Although based on the financial statements audited by public accountants, the value of FCFE still needs to be reexamined. Because, FCFE value accounting, the corresponding figures in the financial statements, have not demonstrated economic value of FCFE. This is due to still plenty of room for companies and public accounting to beautify the financial statements. The cases which present the company’s financial statements are not valid, but to obtain the opinion of “fair unconditionally” by a public accountant has been widely publicized in the newspapers.
c. Stage 3: Consider the company’s actions that may
Companies also need to identify actions that may be performed prior to peddle copies of an SBU. Such actions could be very significant impact on the SBU is concerned, for example, when the company auctioning off some of the assets of the company, of the firm’s value will decline.