Economic Profit Explained
[secret] Lean Centric Design (LCD) encapsulates the start, middle and longterm viability of a productivity transformation build. Focus on driving Economic Profit strategy providing longevity and ever increasing value.
01.
Shareholder Value
Economic Profit is the performance function that delivers shareholder value. The shareholder-base will realise the pragmatic return on their invested capital and stoke the burning platform of LCD strategy [Lean Centric Design will do this]
02.
Return On Invested Capital
ROIC=Profit After Tax/Invested Capital: In other words, focus on driving cost and invested capital down and revenue generation up. [Lean Six Sigma 2.0 will do this]
03.
Weighted Average Cost of Capital
The WACC is basically a hurdle rate for expected returns based on a company’s debt structure and the market conditions.
04.
The Growth Lie Burning Platform!
Companies with high growth and negative Economic Profit are actually destroying value and are not viewed favorably in the marketplace. [Lean Centric Design will counter this]
