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SCMMS2 (Fach) / Interface Operations and Finance (Lektion)
- What is the cash conversion cycle? Measures duration between purchase of inventory and collection of accounts receivables Cash Concersion Cycle : Inventory processing period(days) + Days to collect accounts receivable - Days to pay accounts payable
- What is the Economic value? Economic value is created whenever the Return of invested capital (ROIC) in a corporation exceeds the cost of capital (WACC) Economic Value Created = Invested capital x (ROIC-WACC)
- Describe the four step approach that links financial performance to operational variables Step 1 : Identify high performing companies based on superior financial performance (Stock price, ROIC, Ebit) Step 2 : Develop ROIC tree (or other form of a KPI tree) linking the financial measures to operational value drivers Step 3 : Use productivity ratios to explore which value drivers provide the source of superior performance Step 4 : Estimate financial performance improvement potential if performance laggard (trödelei) improves operational measures to best in class