Capital worth is called “asset value” today and is not managed as part of the business
20th century book valuation does not show real enterprise capital worth. The earlier dot.com burst and the current economic crisis show the inaccuracies of market capitalization. Financial analysts employ arbitrary models and methods like “mark to market” to estimate “asset value” or capital solution or enterprise net worth. Most capital utilized by the enterprise is not defined or managed as capital solutions to understand the worth to the business.
Since the business is not managed, the fundamentals of business management are not understood
Much of what is happening today in listed companies is murky creating problems for valuation and corporate governance. Stock markets fluctuate widely because fundamental capital and total business capital net worth is not substantiated and managed. Financial institutions suddenly incurred large losses due to unknown and unmanaged “asset value”, which is the capital worth of solutions in their investment portfolio. Mortgage security worth is based on speculative resale to another unknowing institution. Actual capital worth in the result value-added from mortgages backing the security cannot be managed, so the security should never be purchased.
Corporations are hit suddenly with collapse in corporate capital worth, because the corporate business is not managed and the low worth of subsidiary businesses is unknown. Corporate mergers and takeovers are risky and delayed due to unmanaged and unsubstantiated capital worth and total enterprise business net worth. Government regulators and corporate investors do not have the information on the business needed to prevent management malfeasance and to make informed investment decisions.
21st century business management measures actual business data to manage capital worth
Business management measures results produced and capital solutions utilized to establish a history of result value and capital solution worth. Result managers learn the value-added achieved and to be expected from results. Capital support professionals become familiar with costs, new advances, and effective capital worth. There is a basis for future strategic result values and the costs of development and operations to produce results. Enterprise investments are directed toward future result value and gaining planned value-added. Results are planned with period by period result value-added goals to execute the strategy. The worth of the enterprise business is based on the capabilities to produce strategic result value-added over a payback period.
The worth of all capital investments are managed to determine full business capital worth
Every capital solution has worth in the future costs absorbed for investment payback and value-added to results in utilization and disposal for gain or loss. Solutions of positive worth are assets and solutions of negative worth are liabilities. The total capital worth is the business net worth.
The total enterprise business similarly has worth in the total result value-added produced by the business over an investment payback period to provide the desired return on investment in the business. The enterprise business worth is reconciled with the total capital worth. Capital worth is managed to prevent problems with unknown “asset values” and “intangible assets”. Investors have a transparent view of the business to justify their investments and to understand stakeholder value being created.
The worth of each capital solution is planned, assessed, and managed over its useful life
The worth of each developed capital solution is in the planned future result value covering costs to be amortized and value-added attributed from solution utilization during the remaining useful life and the result value from solution sale or disposal after utilization. New replacement solution worth is planned after solution life within the payback period. The planned solution worth must be greater than the cost of solution acquisition, development, and implementation to justify development. The return on investment in the solution comes from the payback in solution costs absorbed and the gain in attributed result value-added from the solution in utilization to date. The solution worth declines as the solution deteriorates or becomes outdated over its useful life to reach the disposal worth. The period by period decline in solution worth generates performance costs that are charged to the results that utilize the solution. The current worth is updated each period according to determinates guiding the solution. Solution worth is periodically assessed to update the current worth and performance costing determinates. Human personnel capital worth is the planned attributed result-value added over the future planned utilization and reporting period. Facility supply capital worth is equal to total acquisition costs and the performance costs to be incurred in the supply consumption. Solutions received and utilized as a service have worth in attributed result value that should be greater than the service cost.
The total worth of all capital solutions is reconciled with the worth of the business in the capability to produce future result value-added
The total capital worth should be the total business worth. The total enterprise business worth can also be viewed as a total in the future result value-added over the future investment payback period that provides a cost of capital or other business return needed. The planned result value less planned performance costs is the result value-added that provides stakeholder value. Strategic result value-added is planned over future periods that should equal the result value-added attributed to the total capital solutions. The growth in result value-added indicates enterprise business growth. The total result value-added produced at the rate of return needed from the business shows the total enterprise capital worth. The total enterprise capital worth determined is used to reconcile the total of all capital worth for solutions in current or planned utilization.
Planned result value-added is periodically evaluated to foresee potential reductions that would decrease enterprise business worth. The corporation takes actions to prevent the impacts of worth reductions by improving result value-added, replacing declining-value results with new growing-value results, discontinuing results approaching zero value-added, and reducing performance costs. Business downturns are forecasted and managed to minimize impact and prepare the business to flourish in the eventual recovery.
The corporation or enterprise gains by measuring, assessing, and managing capital solution and total business worth
The worth of the corporate or enterprise business is known and transparent enabling business oversight and management. Corporate owners and managers gain significant advantage; in improved management capability to create strategic and stakeholder value, in accurate understanding of the corporate business and progress to strategic value creation, in justified and understandable business worth, and in the ability to foresee and manage downturns to minimize investor losses and manage investor recovery. Government regulators have actual business data to identify malfeasance or looming problems. Stock markets have confidence in the stability and transparent management of the corporation. Investors know that their investments are invested by the corporation to gain a return and growth. There is confidence in the ability of the business to produce result value-added, and a way to know early if actual result totals are not building toward strategic result goals.
Result-performance Management (R-pM) provides the knowledge for actual business management
Result-performance Management (R-pM) is the only source of knowledge and expertise on how to manage the actual business. Forward-looking enterprises are now using R-pM guidance to organize and manage their business to gain breakthrough advantages over competitors burdened by unsolvable 20th century management problems. Business management is explained and documented in the Business Management Toolkit. The Toolkit provides procedures for actual business management and maintains emerging 21st century management conventions, definitions, and standards. Management consultants who base 21st century business management services on R-pM knowledge are licensed to help enterprises learn, organize, and manage the actual business. R-pM and business management are supported at result-performance-management.com.
The Solution to the Economic Crisis is explained in free downloads
Three free white papers explain the dead-end 20th century management problems, such as the failure to plan, account for, and manage the actual business, that caused the economic crisis, the way to eliminate the problems, and a government program to address the crisis by stimulating the economy, solving the problems, building a structure for financial and economic management, and organizing local businesses to flourish in the eventual recovery.
- How to Eliminate Problems that caused the Economic Crisis explains the major unsolvable 20th century management problems and the solution to eliminate the problems
- Business management; the only Solution to the Economic Crisis explains how to plan and manage the business to capture business data and provide management the information needed for actual business, corporation, industry, and economic management
- A Government Business Management Program to Answer the Economic Crisis outlines a government program to encourage business management, stimulate the economy, restore confidence, organize businesses to flourish in the recovery, and manage economic cycles to prevent future crisis
These three white paper downloads are available to R-pM Community Members at result-performance-management.com. There is no cost or obligation to join the R-pM Community. Join by entering your email address and personal password. Your email address is protected and used only for download problems, product updates, and occasional R-pM Member news and white papers.
