Total return to shareholders target setting

• US 20050209944A1
• Filed: 03/02/2005
• Published: 09/22/2005
• Est. Priority Date: 03/02/2004
• Status: Active Grant

• Current Assignee: Accenture Global Services Limited (Accenture PLC)
• Original Assignee: Accenture Global Services GmbH (Accenture PLC)
• Inventors: McCarthy, Brain F., Ballow, John J., Burgman, Roland, Relvas, Anthony J.
• Granted Patent: US 7,899,735 B2
• Time in Patent Office: Days
• US Class Current: 705/35
• CPC Class Codes: G06Q 10/0637 Strategic management or analysis, e.g. setting a goal or target of an organisation; Planning actions based on goals; Analysis or evaluation of effectiveness of goals
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange

Abstract

A computer-implemented method for setting targets of predicted growth of financial metrics of a company is provided. The method may include displaying a template of historical and predicted financial performance measures, receiving inputs of predicted financial targets such as earnings growth and shareholder return, and calculating the predicted future value and current value components required to obtain the financial targets.

Claims

1. A computer-implemented method for predicting financial performance measures of a company, the method comprising:

displaying on a computer user interface a financial performance template for displaying actual performance measures for a first time period, predicted performance measures for a second time period and a change in performance measures from the first time period to the second time period;

each of the time periods displaying financial performance measures comprising NOPAT, Capital, WACC, EP, Current Value (CV) Future Value (FV) Enterprise Value (EV), Market Value of Equity, Market Value of Debt, number of company shares, and share price;

receiving into the computer the values for the first time period for the actual performance measures of NOPAT, Capital, WACC, EP, Market Value of Equity, Market Value of Debt, and either number of company shares or share price;

calculating with the computer for the first time period the Enterprise Value, the Current Value and the Future Value based on the received performance measures, wherein the Enterprise Value is the Market Value of Equity plus the Market Value of Debt, the Current Value is the NOPAT divided by the WACC, and the Future Value is the Enterprise Value minus the Current Value;

receiving into the computer the values for the second time period for the target performance measures of Target TRS, Target Dividend Per Share and Target NOPAT Growth;

calculating with the computer for the second time period the predicted performance values based on the received actual performance measures and the target performance measures,

calculating with the computer for display the change in the performance measures from the first period to the second period; and

establishing company business goals based on predicted performance measures calculated for a received target performance measure.

2. The computer-implemented method of claim 1, wherein for the second time period the predicted performance measure of Enterprise Value is calculated by the equation:

second period EV=(first period EV*Target TRS)−

(target Dividend Per Share*Number of Shares).

3. The computer-implemented method of claim 1, wherein for the second time period the predicted performance measure of Share Price is calculated by the equation:

second period Share Price=second period EV−

(first period Market Value of Debt*Target TRS).

4. The computer-implemented method of claim 1, wherein for the second time period the predicted performance measures are calculated by the equations:

(a) second period NOPAT=(first period NOPAT*Target NOPAT Growth);

(b) second period Capital=first period capital+second period NOPAT−

(target Dividends Per Share*Number of Shares); and

(c) Economic Profit=second period NOPAT−

(second period Capital*WACC).

5. The computer-implemented method of claim 4, wherein for the second time period the predicted performance measures are calculated by the equations:

(a) second period Enterprise Value (EV)=(first period EV*Target TRS)−

(target Dividend Per Share*Number of Shares);

(b) second period Current Value (CV)=(second period NOPAT/WACC); and

(c) second period Future Value=second period EV−

second period CV.

6. The computer-implemented method of claim 1, wherein for each of the first and second time periods calculating with the computer a Total Economic Profit (TEP) for the period according to the equation:

TEP=Economic Profit+Invested Capital Charge+Economic Profit of Future Value (EPFV)+Total Dividends Paid;

wherein Invested Capital Charge=Capital*WACC, and EPFV=FV*WACC.

7. The computer-implemented method of claim 6, further comprising calculating a percentage change in the TEP from the first period to the second period and determining whether the change in TEP is equal to the received Target TRS.

8. The computer-implemented method of claim 6, further comprising establishing incremental revenue drivers and incremental cost drivers of company operations expected to obtain the predicted EP and EPFV.

14. The computer-implemented method of claim 6, further comprising analyzing the variances to determine the company operational drivers causing the variances and adjusting the future investment related to the determined operational drivers to obtain a target return to shareholders.

9. A computer-implemented method for analyzing financial performance measures of a company, the method comprising:

receiving historical financial data of a company for at least-a first time period and a second time period, the first period preceding the second time period;

receiving target input variables for targeted changes from the first time period to the second time period, the target input variables comprising target NOPAT growth, and target Return to Shareholders;

calculating with the computer the actual performance change from the first period to the second period;

calculating with the computer the predicted financial data for the second period based on the target input variables applied to the historical financial data for the first period;

comparing the predicted financial data of the second period with the historical financial data for the second period to determine a performance variance; and

adjusting target input variables for a future time period based on the determined performance variance.

10. The computer-implemented method of claim 9, further comprising establishing incremental revenue drivers and incremental cost drivers of company operations based on the determined performance variance.

11. The computer-implemented method of claim 9, wherein for each of the first and second time periods calculating with the computer a Total Economic Profit (TEP) for the period according to the equation:

TEP=Economic Profit+Invested Capital Charge+Economic Profit of Future Value (EPFV)+Total Dividends Paid;

wherein Economic Profit=NOPAT−

Capital*WACC, Invested Capital Charge=Capital*WACC, EPFV=Future Value (FV)*WACC; and

FV=Market Value of Equity+Market Value of Debt−

(NOPAT/WACC).

12. The computer-implemented method of claim 11, further comprising calculating a Total Return to Shareholders by the percentage change in TEP from the first time period to the second time period.

13. The computer-implemented method of claim 12, further comprising adjusting the Total Return to Shareholders with an index value indicative of the growth rate of at least a portion of the economy relevant to the company.