Cash management is essential

Contrary to perception, evaluating a company market does not have a positive impact Free cash flow, but what they do with that money, manager of Stern Stewart & Co., Joel M star in the mouth People known as the “Oprah Winfrey Finance in the USA, said in his presentation by India School of Business, on Saturday.

“Assessment of an enterprise market is not based on, but what the liquidity of the company because of its liquidity.

If a company with a number of projects to create prosperity, it is likely that negative Free cash flow, “said stars. He gives a presentation on the theme” Value Based Management - How to manage organizations, the creation of value “.

Nevertheless, it is agreed that this is a problem with the free cash flow, he invented the concept of being back in the 1970’s.

“The problem with free cash flow is that you can invest everything you have today on projects that will, to give you returns in the future. It will not be the correct evaluation of the company. What we have decided something, proper evaluation of the company, “said Stern.

That’s when he came with the concept of Economic Value Added (EVA). This process helps to establish a clear management measure evaluations. EVA is a financial measure closest than any other on the collection of real economic benefits of an enterprise, “said Stern.

Previously, the general manager of Stern Stewart & Co., “Stern” has served as chairman of Chase fiscal policy, the financial advisory arm of Chase Manhattan Bank. He was one of the main defenders of the concept of Managing for Shareholder Value.

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