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101 Things I Learned in Business School

Leading Blog

B USINESS is not a discipline, but an endeavor made up of disciplines such as accounting, communications, economics, finance, leadership, management, marketing, operations, psychology, sociology, and strategy. perpetually exceed the cash receipts from the previous, smaller sales volume.

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Should Companies Retain "Strategic" Cash?

Harvard Business Review

To enhance financial flexibility, companies have been retaining unprecedented amounts of cash on their balance sheets, calling it "strategic" cash to distinguish it from the "operating" cash that is needed to run the business. Arguments for Strategic Cash. Facilitate Investments. energy or telecom) or research-intensive industries (e.g.,

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What Private Equity Investors Think They Do for the Companies They Buy

Harvard Business Review

In particular, we are interested in how many of their responses correlate with what academic finance knows and what it teaches. ” PE firms typically take three types of value increasing actions — financial engineering, governance engineering, and operational engineering.

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The Most Common Mistake People Make In Calculating ROI

Harvard Business Review

Sure, you may know this already, but people who haven’t studied finance often find this statement confusing. HBR TOOLS: Return on Investment. Finance & Accounting Tool. At first glance the return looks great: 30% every year. Determine the minimum return required by your company. Excerpted from.

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The Case for Stock Buybacks

Harvard Business Review

But these claims are very rarely backed up by large-scale evidence, and often driven by a misunderstanding of how buybacks actually operate. Fewer companies would go public, instead financing themselves by taking on more debt. In this way, repurchases are targeted: they return cash to shareholders with the best other uses for it.

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A Refresher on Cost of Capital

Harvard Business Review

. “At most companies, the cost of capital is a mechanical calculation done by the finance people. Then the management team takes that number and decides on the discount rate, or hurdle rate, that you have to exceed to justify an investment,” he says. or 11% as the discount rate. or 11% as the discount rate.

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Could a Four-Year-Old Do What Carl Icahn Does?

Harvard Business Review

r>g: Economist Thomas Piketty’s formula for spiraling wealth inequality, in which the rate of return on capital is higher than economic growth, has its critics. stock markets over Icahn’s career, it’s a simple factual assertion — the total return on the S&P 500 has substantially outstripped economic growth.

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