SHAREHOLDER EQUITY — VALUING YOUR COMPANY

The underlying message is clear: enterprise value management is critical. How can you increase this value to help boost the worth of your company to a buyer? What management strategies should you be employing to maximize the enterprise value to owners?

Remember, the formula is simple (see Chart 5).

You must develop strategies capable of delivering maximum shareholders’ value. This formula points out the following relationship; shareholders’ value will increase with more profits and less interest-bearing debt. However, the truth is that “it is easier said than done.” For example, you decide to purchase a six-color, 40˝ press. You incur a debt of $2,000,000 and you now know that diminishes shareholder value. This long-term investment will have a detrimental effect on shareholders’ value until the capitalized EBITDA of the incremental business attributable to this asset exceeds $2,000,000.