How corporate strategy link with objectives of companies
As a corporate strategy analyst, you can identify there are financial & non-financial objectives are there to be made to meet the corporate strategies.
Financial objectives
The main goal of a company considers as profit maximization. But shareholders may still be disappointed although profits are rising. So what are other important goals?
Therefore, Strategic Financial Management is identifying possible strategies able to maximize the value (NPV) of an organization the allocation of scarce capital resources, and the implementation, monitoring the strategy chosen to achieve the objectives set.
what is a strategy in business?
The strategy is an action plan, including the specification of resources to achieve a specific goal. Therefore, strategy depends on stated objectives or targets.
Example for corporate targets are – Higher EPS, Dividend Cover, Net profit ration, Operating Cashflow
How to value to a company
Three main elements can use to measure the wealth of a firm,
- Going concern basis – using the balance sheet statement
- Break-up basis
- Market values – Trading prices, values and actions relevant to financial goals. The return of shareholders in the investment comes from dividends received and increases in the market value of shares ( known as capital gains).
Increasing shareholder value
If the shares of a company traded on a stock market, the shareholder wealth increases when the price goes up action. The share price of a company should rise when the company expects to obtain additional benefits. We can expect to grow in the share prices when the EPS goes up. Similarly, market prices go up when the P/E ratio goes up. Therefore, P/E ratio shows the investor’s confidence in the shares in the future.
Non-financial objectives
Non-financial objectives such as quality measures, measures of innovation, and measures based on the client can also be necessary for a for-profit entity. These objectives of the company may include the following.
non-financial objectives examples – Customer satisfaction, Welfare of employees, Welfare of management
