Ø Corporate Strategy A firm’s strategy establishes an effective and efficient match between its competences and opportunities and environmental risk

Ø Corporate Strategy A firm’s strategy establishes an effective and efficient
match between its competences and opportunities and environmental risks. It
provides a mechanism integrating the goals of its multiple consistencies.
Ø Financial Policy In practice, financial policy of a company is closely linked
with its corporate strategy. Financial policies of the firms should be developed in
context of its corporate strategy. Within the overall framework of the firm’s
strategy, there should be consistency between financial policies—investment,
debt and dividend. For example, a firm can sustain a high-growth strategy only
when its investment projects generate high profits and it follows a policy of low
payout and high debt.
Ø Economic Profit Growth should lead to the enhancement of the shareholder
value. This will happen when the firm is economically profitable; that is, when
the firm’s return on equity (ROE) is higher than its cost of equity (ke). Value is
created when ROE > ke; value is maintained when ROE = ke; and value id
destroyed when ROE < ke. Alternatively, ROCE can be compared with WACC.
Value is created when ROCE > WACC.Economic Value Added The amount of EVA is the difference between aftertax
PBIT and the charges for capital employed or invested capital:
EVA = PBIT (1 – T ) – WACC × CE