The essential CFO : a corporate finance playbook

381 Pages·2012·23.82 MB·English

by  Bruce P. Nolop

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The Essential CFO
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Founded in 1807, John Wiley & Sons is the oldest independent publishing com-
pany in the United States. With offices in North America, Europe, Asia, and
Australia, Wiley is globally committed to developing and marketing print and
electronic products and services for our customers’ professional and personal
knowledge and understanding.
The Wiley Corporate F&A series provides information, tools, and insights to
corporate professionals responsible for issues affecting the profitability of their
company, from accounting and finance to internal controls and performance
management.
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The Essential CFO
A Corporate
Finance Playbook
BRUCE NOLOP
John Wiley & Sons, Inc.
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Copyright © 2012 by Bruce Nolop. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
Nolop, Bruce, 1950–
The essential CFO: a corporate finance playbook/Bruce Nolop.
pages cm.—(Wiley corporate F&A)
Includes index.
ISBN 978-1-118-17304-6 (pbk.); ISBN 978-1-118-22689-6 (ebk);
ISBN 978-1-118-24003-8 (ebk); ISBN 978-1-118-26463-8 (ebk)
1. Chief financial officers. 2. Corporations—Finance—Management. I. Title.
HG4027.35.N65 2012
658.15—dc23 2011048566
Printed in the United States of America
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To my mother, Barbara Sandager Nolop
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Contents
Introduction xv
PART I: STRATEGY
Chapter 1: Articulating a Strategic Plan 3
Business Objectives 4
Strategic Themes 5
Long-Term Financial Model 7
Total Shareholder Return 10
Capital Allocation Strategies 14
Acquisition Strategies 15
Target Shareholders 17
Elevator Pitch 20
Plan Revisions 21
Chapter 2: Communicating and Achieving Alignment 23
Consistency and Transparency 24
Incentive Compensation Programs 25
Investor Alignment 28
Analyst Relations 29
Investor Presentations 31
Company Website 35
Social Media 36
Media Relations 37
Potential Media Pitfalls 38
Coordinating Communications 39
Interview Formats 39
Media Training 40
Note 42
vii
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viii ◾ Contents
Chapter 3: Assessing Enterprise Risks 43
Enterprise Risk Management 43
Implementation of ERM 44
Risk Identifi cation 45
Risk Quantifi cation 46
Major Exposures 47
Mitigation Strategies 50
Rewarded versus Unrewarded Risks 51
Governance of ERM 52
CFO’s Role in ERM 54
PART II: CAPITAL ALLOCATIONS
Chapter 4: Estimating the Cost of Capital 59
WACC Formula 59
Hurdle Rates 63
Risk Premiums 63
Acquisition Cost of Capital 65
Chapter 5: Prioritizing Capital Investments 67
Cash Flow Projections 67
Investment Budget 68
Evaluating Projects 71
Categorizing Projects 74
Monitoring Projects 75
Pension Fund Contributions 77
Chapter 6: Considering Dividends and Repurchases 79
Dividend Policy Alternatives 80
Dividend Policy Considerations 82
Special Dividends 85
Dividend Declarations 85
Repurchase Considerations 86
Open Market Programs 90
Tender Offers 92
Retaining Strategic Cash 92
Cash Investment Policies 95
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