CEO’s, CFOs and Boards are ultimately measured on their record of generating returns for their shareholders, and the single most important determinant of shareholder returns is capital allocation. This course takes a compelling look at how to master capital allocation to create shareholder value and competitive advantages for your organization.
This course covers:
- How capital allocation can be used to supersize shareholder returns
- How to define capital allocation and evaluate cap allocation decisions
- Operating sources of cash
- Investment of capital
- Cash raised from financing
- Dividends and repurchases
We also take a look at the six traits of highly successful CEOs, such as Jack Welch and Warren Buffet, who have proven to be masters of capital allocation over decades of creating astounding results for their shareholders.
Learning Objectives
- Define what is capital allocation and identify the relevant tools
- Identify and evaluate sources of cash generated by the business
- Integrate financing strategy with capital allocation to preserve flexibility and maximize returns
- Evaluate uses of surplus cash to pay dividends and/or repurchase shares
Last updated/reviewed: March 26, 2024
32 Reviews (128 ratings)
Prerequisites
Course Complexity: Intermediate
Prerequisite: Exposure to corporate finance
Advanced Preparation: None
Education Provider Information
Company:
Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA
95113
Contact:
For more information regarding this course, including complaint and
cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to
.
Course Questions and Answers(2 Questions)
![Instructor for this course Instructor for this course](https://www.illumeo.com/sites/proformative.com/files/imagecache/user_image_large/pictures/picture-27985-1462228397.jpg)
Blair CookDirector of Clarke Inc
I enjoyed taking this course, however where can I find more information regarding analyzing share buybacks? In particular, how do I determine when it is better to buyback shares as oppose to making other investments, e.g., acquisitions or other growth initiatives?
Thanks in advance.
Share buybacks are discussed in most finance textbooks, but the level of discussion mimics what is included in the course. The real crux of your question is what is the best use of free cash - to buy back own shares or to grow the business. This is a multi-faceted question that is unique in each case.
The mathematical answer is to compare the returns. If you believe your stock is undervalued, the buyback has an associated return based on the delta between trading price and intrinsic value. Compare that return against what an investment in growth might do for share price. Easier said than done because both analyzes are based on assumptions, though arguably the buyback has a higher certainty of operating assumptions. However, to generate the return under the buyback, the stock price needs to normalize, the timing of which is uncertain.
If you find someone who has figured out a way to model these uncertainties to make this decision, please do share. It would advance discussion in boardrooms everywhere, which generally go along the lines, do we believe management can profitably grow the business or should be just look at the most efficient way to return capital to shareholders. Sadly, the discussions rarely get into the deep valuation type analysis.