Preface xi
CHAPTER 1 New CEO Activities 1
Immediate Priorities 1
Measure the Business 3
Get to Know the Company 5
Develop a Strategy 7
Create a Budget and Related Systems 9
Review the Management Team 10
Review Risks 11
Review Costs 13
Summary 15
PART I STRATEGY DEVELOPMENT 17
CHAPTER 2 General Corporate Strategy 19
Overview of General Corporate Strategy 19
Building a Strategy: General Concepts 23
Building a Strategy: Product Differentiation 26
Building a Strategy: Low Cost 29
Building a Strategy: Focus on a Niche 32
Building a Strategy: Impact of the Internet 34
Building a Strategy: Additional Comments 34
Strategy Testing 37
Summary 38
CHAPTER 3 Financial Strategy 39
Cash 39
Investments 41
Working Capital 42
Inventory Reduction Decision 45
Fixed Asset Lease versus Buy Decisions 46
Payables 47
Debt 49
Equity 52
Product Elimination Decisions 56
Step Cost Reductions 59
Temporary Labor Decisions 60
Divestiture Decisions 61
Summary 62
CHAPTER 4 Tax Strategy 65
Accumulated Earnings Tax 66
Cash Method of Accounting 67
Inventory Valuation 68
Mergers and Acquisitions 68
Net Operating Loss Carry forwards 69
Nexus 69
S Corporation 70
Sales and Use Taxes 71
Transfer Pricing 72
Unemployment Taxes 75
Summary 76
CHAPTER 5 Information Technology Strategy 77
Reasons for Devising an Information Technology Strategy 77
Developing the Information Technology Strategy 78
Technical Strategies 81
Specific Applications 82
Summary 85
CHAPTER 6 Outsourcing Strategy 87
Overview of Outsourcing 87
Outsourcing Risks 92
Initiating Outsourcing 94
Companies that Take Over Outsourced Functions 94
Summary 97
PART II THE BUDGET 99
CHAPTER 7 Budgeting Process 101
System of Interlocking Budgets 101
Sample Budget 109
Flex Budget 127
Budgetary Control Systems 127
Summary 129
CHAPTER 8 Capital Budgeting 131
Hurdle Rate 131
Payback Period 132
Net Present Value 134
Internal Rate of Return 136
Throughput-Based Capital Budgeting 137
Problems with the Capital Budget Approval Process 140
Cash Flow Modeling Issues 141
Funding Decisions for Research and Development Projects 142
Postcompletion Project Analysis 143
Summary 145
PART III RISK MANAGEMENT 147
CHAPTER 9 Risk Management: General Concepts 149
Risk Management Policies 149
Risk Management Planning 150
Manager of Risk Management 152
Risk Management Procedures 153
Types of Business Insurance 155
Types of Insurance Companies 157
Evaluating the Health of an Insurance Carrier 158
Annual Risk Management Report 159
Summary 160
CHAPTER 10 Risk Management: Foreign Exchange 163
Foreign Exchange Quote Terminology 163
Nature of Foreign Exchange Risk 164
Data Collection for Foreign Exchange Risk Management 165
Foreign Exchange Hedging Strategies 165
Summary 176
PART IV FINANCIAL ANALYSIS 179
CHAPTER 11 Performance Measurements 181
Asset Utilization Measurements 181
Operating Performance Measurements 186
Cash Flow Measurements 190
Liquidity Measurements 193
Solvency Measurements 197
Return on Investment Measurements 199
Market Performance Measurements 204
Summary 206
CHAPTER 12 Cost Reduction Analysis 207
Types of Reports Used for Cost Reduction Analysis 207
Spend Analysis Overview 211
Spend Database 211
Supplier Consolidation Analysis 212
Parts Consolidation Analysis 213
Maintenance, Repair, and Operations Item Analysis 213
Spend Compliance 213
Spend Analysis Reports 214
Workforce Reduction Analysis 217
Workforce Reduction Issues 217
Workforce Reduction Alternatives 221
5S Analysis 223
Error Quantification 223
Fixed Cost Analysis 224
Ishikawa Diagrams 224
Value Stream Mapping 225
Waste Analysis 226
Summary 227
CHAPTER 13 Mergers and Acquisitions 229
Evaluating Acquisition Targets 229
Complexity Analysis 245
Valuing an Acquisition Target 246
Types of Acquisitions 260
Summary 266
PART V THE PUBLIC COMPANY 269
CHAPTER 14 Initial Public Offering 271
Reasons to Go Public 271
Reasons Not to Go Public 272
Cost of an IPO 274
Preparing for the IPO 274
Finding an Underwriter 277
Registering for and Completing the IPO 280
Alternatives for Selling Securities 282
Trading on an Exchange 284
American Stock Exchange 285
Overview of the Nasdaq 287
New York Stock Exchange 289
Comparing the Stock Exchanges 291
Over-the-Counter Stocks 292
Summary 293
CHAPTER 15 Investment Community 295
Analyst’s Perspective 295
Finding the Right Analyst 297
Sell Side: Analysts 297
Negative Analyst Report 299
Sell Side: Brokers 300
Sell Side: Investment Bankers 301
Sell Side: Investor Relations Specialists 302
Buy Side: Types of Investors 302
Buy Side: Institutional Investors 303
Buy Side: Individual Investors 304
Buy Side: Presentations to Investors 306
Summary 307
CHAPTER 16 Public Company Activities 309
Investor Conference Call 309
Road Show 311
Concept of Guidance 315
Form of Guidance Issued 316
Frequency and Timing of Guidance 318
Aggressiveness of Guidance 319
How Short Sellers Operate 320
How to Handle Short Sellers 321
Measuring Short-Seller Activity 322
Summary 323
CHAPTER 17 Taking a Company Private 325
Going-Private Transaction 325
Rule 13e-3 325
300-Shareholder Limit 326
Form 15 327
Summary 327
Appendix New CEO Checklist 329
About the Author 337
Index 339
