Wednesday 3 August 2011

Numbers, numbers everywhere, and not a prop to think...

In unprecedented times we have unprecedented access to numbers, and some NAMs even find themselves working to three places of decimals on the wrong numbers…
However, the answer is not to ignore the numbers and revert to gut-feeling, but to find and use the numbers that ultimately drive the business.
Ego-trips excepted, we are all in business to optimise reward for risk.
This means generating a Return on Capital Employed that is a little better than others using a similar business model. Take a minimum of 15% in current times.
ROCE is in turn driven by Net Margin and Capital Turn i.e. ROCE = Return /Sales x Sales/Cap Employed
If ROCE is Greek to you……?
However, if you know ROCE backwards, then you realise that all other numbers are merely supportive…

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