If we do our jobs right, today's customers will buy more tomorrow, we'll add more customers in the process, and it will all add up to more cash flow and more long-term value for our shareholders.Īs Amazonians, we thank you, our owners, for your support, your encouragement, and for joining us on this adventure. Unlike the profits, cash flows are exact and definite and therefore avoid any ambiguity. Firstly, wealth maximization is based on cash flows and not on profits. We are firm believers that the long-term interests of shareholders are tightly linked to the interests of our customers. The wealth maximization model is superior because it obviates all the drawbacks of profit maximization as a goal of a financial decision. We know our success will be largely affected by our ability to attract and retain a motivated employee base, each of whom must think like, and therefore must actually be, an owner. Focus on hiring and retaining versatile and talented employees, and weight their compensation to significant stock ownership rather than cash.We understand the importance of continually reinforcing a cost-conscious culture. Work hard to spend wisely and maintain our lean culture.When forced to choose between optimizing the appearance of our GAAP accounting and maximizing the present value of future cash flows, we'll take the cash flows. Some of these bold investments will pay off, others will not, but we will have learned a valuable lesson in either case. shifts in valuation methods could permit some companies to do more than maximize shareholder wealth. There is more innovation ahead of us than behind us, and to that end, we are committed to extending our leadership in a way that benefits customers and therefore, inherently, investors - you can't do one without the other. One way of offsetting this accounting treatment is to subtract from cash flow the increase in non-cash net working capital (NWC),12 when we do this we get what. Private equity firms and leveraged buyout firms will employ as much. Supply chain excellence will translate into balance sheet, income statement, and cash flow improvements yielding more economic profit for the firm and as we. Leveraged finance is done with the goal of increasing an investment’s potential returns, assuming the investment increases in value. Make bold investment decisions in light of long-term leadership considerations rather than short-term profitability considerations. Leveraged finance is the use of an above-normal amount of debt, as opposed to equity or cash, to finance the purchase of investment assets. Managers maximize shareholder value by maximizing the total expected cash flows available to distribute to all of their stakeholders. Accordingly, it is important for you, our shareholders, to understand our fundamental management and decision-making approach so that you may ensure that it is consistent with your own investment philosophy. The corporate goal of shareholder wealth maximization does not imply that such stakeholders do not matter. As we stated in our 1997 Letter to Shareholders, "A fundamental measure of our success will be the shareholder value we create over the long term." From the very beginning, our emphasis has been on the long term and as a result, we may make decisions and weigh tradeoffs differently than some other companies.
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