29 08 2016
In my previous article ‘What finance should be, but rarely is‘, I set the scene of how CFOs need to transform the Finance function. Finance needs to redefine itself as a business partner that creates real customer value in a volatile and digital world. One of the key challenges in that transformation journey is the definition of new metrics that represent the value of the company. Traditionally, Finance looks at the return on shareholders’ equity to determine the value of the company. Based on a business plan for the next 3 to 5 years and financial data from the past, a financial projection is made of a free cash flow model that should more or less represent the value of the company.