Consider a large banking group with businesses in retail banking, equity trading, and mergers and acquisitions (M&A) advisory. Discuss its potential for creating value based on the possible underlying sources of competitive advantage for each of these three business areas.
Answer to relevant QuestionsIf growth is a significant value driver, does getting bigger translate into creating value? How much cash flow risk should a company take on? How should it manage risks with extreme outcomes that could potentially bankrupt the company but are very unlikely to occur? What is the expectations treadmill and how does it affect managers’ ability to deliver above-average TRS over long periods of time? Explain the difference between ROICs excluding and ROICs including goodwill for U.S. companies: what does this difference imply and why has it increased so much over the past decade? In a bank valuation, the amount of current loan loss provision is not deducted from the DCF result. Why is it then important to analyze the adequacy of the bank’s current loan loss provisions?
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