"
Critical awareness and the abilities
to hypothesize, to interpret, and to
communicate are essential elements
of successful innovation in a
conceptual-based economy."
Alan Greenspan
First Principles
Capitalists invest capital - financial, human, and intellectual capital. Our responsibility as managers and stewards is to make capital productive, to commit resources wisely, to measure costs and returns accurately, and to act appropriately.
Building an Information Base
When making long-term capital investment and divestment decisions among alternatives, most executives are data-rich but information-poor. Accounting data typically reflect many different methods for recognizing revenues and expenses. Balance sheet information at the business unit level seldom exists. Enterprise resource and customer data systems capture troves of information, but it often lacks the specific level of detail or aggregation needed.
LaFerney Associates identifies the financial and factual information needed to know how and where profits and cash flow are generated by business unit, by business purpose, and by various market segments. This reconstruction of revenues, expenses, assets, and cash flow forms a base for making decisions among strategy alternatives. People understand cash flow, so we forecast the discounted value of all cash that can be taken out of each alternative over its life - what Warren Buffett calls "intrinsic value."
(Acknowledgements)
Financial Modeling
Sometimes the process of building a computer model helps identify how the components of a system interact to generate profits and cash. Please see the modeling we have done for clients.