Please answer the question on attachment “coursework”, the other two attachments power point”Lesson 13 Investment Center” and ebook “Cost Management A Strategic Emphasis” are helping you to figure out the answer. Thank you for your help.
“Coursework” is the questions.
“Lesson 13 Investment Centers” is the power point of the lecture.
“Cost Management A Strategic Emphasis” is the ebook, please read chapter 19 for related data.
John Deere : Shareholder Value Added
John Deere is a pioneer of the Shareholder Added Approach (SVA).
2. Rigorous financial discipline. Deere has embraced a system called shareholder value added (SVA) that, simply put, measures the
difference between operating profit and the company’s cost of capital. “We estimate productivity and cost, and go through a basic analysis
and determine if we can compete,” says Lane. Every factory and every product gets graded. And compensation for everyone from top
management to unionized labor is based in some respect on SVA. “Nobody gets paid at Deere for just making money,” Lane explains.
“Everything is a ratio of what we earn over what we invest.” That gives the whole organization an incentive to drive down costs. “For 30
consecutive quarters, we have reduced inventory and the ratio of receivables to sales,” Lane says. “That is a huge reduction in the amount of
capital that had to be deployed. In the process, we are getting faster and faster at providing the right produc ts to the right customers at the
John Deere defines SVA as operating profit before income taxes and, less an estimated pretax cost of
? How does SVA compare to EVA, RI, and ROI?
? What are some potential issues with the SVA measure?
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