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V Mold Concept
V Mold, developed by Patrick McNamme, from
University of Ulster, is used to evaluate the company’s strategies
success through the comparison of its financial performance and to plan
financial strategies based on the comparison between the capacity to
generate income and the capital cost.
The V indicator of the mold (that means
valorization factor) is calculated by the division of the investment
profitability (ROI) by the capital cost (K):
V = ROI / K
After collecting the financial
demonstration data and calculating the ROI and K of the company and the
competitors with who intends to compare, the mold is built, representing
K on the horizontal axis and ROI on the vertical axis. For the tendency
analysis can be placed the values of different years and arrows that
join the different points and that show the directional movement. The
mold completes drawing on it one diagonal that represents the points in
which the investments profitability (ROI) equals the capital cost (K),
being, the points in which V is 1. When the company is above the
diagonal, means that the V is superior to 1, this is, that the
investments profitability is superior to the capital cost; when is
under, means that the value of V is inferior to 1, being, that the
investments profitability is inferior to the capital cost, a situation
that reveals a bad financial performance; when is very close to the
line, means that the company is very sensitive to slight changes in
investments profitability or in the capital cost.
Translated from Portuguese
by Susana Saraiva, Portuguese-English and English-Portuguese translation
specialist. Contact: spams@sapo.pt.
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