Value-Creating Growth
Short definition
Value-creating growth is growth on which invested capital earns a cash return above WACC. Growing when ROIC < WACC raises EBITDA and cuts value.
Detailed explanation
The multiple pays for a growth story; if cash ROIC is below the hurdle, EV is inflated. Forward EBITDA without maintenance and NWC is mistaken for value creation.
SGR is the internal-finance cap; the value cap is ROIC–WACC. Breach both and cash and value erode together.
Why it matters for the CFO
The answer to “is growth always good?” hangs on this hurdle. If the bonus looks at sales and credit capacity looks at cash, the conflict is here.
How it is calculated
Değer yaratır ≈ büyüme, ancak ROIC > WACC (ve nakit dönüşü) ise
The inequality needs cash ROIC and a consistent WACC. A single-year ROIC is not the life of the growth.
Variables in the formula
- ROIC: return on invested capital
- WACC: weighted average cost of capital
How to read it
ROIC minus WACC is the value margin on growth. Inflation shrinks historic capital and fake-lifts ROIC.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.