Which type of business, a software company or an electric utility, would
beneﬁt more from improving ROIC than from increasing growth? Why?
Stacey Warren - Expert brainly.com
Hey! We 've verified this expert answer for you, click below to unlock the details :)
At vero eos et accusamus et iusto odio dignissimos ducimus qui blanditiis praesentium voluptatum deleniti atque corrupti quos dolores et quas molestias excepturi sint occaecati cupiditate non provident, similique sunt in culpa qui officia deserunt mollitia animi, id est laborum et dolorum fuga.
Et harum quidem rerum facilis est et expedita distinctio. Nam libero tempore, cum soluta nobis est eligendi optio cumque nihil impedit quo minus id quod maxime placeat facere possimus, omnis voluptas assumenda est, omnis dolor repellendus.
Itaque earum rerum hic tenetur a sapiente delectus, ut aut reiciendis voluptatibus maiores alias consequatur aut perferendis doloribus asperiores repellat.
I got my questions answered at brainly.com in under 10 minutes. Go to brainly.com now for free help!
focus on value. any company would benefit greater under circumstances of maximum wealth creation, be it from existing assets or from growth assets. ideally from both.
but industry does have a certain impact on the ROIC of a business
Typically a Electric utility is a regulated entity in most parts of the world, in such a scenario it would be guaranteed some minimum ROIC that gives a descent return to providers of Capital. The regulator also sees that the ROIC must not be two high either, as a result for a Electric Utility greater Value creation can happen by pursuing Growth (building new power plants, buying existing power plants) doing Backwards integrations serves little purpose (unless supply of Fuel can be a problem... as it may be in Emerging Markets) compared to these strategies.
For a software company... assuming it is already enjoying huge Growth in its business additional growth wont add same amount of value as additional ROIC. At worst Growth can also destroy value if the Company is not even recovering its WACC (Weighted Average Cost of Capital). Thus a high growth software company must focus on ROIC.