Companies thrive when they create real economic value for their shareholders. Companies create value by investing capital at rates of return that exceed their cost of capital.
We explain the two core principles of value creation: first, the idea that return on capital and growth drive cash flow, which in turn drives value, and second, the conservation of value
Value is the defining dimension of measurement in a market economy.
The guiding principle of value creation is that companies create value by investing capital they raise from investors to generate future cash flows at rates of return exceeding the cost of capital (the rate investors require to be paid for the use of their capital).