general,actionstakentoincreasecash flowsfromassetsin
place can be categorized into the following groups:
- Redeployassets. To theextent thattheassets ofa
business arepoorly invested, you can increase the
cashflowsandvalueofthefirmbydivestingpoorly
performing assets
2 orbymovingassetsfromtheirexistingusestoones
thatgeneratehighervalue.Oneexamplewouldbea
retailfirmthatownsitsstoresitesdecidingthatthe
store spaces would be worth more developed as
commercial real estate instead of being used in
retailing. - Improve operating efficiency. When a firm’s
operationsareriddledwithinefficiencies,reducingor
eliminatingtheseinefficiencieswilltranslateintoan
increaseinoperating cashflowsandvalue.Thus,a
telecommunicationsfirmthatisoverstaffedshouldbe
able to generatevalue by reducing thesize of its
workforce. A steel company that is losing money
becauseofoutdatedequipmentinitsplantsmaybe
able to increase its value by replacing them with
newer, more efficient equipment. In recent years,
manufacturingcompaniesindevelopedmarketslike
theUnitedStatesandWesternEuropehavebeenable
to generatesubstantial savingsin costs by moving
their operations to emerging markets where labor
costs are lower. - Reducetaxburden. It iseveryfirm’s obligationto
payitsrightfuldueintaxesbutnottopaymorethan
its fairshare. If a firmcan legally reduce its tax
burden,itshoulddoso.Amultinationalfirmmaybe
able to reduce its taxes by moving more of its