Published: 30 April 2024
Funding for new products and services is critical for growth. But left unchecked, product and service lines proliferate, driving costs and complexity. Heads of FP&A can use this research to assess the overall portfolio using a return on invested capital lens to optimize capital-efficient growth.
Financial planning and analysis (FP&A) leaders in companies with fewer, more strategically targeted product and service lines than their industry peers deliver superior profitability and higher total shareholder returns.
In a cost- and capital-constrained environment, FP&A leaders must break away from the prevalent reliance on traditional portfolio management, observed in 87% of organizations annually, which prioritizes revenue or margin metrics over balance-sheet-oriented return on invested capital (ROIC) drivers such as fixed assets and working capital.
A higher weighted average cost of capital has contributed toward investor preferences evolving to place a greater emphasis on capital-efficient profitable growth.
To drive efficient capital
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Analysts:
Vaughan Archer, Vimala Jayaraman
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