Asset turnover as a predictor of shareholder value in the South African manufacturing industry

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dc.contributor.advisor Mr. F. Durand en_US
dc.contributor.author Esterhuyse, Jaco Conrad
dc.date.accessioned 2012-10-29T07:48:18Z
dc.date.available 2012-10-29T07:48:18Z
dc.date.issued 2012-10-29
dc.date.submitted 2011-11
dc.identifier.uri http://hdl.handle.net/10210/7927
dc.description M.Comm. en_US
dc.description.abstract It is widely accepted that the main goal of management is to add shareholder value. Stewart (1990) introduced Economic Value Added (EVA) and Market Value Added (MVA) as a method of calculating the theoretical value added for shareholders. The main purpose of the research was to test whether asset turnover (ATO) which is a component of the EVA calculation, was a driver of shareholder value. The sample for this study was restricted to eight South African listed manufacturing companies from the industrial sector for the period, 2001 to 2010. The study found that ATO is not a driver of price to book (P/B). However, in one sample company, namely, Pretoria Portland Cement Company (PPC), ATO was found to be a strong driver of P/B. This suggested that A TO is a driver of P/B if a company has economies of scale in a product. In companies, cash as a proportion of net assets (Cash/NA) has grown significantly over the past thirty years. High cash holdings do not increase EVA as cash in the bank returns only a risk-free rate and does not provide shareholders with the required weighted average cost of capital (WACC). The secondary objective of the research was to investigate whether Cash/NA inversely drives ATO. The same sample was used for this test. The finding was that there was an inverse relationship between Cash/NA and ATO but only at the 0.1 level of significance. Management can therefore be reasonably sure that higher levels of Cash/NA ·will reduce A TO and consequently RONA T as well. It follows that the trend towards higher levels of Cash/NA should not be seen as healthy and reduced if possible. en_US
dc.language.iso en en_US
dc.subject Shareholder value en_US
dc.subject Share price en_US
dc.subject Economic value added en_US
dc.subject Market value added en_US
dc.title Asset turnover as a predictor of shareholder value in the South African manufacturing industry en_US
dc.type Mini-Dissertation en_US

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