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What private equity can teach executives about metrics: Fridson

Wall Street is often blamed for reducing corporate managers' understanding of business to a single, gameable measure of success: quarterly earnings versus analysts' consensus forecast.
The article by Martin Fridson, published on Reuters, discusses how private equity firms can teach corporate executives about the importance of metrics in business management. Fridson highlights that private equity investors focus intensely on metrics like cash flow, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), and other key performance indicators to drive value creation. He argues that public company executives often overlook these metrics in favor of less tangible goals like market share or brand recognition, which can lead to suboptimal decision-making. Private equity's approach involves rigorous monitoring and a clear understanding of how operational changes impact financial outcomes, which could benefit public companies by fostering a more disciplined, data-driven approach to management. This focus on quantifiable results helps in aligning management's actions with shareholder value, potentially leading to better performance and accountability.

Read the Full Reuters Article at:
[ https://www.reuters.com/business/what-private-equity-can-teach-executives-about-metrics-fridson-2025-02-21/ ]