: For shareholders to earn above-market returns, a company must not just perform well, but outperform the market's existing expectations. Core Measuring Methodologies
The core of any successful business strategy is a deep understanding of what truly creates value. According to the seminal guide, Valuation: Measuring and Managing the Value of Companies by McKinsey & Company , value creation is driven by two fundamental factors: growth and Return on Invested Capital (ROIC) relative to the cost of capital . The Fundamental Principles of Value Valuation: Measuring
: Actions that do not increase cash flows—such as mere accounting changes or "financial engineering"—do not create long-term value. : For shareholders to earn above-market returns, a