Appeal 2007-2745
Application 09/761,671
1 describes how it differs from the traditional SVA framework (Bielinski,
2 2:Second and third full ¶’s).
3 10. Rather than use projections of future cash flow like SVA, the VBM
4 framework utilizes historical cash flow. Five years of historical cash
5 flow are added up to arrive at a cumulative baseline cash flow number.
6 That is in contrast to SVA's method of discounting future cash flows to
7 reach an indicated value. Instead of testing the sensitivity of a value
8 based on a projection, VBM tests the sensitivity of the historical cash
9 flow. VBM tells the executive how much more or less cash flow would
10 be in the bank today if certain events had occurred differently or if the
11 company had operated differently in the past five years (Bielinski,
12 2:Fifth and sixth full ¶’s).
13 11. The use of actual historical data, rather than projections, has proven
14 useful in testing the impact of alternative scenarios against the reality of
15 actual events. It also has served as a catalyst to identify and implement
16 actions that generate improvements. As long as a company's
17 fundamental structure does not change going forward, the results provide
18 meaningful insight regarding the probable outcomes of future strategic
19 action, to the extent that risk is not increased, an executive may
20 reasonably assume that an increase from historical cash flow trends
21 likely would translate into enhanced value (Bielinski, 2:Seventh full ¶).
22 12. VBM utilizes drivers that are more directly linked to operations. For
23 example, rather than use operating profit margin as a broad value driver,
24 a VBM analysis on a manufacturer would include a breakdown of cost
25 of goods sold by key components (Bielinski, 2:Eighth full ¶).
7
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