If nothing else, the fallout over SIVs, CDOs, and other complex securities proves that we’re still learning the lessons of Enron. Lesson 1: High returns are addictive — once you’ve seen 20 percent, it’s hard to go back to single digits. Lesson 2: The risk-return principle cuts both ways. Lesson 3: If it’s off the balance sheet and too complicated to explain to your dad, just walk away.
So maybe, as the holidays approach, we should stop to appreciate the simple things — like cash. Cash is a good thing, especially in times like these. Although shareholders may argue about just how much cash companies should hold, most companies could benefit from a closer look at how well they generate cash flow from operations. For a start, take a look at CFO’s new Cash Masters Scorecard (“Mastering the Flow“), which shows how the top 1,000 U.S. companies stack up against their peers in terms of the efficiency with which they convert sales to cash.
Companies can pull many different strings to improve that efficiency. An often overlooked and relatively simple tactic is through better management of their real estate portfolios. A variety of factors is putting the squeeze on commercial tenants, forcing CFOs to think more strategically about how and where to site operations. As senior writer Alix Stuart explains in “A Tale of Six Cities,” negotiating a better deal can make a huge difference to both the bottom and top lines.
While there may be choices to make regarding which city to call home, there is no debate about which planet. As deputy editor Scott Leibs describes in “Earth in the Balance Sheet,” companies are attempting to quantify the impact they have on the environment and society. Beyond its PR value, a more sophisticated form of “sustainability reporting” can result in better information for stakeholders and a richer set of data to guide management decisions.