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874 INDEX

Operating working capital, 212–214, Pottruck, David, 580


230, 275–276 PP&E (percentage of property, plant,
Operational risk, 754 and equipment), 276
Operations valuation, 181–189 Preferred stock, 190
Opportunity cost, cost of capital as, Pre-mortem, 579
56–57 Price premium advantages, 132
Optimism, excessive, 578–579 Price-to-earnings ratio (P/E)
Options, real, 203–204 leverage, 814–816
Organizational health, 559 stock returns, 104–105
Overconservatism, 298 Principles of Corporate Finance (Brealey,
Myers, and Allen), 43
Payout ratio, 256–257 Privately held subsidiaries, 340–341
Pecking-order theory, 817–818 Procter & Gamble (P&G), 35, 57, 87,
Peer groups, 382–384 129–130, 140–141, 160–161, 513,
PEG ratios, 385–386 530–531, 537, 595–596, 651–652
Pensions and postretirement benefits, Productivity, and ESG, 89–90
217–218, 236–237, 343, 347–348 Property, plant, and equipment
analyzing and valuing, 457–462 (PP&E), 276
cost of capital, 462–464 Provisions, 435–441
expected return and earnings defined, 435
manipulation, 461–462 income-smoothing, 347, 440–441
forecasting, 277–278 long-term operating, 347, 438–439
overfunded, 217–218 nonoperating, 347
unfunded, 457–465 ongoing operating, 346, 437–438
value of equity, 465 restructuring provisions, 439–440
PepsiCo, 298, 468, 588 taxes and, 441
Percentage of property, plant, and Purposeful overconservatism, 298
equipment (PP&E), 276
Performance analysis. See Historical Quality, 132–133
performance analysis
Performance review, 582–584 R&D. See Research and development
Perpetuities, 793–795 Rational price discipline, 144–145
Petajisto, Antti, 673 Real options, 203–204, 766, 769
Phillips, 536, 629 Real-option valuation (ROV), 761,
Pillsbury, 529 769–772, 788–792
Planning Regulation, and ESG, 88
annual operating plan (AOP), REITS (real estate investment trusts),
581–582 48
strategic, 581 Replicating portfolios, 204, 770–771
Polo, Andrea, 590 Reputation management, 610
Porter, Michael, 129 Rerating, 47
Portfolio management, 535–537 Research and development (R&D), 6,
Portfolio momentum, 156 237
Portfolio treadmill, 167 Reserves. See Provisions

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