Define: Value Driver

UK Accounting Glossary

Definition: Value Driver


Quick Summary of Value Driver


Any variable that significantly affects the value of an organisation.



What is the dictionary definition of Value Driver?

Dictionary Definition


A value driver is any variable that significantly impacts the value of an organisation.

Alfred Rappaport identified seven key drivers of value in his development of shareholder value analysis.

These key drivers are:

  • Sales Growth Rate
  • Operating Profit Margin
  • Taxation Rate
  • Fixed Capital Investment
  • Working Capital Investment
  • Planning Period
  • Cost of Capital

Advertisement



Full Definition of Value Driver


Of the seven key drivers identified by Rappaport, the first 5 (sales growth rate, operating profit margin, tax rate, fixed capital investment, working capital investment) may be used to forecast the future cash flows of a business, whereas the planning period and cost of capital can be used to calculate the present value of these cash flows.

In practice, companies will have differing value drivers.

For example: Sony produces high-quality products for which consumers are prepared to pay a relatively high price.

Maintaining a high operating profit margin is therefore more critical to Sony that sales growth.

For another company, however, sales growth may actually be a more important factor.


Advertisement



Value Driver FAQ's



Cite Term


To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
https://payrollheaven.com/define/value-driver/
Modern Language Association (MLA):
Value Driver. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. September 17, 2019 https://payrollheaven.com/define/value-driver/.
Chicago Manual of Style (CMS):
Value Driver. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/value-driver/ (accessed: September 17, 2019).
American Psychological Association (APA):
Value Driver. PayrollHeaven.com. Retrieved September 17, 2019, from PayrollHeaven.com website: https://payrollheaven.com/define/value-driver/

Definition Sources


Definitions for Value Driver are sourced/syndicated from:


This glossary post was last updated: 5th May 2019.