True Value Proposition & Business Fundamentals

In the days of inverted yield curves, home foreclosures, sub-prime mortgages, worthless asset-backed commercial paper, it is important to understand and appreciate the meaning of true value proposition and business fundamentals.

Based on recent years, as articulated by the famous words of Warren Buffet, “weapons of mass financial destruction” continue to erode the true value proposition and business fundamentals of capital markets. These include, but not limited to; 1) Over Leveraging; 2) Over-The-Counter (OTC) derivatives; 3) Credit Default Swaps (CDS) and; 4) Collateralized Debt Obligations (CDOs).

End-of-the-day, it is all about maintaining a sound, sustainable, auditable and transparent balance sheet, profit and loss account and cash flow statement. In addition, it important to provide investors with practical, realistic confidence and comfort levels on achieving appreciable top-line revenues via higher current income, EBITDA margins, net profit margins, retained earnings, positive cash flow, as well as long-term capital appreciation.

Whether it is private equity, venture capital, or public stock exchanges, all real forms of capital always seeks investment destinations which are; 1) intrinsically safe; 2) inherently stable; 3) verifiable underlying physical assets; 4) sustainable rule of law; 5) risks allocated, distributed and mitigated by parties capable of absorbing such risks; 6) assured returns delivered and; 7) a definitive investment exit.

Whether it is equity, debt or working capital, going forward, it is both vital and critical to restore investor’s confidence and ensure adherence to the true value proposition and maintaining business fundamentals.