Perspectives

Creating value through capital expenditure planning

Capital productivity

For leading companies within the S&P 500, more than 25 percent of their market value can be accredited to expectations from unidentified, future investments. The proficiency with which a company can raise, deploy, and distribute its capital directly impacts shareholder value (capital productivity). Attention to capital expenditure planning, the process by which an organization sets capital allocation targets and builds towards an optimized leveraged project portfolio, is paramount to generating and sustaining stakeholder value.

What separates a good company from a great one?

Often it is an organization’s financial strategy; its capital productivity framework. For leading companies within the S&P 500, more than 25% of their market value can be accredited to expectations from unidentified, future investments. The proficiency with which a company can raise, deploy, and distribute its capital directly impacts shareholder value (capital productivity). Attention to capital expenditure planning, the process by which an organization sets capital allocation targets and builds towards an optimized leveraged project portfolio, is paramount to generating and sustaining stakeholder value.

What common barriers impede effective capital expenditure planning? The shared set of challenges endemic to corporations spanning a wide range of industries is a lack of the following attributes:

  • A strategic framework
  • High level of commitment to the process
  • Accurate metrics and measures for evaluation
  • Standardized processes to govern decision-making
  • Proper organizational skill set
Learn more about constructing a strategic framework for capital expenditure planning

As used in this document, “Deloitte” means Deloitte Financial Advisory Services LLP, which provides forensic, dispute, and other consulting services; its affiliate, Deloitte Transactions and Business Analytics LLP, which provides a wide range of advisory and analytics services; and Deloitte Consulting LLP, which provides strategy, operations, technology, systems, outsourcing and human capital consulting services. Deloitte Transactions and Business Analytics LLP and Deloitte Consulting LLP are not certified public accounting firms. These entities are separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.  

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