A key Strategic Finance account used in determining Shareholder Value (v5070). By estimating the rate of anticipated sales growth, you evaluate shareholder value created from the projected cash flow, given your assumptions about other key accounts:
Operating Profit Margin (P) (v6180)
Incremental Working Capital Investment (W) (v6190)
Incremental Fixed Capital Investment (F) (v6185)
Residual Value Income Tax Rate (v4.00.560)
Cash Income Tax Rate (Tc) (v6195)
Cost of Capital (K) (v5000)
If you compare the sales growth of a company to the growth of the overall market, you can determine whether the company is gaining or losing market share. High sales growth may not indicate good economic performance. If a company is growing rapidly, there may be lower margins (due to lower prices or greater promotion expenses) and greater investments required in working and fixed capital. If those factors strain the financial resources of the company, its financial position and solvency may be jeopardized.