Value-based management is based on the four main components of valuation, strategy, finance and corporate governance. The book links corporate strategy with valuation techniques. It incorporates strategic, financial and institutional approaches into a framework for determining how companies are governed, executives are paid and business strategies are implemented and evaluated. The matrix measures prospects of sustainable growth and profitability that lead to value creation. Each dollar of new debt should increase the company's equity value by 20 cents to 40 cents until the company's financial risk becomes excessive.
Dividend policy produces a similar trade-off.
All business activities should be measured to ensure that they are aligned with value-creating goals, she says. Communications with investors should be clear, concise, regular and reliable to build confidence about a company's strategic direction, and companies should be vigilant in guarding against corporate overhead. The impact of excess overhead on value can be staggering.