Imagine you’re on the board of a fairly large company. The business has three verticals — IT services, Investment Advisory, and Organic farming. The CEO is making a presentation to the board about next year’s plan for investing additional capital in each business vertical.
After rushing through a dozen slides on broader industry trends and macroeconomics, the CEO comes to the slide which shows that the company generated a revenue of Rs. Five hundred crores in the recent financial year which translated to a bottom line of Rs. One hundred crores. A decent 20 percent profit margin.
“This year I propose that we put all our focus and investment capital for growing the Investment Advisory vertical.” argues the CEO.
“I understand that you’ve worked for several years in the finance industry,” interjected a senior board member, “and that may give you the confidence about the future prospects of money management business. But do you have any other data to support your argument especially in the context of our company’s business?”
“As a matter of fact, I do.” quips the CEO. “And I am glad you asked that, sir.” It was evident that the CEO was prepared for this question. In fact, he was saving up a special slide just for this.
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