Financial Myopia

by Alan Zakon, Bruce Henderson



Aggressive firms and conglomerates prosper when short-sighted competitors misperceive debt and dividend policies as passive resultants of investment needs, rather than as active strategic weapons. The chief financial officer of many of America's largest corporations has been doing an increasingly efficient job. He has virtually routinized the problem of investing idle cash at short term, maximizing such returns, and minimizing the time cash remains idle. Corporate dividends have grown at adequate levels, and debt burdens have been comfortable. Unfortunately, too many chief financial officers have lost their companies in the process. It is no coincidence that sound, well-managed industry leaders have watched small companies seize initiative and market share. The article cites several such cases. The under-utilization of financial resources created very great opportunities for conglomerate take-overs or for competition. Indeed, the rise of the conglomerate is clear evidence of the ability to generate growth through utilization of financial resources.

California Management Review

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