A successful business is one that continually creates value for its shareholders. Shareholder value is created by achieving profits over time in excess of the cost of capital

• The intrinsic value of a business is equal to the sum of expected of future cash flows (discounted at the cost of capital)
• A business can increase its intrinsic value by increasing the expectation of future cash flows
• Intrinsic value is highly correlated to market value over time, and companies that continually increase the value of their business will achieve top-tier shareholder returns

Superior management can have a dramatic effect on the value of the business

• Focusing the organization around the key drivers of value
• Continually identifying new opportunities to increase value
• Executing strategies that have the largest impact on intrinsic value