16.11. APPENDIX 16.2: MEASURING COMPLEXITY WITH A SCORE—AN EXAMPLE
Item | Factors | Follow-Up Question | Answer* | Weighting Factor | Complexity Score |
---|---|---|---|---|---|
Operating income |
| Number of businesses (with more than 10% of revenues) =
Percent of operating income = Percent of operating income = Percent of operating income = | 2
20% 15% 5% | 2
10 10 5 | 4
2 1.5 0.25 |
Tax rate |
| Percent of revenues from nondomestic locales =
Yes or No Yes or No Yes or No | 30%
Yes Yes Yes | 10
Yes = 3 Yes = 3 Yes = 2 | 3
3 3 2 |
Capital expenditures |
| Yes or No
Yes or No Yes or No | Yes
Yes Yes | Yes = 2
Yes = 4 Yes = 4 | 2
4 4 |
Working capital |
| Yes or No Yes or No | Yes Yes | Yes = 3 Yes = 2 | 3 2 |
Expected growth rate |
| Yes or No
Yes or No Is your return on capital volatile? Is your firm's ROC much higher than industry average? | Yes
Yes Yes Yes | Yes = 3
Yes = 3 Yes = 5 Yes = 5 | 3
3 5 5 |
Cost of capital |
|
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