|Focus on Finance|
|Clearing the air on pensions
Many armchair financial analysts gauge a public company's performance by revenues, earnings and earnings per share. However, for real insights into a company's performance and financial strength many analysts and investors turn to the cash flow statement. In particular, investors are interested in how much cash the company has available to utilize for its growth strategies. A number of companies, including Boeing, use a measurement called free cash flow to most directly identify available cash.
Free cash flow represents the amount of money a company generates from its operations after investing for the future in property, plant and equipment. Growth in free cash flow often comes from higher sales, but important keys to consistently strong free cash flow across the enterprise are higher profits, reduced assets and enhanced efficiency.
EIP award linked to financial performance
''Every year, there's a shot at earning the maximum 20 days of incentive pay from the Employee Incentive Plan for participating nonunion, nonexecutive employees. We made it just over half way at 10.5 days for 2002, which is the highest award in the program's history,'' said Laurette Koellner, Chief People and Administration Officer and member of the Office of the Chairman. ''The EIP award is not a given. The 'performance slate' is wiped clean each year.''
The EIP award is determined by economic profit. It's calculated by subtracting the capital charge—inventory and equipment costs needed to support the business—from the company's net operating profit after taxes. Targets are established each year.
''It's important that Boeing people understand their direct impact on the Company's success, and the EIP is one way shared success is recognized,'' Koellner added.
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