Investor Relations

106INVESTOR RELATIONSCash flow as a percentage of sales, before and after capital expenditure(“free cash flow”);The capital intensity of the business as expressed through capitalexpenditure as a percentage of sales;Net debt-to-equity ratios;Cash and cash equivalents.The internal financial reporting systems must be structured to providethe data that are relevant to the understanding of the company’s businessmodel. In this respect, international accounting standards require thatfinancial reporting and internal organization match. For instance, if yourbusiness is organized by product lines as opposed to geographical regions,you will see to it that this is part of the presentation of your businessmodel.In certain cases, some corporate governance and socially responsibleinvestment metrics are factored into the business model as well. All canserve as a basis for management compensation and for the attribution ofperformance-related pay, either in cash or in shares, when such remunerationpolicies are in place.Companies must be vigilant about not giving in to passing trendsthat favor one ratio over another. If they are in the process of launchinga financial operation, they may also have to withstand pressure frominvestment banks that want to structure the business model to makeit attractive to their own clients, possibly to the detriment of the idealshareholder base targeted by the company, and away from the way managementis actually running the company. Note that portfolio managerspay close attention to how robust a business model is in making theirinvestment decisions.The business model presented to the market should be stable over timeexcept where significant events such as acquisitions cause it to change.Companies that present their business models clearly show that visibilityon their activity is good, even if they do not give targets. The simpler andclearer the business model, the easier it will be for analysts to build theirmodels and determine the value of the company.Lastly, do not exasperate analysts by reclassifying your financials toooften. It means that they have to rewrite their entire valuation model. Tryto keep your core presentation uniform year after year. If, for instance, youhave changed the fundamentals of your business through a major acquisition,provide a detailed reconciliation and variance analysis. If this appliesto your company, make sure you properly explain measures that contrast