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Coupang: Korean E-Commerce Craze - [Business Breakdowns, EP.169]
Business Breakdowns
Assessing Risk vs. Return in Market Dominance
Adopting a reverse discounted cash flow (DCF) analysis allows for evaluating assumed growth rates and market share impacts on earnings before interest and taxes (EBIT) relative to gross merchandise volume (GMV). This method facilitates assessing the required returns based on these assumptions and determining if the anticipated risks accompany worthy returns. A market leader, expanding into new categories, may present a lower risk compared to entering entirely new markets. Despite some uncertainty in market perceptions about long-term growth, a company showcasing an 18% revenue growth with significant free cash flow indicates robust performance. The ability to maintain a high accounts payable relative to inventory signifies strong operational efficiency, reinforcing the strategic advantages in managing cash flows.
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