Overview: Companies exist to meet customer needs in a way that translates into reliable returns to investors. When people invest they expect their investment to increase by an amount that sufficiently compensates them for the risk they took, as well as for the time value of their money (i.e..TVM). Therefore, knowing how to create and measure value is an essential tool for managers and executives.

Fact 2: Anything that doesn't increase cash flows, via improving revenues and returns on capital, doesn't create value.

Question 2: Comprehensively explain, using numerical examples, how, as a corollary to Fact 1, value is created by companies, for shareholders, when companies generate higher cash flows, not when rearranging investors' claims on those cash flows.