Add training workflow, datasets, and runbook
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The Four Drivers of Value • 105
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Over this very long period, the nominal GDP growth in the United
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States averaged just over 6 percent per year. If the investment projects
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of a company are generally successful, the company will be able to
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dependably grow its profits at a rate faster than this 6 percent (or so)
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benchmark. The length of time it will be able to grow faster than this
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benchmark will depend on various factors related to the competitive-
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ness of the industry, the demand environment, and the investing skill
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of its managers.
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Seeing whether or not investments have been successful over time is
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a simple matter of comparing OCP growth with nominal GDP . Let’s look at
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a few actual examples. Here is a graph of my calculation of Walmart’s OCP
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and OCP margin over the last 13 years:
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2000 2005 2010
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0.00%
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0.50%
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1.00%
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1.50%
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2.00%
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2.50%
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3.00%
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3.50%
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4.00%
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4.50%
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5.00%20,000
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18,000
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16,000
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14,000
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12,000
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10,000
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8,000
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6,000
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4,000
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2,000
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-
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Estimated Owners’ Cash Profit and OCP Margin for Walmart
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Total Estimated OCP (LH) OCP Margin (RH)
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As one might expect with such a large, mature firm, OCP margin
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(shown on the right-hand axis) is very steady—barely breaking from the
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3.5 to 4.5 percent range over the last 10 years. At the same time, its to-
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tal OCP (shown on the left-hand axis) grew nicely as a result of increases
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in revenues. Over the last seven years, Walmart has spent an average of
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around 2 percent of its revenues on expansionary projects, implying that
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