Some companies may use creative lease, depreciation and reservation techniques to keep book profits artificially high or low; this does not always contribute to shareholder value.
The second part of the definition concerns the knowledge that the value of a cash flow is time-related, given the term "present value".
With higher technical availability, it is possible to produce and sell more products with the same invested capital, generating more income while the fixed costs remain the same.
At corporate level, this does not generate more turnover, but it does significantly reduce costs, which is another way of creating value.
An increasingly important value driver for maintenance is safety, health, and environment (SHE) in VDM terminology.
It is very controversial to put a value on human life and therefore this VDM theory is just like the ALARP logic dangerous to use and might not be accepted by all legislation world-wide (specially in the US).
Savings on the maintenance budget automatically generate free cash flows in the future and, by consequence, value.
Within VDM, a distinction is made between four types of resources: technicians, spare parts, contractors and knowledge.
One need to think only of cash flows freed up as a result of smarter management or savings on warehouses, logistical employees, insurance and the avoidance of obsolete and surplus spare parts.
This factor shows how great the probability is that the License to Operate will be retained in the coming years and that the expected cash flows from all four value drivers will actually be attainable in the future.
A SHE factor of 0 means 0% probability of retention of the License to Operate, for example in a fictitious case where a company decides to stop performing all maintenance for cost reasons.
But because the company fails to satisfy SHE laws and this loses its License to Operate, this cash flow will not create any value.