Financial Analysis by gjjur4356

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									Financial Analysis
   7 cash drivers




                Accountsreceivablemgmt.com
              7 Cash Drivers

•   Cash impact due to Sales Growth or Reduction
•   Cash impact due to Gross Profit Margin
•   Cash impact due to cost of SG & A
•   Cash impact due to accounts receivable
•   Cash impact due to inventory
•   Cash impact due to accounts payable
•   Cash impact due to Capital Spending
                                  Accountsreceivablemgmt.com
           7 Cash Drivers
   Cash impact due to Sales Growth or
                Reduction
• Firstly we need to know if the company is
  operating at a profit or a loss.

• If you operate at a loss increasing sales
  just means a greater loss and a greater
  drain on cash.
                              Accountsreceivablemgmt.com


• However since most company operate
      Cash impact due to Sales
        Growth or Reduction
• What impacts Sales ?
• Just about everything Right

1. Market forces ( technology, competition,
   regulations )
2. Human resources ( availability, Turnover,
   competencies)
3. Supplier ( availability, competitiveness,
                                Accountsreceivablemgmt.com

   substitutes)
            7 Cash Drivers


• Cash impact due to Gross Profit Margin (Cost of
  sales )




                                 Accountsreceivablemgmt.com
        Cash impact due to Gross
       Profit Margin (Cost of sales )
• What impacts Cost of Sales ?



1. Market forces ( technology, competition,
   regulations )
2. Human resources ( availability, Turnover,
   competencies)
3. Supplier ( availability, competitiveness,
                              Accountsreceivablemgmt.com

   substitutes)
     7 Cash Drivers

• Cash impact due to cost of SG & A
      • (operating expense)




                         Accountsreceivablemgmt.com
        Cash impact due to cost of
       SG & A ( operating expense)
• What impacts operating expense ?

1. Market forces ( technology, competition,
   regulations )
2. Human resources ( availability, Turnover,
   competencies)
3. Supplier ( availability, competitiveness,
   substitutes)
                              Accountsreceivablemgmt.com


4. Clients ( availability, competition to
               7 Cash Drivers

    • Cash impact due to accounts receivable


• Firstly the impact is in relations to sales . The absolute
  number has no value unless it’s in relations to sales.
• Which is why we often refer to as the DSO (days of
  sales outstanding ) of a company. One can also look
  to a % of account receivable over sales.


                                         Accountsreceivablemgmt.com
        Cash impact due to accounts
                receivable
• What impacts Accounts Receivable ?

1. Market forces ( technology, competition,
   regulations )

2. Human resources ( availability, Turnover,
   competencies)
                                 Accountsreceivablemgmt.com



3. Clients ( availability, competition to
            7 Cash Drivers


• Cash impact due to inventory




                                 Accountsreceivablemgmt.com
     Cash impact due to inventory

• What impacts Inventory level ?

1. Market forces ( technology, competition,
   regulations )
2. Supplier ( availability, competitiveness, substitutes)
3. Clients ( availability, competition to markets, the
   barriers to entry )
4. Company Projects ( modernization, expansion
                                     Accountsreceivablemgmt.com
            7 Cash Drivers


• Cash impact due to accounts payable




                               Accountsreceivablemgmt.com
             Cash impact due to
              accounts payable
• What impacts Accounts payable ?



1. Market forces ( technology, competition,
   regulations )
2. Supplier ( availability, competitiveness,
   substitutes)
3. Clients ( availability, competition to
                               Accountsreceivablemgmt.com



   markets, the barriers to entry )
            7 Cash Drivers



• Cash impact due to Capital Spending
• Often enough concerns modernization, big
  project



                               Accountsreceivablemgmt.com
        Likely Course of Cash
• Internal Operations ( 5 cash drivers )
• Additional equity or owner’s capital
  contributions
  – Possible new investors, recapitalization and
    restructuring of Debt.
• Disposition of non-operating assets
  – (i.e. Sales and leaseback )
• Additional borrowings
  – Restructuring of Debt
• Liquidation of company’s assets
                                      Accountsreceivablemgmt.com




  – Sales of assets
• At the End of the day you should be able
  to draw a portrait of your client on several
  fronts and understand if he’s worth saving
  to what degree and possibly how you can
  help to save him..

•   Company structure and key players
•   Management history and experience
•   Future plans of the business
                               Accountsreceivablemgmt.com

•   business structure of operations

								
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