FIRST PARTIAL QUALITATIVE & QUANTITATIVE

MAIN ACCOUNTS

ASSETS

Cash

Trademarks

Machinery & Equipment

Accounts receivable

P&L

Inventories

Interest

Sales

COGS

Gross profit / Margin

EBITDA

Net income

LIABILITIES

Stocks

Short term debt

Retained earnings

Asset revaluation

Accounts payable

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YTD (YEAR TO DAY)

YTGO (YEAR TO GO)

HOW TO GET "OPERATIVE PROFIT"

sales - COGS = Gross profit - S&A = OPERATIVE PROFIT

ANALYSIS

Horizontal Analysis:

Are changes from one year to another?

or only a result of price increase?

Vertical Analysis

Do the present structure generates opportunities?

How could we strength them?

KPI'S LEVERAGE: EXTERNAL FORCES

Tangible Equity

Which is better approach of the company's present since it removes external values

Liabilities / Assets

If I were to close my company today, how much would banks own?

Liabilities / Equity

Does my company run with my money or with external sources of capital?

NOTE: Remember that in case that 66% of equity is represented by losses technical "BANKRUPTCY" has arrived

KPI'S COVERAGE: HOW PROTECTED AM I FROM EXTERNAL FORCES

EBITDA / Interest

It seeks to provide a measure onto how stressed you are from paying the actual interests

EBITDA / Interests + CPLTD

Inform the decision on acquiring debt had a relation between time and payment capability

KPI'S LIQUIDITY: COULD I REACT IN CASE OF CONTINGENCY?

Quick ratio

Current assets / short term liabilities

will be able to fulfill my year's debt?

Acid test

(current assets - inventories) / short term liabilities

If i do not sell anything, could I pay my creditors?

Working capital turnover

Sales / working capital

Analyzes the relationship between money driven by operations and sales

Change in networking capital

(previous current assets - new current assets) + (previous current liabilities - new current liabilities)

Where does my money that i am using come from

KPI'S PROFITABILITY: DOES MY BUSINESS ACTUALLY LEAVE ME SOMETHING?

Return on equity

Net income / equity

How much money i am sharing with those who play in my team?

Return on assets

Net income / assets

Do my properties create value?

EBITDA / sales

Do the money left after paying all my expenses is significant?

Net income / sales

Am i giving something back to business?

KPI'S CYCLE: HOW MANY TIMES AM I RUNNING THE TRACK?

(Accounts receivable / sales) * 360

How many days am I funding my customers?

(Accounts payable / COGS) * 360

How many days do my suppliers fund me?

(Inventories / COGS) * 360

How many days do they pass until i have to buy a whole new order of raw materials?

Operative cycle

Accounts receivable + inventory days - accounts payable days

It illustrates in how many days would I complete a whole business cycle?

Operative cycle - short term debt due date

Am I having an appropriate short term funding, or I am hanging myself?

USE & SOURCE OF RESOURCES

SOURCE

sales

credits

asset revaluation

USE

COGS + SG & A

interest + taxes + dividends

new assets

PROJECTS

Value creation

Solvency

Financial statements

Budget

Financial analysis

Capabilities

Capital investment

Financial projections

Conditions analysis

Project is a set of coordinated activities which are related to each other and work for a specific purpose


It is and idea, and it's decision of execution will be based on valuation techniques

Method of valuation

Set of tools that allow whether a project is acceptable or not

Economíc Engineering

Set of financial and industrial tools for decision making

Dependency

Mutually exclusive

Independent

Interdependent

Between 2 projects , just one project can be executed and the other must be discarded

The execution of a certain project won't be affect the feasibility of another project

Complementary

Competitive

Several projects arise from the selection of given project

A set of projects are proposed while only the best must be selected

Private project

New business units

Change in the business units

The project creates a new product or servie

No project or service is created , only changes into the means of production

Types

foreign direct investment

business partnership

joint venture

agreements

franchises

contracts

PROJECT CLASSIFICATION: WHERE DO WE PLAY?

Character

Objective

Category

Target

WHO PLAYS?

Shareholders

Stakeholders

STAGES

Investment

Operation

Pre feasibility

Feedback

Idea

7 P'S OF MARKETING (EXTERNAL FORCES)

Place

Price

People

Promotion

Product

Physical Environment

Process

BUSINESS MODEL CANVAS

IRR

INTERNAL RATE OF RETURN

Provides the breakeven discount of rate of any project

It should be used along with NPV ( NET PRESENT VALUE)

If the IRR is < than discount rate, the project SHOULD BE REJECTED

If the opposite holds true it SHOULD BE ACCEPTED

MIRR

MODIFIED INTERNAL RATE OF RETURN

Provides the breakeven discount rate of any project

It assumes different rates for the cashflows

DISCOUNT RATE

Inflation 6%

IR on credits

Sector rate of return

SOME RULES

If my IR on credits is > DR; MIRR > IRR

If my IR on credits is < DR: MIRR < IRR

If DR < financing cost; MIRR > IRR

If DR > financing cost; MIRR < IRR

ROI

RETURN ON INVESTMENT

ROI= sum of CFn / CFo >1

ROI= sum of CFn - CFo / CFo > 0

CAGR

COMPOUND ANNUAL GROWTH RATE

Intends to present the annual % return on a long term investment

CAGR= (ending value / beginning value) ^ (1 / # of years)

RETURN PERIOD

Time based analysis that intends to find out when will the project start generating returns

DISCOUNTED RETURN PERIOD

Pursues to diminish the outflows based on a discount rate, so the analysis becomes more acid

FINANCING COST ONLY FOR MIRR