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
EconomÃc 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
[BUSINESS MODEL CANVAS]
(https://canvanizer.com/new/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