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New Tools for Strategic Planning Chapter. 5. T. A. Sgritta University of North Carolina at Charlotte. Chapter 5. Financial Analysis for Strategists and Planners. Planning Factors. Real Market, product, customer Win Strengths vis-à-vis the competition, plans and capabilities to implement

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new tools for strategic planning chapter 5

New Tools for Strategic Planning Chapter. 5

T. A. Sgritta

University of North Carolina at Charlotte

chapter 5

Chapter 5

Financial Analysis for Strategists and Planners

planning factors
Planning Factors
  • Real
    • Market, product, customer
  • Win
    • Strengths vis-à-vis the competition, plans and capabilities to implement
  • Worth
    • Financial and cultural
profit and loss statement
Profit and Loss Statement
  • Operations
  • Somewhat flexible
  • May not be accurate
  • Source of recent financial problems
terms
Terms
  • Earnings
  • EPS
  • EBT
  • EBIT
  • EBITDA
typical p l 000s
Typical P & L ($000s)

Sales $50,000 100%

Material $24,000 48

Labor 6,000 12

CGS 30,000 60

Variable Margin $ 20,000 40%

Fixed costs:

G&A $ 1,750 3.5%

Mktg./Sales 4,600 9.2

Manufacturing/Operations 4,400 8.8

Engineering/Prod. Dev. 3,000 6.0

Subtotal Fixed $ 13,75027.5%

EBIT $ 6,250 12.5%

Interest $ 1,2502.5%

EBT $ 5,000 10.0%

Provision for taxes 1,750 3.5%

Earnings after tax $ 3,250 6.5%

typical balance sheet 000s
Typical Balance Sheet ($000s)

Assets:

Cash $ 300

Receivables 10,000

Inventory 10,000

Sub-Total Current Assets $20,300

PPE $ 5,000

Less accm’d dep. 2,200

Net $ 2,800

Goodwill $ 100

Patents, intangibles, net 0

Sub-Total Fixed Assets $ 2,900

Total Assets $23,200

liabilities and equity 000s
Liabilities and Equity ($000s)

Liabilities

Accounts Payable $ 8,000

Taxes Payable 200

Other current liabilities 0

Sub-total, Current Liabilities $ 8,200

Long Term Liabilities:

Long Term Debt  $11,200

Total Liabilities $19,400

Equity

Paid-in-capital $ 100

Retained Earnings 3,700

Total Equity $ 3,800

Total Liabilities and Equity $23,200

key balance sheet items
Key Balance Sheet Items
  • Cash
  • Receivables
  • Inventory
  • Fixed assets (PPE)
  • Accounts payable (current liabilities)
  • Equity
receivables days sales outstanding
Receivables: Days Sales Outstanding
  • Why is it important?
  • How is it calculated?
  • Why are amounts past due important?
  • What are the strategic implications?
inventory inventory turnover
Inventory: Inventory Turnover
  • Why is it important?
  • How is it calculated?
  • Why are obsolete items important?
  • What is the inverse of inventory turnover?
  • What are the strategic implications?
what if
25% of inventory is unusable?

30% of receivables are uncollectable?

How does this change:

Equity?

Income?

What If…
compound growth rates
Compound Growth Rates
  • Finance
  • Marketing
  • Evaluation
return on investment roi example
Return on Investment (ROI)(example)
  • EBIT = $5,000
  • Total assets = $25,000
  • Current liabilities = $5,000
  • ROI = 25%
discounted cash flow worksheet
Year

1

2

3

4

5

6

7

8

9

10

Discount Value (@ 25%)

1.00

0.75

0.56

0.42

0.32

0.24

0.18

0.13

0.10

0.08

Discounted Cash Flow Worksheet