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New Tools for Strategic Planning Chapter. 5

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New Tools for Strategic Planning Chapter. 5 T. A. Sgritta ... Equity Receivables: Days Sales Outstanding Why is it important? How is it calculated? – PowerPoint PPT presentation

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Title: New Tools for Strategic Planning Chapter. 5


1
New Tools for Strategic Planning Chapter. 5
  • T. A. Sgritta
  • University of North Carolina at Charlotte

2
Chapter 5
  • Financial Analysis for Strategists and Planners

3
Planning Factors
  • Real
  • Market, product, customer
  • Win
  • Strengths vis-à-vis the competition, plans and
    capabilities to implement
  • Worth
  • Financial and cultural

4
Profit and Loss Statement
  • Operations
  • Somewhat flexible
  • May not be accurate
  • Source of recent financial problems

5
Terms
  • Earnings
  • EPS
  • EBT
  • EBIT
  • EBITDA

6
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 GA 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 13,750
27.5   EBIT 6,250 12.5   Interest
1,250 2.5   EBT 5,000
10.0   Provision for taxes 1,750
3.5   Earnings after tax 3,250 6.5
7
Typical Balance Sheet (000s)
  • Assets
  • Cash 300
  • Receivables 10,000
  • Inventory 10,000
  • Sub-Total Current Assets 20,300
  •  
  • PPE 5,000
  • Less accmd dep. 2,200
  • Net 2,800
  • Goodwill 100
  • Patents, intangibles, net 0
  • Sub-Total Fixed Assets 2,900
  • Total Assets 23,200
  •  

8
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

9
Key Balance Sheet Items
  • Cash
  • Receivables
  • Inventory
  • Fixed assets (PPE)
  • Accounts payable (current liabilities)
  • Equity

10
Receivables Days Sales Outstanding
  • Why is it important?
  • How is it calculated?
  • Why are amounts past due important?
  • What are the strategic implications?

11
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?

12
What If
  • 25 of inventory is unusable?
  • 30 of receivables are uncollectable?
  • How does this change
  • Equity?
  • Income?

13
Compound Growth Rates
  • Finance
  • Marketing
  • Evaluation

14
Sales Projections(CGR estimate 8)
15
Sales Projections
16
Sales Projections
17
Sales Projections
18
Return on Investment (ROI)(example)
  • EBIT 5,000
  • Total assets 25,000
  • Current liabilities 5,000
  • ROI 25

19
Income Statement Growth Situation (000s)
20
Cash Flow (000s)
21
Discounted Cash Flow Worksheet
  • Year
  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • Discount Value (_at_ 25)
  • 1.00
  • 0.75
  • 0.56
  • 0.42
  • 0.32
  • 0.24
  • 0.18
  • 0.13
  • 0.10
  • 0.08
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