Financial Analysis Tools

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Problem Solving Methodology BBC

luonut Long Le

Drama

luonut Desi McKeown

Scope Management

luonut Paul Lamb

Hofstede's Cultural Dimensions

luonut Iqra Afridi - Rick Hansen SS (2542)

Financial Analysis Tools

Variance Analysis

Compare actual with Budget or std

Review Hist performance, assess interrelationshiop b/w variables

Sensitivity Analysis

Process of selectively varying a plan's key estimate 4 ID over wat range a dcn option is preferred

Identify the estimates that are critical for Dcn under consideration

Complete model reflect accurate capacity, cost, revenue re/ship - estimated data'd be accurate

study impact of Change in underlying assumptions / key drivers

Scenario Analysis (What-if)

Info collected from ppr master bgt - basis for what-if analysis

E.g. Cost Volume-profit (CVP) analysis, Outsourcing decisions

Best, worst & most likely scenarios

Evaluate Fin impacts of diff alternatives

Trend Analysis

Forecasting Sales

Separate cash budget for each forecast

Optimistic, Pessimistic, Most likely sales estimate

New firm - use similar firms' 1st yr operation to forecast

Cash budget is heart of sales forecast

also see if re/ship with another set of data

Comparing beyond 2 yrs

Base period should not be exceptional yr

Comparing one yr's rst vs previous yrs' - $ & %

Key Performance Indicators (KPIs)

Types of KPIs

Operational Performance vs Strategic Initiatives

Operational

whether achieving strategic objective effectively & efficiently

Strategic

e.g. milestone on implementing new warehous m'ment sys

whether org is heading in direction agreed upon

Lead verse Lag Indicators

Lagging

e.g. Gross margin/ pdt

Effectiness of stratigies in meeting org goals

past performance

Lead

e.g % of rev derived from new pdts, customer complaints

Effectiveness of org's strategies for meeting future goals

What's about to occur

Short-term vs long-term

LT - qualitative, LT profitibility

ST - profit objectives, may not work in LT

Fin vs non-fin

Non-fin e.g. no. of units sold

turned into Trend or Variance

Measures used to track and measure Performance & Control

Develop KPIs

What the org trying to measure

Efficiency of activity/process

Output of activity/process

Org's goals

SMART