Financial Analysis Tools

SMART

Develop KPIs

What the org trying to measure

Org's goals

Output of activity/process

Efficiency of activity/process

Measures used to track and measure Performance & Control

turned into Trend or Variance

Types of KPIs

Fin vs non-fin

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

Short-term vs long-term

ST - profit objectives, may not work in LT

LT - qualitative, LT profitibility

Lead verse Lag Indicators

Lead

What's about to occur

Effectiveness of org's strategies for meeting future goals

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

Lagging

past performance

Effectiness of stratigies in meeting org goals

e.g. Gross margin/ pdt

Operational Performance vs Strategic Initiatives

Strategic

whether org is heading in direction agreed upon

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

Operational

whether achieving strategic objective effectively & efficiently

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

Comparing beyond 2 yrs

Base period should not be exceptional yr

also see if re/ship with another set of data

Forecasting Sales

Cash budget is heart of sales forecast

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

Optimistic, Pessimistic, Most likely sales estimate

Separate cash budget for each forecast

Evaluate Fin impacts of diff alternatives

Best, worst & most likely scenarios

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

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

study impact of Change in underlying assumptions / key drivers

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

Identify the estimates that are critical for Dcn under consideration

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

Review Hist performance, assess interrelationshiop b/w variables

Compare actual with Budget or std