To input Product requirements
I. FINANCIAL STATEMENT ANALYSIS Two Analyzing Financial Statements
1. Absolute = MRV-MPPV 2. Percentage Change = MRV-MPPV MPPV 3. Trend Percentage = _MRV_ MPPV VERTICAL ANALYSIS Liquidity Ratio
1. Current Ratio = Current Asset Current Liability
I. FINANCIAL STATEMENT ANALYSIS Two Analyzing Financial Statements
1. Absolute = MRV-MPPV 2. Percentage Change = MRV-MPPV MPPV 3. Trend Percentage = _MRV_ MPPV VERTICAL ANALYSIS Liquidity Ratio
1. Current Ratio = Current Asset Current Liability
2. Acid Test Ratio = Current Asset Inventory Current Liabilities
ACTIVITY RATIO
Inventory Turn Over = ___CGS__ = # of working days (360) Average inventory Average Sales Period Receivable Turn Over = Net Credit Sales = # of working days (360)
Average A/R Average Collection Period Payable Turn Over = Net Credit Purchases = # of working days (360)
Average A/P Average Payment Period Operating Cycle = Average Sales Period +Average Collection Period Cash Conversion Cycle =Operating Cycle – Average Payment Period
SOLVENCY RATIO
1. Debt Ratio = Total Liabilities Total Assets 2. Equity Ratio = Total Equity Total Assets 3. Debt to Equity = Total Liabilities
Equity Ratio
6. Time Interest = Operating Income or NIBIT Earned Ratio Interest
7. Fixed Payment = NIBIT + LEASE
Coverage Ratio Interest + Lease+ [Principal + Preferred Fix] 1 – Tax%
PROFITABILITY RATIO
1. GP Ratio = GP 10. EPS = NIACS
Sales WACSO
2. OI Ratio = OI
Sales 3. Net Profit = NIAT
Ratio Sales
4. Net Profit = NIACS
Ratio Sales
5. Return on = NIAT
Sales Sales
6. Return on = NIAT
Asset Average Asset
7. Return on = NIAT
Equity Average Equity
8. Asset Turnover = Sales
Average Asset 9. Equity Turnover = Sales
MARKET TEST
1. Price Earnings Ratio = Market Price of CS / EPS
2. Dividend Yield = Div. per Share / Market Value per Share 3. Dividend Pay Out = Div. per Share / EPS
Puzzle Ring to Remember
D
(2) —— —— (3)
M ⁄ E
DU POINT SYSTEM
1 ROE = ROS x ETO
→
E%__ __E%__
2 ↑ R OA = ROS x ATO
3 → 4 ↑
ROS ETO
ROE = ____NIAT___ = __NIAT__ ● _____SALES______ = ―ROSETO‖
AVERAGE EQUITY SALES AVERAGE EQUITY
ROA = ____NIAT__ = __NIAT__ ● ______SALES______ = ―ROSATO‖
GROSS PROFIT VARIANCE ANALYSIS
1. Sales Price Variance = (MRSP – PPSP) (MRQ) 2. Sales Quantity Variance = (MRQ – PPQ) (PPSP) 3. Cost Price Variance = (MRCP – PPCP) (MRQ) 4. Cost Quantity Variance = (MRQ – PPQ)(PPCP)
1. Sales Price Variance = MRS – [PPS x QF] 2. Sales Quantity Variance = MRS/PF – PPS 3. Cost Price Variance = MRC – [PPC x QF] 4. Cost Quantity Variance = MRC/PF- PPC
- PLANNING AND CONTROLLING FUNCTION –
A. Cost Volume Profit Analysis B. Leverage Analysis
1. DOL= % ∆ in OI DFL= % ∆ in NIACS DTL= % ∆ in NIACS
% ∆ in Sales % ∆ in OI % ∆ in Sales
NOTE: When there are two year given
2. DOL = TCM DFL= Operating Income DFL= TCM Operating Income OI-Interest- PD OI-Interest- PD
1-T% 1-T%
NOTE: When only one year is given
SVV --- xxx ---- SPV Price Factor Prior x Qf x Pf = Recent Sales xxx x n% x n% xxx COS (xxx) x n% x n% (xxx) ____ _____ ______ GP xxx xxx SVV --- xxx ---- Cost Function CPV Volume Variance =
III. Decisions Making & Evaluation System Differential Cost Analysis
1. Total Cost Approach 2. Differential Analysis
Incremental Revenue xxx
Less: Incremental Cost
Material xxx DL xxx Variable FOA xxx (xxx) Incremental Profit (xxx) Make or Buy Purchase Price xxx
Less: Relevant Manufacturing Cost
DM xxx
DL xxx
VFOA xxx (xxx)
Difference X xxx
Number of Units * xxx
Net Advantage of Make or Buy (xxx)
Accept or Reject w/ Excess Capacity
Special Selling Price xxx
Less: Relevant Cost
DM xxx
DL xxx
VFOA xxx (xxx)
Marginal Profit/ Unit xxx
x No. of Units Ordered *xxx
Incremental Advantage of
Accept or Reject the Offer (xxx)
Without Excess Capacity Less: Contribution Margin
Lost by reducing sale (xxx)
To regular costumers
Continue or Discontinue Operating a Business Segment
Continue or Discontinue
Units Selling Price xxx —○—
Units Variable Cost xxx —○—
CM xxx —○—
FC (xxx) (xxx)
Profit
Manila Makati Quezon Total
Sales xxx xxx xxx xxx
Variable Cost (xxx) (xxx) (xxx) (xxx)
CM xxx xxx xxx
-FC Profit
Sell or Process Further
Additional/Sales Value if Process Further xxx Less: Further Processing Cost (xxx) Profit
xxx
xxx (xxx)
Product Combination / Utilization of Scarce Resource Steps:
1. Identify the scarce resource.
2. Identify the product utilizing the scarce resource. 3. Compute the CM per Scarce Resource.
CM= CM
Resource needed per unit
4. Prioritize the product with the highest input of Contribution Margin per Scarce Resource.
(B) Short Term Financial Management 1.) Cash Management
ECQ=
Conversion Cost =
Total Opportunity Cost = Average Cash Balance x Interest Rate
Accounts Receivable Management
Average Investment in A/R =
Turn Over A/R =
Powerful Tool
Turn Over of A/R =
Additional Profit Contribution from Sales
(Increase x CM / Unit) xxx
Cost in Marginal Investment in A/R
(Marginal Investment x Required Return on Equal Risk Investment) (xxx) Cost of Marginal Bond Debts
(Increase in Bad Debts) (xxx)
Net Profit from Implementation of Proposed Plan (xxx)
Note: This is about Relaxation of Credit Standards
Speeding-Up Collection of A/R (w/ Cash Discount)
Additional Profit Contribution from Sales xxx (Increase in Units x CM/ unit)
Cost in Marginal Investment in A/R
(Marginal Investment x Required Return) (xxx) →depends if the investment is to spent or save
from the proposed plan.
Cost of Marginal Bad Debts (xxx)
Cost of Cash Discount
(Total Units x Save Price x No. of (xxx) Customers who Avail Discount x Disc x Ratio) ______ Net Profit from Initiation of Cash Discount (xxx)
Credit Monitoring
1. Average Collection Period 2. Aging of A/R
Float
1. Mail Float 2. Processing Float 3. Clearing Float Lock Box System
Investment Reduce = Sales x
Cash Concentration1. Pool of funds for making cash investment – Short Term. 2. Improves trading and internal control of the firm cash. 3. Reduces idle cash balance.
Resource Invested
Inventory = COS x
= xxx+ Accounts Receivable = NCS x
= xxx- Accounts Payable = Purchases x
= (xxx)Resource Invested (xxx)
Inventory Management
Common Techniques for Managing Inventory
1. ABC Inventory System (Average According to Value of A/P) 2. Two Bin Method
3. EOQ
S = Usage in units per period O = Order cost per order
*Order Cost = O x
*Carrying Cost = C x
*Total Cost = Order Cost + Carrying Cost
*EOQ =
*Reorder Point = Days of load time x Daily usage
PR = C = = x
Profit/sales CM/SALES MS/SALES
5. Indifference Point:
1. (cm/unit multiply Q) – FC = (cm/unit multiply Q) – fe 2. fc+( vc/unit multiply Q) = fc+ (vc/unit multiply Q)
NOTE: Q = Indifference Point