Acro Yoga Is A Flexible Combination Of Yoga

Acro Yoga Is A Flexible Combination Of Yoga

Acro Yoga Is A Flexible Combination Of Yoga

Copyright © 2024 by Janice Fordyce

All rights reserved

TABLE OF CONTENTS

CHAPTER 1 : INVENTORY DAYS AND INVENTORY ROTATION SPEED

CHAPTER 2 : THIS IS THE FIRST AND IMPORTANT CHALLENGE FOR ANY BUSINESS.

CHAPTER 3 : THINK ABOUT YOUR CUSTOMERS

CHAPTER 4 : BRAIN TRAINING

CHAPTER 5 : GET THINGS DONE

CHAPTER 1 : INVENTORY DAYS AND INVENTORY ROTATION SPEED

These ratios can be a bit confusing. They are based on the fact that inventory moves throughout the business, and can move faster or slower. In addition, the speed of inventory turnover is also very important. If you think of inventory as frozen cash, then the faster you get it out the door and get real money in, the richer you are.

For that reason, let's start with a ratio that has an easy-to-remember name: days in inventory (or DII, inventory days). In essence, this ratio measures the number of days inventory sits in the system. The numerator is the average inventory, the result of adding the beginning inventory to the ending inventory (we can find these two numbers on each day's balance sheet) and dividing by 2. (Some sales Businesses only use ending inventory). The denominator is cost of goods sold (COGS) per day, which is a measure of how much inventory is actually used each day. Sample formulas and calculations look like this:

DII      =      Average inventory      =      (1,270 + 1,514)/2      =      74.2

COGS/day            6,765/360

(Financial experts often calculate the number of days in a year as 360 days, just because this is a round number). In this example inventory is in the system for 74.2 days. Of course, whether this indicator is good or bad depends on each product, industry, competitive environment, etc.

Inventory turn, another inventory metric, measures the number of times inventory turns over in a year. If each inventory item is processed at the same rate, your inventory turnover rate will be the number of times per year that you make a sale and have to replenish it. The formula and calculation of this ratio sample is very simple:

Inventory turnover speed      =      360      =      360      =      4.85

DII            74.2

In this example, inventory turns over at a rate of 4.85 times per year. But what are we actually measuring here? Both ratios are a measure of a business's efficiency in using inventory. The higher the inventory turnover rate, or the lower the number of days of inventory, indicates the tighter your inventory management and the better your cash position. As long as you have enough inventory ready to meet customer demand, the more efficiently you manage it, the better off you will be.

In 2002, the Target Stores chain had an inventory turnover rate of 6.5, which is a respectable number for a large retailer. But that's still nothing compared to Wal-Mart's inventory turnover rate of 8.1. In the retail industry, differences in inventory turnover can indicate the success or failure of a business; Both Target and Wal-Mart are successful, but Wal-Mart is definitely the leader. If your responsibility lies anywhere near the realm of inventory management, you need to keep a close eye on this ratio. (And even if not, there's nothing stopping you from asking: Hey Sally, why was there a check mark on our DII recently?). Both of these ratios are key levers that can be used by financially intelligent managers to create a more efficient organization.

AVERAGE COLLECTION PERIOD

Days sales outstanding (days sales outstanding, or DSO, also known as average collection period and receivable days) is a measure of the average time it takes to collect money from a sales transaction - in other words, it is a measure of the average collection period and receivable days. Measure customer bill payment speed.

The numerator of this ratio is the ending accounts receivable, taken from the balance sheet at the end of the period we are considering. The denominator is revenue per day – annual revenue divided by 360 days. The formula and calculation of this ratio sample are as follows:

Average collection period      =      A/R at the end of the period      =      1,312      =      54.5

Revenue/day            8,689/360

In other words, a business's customers typically pay their invoices within an average of about 54 days.

Of course, it is here that the route to rapid improvement of the business's cash position opens. Why did it take so long? Are customers dissatisfied because of defective products or poor service? Is the salesperson too lenient when negotiating contract terms? Debt collectors frustrated or ineffective? Everyone has to put effort into finding newly updated financial management software? DSO varies greatly between industries, regions, economies and seasons, but regardless: if you can reduce this ratio to 45 or 40 days, businesses can improve significantly. Tell your cash situation. This is a fundamental example of an important phenomenon, namely, that careful management can improve the financial picture of a business without changing revenues or costs.

DSO is also a key ratio for those carefully negotiating the terms of a potential acquisition. A high DSO can be a red flag, in that it suggests that customers are not paying their invoices on time. Maybe the customer himself is having financial difficulties. Maybe the financial management and operating activities of the target business are too weak. Maybe, as at Sunbeam, there's some equivocal financial aesthetic trickery going on. We will return to DSO in Part VII, on working capital management; For now, just note that, by definition, it is an adjusted average.

Therefore, it is important that those carefully negotiating terms look at the timing of accounts receivable – that is, how old are those particular invoices and how much do they have in total? how much. It is very possible that there are some invoices with unusually high values and late payments that are distorting the DSO index.

AVERAGE PAYMENT PERIOD

Days payable outstanding (DPO) indicates the average time it takes a business to pay current invoices. It is the opposite of DSO. The calculation formula is similar: take accounts payable at the end of the period and divided by COGS per day:

Average payment period      =      A/P at the end of the period      =      1,022      =      54.5

COGS/day            6,756/360

In other words, the business's suppliers wait a long time to pay, this time period is almost equivalent to the time the business waits to collect debt from customers.

So what? Isn't that something the supplier, not the business's management, needs to worry about? The answer is correct and incorrect. The higher the PDO, the better the business's cash position, but the worse for the supplier. A business with a reputation for slow payments may find that its top suppliers are not as enthusiastic about competing for their business as they should be. Their prices may be higher, their terms may be stricter. A business with a reputation for paying promptly within 30 days receives the exact opposite. Tracking DPO is one way to ensure that a business is keeping a balance between keeping its cash on the one hand, and keeping its suppliers happy on the other.

SPEED OF REPLACEMENT OF LAND, FACTORY AND EQUIPMENT

This ratio tells you how much revenue a business gets from each dollar invested in land, factory, and equipment (property, plant, & equipment, or PPE). It is a measure of the efficiency in generating revenue from fixed assets such as buildings, vehicles and machinery. The calculation for this ratio is simply taking total revenue (from the income statement) divided by ending PPE (from the balance sheet):

PPE replacement speed      =      Revenue      =      8,689      =      3.90

PPE            2,230

By itself, the figure of $3.90 in revenue for every dollar of PPE doesn't say much. But it can mean a lot when compared to past performance, and to the performance of competitors. A business with a low PPE turnover rate, other things being equal, is not using assets as efficiently as a business with a high PPE turnover rate. So check out trend lines and industry averages to see how the business is measuring up.

But please note this small, silent condition, other factors remaining constant. In fact, this is a ratio at which the art of finance can have a strong impact on the numbers. For example, if a business leases most of its equipment, rather than owns it, this leased asset may not appear on the balance sheet. The total demonstrated assets of the business will be much lower, and the rate of PPE replacement will be correspondingly higher. Some businesses pay bonuses at this rate, which gives managers an incentive to rent, rather than buy, equipment. Such a hire may or may not make strategic sense for the business. The absurd point here is making decisions on the basis of bonus payments. By the way, let's also mention that a lease must meet specific requirements to be considered an operating lease (the type of expense that is not shown on the balance sheet), instead of a lease. capital asset lease (must be included in the balance sheet).

TOTAL ASSETS TURNOVER SPEED

This ratio is based on the same idea as the above ratio, but it compares revenue to total assets, not fixed assets. (Total assets include cash, accounts receivable and inventory, as well as PPE and other long-term assets). The formula and calculation for this ratio is as follows:

Total asset turnover rate      =      Revenue      =      8,689      =      1.67

total assets            5.193

Total asset turnover rate not only measures the efficiency of using fixed assets, but also measures the efficiency of using all assets. If you reduce inventory, total asset turnover will increase. If you can reduce the average collection time, the total asset turnover rate will increase. If you increase revenue while keeping assets the same (or keeping the rate of asset growth low), total asset turnover will increase. Any of the above balance sheet management moves will help improve operational efficiency. Tracking trends in asset turnover shows how you're doing your job.

Of course, in reality the list of ratios does not end here. Financial professionals of all types use a wide variety of ratios. The same goes for investment analysts. (A similar ratio for investors is the price-to-earnings ratio, which represents the relationship between a business's stock price and its earnings or profits.) Your company may have specific ratios that are appropriate for you, your industry, or both. You'll want to learn how to calculate them, use them, and how to influence them. However, the ratios we present here are the ones most popular with most managers. While understanding financial statements is important, it is only the starting point on the journey to financial intelligence. Ratios take you to the next level; they open your eyes to the hidden meaning between (or perhaps beneath) the lines, so you can see what's really going on. They are useful tools for analyzing a business and telling its financial story.

Part V

TOOL BOX

WHICH RATIO IS MOST IMPORTANT TO YOUR COMPANY?

In general, each industry will have certain ratios that are considered important. For example, retailers closely monitor inventory turnover rates. The faster inventory turns over, the more effectively they are utilizing their other assets (such as store space). But businesses often want to create their own key ratios, depending on their own circumstances and competitive situation. For example, Joe's company Setpoint is a small, project-based business that must carefully track operating costs and cash flow. So which ratios will Setpoint managers be watching most closely? One is the ratio that the company invents: gross profit divided by operating expenses. Tracking this ratio ensures that operating expenses do not deviate from the gross profit the company is generating. The second is the short-term ratio, used to compare short-term assets with short-term liabilities. The current ratio is a good indicator of whether a company has enough cash to meet its obligations.

You probably already know the key ratios at your company. If not, ask the finance director or any finance department employee. We are confident, they can answer that question easily.

THE POWER OF REVENUE PERCENTAGES

You will often see a form of ratio embedded right in a business's income statement: each item will be expressed not only as a dollar, but also as a percentage of revenue. For example, COGS could be 68% of revenue, operating expenses 20%, etc. This revenue percentage number itself will be tracked over time to establish trend lines. Businesses can conduct this analysis at a relatively detailed level – for example, tracking the percentage of revenue of each product line, or the percentage of revenue of each store or region in the retail chain. The power here is that sales percentage calculations give managers more information than raw numbers. Percentage of revenue allows managers to track their operating expenses in relation to revenue. Without this ratio, it is difficult for managers to know whether they are still within the norm when revenue increases or decreases.

If your company doesn't use percentage of revenue, try this exercise: take three recent income statements, and calculate percentage of revenue for each major item. Then track results over time. If you see certain items increase while others decrease, explain to yourself why this is happening – and if you can't find the answer, try to find someone who does. This exercise can teach you a lot about the competitive (or other) pressures your company is under.

PROPORTIONAL RELATIONSHIPS

Like the financial statements themselves, the ratios are mathematically consistent. We won't go into too much detail here, because this book is not aimed at financial professionals. But there is a relationship between these ratios that is worth stating clearly because it clearly shows what we are talking about, management can influence the performance of a business in many ways.

Let's start with the fact that one of the main profitability goals of a business is return on assets, or ROA. That is an important measurement because investment capital is the lifeblood of a business, and if a business cannot have a good ROA, its capital flow will dry up.

In this section, we learn that ROA is calculated by dividing net income by total assets. But another way to calculate ROA is through two other factors, which are multiplied together and result in net income divided by total assets, as follows:

Net income      x      Revenue      =      Net income      =      ROA

Revenue            Asset            Asset

The first term, net income divided by sales, is of course the net profit percentage, or return on sales (ROS). The second term, sales divided by assets, is the asset turnover rate, which we discussed in chapter 23. So the net profit ratio multiplied by the asset turnover rate gives the result: ROA. This equation clearly shows that there are two ways to jump through hoops, with hoop here being high ROA. One is to increase the net profit margin, through either increasing prices or providing goods or services more efficiently. This method may be difficult to implement if the market the business is operating in is highly competitive. The second way is to increase the speed of asset turnover. This opens up a range of possible actions: reduce average inventory, reduce average collection period, and reduce purchases of land, plant, and equipment. If you can't improve your business's net profit margins, then finding ways to handle those ratios – that is, managing your balance sheet – may be the best way to beat the competition and improve your business. improve ROA.

Part VI

Learn how to calculate (and truly understand) your ROI

24. The rocks make up the return on investment

All financial intelligence is concerned with understanding how the financial side of business operates, and how financial decisions are made. The principles discussed in this chapter are the basis for making a number of decisions—decisions involving fundamental investments—in American businesses.

Most of us need no lengthy introduction to the fundamental financial principle known as time value of money. The reason is because we are taking advantage of it in our daily personal financial activities. We borrow money to buy a house, then we borrow money to buy a car. We pile up huge balances on credit cards. When debt is too high, we pay money into the account. We also put the money we save into savings or checking accounts, money market funds, government bonds, stocks and bonds, and perhaps half a dozen other types of money. Other taxable investments. America is a nation of borrowers, but it is also a nation of savers, lenders, and investors.

Since all of the above activities reflect monetary value over time, the bet is safe if most of us have a rudimentary understanding of the concept. Those who do not understand will most likely end up in failure, with a truly expensive price.

At its simplest, the time value principle of money states as follows: a dollar in our hands today is worth more than a dollar we get tomorrow - and much more valuable than a dollar in our hands. Hope to be able to collect it after 10 years. The reason is very clear. We know we have a dollar today, while the dollar we expect to