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
