14.- Brief Recap

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Del curso dictado por IESE Business School

Operational Finance: Finance for Managers

270 calificaciones

IESE Business School

Operational Finance: Finance for Managers

270 calificaciones

Curso 2 de 5 en SpecializationFoundations of Management

When it comes to numbers, there is always more than meets the eye. In operational finance, you will learn how to read the “story” that the balance sheet and income statement tells about the company’s operations. The insights you gain from this “financial story” will then become a tool for short-term decision-making at the top management level relating to current assets, current liabilities and the management of working capital. Finally, by the end of the course you will understand the financial consequences of managerial decisions on operations, marketing, etc.

De la lección

Week 2: Operational Ratios and Forecasting

In week 1, we looked at Polypanel’s Balance Sheet and P&L Statement. In the Balance Sheet, we noted that receivables increased from €188,000 in 2004 to €649,000 in 2007. We left off with the question: Is this difference due to an increase in sales or delays in payments from customers? In week 2, we will introduce operational ratios, the tools we need to disentangle both effects and understand what’s going on below the surface. We will also conduct a forecasting exercise of Polypanel to understand how well it will be positioned to pay back a potential credit line in the future. Objectives: By the end of the session you will understand the different types of operational ratios (Days of Collection, Days of Inventory and Days of Payables) in order to analyze how well a business is performing. You will also learn how to use forecasting to support financing decisions.

1.- Recap from Week 15:47

2.- Recap from Week 1, (continued)6:06

3.- Operational Ratios: Days of Collection5:20

4.- Operational Ratios: Days of Collection, (continued)3:59

5.- Operational Ratios: Days of Inventory3:45

6.- Operational Ratios: Days of Inventory, (continued)4:39

7.- Operational Ratios: Days of Payment6:28

8.- Operational Ratios: Days of Payment, (continued)4:10

9.- Forecast of the P&L7:08

10.- Forecast of the Balance Sheet (Theory)5:40

11.- Forecast of the Balance Sheet (Theory), (continued)5:53

12.- Forecast of the Balance Sheet (Polypanel)6:12

13.- Forecast of the Balance Sheet (Polypanel), (continued)3:21

14.- Brief Recap3:49

Conoce a los instructores

Miguel Antón
Associate Professor
Financial Management

[MUSIC]

So here we are at the end of session two of this week two of Coursera.

Now what have we done today?

Basically, we started the week with one thing which is we want to understand

why receivables have increased so much.

And we said there is only two reasons.

One, sales have increased, so your sales increase,

your invoices are going to be more.

And second one, your days of collection might have changed.

So perhaps you are collecting worse, later or sooner, we don't know.

So to understand that change we want it,

we need it to go deep into the operational ratios.

And this is what we did in the first three clips.

We did the operational ratios for days of collection, for days of inventory and for

days of payment.

And that actually gave us an information about whether the company's

actually managing well.

We understood that by looking at the evolution of those ratios,

we've seen that there has been a deterioration.

And we also have seen that there is a financing impact of this delaying

payment and this delaying collection.

So we actually need more finance because of these mismanagement of the days.

And afterwards we asked the question, well okay fine,

we have the operational ratios, and we devoted some time to it.

But at the end of the day,

the bank is interested in whether the company will pay back or not.

And we can only know that if we do a forecast of the future and

we specifically look at the line of bank credit.

Now to do a forecast we started with a P&L, because the most important thing

to forecast in a forecast of financial statements of a company is the sales.

And we saw that from the sales everything has just flowed.

Because we just followed the policies of the previous years that were reasonable.

And then we moved to the forecast of balance sheet.

And we saw that the balance sheet has basically eight elements in the asset

side, cash, receivables, inventory and fixed assets.

In the liabilities we basically had credit, payables, long-term debt and

equity.

And we started filling in all those numbers starting from the ones

that depend on sales.

Afterwards, we moved onto fixed assets and long-term debt, which is very simple.

Then we filled the equity and if you recall the most important

thing when we do a forecast of the balance sheet is that we fill in cash and credit.

The very, very, very last thing, cash and credit.

And then we did the one for Poly Panel, we did all those numbers, and

then we looked at the line of credit.

And it turned out that the first year you are below 500,000 euros.

But then the second year you are almost at 600,000 euros and

the third year we are near 800,000 euros.

So why is the company needing more and more credit every year?

What do we tell the guys in the bank,

should we tell them to keep the credit or not?

Because the company's going to come in March 09 to ask for more credit.

So to answer this question, we need to get a correct and meaningful

diagnosis of what is the problem to be able to solve the problem afterwards.

And this is what we will do next week.

So hope to see you next week.

[MUSIC]

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