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By: Se Kim

By: Se Kim. By: Se Kim Module 4: Parsimonious Forecasting February 3 , 2014. Return on Enterprise Operations. RNEA = EPAT/ avg (NEA) Rate of return on Net Enterprise Assets. RNEA – Competitors. RNEA of competitors are all over the grid Amount of resources employed varies

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By: Se Kim

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  1. By: Se Kim By: Se Kim Module 4: Parsimonious Forecasting February 3, 2014

  2. Return on Enterprise Operations • RNEA = EPAT/avg(NEA) • Rate of return on Net Enterprise Assets

  3. RNEA – Competitors • RNEA of competitors are all over the grid • Amount of resources employed varies • Different growth stages

  4. Enterprise Profit Margin • Profit the firm earns from each sales dollar • Affected by level of enterprise expenses

  5. EPM from Sales • Cannot forecast certain gains/losses from non-operating revenue

  6. Enterprise Asset Turnover • Sales realized from each dollar invested in enterprise assets • How Walmart manages working capital

  7. EPM v EATO • Industry – low capital structure • Higher EATO • Low profit margin

  8. Weak revenue growth in 2010 due to recession • From 2011 on: • Avg. growth of 4.54% • Expect stronger growth in the future from emerging markets

  9. Competitors

  10. Parsimonious Forecast Assumptions • Sales Growth: 4.95% first two years • 6.5% last three years • Higher revenue growth from growing markets • Canada &Emerging markets (Brazil, China, India, etc.) • EPM: 5.2% • Avg. is 5.23% • As competition rises, lower profit margins

  11. Assumptions (cont.) • EATO: fluctuates during the years • 3.75 – first two years • Increased investing in new markets • 4.00 – last three years • Increase return on its earlier investments

  12. Forecasts • Ambitious, yet reasonable forecast • Based on company trends, less on comparable companies

  13. Target & Hibbett

  14. Questions??

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