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Learn how to simplify your financial statements and use key metrics to drive improved results in your business. Presented by Don Davis.
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Durable Results Transform Your Business By Simplifying Your Metrics Presented by Don Davis
Introduction • Release Your Inner Bean Counter • Simplify your Financial Statements and Drive Improved Results • Understand the Impact of Metric Management Duckridge Advisors
Agenda • Cash Flow as the Ultimate Metric • How Your Financial Statements Fit Together • What Metrics Are Best For Your Business • Industry Examples • Lincare, Invacare, American Home Patient • Using Ratio Analysis for Quick Review Duckridge Advisors
Cash Flow:The Ultimate Metric “Too often we measure everything and understand nothing. The three most important things you need to measure in a business are customer satisfaction, employee satisfaction, and cash flow. If you’re growing customer satisfaction, market share is sure to grow, too. Employee satisfaction feeds you productivity, quality, pride and creativity. And cash flow is the pulse -- the key vital sign of a company” Jack Welch - former CEO, GE Duckridge Advisors
Quick Primer on Cash Flow Information Available in Your Monthly Financial Statements
Cash Flow Statement Financial StatementsThe Three Pillars Earnings Statement Balance Sheet Cash AR Rental Equipment Total Assets AP & Accruals Debt Total Liabilities Equity Total Liabilities & Equity Sales Cost of Sales Gross Profit Operating & Admin EBIT Interest & Taxes Net Income Net Income Change in Working Capital Cash from Operations CAPEX Cash from Financing Activities Cash Duckridge Advisors
What Are Most Effective Cash Flow Metrics? • Daily Cash Report • How Much Cash Did You Begin the Day With? • How Much Cash Came In? • How Much Cash Went Out? • How Much Cash Do I Have at End Of Day? • Month End Cash Flow Statement • Compare to Prior Months for Orientation • Develop Sales Converted to Cash Orientation Duckridge Advisors
Simplify Your Metrics Drive Results • Compare • Either versus prior year or prior months • The more comparison points the better • Summarize • Always have a one page summary prepared. • Use the summary to evaluate the detail • Divide • Use ratios to your advantage • Benchmark yourself against yourself Duckridge Advisors
Industry Examples • Quick Snap Shot of Publicly Traded Industry Leaders • Focus on Simplicity and Relevancy • Incorporates the Idea of Compare, Summarize and Divide • What Other Metrics Would You Add? Duckridge Advisors
Gross Margin EBIT Margin Sales Converted to Cash Sales by Employee Payroll to Sales Other Identified Costs to Sales Days Sales Outstanding Inventory Turns Gross Margin by Product Line Quick Ratios Debt to EBITDA Debt to Equity Key Ratios Balance Sheet Cash Flow P&L
Gauging Sales by Employee Per Steven Richards & Associates, Inc
Major Players: Sales, PROFIT & Cash per Employee Duckridge Advisors
DSO: a Matter of Opinion? Per Steven Richards & Associates, Inc
DSO:The Assorted Math • Calculations Differ by Organization • Some use rolling average • Some annualize • Timing of Write-offs Has Impact • What Impact Does a Day Mean? Duckridge Advisors
DSO:The Assorted Math Duckridge Advisors
DSO:The Assorted Math Timing of Write-offs Matter Duckridge Advisors
DSO:The Assorted Math What Is A Day Worth? Duckridge Advisors
So What? • Summarize, Compare and Divide For High Level Review • Establish Your Own Metrics • Quick Summaries allow for Quick Reviews for Busy Executives • Different Comparisons provide Different Points of View • Focus on Cash Duckridge Advisors
Transform Your Business By Simplifying Your Metrics • Daily Cash Report • Monthly Review of Cash Flow • Sales converted to Cash • Compare all Metrics • Prior Months • Prior Year to Date • Budget Duckridge Advisors
Where to Get More Information • Get remote electronic access to your Financial Reporting Software and Explore • Learn more about your own Company by Understanding Your Industry Leaders • www.sec.gov/edgar.shtml • Click on Search for Company Filings • Focus on 10-K Annual Reports • Contact me at ddavis@duckridge.com or 412-805-0662 Duckridge Advisors