Reorder Point and Working Capital

The reorder quantity formula can be used to calculate the minimum level of inventory a business should maintain to be able to satisfy customer demand for its products. The calculation takes into account supplier lead times and customer demand and helps a business to operate at its optimum level of working capital.

Reorder Point and Working Capital November 8th, 2017Team
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Economic Order Quantity and Working Capital

This inventory carrying cost formula can be used to calculate the economic lot size (EOQ) which a business should use to place purchase orders with suppliers. The total inventory cost calculated can be used in the financial projections template by adjusting the inventory days assumption.

Economic Order Quantity and Working Capital November 7th, 2017Team
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Cost Forecast Using Excel Regression Analysis

Financial projections require cost forecasts to be made based on key cost drivers. Most costs are mixed in that they contain both a variable and a fixed cost component. Excel linear regression analysis can be used to identify both of these components based on past data to enable a cost forecast equation to be developed.

Cost Forecast Using Excel Regression Analysis October 23rd, 2017Team
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Customer Acquisition Cost – CAC

The customer acquisition cost is calculated by dividing the sales and marketing costs by the number of new customers acquired during an accounting period. To make economic sense the lifetime value of the new customer must be greater that the cost to acquire the customer.

Customer Acquisition Cost – CAC August 4th, 2017Team
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How to Determine Other Liabilities Days Outstanding

For the purposes of the financial projection template other liabilities are defined as amounts owed by a business at the year end arising from operating expenses, finance costs, and income tax expenses. The year end value of other liabilities is calculated using the other liabilities days assumption.

How to Determine Other Liabilities Days Outstanding July 19th, 2017Team
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Enter Other Liabilities Opening Balance

The opening day other liabilities balance forms part of the opening balance sheet of the business. For the purposes of the financial projections. other liabilities are amounts which are owed by the business in respect of operating expenses, finance costs and income tax expenses.

Enter Other Liabilities Opening Balance July 18th, 2017Team
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Working Capital Over Total Assets Ratio

The working capital over total assets ratio is a financial ratio used by a business to give an indication of it’s liquidity or financial distress. The ratio is calculated by taking the difference between the current assets and current liabilities and dividing this by the total assets of the business.

Working Capital Over Total Assets Ratio May 19th, 2017Team
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Retained Earnings Total Assets Ratio

A business can fund it’s operations from both internal (retained earnings) and external (debt and injected capital) sources. The retained earnings to total assets ratio is the ratio of the accumulated retained profits of the business compared to its total assets, and is an indication of the percentage of assets funded by internal resources.

Retained Earnings Total Assets Ratio May 19th, 2017Team
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Debt Ratio in Financial Projections

Leverage is the extent to which a business uses liabilities relative to equity to finance it’s assets. The debt ratio is the ratio of liabilities to assets and is used in the financial projections template as one indicator of financial leverage.

Debt Ratio in Financial Projections May 12th, 2017Team
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Operating Return on Assets Ratio

The operating return on assets ratio measures the ability of a business operation to use its assets to generate earnings. It is calculated by dividing the operating income by the assets of the business.

Operating Return on Assets Ratio April 28th, 2017Team
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Understanding Cash Flow Statements in Startups

An understanding of the cash flow statement allows the startup entrepreneur to manage the cash flow of a business effectively. In doing so they will avoid many of the cash flow problems which can damage or even destroy what would have been a successful startup operation.

Understanding Cash Flow Statements in Startups April 5th, 2017Team
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Service Business Break Even Analysis

A service based business can use break even point analysis to calculate the number of units it is required to sell in order to reach break even. As a service business does not normally have a physical product to sell it must first define the unit (clients numbers, labor hours, projects, jobs etc.) to be used in the analysis.

Service Business Break Even Analysis March 8th, 2017Team
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