In this article I will discuss different methods to evaluate an investment or a project that involves capital expenditure (CAPEX). At the end, I will compare all methods and discuss advantages and shortcomings of each. ROI The Return On Investment shows, how much profit you make on your initial investment. An example: Year 0 Year…
In strategic finance you understand the value creation of a business and translate it into financial scenarios. The ultimate outcome of strategic finance is a capital allocation. This can include allocation of resources to business initiatives (in sales, tech, operations, etc.), restructurings, or M&A transactions. Understand the business model Before you start creating scenarios, you…
Finance teams can have a significant impact on company’s results and performance. First, they can influence capital allocation based on market analysis, financial analysis, and business scenarios. See strategic finance. Second, the typical finance agenda allows for better cash flows and profitability across the company; Accounts payable Key activities: Processing invoices from suppliers. Opportunities: Negotiate…
Cash flow levers are pathways to improve your cash balance in a few weeks time. You can mark your success merely by checking bank accounts or by measuring the cash flow margin ratio. The ratio compares monthly revenues to operating cash flow, i.e. how much cash can you generate out of 1 dollar (invoiced) revenue.…
If you are running out of cash and face imminent threat to your survival here’s a recipie to survive; I. Find the margin and cut everything else Focus on your core activities and stop doing anything else immediately. Never try to sell your way out of losses. Within your core business identify add-ons with low…