14.- Brief Recap

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From the course by IESE Business School

Operational Finance: Finance for Managers

296 ratings

IESE Business School

Operational Finance: Finance for Managers

296 ratings

Course 2 of 5 in the Specialization Foundations 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.

From the lesson

Week 4: Negative NFO and DuPont Analysis

In this final week, we will introduce the final pieces of the puzzle to give you a complete overview of operational finance. We’ll discuss tools like sensitivity analysis that will help you consider the potential outcome of a decision given different variables. In this session we will also look at other crucial concerns for the firm and its shareholders like sustainable growth and ROE (Return On Equity) plus revisit NFO (Need of Funds for Operations) and other topics. Objectives: By the end of this session, you should have a complete overview of the key aspects of operational finance. You will also understand what tools financial professionals use in order to make decisions to strengthen a company’s position.

Course Conclusion & Congratulations0:55

1.- Recap from Week 37:11

2.- Recap from Week 3 (Part 2)3:55

3.- Sensitivity Analysis7:33

4.- Sensitivity Analysis (Part 2)5:54

5.- An Example of Sustainable Growth6:03

6.- Minimum Cash and Other Elements in the NFO7:37

7.- Seasonal Companies6:54

8.- Building up the ROE (Part 1)3:57

9.- Building up the ROE (Part 2)5:20

10.- Building up the ROE (Part 3)4:57

11.- Blind Financial Statements5:02

12.- Blind Financial Statements (Part2)3:34

13.- Blind Financial Statements (Part 3)7:19

14.- Brief Recap2:42

15.- Course Conclusions6:46

Meet the Instructors

Miguel Antón
Associate Professor
Financial Management

[MUSIC]

Now, welcome to the end of the course.

Now, let me briefly recap what we saw today.

We did a brief recap of week three, which we were looking at NFO working capital,

diagnosis, and action plan.

Now, what did we do today?

Now, we first started with a sensitivity analysis, do you remember?

Which was, what happens in the financial statements if something goes wrong,

if the competition gets bigger and then push prices down.

If Mr. Lichtstein's wife gets sick and you have to get some dividends and

many other stuff, that have an effect in the balance sheet and in the P&L.

Now, we then moved into an example of the sustainable growth in which I gave you

an example of a company that keeps sales constant or growth in sales.

And then you saw in a very simple numerical example how the sustainable

growth formula actually works.

Then I explained to you a little bit that minimum cash for

operations and other spontaneous sources of funds actually go into the NFO

because they are short-term and they are free.

Then we talked briefly about seasonal companies, and

we said it very important when you face the analysis of a seasonal business.

First, that you look at two months in the balance sheet on the P&L, the best and

the worst.

So that you don't lose an idea of what's happening in the company,

because sales differ very much from one month to another.

And second thing, operational ratios have to be done manually

because the formula doesn't hold anymore.

And then we looked into the composition of the ROE,

the Dupont decomposition that you get ROS times turnover times leverage.

And that decomposition is very useful,

first to know where to work on if you want to improve the company.

And second to understand where the strategy of the company

is actually coming from.

Finally, we did this game of the blind financial statements where you have to

guess which industry corresponded to which column.

And we showed that just looking at three or

four elements from each column would be a clear data points that

hint us to conclude that the first one was a pharmaceutical, etc.

Then in the next, we're going to close the main

learnings of the whole course of operational finance.

[MUSIC]

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