14.- Brief Recap

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From the course by IESE Business School

Operational Finance: Finance for Managers

275 ratings

IESE Business School

Operational Finance: Finance for Managers

275 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.

Let me briefly recap what we taught today.

We did a brief recap of week 3,

in which we were looking at NFO Working Capital, Diagnosis and Action Plan.

Now, what did we do today?

We first started with the 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. wife gets sicken you have to get some dividends.

And many other stuff that have an effect in the balance-sheet and in the pay.

Now we then move to 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 explain to you a little bit that minimum cash for

operations, another spontaneous sources of fund,

actually go into the NFO, because they are short term, and they are free.

Then we talk briefly about seasonal companies.

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

First, that you look at two months in the balance sheet and the PNL.

The best and the worst, so that you don't lose 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 formulae

doesn't hold anymore.

And then we looked into the decomposition of the ROE.

These dupont decomposition that you get ROS x turnover x 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's actually

coming from.

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

guess which industry corresponded to which column?

And we saw that just looking at three or

four elements from each column would be a clear data points

that hint as to conclude that the first one was a pharmaceutical, etcetera.

And then in the next click we're going to make the main learnings of the whole

course of operation of finance.

[MUSIC]

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