Monthly Archives: February 2022
Operating lever
Typically, business owners are interested in two interrelated indicators: revenue and profit. Revenue shows how much the company has earned, and profit shows how much is left after deducting expenses.
Most likely, if the revenue is higher, then the profit will be higher. The opposite also works: if revenue falls, then the same will happen with profit. And everything would be very simple if there was a direct relationship between the indicators. But no: revenue can sink quite a bit, and this will lead to big losses. Continue reading
Margin Analysis
Let’s imagine that confectioner Vasya Yagodkin sells one hundred cakes with raspberries and one hundred with currants every month. Crimson ones bring him 50,000 rubles, and currant ones – only 30,000 rubles. It seems that it is more profitable to score on currants and sell only raspberry cakes. The idea is ok, but there are a few things to consider first.
Before getting rid of currant cakes, we consider how much money Yagodkin spends on production, and we see: 40,000 rubles are spent on raspberry cakes, and 10,000 rubles on currant ones. Continue reading
Types of cash flows
Three types of cash flows
It is customary for entrepreneurs to divide the cash flow into receipts and disposals and compare: if the amount of expenses is greater than the amount of receipts, then the month is unsuccessful, and if vice versa, everything is fine. This is the fastest way to assess the state of affairs in a business. However, it is not the most accurate, since a lot depends on what the money was enough for.
For example, in one month they overpaid for the maintenance of the office – they updated the form of employees, but at the end of the month there was not enough money for basic expenses – salaries and rent. Continue reading
