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FINANCE MANAGEMENT FOR NON-FINANCE MANAGERS Michael F Hartung Course Agenda Module 1 Introduction & Finance Stakeholders Module 2 Accounting Overview Module 3 Financial Reporting Module 4 External Financial Analysis Module 5 Internal Financial Analysis MIS Module 6

Cost Management Course Goals 2016 At the end of the course participants should be able to Critically evaluate company performance and evaluate own performance and contribution; Better understand the bias in the numbers (challenge the data provided by finance and accounting department); Use numbers and financial tools to make better and more substantiated decisions. 2 days workshop Working hours 9:00 18:00 Lunch break 12:00 13:30 No mobile phones Be open share and listen Welcome 2016 Please introduce yourself Your Name Your Position Your expectation on this course Your engagement with Finance in the past Click icon to add picture Click icon to add picture 1. Introduction & Finance Stakeholders 2. Accounting Overview 3. Financial Reporting 4. External Financial Analysis 5. Internal Financial Analysis - MIS 2016

6. Cost Management Q&A 1.1. Finance Functions Definition: Valuation & Taxation Risk Managemen t Financial Reporting (external) Stakeholder Managemen t MIS Controlling (Internal) 2016 Investment

s Accountin g Financing Liquidity Finance Management covers the reporting, planning, procuring and controlling of the firm's financial resources. It includes reporting of Financial information to internal and external Stakeholders. Finance Stakeholders Business Manageme

nt Regulators External Finance Operations Controlling Accounting Financial Analysis Valuation 2016 Strategic Business Analysts Accountant s Financial Analysts

Sup port Tax Tax Spe c 2016 Finance Management Objectives Have sufficient Liquidity Maintain sufficient Equity Keep Stakeholders informed Failure may lead to bankruptcy 1.2 Financial Data Consolidation

Du Pont Scheme to measure Shareholder Value via the Financials Sales Gross Margin Net Profit Net Profit Margin Return on Net Worth Net Profit Net Worth Financial Leverage Total Assets Net Worth X 2016 Capital Efficiency Total

Expenses - Return on Assets Income Taxes X Net Profit Total Assets ROE = Profit / Equity = Profit Margin x Asset Turnover x Equity Multiplier Operational Efficiency - / Sales / Total Assets

Var. Expenses Fixed Expenses Inventory Sales Asset Turnover Cost of Sales Current Assets + Fixed Assets Accounts receivable Other Assets 1.3. Financial Reporting Financial Reporting External Reporting

Public Relation Data Tax Filing MIS 2016 Internal Reporting Budgets Investment Planning 1.4.Type of Finance Stakeholders Internal Ta Management xEmployees Finance Shareholders

2016 External Suppliers Lenders / Banks Capital Markets Tax Authorities Regulators Competitors Different Stakeholder with different Expectations and aims to look into the Financials 1.5. Aims of Financial Stakeholders Reporting Stakeholder Management Accurate Details

Growth Employees Transparent Profits Shareholders Transparency Accurate Standard Details Risk Profits Clients Lenders Suppliers Risk Competitors Benchmark Markets

Transparency Risk Regulators 2016 Growth Transparency Standard Accurate Standard Accurate Transparency Tax Requirement Goal Risk Profits Risk

Stakeholders have different and partly controversy aims and requirements on Financial Reports and Finance Management have to consider and manage these different interests of Stakeholders in the Financial Reports. Group Exercise Identify the intentions and expectations of the following Stakeholders from the Financial Reporting: Shareholders Management 2016 Lenders Competitors What information they want to see and how are their views on the profitability of the Company? 1. Introduction & Finance Stakeholders 2. Accounting Overview 3. Financial Reporting 4. External Financial Analysis 5. Internal Financial Analysis - MIS 6. Cost Management 2016 Q&A Financial Elements Asset: Resource controlled as a result of past events and from which future economic

benefits are expected to flow Liability: Present obligation arising from past events, the settlement of which is expected to result in outflow of resources embodying economic benefits Equity: Assets minus liabilities 2016 Income (Expense): Increases (decreases) in economic benefits during period from inflows or enhancements (outflows or depletions) of assets (liabilities) or decreases (incurrences) of liabilities from in increases (decreases) in equity, other than contributions from (distributions to) equity Balance Sheet Asset Tangible Assets

Liabilities Characteristics Overview on all Assets and Liabilities legally owned by the Company Liabilities Equity defines as variance between all Assets minus Liabilities Inventories Data represents status from last Intangible Assets Equity Business day, no continues data for the Year 2016

Predefined Asset and Liabilities Off Balance Sheet Items Categories (Chart of Accounts) Include Valuation on Assets and opportunities of Window Dressing Income Statement Sales Characteristics Change in I nventory Cost Material Personnel Expenses Other Costs I nvestment I ncome I nvestment Expenses 2016 Operating Profit / Loss Extraord. I ncome Extraord. Expenses Tax benefits Tax Expenses Net I ncome / Loss Income statement in Cost Summary or Cost of Sales method Revenues and costs show related to full reporting period (Continuous data) Ordinary and Extraordinary Results shown according to Pre-defined Chart of Accounts Include Valuation methods and

opportunities of Window Dressing Cash Flow Statement CF from Operations Characteristics CF from Investments and outflows for the full period Taxes Investing 2016 Financing Net Cash Flow Overview on actual cash in- Not required under all GAAPS Categories of Cash Flows

Instrument to check Liquidity and Financing needs Other Information Directors Report 2016 Auditors Opinion Other Documents (Depends on local requirements) Information about the company Special information or impacts Accounting information

Results and Dividends Shareholder Information Completeness of books Fair Accounting Treatment Rules for Financial Reporting - Consistent Accounting Treatment - Continuous Business - Transparent - Accrual Concept - Existing Fair Value Golden Accounting Rules Debit The Receiver, Credit The Giver This principle is used in the case of personal accounts. When a person gives something to the organization, it becomes an inflow and therefore the person must be credit in the books of accounts. The converse of this is also true, which is why the receiver needs to be debited.

2016 Debit What Comes In, Credit What Goes Out This principle is applied in case of real accounts. Real accounts involve machinery, land and building etc. They have a debit balance by default. Thus when you debit what comes in, you are adding to the existing account balance. This is exactly what needs to be done. Similarly when you credit what goes out, you are reducing the account balance when a tangible asset goes out of the organization. Debit All Expenses And Losses, Credit All Incomes And Gains This rule is applied when the account in question is a nominal account. The capital of the company is a liability. Therefore it has a default credit balance. When you credit all incomes and gains, you increase the capital and by debiting expenses and losses, you decrease the capital. This is exactly what needs to be done for the system to stay in balance. The golden rules of accounting allow anyone to be a bookkeeper. They only need to understand the types of accounts and then diligently apply the rules. Accounting Principles Principle of Business Continuity Transparency Principle Completeness of all transaction and financials Consistency Principle Consistent Accounting Treatment Fair Value Principle (Fair Value)

2016 Consistent Valuation & Risk Measurements Accrual Principle Periodical separation of Financial impacts Accounting Basics Balance Sheet A Machinery XXX + A L - Receivables Loans A L

XXX 2016 - XXX + Equity A L Financial Reports consists from single accounts Accounts defined in Chart of Accounts Double-entry book keeping

applied L XXX + Bookings done in Balance Sheet and Income accounts All accounts closed to Financial report Income Statement A Sales Income XXX L A Interest Exp L XXX

2016 Accounting Rules DR Asset (Liabilities) - CR Asset (Liabilities) Reclassification DR Asset (Liabilities) - CR Liabilities (Asset) Total BS adj. DR Asset (Liabilities) - CR P&L account Profit CR P&L account - DR Asset (Liabilities) Loss Accounting Actions & Treatments Definition (Bookings)

assets, liabilities, and other financial statement elements are defined. Recognition guidelines as to when to recognize revenues and expenses. 2016 Measurement various bases are allowed: historical cost, current cost, realizable value, and present value. Group Exercise Create a Balance Sheet Report and Income Statement based on the information below: The Company has Administrative Costs of USD 69k, additional the company buys office equipment for daily use with total amount of USD 1k

Equity is USD 1,000k unchanged The inventories increased from USD 100k to 150k Staff Costs of USD 150k p.a. The company buys a new car for USD 50k expected usage of 5 years 2016 Machinery of USD 1,500k with expected lifetime of 10 years is already 3 years old (linear depreciation) Sales Revenues of USD 400k p.a.

The Company buys Material of USD 100 k The company has a short term bank loan of USD 200k 1. Introduction & Finance Stakeholders 2. Accounting Overview 3. Financial Reporting 4. External Financial Analysis 5. Internal Financial Analysis - MIS 2016 6. Cost Management Q&A Information in Financial Reports Balance Sheet Income Statement Cash Flow Statement Fixed Assets Movement Auditors Opinion Comments and Directors Report 2016 Tax Filing Different Reports to meet different Stakeholders expectations Financial Reporting Overview Accounting Standards External Financial Reporting (Financial Accounting) 2016 Internal Reporting (Management Accounting) Aims of Financial Reporting Basis for Taxation Click icon to add

picture Show Wealth and Profitability of the Company 2016 icon to add Information for Stakeholders Click picture Check for Creditworthiness 2016 Accounting Standards Global Standards (IFRS / USGAAP) Local Standards (Singapore Financial Reporting Standards )

Stock Exchange Reporting (20F Filing) Tax Filing Standards differentiate in Valuation: Conservative Historical Values Realization Market Value Standards Comparison GAAP Stands for Introduction Used in 2016 Required

documents in financial statements Objectives of financial statements IFRS Generally Accepted Accounting Principles Standard guidelines and structure for typical financial accounting. International Financial Reporting Standards Universal financial reporting method that allows international businesses to understand each other and work together. United States Over 110 countries, including those in the European Union Balance sheet, income statement, Balance sheet, income statement, statement of comprehensive changes in equity, cash flow income, changes in equity, cash statement, footnotes flow statement, footnotes Separate objectives for business The same set of objectives for

and non-business entities. business and non-business entities. Relevance, reliability, Qualitative comparability and characteristics understandability. The US GAAP framework defines Definition of an an asset as a future economic asset benefit. Relevance, reliability, comparability and understandability. The IFRS framework defines an asset as a resource from which future economic benefit will flow to the company. Introduction IFRS International Accounting Standard Boards Close to USGAAP but less individuality 2016

Fair Presentation / Decision Usefulness / Stakeholder View (information) Capital markets oriented Transparency / Relevance, Comparability / Reliability Continuous update and feedback Introduction IFRS Asset IAS 16, 17, 36 IAS 21, 39 IAS ,24, 27, 31 Liabilities Tangible Assets Liabilities IAS 2, 11, 15 Inventories Intangible Assets IAS 38

2016 IAS 39 IAS 23 IAS 37 Equity Comments & Information (IAS 1, 10,24, 30, 32, 35) Valuations / Impairments (IAS 36, 39) Segmental Reporting (IAS 14) IAS 8 Income

+ Revenues IAS 18 - Expenses IAS 19 +/- Financial Results IAS 20-23 +/- Results Group Ent. IAS 31 +/- Results Accounting IAS 20 - Taxes IAS 12 + Net Income 2016

Fixed Assets (IAS 16) Acquisition Costs = Sales price + Delivery Costs Discounts + additional expenses Production Costs = Direct costs, allocated Costs, Accruals, Social Expenses, interests if related to product, no general admin costs Split of assets in single parts to be valued with different lifetimes (incl. spare parts and costs for inspections) Consistent and continuous Valuation Cost Model (previous Year Value impairments / accruals) Fair Value Current Assets (IAS 2)

Individual valuation. Valuation of stock according to average method or FIFO (First in First Out). First Time valuation based on acquisitionor production costs. 2016 Valuation based on net realizable value, means the lower value of liquidation value or production costs In general request for impairments on stocks to realize a Fair Value. For raw materials no need for impairments if the sales price of finished product is stable. Financial Instruments (IAS 39) Categories of Financial Assets (Fair Value, Available for Sale, Loans and Receivables, Held to maturity) Categories of Financial Liabilities ( Fair Value,

Other Liabilities, Equity) Change in categories to be carefully checked to avoid reclassification of whole portfolio 2016 Valuation: For Fair Value all changes in P&L For SFA changes in Reserves (impairments in P&L)For Other based on amortized Costs 2016 Impairments (IAS 36) Impairment Testing to be done at triggering event or regularly.

Impairment Tests: Compare Book Value with current value or use value (cash values plus remaining values) . Impairment booked in P&L. Recoveries booked in P&L up to continued book value. Additional recoveries booked in Reserves. Income Recognition (IAS 18) Booking of revenues in economic benefit 2016 likely and can be calculated.

All income booked with actual value or Fair Value (discounted for future cash Flows) Income recognition for spot deals at transfer date. For Forward deals or deals with longer completion period based on percentage of completion of costs and margins can be recognized. Only recognize of income if good is available for delivery. Also considering of conversion rights (delay in income recognition) if can be determined Group Reporting / Consolidtion Consolidation of Subsidiaries (>50%)Complete consolidated Joint Ventures (=50%) Equity consolidation Associated Entities (20-50%) Equity Consolidation Investments (<20%) Market Value (IAS 39)

Business Combination with getting control over subsidiary based on purchase method (valuation based on current value of purchased assets, incl. set up of Goodwill) Joint Ventures / Associated Corporates: reporting of percentage of Assets excluding portion of other shareholders. Continued to be reported as Equity consolidation. Losses in Equity to be reported separately 2016 Investments to be reported as SSAFS or Held to maturity according to IAS 39 2016 GAAP Differences

Fair Value (no concept in USGAAP) US GAAP more argumentation based Production costs of tangible assets Licenses and own produces intangible assets Choice of accounting / Validation methods Consolidation Singapore Financial Reporting Standards 2016 In Singapore, accounting standards are known as Singapore Financial Reporting Standards (SFRS) and are based on the IFRS. Financial statements are prepared on the accrual basis of accounting. The overall set of accounting standards in Singapore contain about 39 different standards with each standard named as FRS X e.g. FRS 1. Each standard covers a specific topic such as presentation of financial statements, recognition of revenue, accounting for inventories, and so on. Group Exercise 2016

Explain 4 major differences between IFRS and US GAAP (or local GAAP) What are reliable Documents for Review of Financial Performance? Current Assets & Inventory Inventory types (raw material vs. finished goods) Valuation Methods of Inventory FIFO First in First out (historical value) LIFO Last in First Out (current value) 2016 Fair Value on Inventory

Determine cost of Production for stock of finished goods Trends in finished products (identify slow seller) Trends in prices for raw materials 1. Introduction & Finance Stakeholders 2. Accounting Overview 3. Financial Reporting 4. External Financial Analysis 5. Internal Financial Analysis - MIS 2016 6. Cost Management Q&A Balance Sheet Analysis Assets Intangible Assets - Development Costs . Concessions, licenses - Goodwill

- Payments on Accounts Tangible Assets - Land & Buildings - Plant & machinery - Fixtures, fittings, tools - Payments on account Investment - Shares in group undertakings - Loans to group undertakings - Participating interests - Other investments - Other loans Stocks - Raw Materials - Work in progress - Finished goods - Payments on account 2016 Debtors - Trade debtors - Amounts owned by group undertakings - Other debtors Investments - Share in Group undertakings - Own shares

- Other investments Cash at bank and in hand Prepayments and accrued Income Liabilities Amounts due within 1 year - Debenture loans - Bank loans and overdrafts - Payment received ion account - Trade Creditors - Bills of exchange payable - amounts owed to group undertaking - Other creditors (incl. taxation) - Accruals and deferred income Amounts due more than 1 year - Debenture loans - Bank loans and overdrafts - Payment received on account - Trade Creditors - Bills of exchange payable - Amounts owed to group undertakings - Other creditors (incl taxation) - Accruals and deferred income Provisions (pension, tax, other) for liabilities Accruals and deferred income Capital and Reserves - Called up share capital - Share premium account - revaluation reserve

- Other reserve - Profit and loss account - Minority interests accounts 2016 Balance Sheet Analysis Check on relationships in the Balance sheet Liquidity: Short Term Asset funded by Short Term Asset Capitalization: Equity covers Intangible Assets and Tangible Assets Assets sufficient for operations / productions

How far goes inventory and stock (compared to turnover) Financing: How Investments and current Assets funded Balance Sheet Analysis 2016 Review Following Balance Sheet Current Assets Inventory 25 20 Hidden Reserves with increasing prices 15 LIFO

10 Hidden losses with falling prices 5 0 1 2 3 4 5 6 7 8 9 10 11

12 25 FIFO 20 Valuation gains with increasing prices 15 2016 10 Valuation losses with falling prices FIFO 5 0 1 2

3 4 5 6 7 8 9 10 11 12 Fixed & Tangible Assets 2016 Loss of value booked as accrual Define accrual method (years / percent) Determine lifetime of the good Costs for inferior assets directly booked in Income Statement Determine age of fixed assets Determine how assets are critical for operations Check Quality on investments (securities) Fixed Assets Accrual Accrual Method and lifetime impact the annual Methods expenses for Accruals in near or in long term future 140 120 Linear Accruals (be lifetime)

100 80 60 40 2016 20 Digressive Accruals (by percentage) 0 1 2 3 4 5 6 Valuation of Intangible Assets 2016 Valuation depends on GAAP Determined by Sales Price and usage Determine cost of Production Determine value of goods for the company Check Goodwill on the company taken over Valuation of Passives 2016 Valuation on Liabilities Value based on Valuation of Equity Positions Repayment

Value Tier I Capital Under IFRS - Shareholders Equity (Shares) Fair Value Option Tier II Capital - Long Term sub-ordinated Debt - Warrants - Other equity close positions Income Statement Turnover (+) Cost of Sales (-) Gross Profit or Loss Operational Results Distribution Costs (-) Administrative Expenses (-) Other Operating Income (+/-) Income from participating interests (+/-) Income from other fixed Assets (+/-) Other interest receivable (+/-) Amounts Written off investments (-)Financial profit or loss Financial

Results Interest payable (-) Tax on profit and loss (+/-) Profit and loss on ordinary activities Extraordinary Income & Charges (+/-) Extraordinary profit & loss Other Taxes (+/-) Profit or loss for financial Year Other/Extraordinary Results Income Statement Analysis Analyze impacts from Operational results Compare turnover with price developments Identify components of Cost of sales (compared to prices for raw material) Identify labor intense operations

Analyze impacts from Financial results Contribution of Financials and aligned to Business 2016 Analyze Extraordinary result Check if actual tax costs in line with results (variances in tax filing) Income Statement Analysis 2016 Review Following P&L 2016

Cash Flow Statement Cash flows from (used in) operating activities Cash receipts from customers Cash paid to suppliers and employees Cash generated from operations (sum) Interest paid Income taxes paid Net cash flows from operating activities Cash flows from (used in) investing activities Proceeds from the sale of equipment Dividends received Net cash flows from investing activities Cash flows from (used in) financing activities Dividends paid Net cash flows used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Cash Flow Analysis 2016 Changes in Stock / Current Asset Check on liquidation opportunities on Assets Analyze Accrued Income / Deferred Income Quality of Debtors including changes and compared to turnover Illiquidity is mandatory reason for filing bankruptcy Cash-Flow Analysis 2016 From P&L to Cash FlowP&L Off-Balance Sheet Positions

2016 Include obligations from contracts not included in Balance Sheet or Income Statement Guarantees (Obligations) Derivative Contracts (Swaps / FX / Forward) Financial Relations Balance Sheet Equity = Asset Liabilities P&L to Balance Sheet Equity = Capital + retained earnings Changes in stock / inventory Accruals => Changes in Fixed Assets 2016 Cash Flow to P&L Cash Flow ~ Profit + non payable expenses non payable revenues

2016 Financial Key Data Key data pack Balance Sheet and P&L Positions and their relations Method often used for developments in companies and industries Individual key data checked by stakeholder for each industry 2016 Financial Ratios Financial Ratios - Liquidity Current Ratio: Current Assets / Current Liabilities Quick Ratio:

Quick Assets / Current Liabilities Net Working Capital: 2016 Current Asset Current Liabilities Net Working Capital Ratio: Net Working Capital / Total Assets Financial Ratios - Operations Asset Turnover: Sales / Total Assets Account Receivable Turnover: Sales / Account Receivable Inventory Turnover: 2016

Cost of Goods sold / Inventories Asset Intensity: Fixed Assets / Total Assets Financial Ratios - Profitability Return on Assets (ROA): Net Income / Total Assets Return on Equity (ROE): Net Income / Stockholders Equity Profit Margin: 2016 Net Income / Sales

Earnings per Share: Net Income / Number of shares Financial Ratios - Leverage Debt to Equity: Liabilities / Shareholders Equity Interest Coverage: 2016 Income (bef.Interest&tax) / Interest Expense Financial Ratios - Solvency Equity Ratio: Equity / Total Assets Price Earning

Market Price (shares) / Earnings per share Market to Book Ratio: 2016 Market Price (shares) / Book Value per share Dividend Yield Annual Dividend / Market Price per share 2016 Financial Analysis Samples Group Exercise 2016

Discuss where following information can be found: Outlook for the Company Net Cash Flow Intensive of usage Machinery in the production Process Profitability of the company Shareholder background Correctness of accounts Lifetime of machinery Inventory Labor intensive production Private fortune of major stakeholder Hedging of FX risks Subsidiaries Employees

Sources of Financial Analysis 2016 Published Financial Reports Newspaper Information Market Research Credit / Rating Agencies Tax Filing Management Interviews

MIS Reporting Internal collected Data Methods of Financial Analysis 2016 Peer Groups Industry Comparison Timelines Ratios

Ratings Market Researches Key Data Analysis Corporate Valuation Peer Group Comparison Identify Best Practices Choose Peers wisely Impact 2016 Location Sub - Industry Organization Market / Brand Financial Year Closing GAAP / Accounting Treatments Business Strategies Understand the position of analyzed company compared to the Peer Group / Industry Timeline & Periodic Reviews Identify the macroeconomic cycle Impact 2016 Macroeconomic impacts Trends Product scope

Investing / Financing Financial Year Closing GAAP / Accounting Treatments Business Strategies Understand the development of the analyzed company Key Data Reviews 2016 Assets Net Profit Equity Current Assets

Current Liabilities Accounting Financing methods Dividend Politics Expansion / Consolidation Reporting / Communication Compared to: Peers Industry History/ Timeline Impact for Management Financial Analysis 2016 Relationship s/t Assets to s/t Liabilities Quality of Assets (Inventory changes/ Non Tangible Assets, Depreiation) Quality of Equity Funding of Business Growth (timeline)

Revenue generation (timeline) Expense Development and Operational Result Financial / Other Results Tax payments Revenue and Expense movements according to Business Strategy Comparison to market drivers Financial Analysis Samples 2016 Comparison of Key Rations between different companies in the same industry Financial Analysis Samples 2016 Comparison of

key financial data over time for the same company Financial Analysis Samples 2016 Standard Financial Analysis of a company over time Financial Analysis Samples 2016 Forecast Group Exercise

2016 Discuss where the following information can be found Outlook for the Company Net Cash Flow Intensive of usage Machinery in the production Process Profitability of the company Shareholder background Correctness of accounts Lifetime of machinery Inventory Labor intensive production Private fortune of major stakeholder Hedging of FX risks Subsidiaries

Employees Key Data Review Analyze impacts from Operational results Compare turnover with price developments Identify components of Cost of sales (compared to prices for raw material) Identify labor intense operations Analyze impacts from Financial results Contribution of Financials and aligned to Business 2016 Analyze Extraordinary result Check if actual tax costs in line with results (variances in tax filing) Section Header Title

1. Introduction & Finance Stakeholders 2. Accounting Overview 3. Financial Reporting 4. External Financial Analysis 5. Internal Financial Analysis - MIS 2016 6. Cost Management Q&A MIS Overview Management Information System Cost & Revenue Allocation 2016 Budgeting Management Information System Operational Revenues Extraordinary Revenues Direct Costs & Allocations Return / Income

Tax - Impacts Balance Sheet Usage 2016 Capital Usage Liquidity Usage Future Potential M E T R I C S MIS Function Analyze impacts from Operational results Compare turnover with price developments Identify components of Cost of sales (compared to prices for raw material) Identify labor intense operations

Analyze impacts from Financial results Contribution of Financials and aligned to Business 2016 Analyze Extraordinary result Check if actual tax costs in line with results (variances in tax filing) 2016 MIS Architecture Use Revenues and Costs from Financials Set up Business Units as basis for measurement of operating success

Identify Cost Centers and Cost Drivers. Consider responsibilities (influence to manage revenues / costs) Allocate all related income and costs to the Business Units and Cost Centers Assure reconciliation external to internal accounting MIS Archiecture Link from External Accounting to break down according to Business Structure Other / Categories Financials Product 1 Product 2 Overhead Sales Income Other Income Finance Income Direct Costs Staff

Rental Other 2016 Indirect Cost BS Positions Completeness, Transparency, Reliability MIS Model Analysis by Timeline Analysis by Product Year 1 Year 2 Prod1 2016 Defined Financial Categories Fee Provn Salary

Mrktg Intrst Rental Profit Prod2 Centr Prod1 Prod2 Centr Total Budgeting Overview Strategic Budgeting 2016 Operative Budgeting Cash Budgeting Growth Indicators

Business Potentials Budgeting (Key Data & Impacts Analysis) Daily Compare Actual vs. Plan 2016 Types of Budgets Corporate Budget Resources Budgeted Income / Balance Sheet Statements Financial Budget Profit calculations Business Division Budget Sales Budget Production, Inventories, Materials Marketing Profit

Projects Budgets Project Costs Development Budgets Resources Future Income Profit Center Budgets Staff Investments Activities Costs Horizontal Budgeting Process Sales Budget Development Production Budget Investments 2016 Stuff / Resources Finance Budget

Liquidity Training Vertical Budgeting Process Bottom Up Final Budget Set Targets Top Down Feedback Management Budget Responsibilities Budget Implementation 2016 Information

Feedback Workforce Investment Planning Investme nt Need Investment Alternatives Accounting Impacts Risk & Reward Rentability DCF Financing Financial Impacts Profitability 2016

Maintenance Action Implemen t Investment Alternatives Buy Rent / Lease Increase Assets Type content No Asset impact Negative Cash Flow on Rental fees 2016

TypeCash sub content Negative Flow on sales price Cost due to accruals Cost due to rental fees Liability if Financing Leasing Liability Economic Aspects: Flexibility, Service, Conditions (price and expenses), Usage, Guarantee Financing Mix Corporate Finance Mix

Shareholders Bank Loans 2016 To Consider: Costs (interests / Dividends) Control Information duties Strategic Investments Retain ed Earnin gs Private Equity Capital Market s Supplie r Credits

Liquidity Management Incoming Payments Outgoing Payments Liquidity Cash Flow Analysis Profitability 2016 Liquidity Lines Type of Payment Supplier Credit Storage Time Company Risk Evaluation Risk Related Return

Market / Market / -Portfolio Marke t Rate Market Rate Valuation: Portfolio 2016 Portfolio Rate Portfolio Rate Discounted Cash Flow Valuation against market expectations. Also in combination with loss potentials. Returns above markets also assume

higher Based on returns risks from investment against standard interest rate MIS Architecture Annual Report Cost s Costs Revenu es Tax Revenu es 2016 Profit Tax

Adj Tax Adj Tax File Tax Incom e 1. Introduction & Finance Stakeholders 2. Accounting Overview 3. Financial Reporting 4. External Financial Analysis 5. Internal Financial Management - MIS 2016 6. Cost Management Q&A Cost Types Business Category Operational Costs Financial Costs Extraordinay Costs

Felixibility 2016 Variable Costs Fixed Costs Cost Allocation Identify the cost type Direct Costs Indirect Costs Set Up Cost Center for Cost Allocations 2016 Assign direct related Cost to the Cost Centers (Staff, rental, travel) Identify allocation key to allocate Indirect Costs to Cost Centers (Admin, Server, Tax, Finance). - Keys based on headcount, SQM, revenues, costs, time, other

Activity Based Costing Expenses by Department 1. Resource Drivers 2. Activity Costs by Department 4. 2016 Activity Drivers 3. Cost - Objects Costs Product, customer, channes ets 5. Steps for a simple Cost Analysis:

Define Cost objects, indirect activities & resources (costs). Determine costs for indirect activity. Identify Cost drivers for each resource. Calculate the total indirect product costs for each cost object type. Divide the total costs by quantity for indirect cost per individual cost object. Cost Management Operational Cost Management Outsourcing, Efficiency Gaines, Replacements 2016 Financial Cost & Investment Planning Lease 0r Buy Decisions, Interna; vs external Funding Cost Bugeting Completeness of cost impacts (hotorical or foeward looking)

Section Header Title 1. Introduction & Finance Stakeholders 2. Accounting Overview 3. Financial Reporting 4. External Financial Analysis 5. Internal Financial Analysis - MIS 2016 6. Cost Management Q&A THANK YOU FOR ANY FURTHER INFORMATION Michael F Hartung [email protected]

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