Archive for category profit projections
The fundamentals of credit valuation
Posted by admin in Save Money, performance objectives, profit margin, profit projections, revenue, understanding finances, variable costs on October 24th, 2009
Besides market fundamentals valuation is the major driver of market performance for the longer term. The other two drivers that are commonly mentioned in investment literature, technicals and market sentiment, are more likely to explain short- to medium-term fluctuations of credit spreads.
The subject of valuation arises on every level of the investment process. Generally, it is a question of relative attractiveness of one investment vis-avis another one. In this chapter, we will outline four approaches that may support asset allocation decisions in fixed income portfolios with an aggregate benchmark as well as help to determine the beta of a pure credit portfolio.
The Management Function in Budgeting – part 2
Posted by admin in incentive, market demand, material costs, performance objectives, profit projections on August 2nd, 2009
Shipping/Delivery seems to have climbed precipitously in the last year. Why? Clearly, this is a case where vendor price had exceeded market value. It may be a case of a long-term supplier who has gotten used to raising its prices a certain percentage each year with little incentive to remain competitive. Management should review any contracted relationship with the vendor and check the last three years’ delivery and shipping charges to note the percentage increase. Chances are it’s time to put the service out for competitive bid.
There are dozens of questions that can and should be raised, but the preceding three make the point: Setting up the budget is only half the task. The document must then be put through management scrutiny, not only to check the accuracy of its numbers and suppositions, but also to raise those issues that will enable the company to be more efficient and cost-effective.
If these questions aren’t part of the budget creation, then management is doing only half its job.
Drafting a Budget
Posted by admin in Real estate, production cycles, profit margin, profit projections, short-term income on August 2nd, 2009
So what does a budget look like? There are numerous variations, but the goal of any budget is to clearly communicate revenue and cost centers so that profit statements can be drafted and management of resources, including income, can be better accomplished. To that degree, all budgets tend to look the same.
For the sake of this lesson, let’s assume our unit maker described earlier has been in business several years and is charged with budgeting for next year. That means he will have budgets from previous years from which to draft future business plans. The operational budget, then, likely will break revenue and expense components down to three columns:
1. The current year’s budget, or what he originally projected his income and expenses to be.
2. The current year’s projected year-end actual expenses and revenues. Even if it’s a guess, which it tends to be, it must be as accurate a guess as possible.
3. The next year’s budget, which tends to be a hybrid between the actual budget, the year-end projected actuals, and a best guess for what the new year will bring.