Larsen & Toubro’s Post

Know Your Margins: Calculate your profit margins regularly to ensure you're pricing your products or services appropriately. Aim for a healthy margin that covers your costs and allows for growth.https://https://lnkd.in/grwnxnf9

Track Profit Margins Regularly Monitor profit margins to ensure your pricing covers costs and generates adequate profit. Regular tracking allows you to spot declining margins early and adjust accordingly.

Top 3 cash conversion killers that need to be avoided: 1. Overeager Payments 2. Poor inventory management 3. Having long standing receivables These can cost a business.

✔ Develop a sustainable plan and pricing strategy to overcome declining sales and improve profit margins. 👉 Review your expenses and pricing to understand if you need to adjust prices or stop services with weak margins. #BrainyBooks #cashflow #financialchallenges

Financial statements yellow flags. 𝗜𝗻𝗰𝗼𝗺𝗲 𝘀𝘁𝗮𝘁𝗲𝗺𝗲𝗻𝘁 Gross  Margin < 30 Revenue Growth Rate <10 Net Profit Lower than Cash From Operations Ebitda  margin <10 Net  margin <5 Direct Costs Rising Faster than Sales Interest Coverage Ratio <2 𝗕𝗮𝗹𝗮𝗻𝗰𝗲 𝗦𝗵𝗲𝗲𝘁 Goodwill in Assets > 20% Debt to Equity Ratio > 2% Receivables Rising Faster than Sales Inventory Rising Faster than Profits Asset Turnover Ratio < 1% Current Assets Lower than Current Liabilities Quick Ratio < 0.8% 𝗖𝗮𝘀𝗵 𝗙𝗹𝗼𝘄 𝗦𝘁𝗮𝘁𝗲𝗺𝗲𝗻𝘁 Stock-based Compensation of Net Income > 10% Capital Expenditures of Net Income > 25% Low or Negative Cash Flow from Operating Activities Free Cash Flow Declining Free Cash Flow Lower Than Net Income Cash Flow to Debt < 0.3% Operating Cash Flow to Sales < 10%

Smoothly can measure the heart's condition of a business by CCC!!

Income above 50 lakh? Pay 10% surcharge. Also, govt wants to know ALL your assets. Fill Schedule AL in ITR. How? 1) Report all assets 2) At cost, not market value. Stocks you bought for 1 cr in 2019, now worth 3 cr. Report at 1 cr. 3) Exclude business balance sheet reported elsewhere in ITR 4) Inherited assets reported at cost paid by original owner Story by Shipra Singh Full infographic and story at: https://lnkd.in/g6s3v88y

Cash Conversion Cycle (CCC) A metric you should follow to improve your cash. Bonus: Get my free action plan template here: https://lnkd.in/ezEAHxq6 🎯Goal: check how many days you need to convert your cash out (for inventory in cash in (from sales) You should have as a target to reduce the CCC to optimize your cash. 💡Formula: Days of Inventory Outstanding (DIO) + Days Sales Outstanding (DSO) - Days Payable Outstanding (DPO) Note: DIO: Days of Inventory Outstanding = Average inventory for a month / Cost of Good Solds * 365 DSO: Days Sales Outstanding = Receivables / Annual Revenue * 365 DPO: Days Payable Outstanding = Payables / Annual COGS * 365 👉 Which other metric do you use to follow your cash flows? Bonus: Get my free action plan template here: https://lnkd.in/ezEAHxq6

How do you calculate the Cash Conversion Cycle? Nick Boucher shows you how!

Balance sheet is simply Assets =Liabilities +Owner's Equity A balance sheet shows what a company owns and owes at one time. Why balance sheets are important ? * It shows perfomance over time * It shows how much you earned * It shows how much you owned * It helps to get credit Key perfomance Indicators 1. Working Capital Currents Assets - Current Liabilities 2.Current Ratio Current Assets / Current Liabilities Ideal ratio -1.5 to 2 3.Quick Ratio (Current Assets -Inventory)/Current Liabilities 4.Cash conversion cycle Days Inventory Outstanding (DIO)+Days Sales Outstanding (DSO)-Days Payable Outstanding (DPO) DIO=(AVERAGE INVENTORY /TOTAL COST OF FOODS SOLD)* 365 DSO= (AVERAGE ACCOUNTS RECEIVABLE/TOTAL REVENUE)*365 DPO=(AVERAGE ACCOUNTS PAYABLE/TOTAL COST OF GOODS SOLD)*365 if it is a leap year replace 365 with 366 5.RETURN ON ASSETS NET INCOME / TOTAL ASSETS 6.DEBT TO ASSET RATIO TOTAL LIABILITIES/TOTAL ASSETS 7.DEBT TO EQUITY RATIO TOTAL LIABILITIES/TOTAL EQUITY You can use balance sheet to interpret a business's financial situation at a time. The ideal value of each of these metrics vary depending on the nature of business. #finance #analysis #daytodayterms