# Financial analysis and control

Based on the literature, Per Olsson summaries of it, the Compendium and lecture notes.

### Budgeting

Calculation of individual items, aggregated to a budget

Fixed budget, revised (changed several times / year), rolling (always one year ahead), variable budget (taking into account different volumes).
Forecasts can be a good complement to a fixed budget.

Purpose of budgeting: 1) Decision-making / priorities 2) Planning 3) coordination / adjustment 4) Motivation

Budgets are more prescriptive / self-fulfilling than forecast

Liquidity budget is the most important thing in the short term

Budget both document and process: 1) The establishment 2) Continuous use 3) Follow-up

Construction method: built up from below on the basis of conditions;
Decomposition method: line determines the rank and file review and approve.

Other concepts: Objects budget (expense accounts), programming budget (activity), purpose budget (different dimensions), nollbasbudget (start from scratch, various packages).

Financial ratios

RE = res by fine.
and tax / equity capital.
An investor dimensions, used on entire groups.

RT = V (Profit before interest expense) / T (Total Capital).
Internal control systems.
RT = ROI = ROA.

DuPont formula: R = V / T = Gain * Turnover = V / Sales * Oms / T.
Graphics: Curves = X * Y curves are return proc.
Shows that there are different ways to reach them.

Hävstängsformeln:

RT = RE * E / (E + S) + RS * S / (E + S) (weighted average of RE and RS) =>

RE = RT + (RT - RS) * S / E

RSYS = Profit before interest expense / (shareholders chap + interest bearing debt).
Although ROCE (Return On Capital Employed).
As RT but we exclude non-interest-bearing liabilities.

RI = Income - (Ch * Required rate of return).
Absolute dimensions instead of quota, Residual Income.

EVA = Profit - (Actual Ch * Capital) - tax.
Economic Value Added.

Variance analysis

Working with the budget, adjusted budget and outcome.
Adjusted budget is that the budget would have been if you had known what quantity they could sell, then the actual quantity.

Volume difference for the premium = premium acc adjusted budget - originally budgeted contributions

Price differences for sales / income = actual sales - sales acc adjusted budget

Consumption Difference = Actual costs - costs acc adjusted budget

It can be any split the cost, price and volume.
The price difference for the costs which the price differential / pcs * actual sales, thus working again with actual quantity.
Volume difference for costs, however, the volume difference / pcs * price acc adjusted budget.

Investment Appraisal

Interest Factor, final value factor: (1 + r) t.
The value of such year of £ 1 remunerated.

Discount rate, the present value factor: (1 + r) -t.
The value today of £ 1 paid for such year.

Discount rate, discount rate: r.

The default method: Payment Consequences (not compli) affected by the project.
After taxes.
Shall refer to the entire company.
The discount rate is based on the entire capital of the company (Weighted Average Cost of Capital).
Financial payments are not included in the payment consequences.
Yields are not themselves pay the consequences, however, affecting the tax constitutes a payment consistency.

Assuming that the input / payments made at the end of each year.

Implement projects with positive net present value, if we must choose: take the one with the highest net present value.
One can also produce net present value ratios to select: brought the present value / original investment.

IRR: the cost of capital for which the present value is 0. If IRR> discount rate: implementing the project.
But we can not choose between projects, and it may be several discount rates.

Gordon formula: the present value of an infinite series of payments that are in C 1, C (1 + G) 2, C (1 + g) 2 years 3 etc. = C / (rg).
If no growth, i.e., g = 0, C / R.

The present value of a finite series of constant amount A: a * ((1 - (1-r) -T) / s).
This is NSF ().

If, instead of a, a, a has a (1 + g), a (1 + g) 2, a (1 + g) 3 we can use the same formula with the rjust = (1 + r) / (1 + g) - 1. To discount a growing range of payments to the discount rate r gives the same present value discounting the corresponding constant payment series to rjust.
One can see it as discounting the nominal series that grows with inflation to the nominal interest rate rnom gives the same present value as to discuss the corresponding real payment series for the real interest rate rreal.
(1 + rreal) = (1 + rnom) / (1 + infl).

Annuitetsfaktorn = 1 / Nusummefaktorn.

One can summarize all net payments in every period they are either purely real or nominal, and then discounting.
This is probably the easiest method with the least risk of careless mistakes.
But it could also take more time, in that you do not use (NSF).
One can also calculate the net present value of different types of payments consequences for themselves.
In the latter case, one can use real estimates for a certain type of payment consequences (eg operating costs), and rated for a different type (eg investment / depreciation of tax effects), as long as you do not mix in the same.
You can add the present values.

Nominal cost rate after tax = Weighted Average Cost of Capital = w (1-S) RLAN + (1-w) ravkastningskrav on EK where w is the (interest-bearing liabilities / (EK + ränteb liabilities)).
EK will be a market valuation.
The future yield requirement refers to the entire company and carbon copies thereof, that is, with the same operational and financial risk.

Ongoing (product) calculation: count before tax;
investment calculations: figure after tax.

Structure of the working capital (eg trade receivables) is a payout, recycling a inbet.

Do not unnecessarily carefully for future payments implications, manage risk by the cost of capital.

Selection between machines with different life requires discounting from a common horizon (for the same number of years).

Product Selection Problems / Linear Optimization

If we must choose between two products have a common limitation / narrow section, we can use splash with narrow sections and calculate the maximum TB / unit bottleneck.
There are several narrow sections, one can use a margin replacement reasoning, where testing forward and try to reduce the volume of one and increase the other.

In algebraic terms, one can describe a linjär optimization problems: "Maximize 200x + 300Y under the constraints 2x + 4y 40".
One can also draw the problem graphically by x on ena100 and x + y axis and y on the second and drag the limitations lines between the axles.
The allowable range may be on different sides of the boundary lines depending on whether.
Then you can draw the parallel räta or begränsningar is bidragshöjd- / isokostkurvor, where each line is composed of points that give a certain contribution.
Any / some of the permitted area corner points will always be a / the optimum point (can also be a line segment).

You can count on it would be worthwhile to increase on one of the limitations, such as the value of the SEK / hour of additional labor, "shadow price", "dual price"?
This value applies only in certain intervals.
You can test it by moving any of the boundary lines and see what a difference the grants it gives.

Two LP-problems that are each dual problems have optimum values in the one problem that dual rates in the second, målfunktionerna have the same value in the optimum in both the problems and the X and Y (+ how much they can increase or reduce the current constraint) in one problem equals bivillkorets right-sides (+ how much they can increase or decrease) in the second problem.
It may look like two competitors' approach to the same problem.

Cost Concepts

Major (special) cost = operating cost = run incremental cost + opportunity cost

The opportunity cost of the use of a resource in a certain way is the contribution it would have given the best alternative use.

Capital cost is amortization / depreciation and interest on invested capital.
Capital costs are cost-related if the total current value of the individual periods of charges (= the cost of capital) is equal to the initial capital / purchase price.
You take out what is needed to get back the initial capital plus interest.

The period's interest rate = rate * input capital / residual value

Closing equity / residual value = input capital / residual value - amortization / depreciation

If we start with determining each period depreciation so we must ensure that the total amount of depreciation is equal to the initial capital.
The period's depreciation may be nominally constant, "nominally linear", and then based on the historical acquisition cost.
When you use also the nominal interest rate.
One can also imagine a real linear depreciation where depreciation is constant in real terms - as they do in practice, depreciation based on replacement cost - but then you must of course discounting the real interest rate.
You can also write down each year to a percentage of the replacement value at beginning of year, expressed in nominal terms, for example, to 3/5 of the replacement value at beginning of year if you are at 3 years for a machine with a 5 year lifespan.

If instead we start by determining each period of capital, we must ensure that the total current value of the corresponding payments is equal to the initial capital.
If the capital cost is nominally constant, it must be the nominal installment of input capital.
If the cost of capital is the real constant is the same as the real annuity of the incoming capital.

Traditional product costing and ABC costing

Contribution Calculator short term good when the price is known, self-cost calculation for pricing, activity-based costing enables profitability analysis in the long term.
Step Calculus means that benefits joint costs for a single product, so they become separate costs for product groups.
At the main and by-product calculations need byproducts only wear their incremental cost.

Self-cost calculations are problematic when it benefits large indirect costs through injustice spreads bases.
In the ABC calculations shall not spare capacities, the development of future products, board work, etc. charged to individual products.
However, other costs may be allocated even if they are true common costs that can not be broken in a credible way.
When designing activities should you look especially on expensive resources, resources consumed different amounts of different products and resources that are not the traditional toppings bases (time, materials, etc.) to do.

*financial analysis and control,*or in any way related with the

*economic analysis and management.*