We’ve covered working capital a few times in the past… But today we’re covering probably the all-time most useful ratio when it comes to managing working capital… the Cash Conversion Cycle (CCC). What is it? Your CCC measures how long (measured in days) it takes a dollar of cash to move through your business, from start…
Sources & uses of cash This is Part 2 of a series on capital allocation. A quick recap from last week: We defined the 3 uses of profits as capital allocation. They are: Where we left off was how to assess capital allocation… let’s cover one of the best methods for evaluating capital allocation, a tool we refer to…
We’re wrapping up a 3-part series (here’s part I and part II) on capital allocation – the effective use of profits and cash flow – with a concept called Return on Invested Capital (ROIC). [Sometimes just called return on capital or ROC.] First, a quick reminder of our balance sheet – we buy or build assets for the purpose…
Taking the quarterly view It’s not too late to review 2024 annual financial statements. In fact, most public companies are still reporting Q4 and full year results. Like other business owners, I have a strong preference for monthly financial statements; but, with yearend in full swing, it felt like a good time to pitch the quarterly…
What’s your financial cadence? Business owners have a typical financial review process that goes something like this: Financial statement analysis is the primary tool when it comes to evaluating business performance (I’ve said this before). There’s a “what” component and a “when” component to that analysis; here’s a simple routine that should work for most…
The basic steps for getting things done could be summed up as: I’m always looking for new ways to compartmentalize work and life. Lately, I’ve been using a simple framework referred to as the “Action Priority Matrix.” It’s a close cousin to the Eisenhower Decision Matrix which blends urgent and important tasks into categories of: do, schedule,…
To run a successful business, you need 3 essential models: Sounds simple and you probably have a sense for these in your head. If you’re managing a large team, trying to grow, or climbing toward profitability; then keeping your models in your head won’t scale. You know… that concept of rowing in the same direction?…