Hornung & Associates, LLC5148 Stillwater Drive Colorado Springs, CO 80918-7603 (719) 548-0160 www.hornungllc.com

The Business Analyzera Financial & Operational Analysis

Model

Version 2.0 for Windows

Abbreviated Instructions

FINANCIAL ANALYSIS SOFTWARE FOR TODAY’S BUSINESS

The Business Analyzer

a Financial & Operational Analysis Model

Hornung & Associates, LLC5148 Stillwater DriveColorado Springs, Colorado 80918-7603(719) 548-0160www.hornungllc.com

Copyright 2001-2003 by Hornung & Associates, LLCAll rights reserved.

Hornung & Associates, LLC License Agreement

This is a legal agreement between you, the end user (either an individual, or a legal entity such as a corporation) and Hornung & Associates, LLC (‘COMPANY’). By opening the sealed proprietary software package you are agreeing to be bound by the terms of this agreement. If you do not agree to the terms of this agreement, promptly return the unopened software package and the accompanying items (including written materials) to Hornung & Associates, LLC for a full refund.

Hornung & Associates, LLC PROPRIETARY SOFTWARE LICENSE1. GRANT OF LICENSE. This COMPANY License Agreement permits you to use one copy of the specified version of the

COMPANY multimedia THE BUSINESS ANALYZER a Financial & Operational Analysis Model proprietary software (‘SOFTWARE’) on a single computer. You may use the SOFTWARE on a different computer only if you first delete the SOFTWARE from the first computer.

2. COPYRIGHT. The SOFTWARE, including all forms and matters of copyrightable material and information now allowed by statutory or judicial law hereinafter granted, including without limitation, material generated from the software programs that are displayed on the screen and reports generated therefrom, any images, video, audio, manual and text incorporated in the SOFTWARE, is owned by COMPANY and is protected by United States copyright law. You may not copy any of the printed materials accompanying the SOFTWARE except where instructed.

3. OTHER RESTRICTIONS. You may not rent or lease the SOFTWARE, but you may transfer the SOFTWARE and accompanying written materials on a permanent basis to another end user provided you delete all copies of the SOFTWARE from your computer, and the recipient agrees to the terms of this Agreement. You may not reverse engineer, decompile or disassemble the SOFTWARE. Any transfer of the SOFTWARE must include the most recent update and all prior versions.

LIMITED WARRANTYCOMPANY warrants that, for a period of ninety (90) days from the date of receipt, the SOFTWARE will perform substantially in accordance with the accompanying written materials. Any implied warranties on the SOFTWARE are limited to ninety (90) days. Some states/jurisdictions do not allow limitations on duration of an implied warranty, so the above limitation may not apply to you.

CUSTOMER REMEDIES. COMPANY’s entire liability and your exclusive remedy shall be, at COMPANY’s option, either (a) return of the price paid or (b) repair or replacement of the SOFTWARE that does not meet COMPANY’s Limited Warranty and that is returned to COMPANY with a copy of your receipt. This Limited Warranty is void if failure of the SOFTWARE has resulted from accident, abuse, or misapplication. Any replacement SOFTWARE will be warranted for the remainder of the original warranty period or thirty (30) days, whichever is longer.

NO OTHER WARRANTIES. To the maximum extent permitted by applicable law, COMPANY and its suppliers disclaim all other warranties, either express or implied, including, but not limited to implied warranties of merchantability and fitness for a particular purpose, with regard to, the SOFTWARE and the accompanying written materials. This limited warranty gives you specific legal rights. You may have others, which vary from state/jurisdiction to state/jurisdiction.

NO LIABILITY FOR CONSEQUENTIAL DAMAGES. To the maximum extent permitted by applicable law, in no event shall COMPANY be liable for any damages for whatsoever (including without limitation, damages, loss of business profits, business interruption, loss of business information, or any other pecuniary loss) arising out of the use of or inability to use this COMPANY product, even if COMPANY has been advised of the possibility of such damages. Because some states/jurisdictions do not allow the exclusion or limitation of liability for consequential or incidental damages, the above limitation may not apply to you.

Product names mentioned in the documentation set may be trademarks and/or registered trademarks of their respective companies.

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Changes are periodically made to this document. Changes, technical inaccuracies, and typographical errors will be corrected in subsequent editions.

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Table of Contents

Section Page #

I. DescriptionA. Features 4B. Reports and Schedules 5C. Structure 6D. Software & Operating System 6

II. InstructionsA. Installation and Startup 7B. Data Entry of General, Financial and Operational Data 7

1. General Information 82. Organizational Specifications 83. Income Statement Values 84. Balance Sheet – Current Assets 105. Balance Sheet – Fixed Assets 116. Balance Sheet – Current Liabilities 117. Balance Sheet – Long Term Debt 128. Optional Operational & Performance Elements 129. Other Miscellaneous Information 14

10. Forecasting Annual Sales, Expenses and Profits 14C. Adjustments to your Financial Statement Graphs 15D. Profit & Loss Statement Analysis 16E. Balance Sheet Analysis 16F. Percentage Analysis 16G. Performance Analysis 17H. Operational Analysis 17I. Individual Product Line Analysis 17J. Financial Flowchart 18K. Sensitivity Analysis 18L. Comparative Profit and Loss Statement 20M. Comparative Balance Sheet 20N. Message Center 20O. Report Packet Contents and Printing 20P. Ratios –What They Mean, Formulas & How to Use Them 21

1. Liquidity & Solvency 212. Debt Analysis 223. Profitability 234. Performance & Efficiency 235. Operational 30

Q. Ways of Improving your Financial Image 31R. Summary 32

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I. Description

The Business Analyzer is a very comprehensive analytical tool that allows today’s business executives to obtain a complete understanding of their company’s financial and operational position and performance. You can perform unlimited ‘What If?’ simulations permitting you to see what actions will improve your firm’s bottom line. It identifies your company’s financial and operational strengths and weaknesses. You can monitor your sales performance and determine where you stand regarding your breakeven points and profit objectives on annual, quarterly, monthly and weekly basis. It identifies effective units of measure, which you can use to monitor and control your firm’s efficiency. It will also provide you with methods you can use to enhance your financial image. The quick data entry allows for a full analysis in less than an hour.

A. Features

Automatically calculates more than 250 key financial and operational performance ratios and measurements.They provide in-depth information that allows the manager to make more informed management decisions. They identify a firm’s strengths and weaknesses. You select which ratios you would like to track and omit those of lesser significance. Most of these figures are derived using the same formulas and elements as employed in “ Annual Statement Studies” published by Risk Management Association (*); “Industry Norms and Key Business Ratios” by Dun & Bradstreet (-); “Almanac of Business and Industrial Financial Ratios” by Leo Troy, Ph.D. (+); and “Financial Studies of the Small Business” by Financial Research Associates (#). See column ‘L’ on the Performance standards report showing possible sources for industry standards. The codes correspond to the symbols following the titles above. See column ‘R’ on the balance sheet and column ‘Q’ on the profit & loss statement. (Some of these values are not actually given but can be derived from the industry information available). This will allow you to compare your numbers with industry standards. Additionally, most trade associations publish standards for their industry or trade. These books and materials should be available in bookstores and the reference section of your library.

Provides item by item percentage and variance analysis on your Profit & Loss Statement and Balance Sheet.

Produces comparative analysis P & L Statements and Balance Sheets between the current period and a prior period (or budget) showing the amount and percent change.

Generates breakeven points in total sales, units, orders, customers, man-hours, number of employees, sales representatives and square feet allowing you to monitor your organizations profit position on an ongoing basis. The breakeven points are provided in annual, quarterly, monthly and weekly values.

Contains a financial flow chart for a visual representation of your firm’s financial position. It provides you with a complete understanding of the financial and operational interrelationships that exist within your organization.

Forecasts current year totals from year-to-date values allowing you to evaluate your performance year-to-date and compare your information to an annual budget.

A full range of ‘Sensitivity Analysis’ allows you to perform ‘What If?’ simulations to determine improvements in what areas of your business will generate your biggest return for your efforts. Additional unique simulation tools contained in the model:- Calculate the level of sales required to achieve different profit level . These are presented in yearly, quarterly,

monthly and weekly values broken down by total sales, orders, man-hours, units, customers, salesman and square feet (as needed). The net changes (increases) from your current operational levels are calculated.

- Determine operational levels required to achieve various sales levels in orders, man-hours, units, customers, salesman and square feet expressed in annual, quarterly, monthly and weekly values. The net changes (increases) from your current operational levels are calculated.

- Compute the accounts receivable & inventory levels required for different levels of sales - Calculate the level of sales required to offset changes in unit prices - Determine the accounts receivable & inventory levels for different turnover rates - You can perform a full simulation by making a copy of your analysis file and change any and all elements to see what

affect it will have on your financial and operational performance.

You can analyze individual product lines and perform the full range of sensitivity analysis.

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The primary data entry requirements consist of the elements from your balance sheet and income statements . Additional data entry is optional. However, the more data you can provide, the more information will be generated for your management team to control and monitor your organizations performance.

The user defines: class descriptions, cost center descriptions, company identification, reporting currency to be used and the report dates.

All values are accurate up to 999,000,000.

Full descriptions of the primary ratios with explanations of ‘What They Mean’ & ‘How to Use Them’ are provided.

The user selects what reports will be included in their financial & operational analysis packet.

Multiple applications can be created concurrently.

B. Reports and Schedules The model contains the reports, schedules and graphs listed below. They are classified as either “Requires Data Entry”; “Generated” by the model; “Allows Optional Entry of Additional Information and/or Industry Standards for Variance Analysis, Sensitivity Analysis or Comparative Analysis” or “Miscellaneous”. The Index provides easy navigation to the desired document. You can easily return to the Index from anywhere in the workbook by left-clicking on the “Index” buttons located through out the model or pressing “Ctrl + i”.

1. Requires Data Entry Global Information, Financial Data & Operational Specifications (Data Entry)

2. Generated Title Page (Title)Table of Contents (Contents)Profit & Loss Statement Analysis (P & L)P & L Statement Graphs (P & L Gph)Balance Sheet Analysis (Bal Sht)Balance Sheet - Assets Graphs (Bal Gph - A)Balance Sheet - Liabilities Graphs (Bal Gph - L)Performance Ratios & Analysis (Performance)Operational Ratios and Percentages (Operational)Financial Chart (Financial Chart)Sensitivity Analysis (Sensitivity)Glossary of Terms & Formulas (Glossary)Message Center for listing data entry errors and warnings (Message Center).Preparation Cover Sheet (Prepare)

3. Allows Optional Entry of Additional Information and/or Industry Standards for Variance Analysis, Sensitivity Analysis or Comparative Analysis Balance Sheet Analysis (Bal Sht)Profit & Loss Statement Analysis (P & L)Performance Ratios & Analysis (Performance)Sensitivity Analysis (Sensitivity)Comparative Profit & Loss Statements (Comp P&L)Comparative Balance Sheets (Comp BS)

4. Miscellaneous Schedules Index (Index) - Permits automatic branching to all other schedules. Each individual schedule has buttons to return you to the index or you can press ‘Ctrl’ ‘I’ simultaneously.

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Report Selection & Print Schedule (Data Entry) - Allows Report Selection & Automatic Printing. The user designates the desired reports to be contained in each report packet. The table of contents will reflect only the reports selected and the page numbers are coordinated with the selection.

Report printing macro (Macro) - Contains the print macro for processing automatic print requests.

Preparation Cover sheet (Prepare) - An optional schedule which will print a report preparation cover sheet

C. Structure The model is designed so that data only needs to be entered once in the Data Entry Form. Once entered, the information will be automatically transferred throughout the model. The information can be entered in any order. You can enter data for an entire year or part year.

All reporting pages of the model have been protected with a password to guard formulas and limit data entry to only those cells that require information in the model. Consequently, you can only enter data into the pink, blue or green outlined cells. The three pages of graphs are protected without a password. This is to allow you to adjust the data sources to accommodate your financial environment.

A message center is provided to assist in resolving data entry issues.

A set of sample reports can be generated from the ‘Demo Model’.

Remove the formula bar, status bar and all toolbars in the MS Excel View dropdown menu for optimum operating, viewing and presentation.

D. Software & Operating System It consists of nineteen (19)-interconnected forms, reports and graphs. It requires about 1.5 Mb. It is written in Microsoft Excel in Microsoft Windows. It contains VBA macros that are used for simple navigation. It also contains an Excel v4.0 macro to facilitate printing of reports. Therefore you must enable macros when opening the workbook. A color monitor is recommended to take advantage of the color-coding used in the reports. This manual is on the CD in Microsoft Word under the file name “Business Analyzer Instructions”. You can make additional copies for reference purposes.

Excel, Microsoft and Windows are registered trademarks of the Microsoft Corporation.

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II. Instructions

Read these instructions completely before entering data or updating the model. Print and/or review the sample reports, graphs and schedules provided in the Demo Model to help you comprehend them and their interrelationships. You may want to print a blank copy of the ’Data Entry’ form and fill it out before entering the data to save time and avoid confusion. Remember that you can only enter data in the pink, green or blue outlined cells.

A. Installation and StartupThe model was developed in Microsoft Excel under Microsoft Windows.1. Open the Demo model ‘Business Analyzer n.nn Demo’. Be sure to ‘Enable Macros’ when prompted.

a. The model should open at the index. If not, Index buttons are located through out the model. Just left-click on one and you will return to the Index. You can also press ’Ctrl’ and ‘I’ simultaneously and it will take you to the index.

2. Go to the Report section of the ‘Data Entry’ form.a. Left-click the Reports button in cell ‘B27’ on the index.b. You can also move to the ‘Data Entry’ form and go to the report section manually.

3. Check that all schedules have a ‘Y’ in the ‘Print Y/N’. (The Demo model is shipped with these set to ‘Y’.)

4. Left-click the Print button in cell ‘H71’ on the ‘Data Entry’ form. This will print out samples of all schedules.

5. You can then close the Demo model.

6. Begin your analysis process by moving a copy of the ‘Business Analyzer’ to your hard drive. You may want to rename the model once you have copied it.

7. Open the model with your MS Excel software. Be sure to ‘Enable Macros’ when prompted.

8. You may want to print a blank copy of your ‘Data Entry’ form to aid in data collection and organization. See the “Report Packet Contents and Printing” section below. Enter a “y” in the “Print Y/N” column for only the report ‘Global, Operational & Financial Data Entry” and then left-click the Print button. The Model is shipped with all print selections set to “N”.

9. You can return to the model Index at any time by left clicking on any of the ‘Index’ buttons located through out the model or by pressing ‘Ctrl’ and ‘I’ simultaneously.

10. Remember that you can only enter data in the pink, green or blue outlined cells

B. Data Entry of your General Information, Financial Data & Operational SpecificationsThe general information, financial data and operational specifications entry form contains: all company name/address information; report title; heading constants; long and abbreviated cost center titles; report dates; class descriptions; and all financial information about your organization. The title information is used to customize all reports in the model to reflect your firm and to fit your organization’s structure and operating parameters. The model will automatically transfer this information to all reports in the system.

You must enter all values as whole numbers.

Enter all percentages as whole numbers with two decimal places and the model will display them as a percent (e.g. ‘45.23’ is equal to 45.23%). If a percentage is less than 1 enter with a leading zero and decimal point (e.g. “0.25” is equal to 0.25%)

Check the Message Center for any errors after you have entered all of your information.

Go to the ‘Data Entry’ form (press the Data Entry button on the Index spreadsheet) and reference the ‘Demo Model’.

1. General Information . Enter the data into the pink outlined cells. The company name, address, city, telephone and title fields will hold any number of characters within reason. Optional data is indicated with an ‘O’.a. The company name (e.g., Hornung & Associates, LLC). This will appear in the report titles through

out the model. A warning message will appear in the message center in you do not enter a company name.

b. The company address (e.g., 5148 Stillwater Drive). This will appear on the Title sheet and the Preparation Sheet and is for documentation purposes. It is not used in the model. – ‘O’

c. The company city, state and zip (e.g., Colorado Springs, CO 80918). This will appear on the Title sheet and the Preparation Sheet and is for documentation purposes. It is not used in the model. – ‘O’

d. The company telephone number (e.g., (719) 548-0160). This will appear on the Preparation Sheet and is for documentation purposes. It is not used in the model. – ‘O’

e. Contact nam e (e.g. Ms. Jane Doe). This will appear on the Preparation Sheet and is for documentation purposes. It is not used in the model. – ‘O’

f. The title of the report (e.g., Financial & Operational Analysis). This will appear in the report titles through out the model. A warning message will appear in the message center in you do not enter a report title.

g. The date of your balance sheet (e.g. 12/31/2000). This will appear in the report titles through out the model. A warning message will appear in the message center in you do not enter a date.

h. The period ending date for the analysis (e.g., 12/31/2000). This will appear in the report titles through out the model. A warning message will appear in the message center in you do not enter a date.

i. The reporting currency to be used for the analysis (e.g., “$”, “₣”, “€”, etc.). This will appear in all report titles through out the model. A warning message will appear in the message center in you do not enter a currency. A default of “$” is given but can be changed to fit your environment. Substitute your selected currency for the word “dollar” in these instructions.

2. Organizational Specifications a. Enter both the long and abbreviated titles for your cost centers. A warning message will appear in the

message center in you do not enter both titles for a cost center. Enter a space in both cells provided if you will not use one of the cost centers. Defaults are given but can be changed to fit your environment. The cost centers will appear on the income statement and Financial Chart in the order below. See the Demo model to see the location and method of processing for these cost centers. A cost center will not appear on the income statement or Financial Chart, if you do not enter income statement values for the cost center. The types of cost centers are:

SellingGeneral & AdministrativeOther OperatingNon-Operating

3. Income Statement Values The values entered in the income statement are normally for a twelve-month period or for one business year. This can be prior year data, current year budget or the last twelve months. See the section “Forecasting Annual Sales, Expenses, Profits and Financial Performance” below if you are entering part-year values. When entering values for a full business year, be sure that all of the “% of Annual Volume” cells (green outlined cells) contain “100.00%”. This is required for many of the financial ratios to be an accurate representation of your financial picture.

If you leave a field blank the entire line will not appear on the income statement. If you inadvertently enter a value, go to the field and delete it.

A ‘Percent of Annual Volume’ must be greater than zero for each respective cell that you have entered a value in an income statement. If you enter a value for any item on the income statement and the ‘% of Annual Volume’ is zero no value will be distributed to the rest of the model. An ERROR message will also appear in the Message Center if this condition exists.

a. Credit Sales . Enter the amount of Credit Sales for the period. (I.e. 2875099). Leave the space blank if you did not have any credit sales during the period. This is transferred to the ‘Profit and Loss Statement’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, breakeven points, performance measures and ratios – ‘O’

b. Cash Sales . Enter the amount of Cash Sales for the year. (I.e. 608579). Leave the space blank if you did not have any cash sales during the year. This is transferred to the ‘Profit and Loss Statement’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, breakeven points, performance measures and ratios – ‘O’

The Credit Sales plus Cash Sales must equal your total sales for the year.

c. Cost of Sales, Material . Enter the amount of Cost of Sales, Material for the year. (I.e. 872316). Leave the space blank if you did not have any cost of sales, material during the year. This is transferred to the ‘Profit and Loss Statement’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, breakeven points, performance measures and ratios – ‘O’

d. Cost of Sales, Labor . Enter the amount of Cost of Sales, Labor for the year. (I.e. 651627). Leave the space blank if you did not have any cost of sales, labor during the year. This is transferred to the ‘Profit and Loss Statement’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, breakeven points, performance measures and ratios – ‘O’

e. Cost of Sales, Other . Enter the amount of Cost of Sales, Other for the year. (I.e. 123305). Leave the space blank if you did not have any cost of sales, other during the year. This is transferred to the ‘Profit and Loss Statement’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, breakeven points, performance measures and ratios – ‘O’

The Cost of Sales, Material plus Cost of Sales, Labor plus Cost of Sale, Other must equal your total cost of sales for the year.

The title “Selling Expense” can be omitted or changed to fit your environment (see above).

f. Variable Selling Expense . Enter the amount of Variable Selling Expense for the year. (I.e. 92318). These are expenses that vary directly with sales (e.g. commissions). Leave the space blank if you did not have any variable selling expenses during the year. This is transferred to the ‘Profit and Loss Statement’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, breakeven points, performance measures and ratios – ‘O’

g. Fixed Selling Expense . Enter the amount of Fixed Selling Expense for the year. (I.e. 219506). These are expenses that do not vary directly with sales (e.g. sales secretary’s salary). Leave the space blank if you did not have any fixed selling expenses during the year. This is transferred to the ‘Profit and Loss Statement’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, breakeven points, performance measures and ratios – ‘O’

The Variable Selling Expense plus Fixed Selling Expense must equal your total selling expense for the year.

An error message will appear in the Message Center if you enter a Variable or Fixed Selling Expense value and have not entered a title for your Selling cost center.

The title “General & Administrative Exp.” can be omitted or changed to fit your environment (see above).

h. General & Administrative Expense . Enter the amount of General & Administrative Expense (e.g. executive salaries, postage, etc.) for the year. (I.e. 265675). Leave the space blank if you did not have any general & administrative expenses during the year. This is transferred to the ‘Profit and Loss Statement’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, breakeven points, performance measures and ratios – ‘O’

An error message will appear in the Message Center if you enter a ‘G & A’ expense value and have not entered a title for your ‘G & A Expense’ cost center.

The title “Other Operating Expense” can be omitted or changed to fit your environment (see above).i. Other Operating Expense . Enter the amount of Operating Expense (e.g. supervisory salaries, etc.) for

the year. (I.e. 142370). Leave the space blank if you did not have any operating expenses during the year. This is transferred to the ‘Profit and Loss Statement’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, breakeven points, performance measures and ratios – ‘O’

An error message will appear in the Message Center if you enter an ‘Other Operating’ expense value and have not entered a title for your ‘Other Operating Expense’ cost center.

The title “Non-Operating Exp. & (Rev.)” can be omitted or changed to fit your environment (see above).

j. Non-Operating Expenses & Revenues . Enter the amount of Non-Operating Expenses & Revenue (e.g. board of directors meeting expenses, interest income, etc.) for the year. (I.e. 38746). If your non-operating revenues exceed your non-operating expenses, enter this as a negative value. Leave the space blank if you did not have any non-operating expenses & revenue during the year. This is transferred to the ‘Profit and Loss Statement’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

An error message will appear in the Message Center if you enter a ‘Non-Operating’ expense value and have not entered a title for your ‘Non-Operating Expense’ cost center.

k. Taxes . Enter the amount of Income Taxes for the year. (I.e. 371910). Leave the space blank if you did not have any income taxes for the year or you do not want to analyze your “Earnings After Taxes”. This is transferred to the ‘Profit and Loss Statement’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

4. Balance Sheet – Current Assets If you leave a field blank the entire line will not appear on the balance sheet. If you inadvertently enter a value, go to the field and delete it.a. Cash & Marketable Securities . Enter the amount of Cash & Marketable Securities you had at the

end of the year. (I.e. 702135). Leave the space blank if you did not have any cash & marketable securities at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

b. Accounts Receivable (Net). Enter the amount of Accounts Receivable (Net) you had at the end of the year. (I.e. 461681). Leave the space blank if you did not have any accounts receivable (Net) at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

c. Inventory . Enter the amount of Inventory you had at the end of the year. (I.e. 152785). Leave the space blank if you did not have any inventory at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

d. All Other Current Assets . Enter the amount of All Other Current Assets you had at the end of the year. (I.e. 4250). Leave the space blank if you did not have any all other current assets at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

e. Two additional fields are available for entering values for current assets other than those listed above. Description fields are also available. They work the same as the above fields. It is recommended that you use the predefined fields above so you can compare the values to published standards in the industry. (I.e. Robert Morris Associates). Leave the space blank if you did not have any additional values at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

An error message will appear in the Message Center if you enter a value for a non-defined current asset and have not entered an associated description.

5. Balance Sheet – Fixed Assets The balance sheet data should normally be as of the end of the business year for which the income data represents. You can use your current values when used in conjunction with a current year budget, the last twelve months or a projection for the rest of the current year based on year-to-date actual. This is required for the financial ratios to more closely represent your financial and operational picture.

If you leave a field blank the entire line will not appear on the balance sheet. If you inadvertently enter a value, go to the field and delete it.

a. Land, Buildings & Equipment (Net) . Enter the amount of Land, Buildings & Equipment (Net of Depreciation) you had at the end of the year. (I.e. 712000). Leave the space blank if you did not have any land, buildings & equipment (net) at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

b. Intangibles . Enter the amount of Intangibles you had at the end of the year. (I.e. 75000). Leave the space blank if you did not have any intangibles at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

c. All Other Non-Current Assets . Enter the amount of All Other non-Current Assets you had at the end of the year. (I.e. 15000). Leave the space blank if you did not have any all other non-current assets at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

d. Three additional fields are available for entering values for non-current assets other than those listed above. Description fields are also available. They work the same as the above fields. It is recommended that you use the predefined fields above so you can compare the values to published standards in the industry. (I.e. Robert Morris Associates). Leave the space blank if you did not have any additional values at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

An error message will appear in the Message Center if you enter a value for a non-defined fixed asset and have not entered an associated description.

6. Balance Sheet – Current Liabilities If you leave a field blank the entire line will not appear on the balance sheet. If you inadvertently enter a value, go to the field and delete it.

a. Accounts Payable . Enter the amount of Accounts Payable you had at the end of the year. (I.e. 86055). Leave the space blank if you did not have any accounts payable at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

b. Notes Payable – Short Term . Enter the amount of Notes Payable – Short Term you had at the end of the year. (I.e. 36000). Leave the space blank if you did not have any notes payable – short term at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

c. Current Maturities . Enter the amount of Current Maturities you had at the end of the year. (I.e. 12000). Leave the space blank if you did not have any current maturities at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

d. Income Tax Payable . Enter the amount of Income Tax Payable you had at the end of the year. (I.e. 16000). Leave the space blank if you did not have any income tax payable at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

e. All Other Current Debt . Enter the amount of All Other Current Debt you had at the end of the year. (I.e. 2100). Leave the space blank if you did not have any all other current debt at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

f. Two additional fields are available for entering values for current liabilities other than those listed above. Description fields are also available. They work the same as the above fields. It is recommended that you use the predefined fields above so you can compare the values to published standards in the industry. (I.e. Robert Morris Associates). Leave the space blank if you did not have any additional values at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

An error message will appear in the Message Center if you enter a value for a non-defined current liability and have not entered an associated description.

7. Balance Sheet – Long Term Debt If you leave a field blank the entire line will not appear on the balance sheet. If you inadvertently enter a value, go to the field and delete it.

a. Long Term Debt . Enter the amount of Long Term Debt you had at the end of the year. (I.e. 450000). Leave the space blank if you did not have any long-term debt at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

b. Deferred Taxes . Enter the amount of Deferred Taxes you had at the end of the year. (I.e. 26000). Leave the space blank if you did not have any deferred taxes at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

c. All Other Non-Current . Enter the amount of All Other Non-Current Debt you had at the end of the year. (I.e. 5000). Leave the space blank if you did not have any other non-current debt at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

d. Three additional fields are available for entering values for non-current liabilities other than those listed above. Description fields are also available. They work the same as the above fields. It is recommended that you use the predefined fields above so you can compare the values to published standards in the industry. (I.e. Robert Morris Associates). Leave the space blank if you did not have any additional values at the end of the year. This is transferred to the ‘Balance Sheet’. It is used for performing percentage and variance analysis. It is also used for calculating operational measures, performance measures and ratios – ‘O’

An error message will appear in the Message Center if you enter a value for a non-defined Long Term Debt and have not entered an associated description.

8. Optional Operational & Performance Elements . This data is optional but the more you enter the more information the model will generate for you. When entering the information, consideration should be given to entering only the required amounts rather than actual amounts. Example: When entering the number of square feet do not include any square footage that you currently do not need to conduct business.

The values entered in this section are normally for a twelve-month period or for one business year. This can be prior year data, current year budget or the last twelve months. See the section “ Forecasting Annual Sales, Expenses, Profits and Financial Performance” below if you are entering part-year values. When entering values for a full business year, be sure that all of the “% of Annual Volume” cells (green outlined cells) contain “100.00%”. This is required for many of the financial ratios to be an accurate representation of your financial picture.

If you leave an element blank, the element will not appear as part of your analysis through out the model. If you inadvertently enter a value, go to the field and delete it.

A ‘Percent of Annual Volume’ must be greater than zero for each respective element you have entered. If you enter a value for any element and the ‘% of Annual Volume’ is zero no value will be distributed to the rest of the model. An ERROR message will also appear in the Message Center if this condition exists.

a. Unit Title . Some companies have only one primary product line (I.e. Widgets). You can enter the title of your production units in this cell. This is used in identifying a unit description (I.e. ‘Costs per Widget’). If you enter a unit title you must enter the production units. – ‘O’.

b. Production Units . Enter the number of products (Widgets) produced during the year (I.e. 1200). This is used for calculating operational measures, breakeven points and equivalent sales units. If you enter Production Units you must enter a Unit Title. – ‘O’

c. Number of Orders . Enter the number of orders you processed during the year. This is used for calculating operational measures, breakeven points and equivalent sales units. – ‘O’

d. Number of Hours . Enter the number of hours used to generate your sales for the year. This could be production man-hours, service man-hours, consulting hours or any other type of hours you may have as a unit of measure. This is used for calculating operational measures, breakeven points and equivalent sales units. – ‘O’

e. Number of Customers . Enter the number of customers serviced during the year. This is used for calculating operational measures, breakeven points and equivalent sales units. – ‘O’

f. Number of Sales Reps . Enter the average number of sales representatives you had during the year. This is used for calculating operational measures, breakeven points and equivalent sales units. – ‘O’

g. Number of Employees . Enter the average number of employees you had during the year. This could be production employees, service employees, consultants or any other type of employee you may want as a unit of measure. This is used for calculating operational measures, breakeven points and equivalent sales units. – ‘O’

h. Number of Square Feet . Enter the total square feet you currently occupy. This could be production square feet, warehouse square feet, sales floor square feet or any other type of square feet you may want as a unit of measure. This is used for calculating operational measures, breakeven points and equivalent sales units. – ‘O’

i. Sales Personnel Expense . Enter the amount spent on sales personnel expenses. This should include wages, workman’s comp premiums, employer half of social security, all fringe benefits, etc. (I.e. 192314). This is used for calculating operational measures and ratios – ‘O’

j. Bad Debt Expense . Enter the amount expensed for bad debt. (I.e. 4665). This is used for calculating operational measures and ratios – ‘O’

k. Depreciation, Depletion, Amortization Expense . Enter the amount incurred for this category of expense. (I.e. 22800). This is used for calculating operational measures and ratios – ‘O’

l. Employee Pensions & Other Benefits . Enter the total amount spent on this category of expenses. (I.e. 48596). This is used for calculating operational measures and ratios – ‘O’

m. Current Interest Rate . Enter the current interest rate you pay for business loans. (I.e. 6.12%). This is used for calculating the potential annual receivables savings on the sensitivity analysis report – ‘O’

n. % Inventory Carrying Cost . Enter your current percent inventory carrying cost. (I.e. 34.67%). This should include interest; warehousing (space, equipment, personnel); taxes; insurance; general overhead; and obsolescence. This is used for calculating the potential annual inventory savings on the sensitivity analysis report – ‘O’

o. Officer’s Salaries & Benefits . Enter the total amount spent on this category of expenses. (I.e. 240000). This is used for calculating operational measures and ratios – ‘O’

p. Total Personnel Expense . Enter the total amount spent on this category of expenses. This should include wages, workman’s comp premiums, employer half of social security, all fringe benefits, etc. (I.e. 697914). This is used for calculating operational measures and ratios – ‘O’

q. Interest Expense . Enter the amount spent on this category of expenses. (I.e. 5855). This is used for calculating operational measures and ratios – ‘O’

r. Normal A/R Credit terms in Days . Enter the normal credit terms you offer your customers in days. (I.e. Net 30 or 2%10n30 = 30 days). This is used for calculating operational measures and ratios – ‘O’

s. Normal A/P Credit terms in Days . Enter the normal credit terms offered to you by your vendors in days. (I.e. Net 30 or 2%10n30 = 30 days). This is used for calculating operational measures and ratios – ‘O’

You can return to the model Index at any time by left-clicking any ‘Index’ button or by pressing ‘Ctrl’ and ‘I’ simultaneously.

9. Other Miscellaneous Information a. Prepared by name (e.g. Jim Jones). This is placed on the Preparation cover page. – ‘O’

b. SIC Code - your organizations primary Standard Industry Classification codes (e.g. 3104, 3106). This is strictly for informational purposes and does not affect the model.

Check the Message Center for any errors after you have entered all of your information.

10. Forecasting Annual Sales, Expenses, Profits and Financial Performance You can enter year-to-date values and have the model forecast your sales, expenses and profits for the year. It will also evaluate your performance and financial position based on these numbers. You enter the year-to-date figures and the estimated percent year-to-date for each value. Except for the Data Entry form, the values in all schedules contained in the model will be the forecast for the full year.The forecasts can be compared to your budget for the year by looking at your Comparative Profit & Loss Statement.

a. Enter the actual year-to-date amount you incurred into the Income Statement section of the Data Entry form.

b. Enter the ‘% of Annual Value’ for each of your figures. These are the green outlined cells on your Data Entry form next to your currency fields.

Example:

Six months into the year you may have incurred 50% of your fixed costs but only 30% of your sales and 30% of your cost-of-sales. You would change the “% of Annual Value” for your fixed expenses from 100% to 50% and your sales and cost-of-sales percentages from 100% to 30%.

The following conversion chart is for your convenience.Months %1 8.33%2 16.67%3 25.00%4 33.33%5 41.67%6 50.00%7 58.33%8 66.67%9 75.00%10 83.33%11 91.67%12 100.00%

c. Enter your current balance sheet values.

d. If desired and were applicable, enter the year-to-date amounts for your operational & performance elements.

e. Change the “% of Annual Value” for each element to correspond to its value. These are the green outlined cells on your Data Entry form next to your volume and currency fields.

Check the Message Center for any errors after you have entered all of your information.

C. Adjustments to GraphsBefore you print or use the graphs of your financial statements you may want to adjust them. All profit and loss statement graphs (P & L Gph) and balance sheet graphs (Bal Gph – A and Bal Gph – L) may need adjustments to more clearly present your financial information. These spreadsheets are protected without a password. Extreme caution should be taken when unprotecting these spreadsheets so you do not damage their integrity. Refer to your MS Excel user’s manual if you do not fully understand the following steps.1. Unprotect the spreadsheet you want to adjust. Follow the dropdown menu steps listed.

TOOLSPROTECTION

UNPROTECT SHEET

2. If you do not use all categories contained in each financial statement you will want to reselect your source data. This will apply if a label is blank and/or a percentage is zero. You will reset ‘Values’ and ‘Category Labels’ in the SERIES section of the DATA SOURCE for each graph to reflect only those categories you have values for. If this does not apply, go to step 4.a. Right-click in an open area of the graph you desire to change. Select the dropdown menu step:

SOURCE DATA

b. Review the ‘Values’ included in the source data. Select the dropdown menu steps:

SERIESVALUES (window icon)

All fields selected must have a value other then zero

c. If necessary, reselect the ‘Values” fields that have non-zero values and you want to include in your graph.

- Left-click on the first field to be selected- While pressing and holding the control key, select all other fields to be included in your

graph

- When you are finished selecting, left-click on the Window Icon to return to the SERIES window

d. Review the ‘Category Labels’ included in the source data. Select the dropdown menu steps:

SERIESCATEGORY LABELS (window icon)

All fields selected should be non-blank and match the value fields selected above.

e. If necessary, reselect the ‘Category Labels” fields that are non-blank and you want to include in your graph.

- Left-click on the first field to be selected.- While pressing and holding the control key, select all other fields to be included in your

graph.- When you are finished selecting, left-click on the Window Icon to return to the SERIES

window.

3. Left-click “OK” to return to the graph.

4. You may want to adjust the location of the ‘Data Labels’ contained in the graphs.a. Left-click once or twice on top of each label you want to move until a border appears around the

label. Drag the label by its border to a new location.5. Protect the spreadsheet.

a. Left-click on cell A2 just below the Index button.b. Follow the dropdown menu steps listed

TOOLSPROTECTION

PROTECT SHEETOK

D. Profit & Loss Statement Analysis A quick review of the sample profit & loss statement in the Demo Model will confirm the enormous value this report can be to your organization. A full percentage analysis is calculated for evaluation. Fields are available for entering optional percentages for variance analysis. The sources of comparison percentage values (i.e. industry standards) are discussed in the Description section above. These cells are outlined in blue. The values should be entered as a whole number with two decimal places (i.e. 54.90 equal 54.90 %). You can enter industry standards, past performance or other percentage values that you want to compare to. The model will automatically calculate a percent variance against any value you enter. This will help you determine how your organization is performing. A variance percentage will not appear when no value is provided for comparison.

E. Balance Sheet Analysis A quick review of the sample balance sheet in the Demo Model will show how useful this can be to your organization. A full percentage analysis is calculated for evaluation. Fields are available for entering optional percentages for variance analysis. The sources of comparison percentage values (i.e. industry standards) are discussed in the Description section above. These cells are outlined in blue. The values should be entered as whole numbers with two decimal places (i.e. 14.80 equal 14.80 %). You can enter industry standards, past performance or other percentages that you want to compare to. The model will automatically calculate a percent variance against any value you enter. This will help you determine how your organization is performing. A variance percentage will not appear when no value is provided for comparison.

F. Percentage Analysis

Percentage Analysis is the process of calculating the percent an individual line item to a total. More than 90 balance sheet and profit & loss and percentages will be calculated along with associated variance percentages. Compare your percentages to industry standards, a budget (if you have one) and your historical past. Watch for variances and undesirable trends. Get a feel for the volatility and significance of different elements in your financials.

If you are not familiar with the “Annual Statement Studies” by Risk Management Associates, you should be. Ninety-five (95) to ninety-eight (98) percent of all banks and lending institutions use “Annual Statement Studies” to evaluate their clients when applying for financing. These comparisons determine whether you obtain financing and secondly, what interest you will pay.

The “Annual Statement Studies” is broken down by size of business in Sales and also by value of assets. Some percentages are not given but can be derived. (E.g. % Cost of Sales). The bank is going to evaluate your company’s financial position & performance against these percentages. Significant variances from these values will result in your company’s performance and financial position being questioned. The banks will also look at your historical past.

Dun & Bradstreet’s “Industry Norms & Key Business Ratios” is another popular set of industry standards. Ask your financial institution what they use. If they say they do not use a specific standard, use the “Annual Statement Studies”. For internal evaluations, use your trade association figures if available.

Refine your analysis by calculating a percent of category. You should do it in as much detail as possible (E.g. Rent as a percent of General & Administrative Expenses or Inventory as a percent of Current Assets). These percentages are more reactive to small changes and more meaningful in the day-to-day operations. Identify actions you can take to improve your image. Review your cost of sales, operating expenses and balance sheet items to see if any can be adjusted to more closely reflect industry standards. You may be posting your transactions differently than your industry and this could have a negative impact on your financial image.

Short range actions you can take to improve your financial image and performance include adjusting your Cost of Sales to Operating Expenses or adjusting your Accounts Payable by offsetting cash or adjusting Inventory.

Long range actions might include leasing assets rather than purchasing them or purchasing rather than leasing. Excessive fixed assets can result in having too much capital tied up and limit your ability to take advantage of short term opportunities.

G. Performance Ratio Analysis The Performance Analysis report will calculate more than 75 financial and operational performance ratios and percentages. Fields are available for entering optional values for variance analysis. These cells are outlined in blue. Percentages should be entered as whole numbers with one decimal place (i.e. 12.7 equal 12.7 %). The sources of comparison values (i.e. industry standards) are discussed in the Description section above. Robert Morris Associates’ “Annual Statement Studies” is suggested when doing comparisons.

You can omit any of the ratio from your report by placing the letter “O” in column ‘m’ for the appropriate row.

The model will automatically calculate a percent variance against any value you enter. This will help you determine how your organization is performing. A variance percentage will not appear when no value is provided for comparison.

Paragraph ‘P.’ below “Ratio- What They Mean, How They are Calculated and How to Use Them to Improve your Financial Performance and Image” provides a detail explanation of most of the performance ratios and percentages.

H. Operational Analysis

The Operational Analysis report will calculate more than 80 operational ratios and percentages. The number of ratios and percentages will depend on the amount of operational values enter on the Data Entry form. This analysis helps you establish effective measures that will assist you in monitor your company’s operational performance - Benchmarks.

Paragraph ‘P5.’ below provides a detail explanation of most of the productivity & efficiency ratios and percentages contained in the Operational Analysis section.

I. Individual Product Line Analysis You can analyze individual product lines.

1. Open a separate workbook and give it a unique file name.

2. Enter the appropriate title information

3. Adjust the Cost Center titles where applicable.

4. Enter the direct income, costs and expenses associated with the product line.a. Review the formulas associated with variable and fixed costs when entering these values in the Data

Entry form. See the Glossary for the calculations used in the Breakeven Analysis.

5. The appropriate overhead amounts of general & administrative, selling and operating costs for the product line must be allocated and added to the above values. The analysis will not be accurate unless this step can be performed.

6. Enter those Operational & Performance Elements that apply to the product line.

7. All Profit & Loss percentage and variance analysis will be valid.

8. All Operational ratios should be valid except for ‘Assets per Employee’

9. All Sensitivity Analysis will be valid except for possibly those values associated with the balance sheet.a. Receivables, inventory and payables values should be ignored unless you are able to identify those

values directly related to the product line.

10. Most balance sheet items are not broken out by product line. However, if this applies, enter the balance sheet items. Otherwise, very few of the performance ratios will be valid when evaluating a product line. Inventory, receivables and payables performance may be useful and valid if these balance sheet values can be associated directly with the product line.a. ‘Return on Gross Profit’ and ‘Average Days Sales’ should be valid.

11. The following schedules normally would not be valid when evaluating a product line.a. Balance Sheetb. Balance Sheet Graphsc. Financial Flow Chartd. Comparative Balance Sheet

J. The Financial Flow Chart The financial flow chart presents the flow of financial information and the interrelationships between your financial statements and your firm’s profitability. It shows how your finances flow from sales, cost of sales and expenses to gross profit, operating profit and net profit before taxes. It illustrates how the detail assets and liabilities flow to total assets, total debt and net worth. It then presents your profitability in return on sales, return on assets and return on equity.

K. Sensitivity Analysis The Sensitivity Analysis report is divided into six sections.

Breakeven Analysis & Simulations

Profit to Sales SimulationsPrice to Sales SimulationsOperational Performance SimulationsSales to Assets SimulationsFull “What If?” Simulations

1. Breakeven Analysis & Simulations a. The model will automatically calculate your breakeven point in sales for a year, quarter, month and

week.b. The model will calculate the average sales per Unit, Order, Customer, Hour, Sales Rep, Employee

and Square Foot if you provide the necessary values in the Operational & Performance Elements section on the Data Entry input form.

c. If you supplied operational and performance elements, it will also calculate your breakeven points in Units, Orders, Customers, Hours, Sales Reps, Employees and Square Feet. They will be expressed in annual, quarterly, monthly and weekly values.

d. You can enter simulated average sales (in the pink outline cells) per Unit, Order, Customer, Hour, Sales Rep, Employee and Square Foot. If entered, it will calculate the breakeven points for the simulated sales dollars. These will be given in annual, quarterly, monthly and weekly values.

2. Profit to Sales Simulations a. You can enter the desired ‘before tax profit’ you would like to achieve and the model will calculate

the amount of sales required in Total Sales, Units, Orders, Customers, Hours, Sales Reps, Employees and Square Feet both for averages and simulated values. The net changes (increases) from your current operational levels are also calculated. The Net Change in sales is also provided.

3. Price to Sales Simulations

a. You can enter a percentage you would like to alter your overall prices and the model will calculate the sales required to achieve the desired profit in step 2 above. The Net Change in sales is also provided.

4. Operational Performance Simulations a. The model will show your actual current levels of Inventory, Receivables and Payables and turns. b. The model will calculate what your Inventory, Receivables and Payables levels “Should Be” for your

current level of sales. The model uses the external comparison formulas for these calculations. Therefore you must enter your industry standards for the corresponding external turn rates on the Performance Analysis report for the model to calculate these values.

c. You can enter internal desired rates of Inventory, Receivable and Payable turns and the model will calculate the level of Inventory, Receivables and Payables you will need to carry for your current level of sales to meet those turn rates. The model uses the internal comparison formulas for these calculations. Therefore enter the corresponding values.

d. The difference between your actual and desired levels is calculated and percent variances are calculated.

e. The Potential Annual Savings for the changes in inventory is calculated (15,167). It is equal to the difference in inventory (43,746) multiplied by the % Inventory Carrying Cost (34.67% entered on the Data Entry form).

f. The Potential Annual Savings for the changes in receivables is calculated (12,401). It is equal to the difference in receivables (174,171) multiplied by the sum of your current loan interest rate (6.12% entered on the Data Entry form) and the bad debt as a % accounts receivable (1.0% calculated on the Operational Analysis report).

5. Sales to Assets Simulations a. You can enter a desired level of sales and the model will calculate the Inventory, Receivables and

Payables levels required to support that level of sales based on your current level of performance in these three categories. The Net Change in sales is also provided.

b. If you enter a desired rate of Inventory, Receivable and Payable Turns respectively in the Operational Performance Simulations above, the model will calculate the levels of inventories, receivables and payables needed to service your desired level of sales at those turn rates. The Net Change in inventory, receivables and payables is also provided.

c. If you supplied operational and performance elements, the model will calculate your volume requirements in Units, Orders, Customers, Hours, Sales Reps, Employees and Square Feet to achieve your sales forecast. These will be expressed in annual, quarterly, monthly and weekly values. The net changes (increases / decreases) from your current operational levels are also calculated.

d. If you entered simulated average sales above (per Unit, Order, Customer, Hour, Sales Rep, Employee and Square Foot), the model will calculate the volume requirements necessary to achieve your sales forecast at these simulated sales values. These will be expressed in annual, quarterly, monthly and weekly values. The net changes (increases / decreases) from your current operational levels are also calculated.

6. Full “What If?” Simulations You can perform full “What If?” simulations on your company.a. Save your completed operational analysis for a permanent record.b. Then save your analysis under a different file name such as “Simulations” using ‘Save As’.c. You can then use your simulation file to change your financial values to see what actions will

improve your ‘net profit before taxes’; and/or financial ratios and percentages.d. This will allow you to identify what actions you can take that will probably generate the optimum

improvement in your bottom line or improve your financial ratios.

L. Comparative Profit and Loss Statement (Optional) The Comparative P & L Statement is optional. You must enter the respective values for the comparative year in column “F” of the (Comp P&L) schedule. Enter the date of the comparative year in cell ‘H12’. The model will calculate a full percentage analysis on the comparative year. It also will calculate the net changes (plus or minus) between the comparative year and the current period. The percent change is also provided. Be sure that you enter all values for the comparative year. If you have an element in the comparative year that is not present in the current year, you must enter the description for the element in the fields available in the “Data Entry” form for the current year.

M. Comparative Balance Sheet (Optional) The Comparative Balance Sheet is optional. You must enter the respective values for the comparative year in column “g” of the (Comp BS) schedule. Enter the date of the comparative year in cell ‘H9’. The model will calculate a full percentage analysis on the comparative year. It also will calculate the net changes (plus or minus) between the comparative year and the current period. The percent change is also provided. Be sure that you enter all values for the comparative year. If you have an element in the comparative year that is not present in the current year, you must enter the description for the element in the fields available in the “Data Entry” form for the current year.

N. Message Center The model will generate error and warning messages if you enter information into the Data Entry form that it thinks is incomplete or incorrect. Always check the message center before using the information generated by the model. A message “You have at least one ERROR message” or “You have at least one WARNING message” will be displayed at the top of the Message Center if a warning or error is present. The center is divided into five sections.

GeneralOrganizational SpecificationsIncome StatementBalance SheetOperational & Performance Elements

O. Report Packet Contents and Printing All reports in the model can be printed or not printed regardless if it is employed in the analysis process. The report selection allows the user to choose the reports that he or she wants in the report packet. The table of contents will reflect only the reports designated on the selection. The corresponding page numbers will automatically adjust to the selected reports. The report selection can be changed at anytime and the table of contents and page numbers will adjust accordingly. NOTE: When changing the report selection be sure to adjust your printing schedule appropriately. See section below.

1. Once you have completed entering all information into the model, review all reports and determine which ones you want to include in your report packet.

2. Remember to enter your industry standards or budget percentages.

3. Be sure to adjust your graphs.

4. Go to the Report Selection & Printing schedule section in the ‘Data Entry’ spreadsheet (press the Reports button on the Index spreadsheet) and refer to the Demo Model.

5. Enter a ‘Y’ into the ‘Print Page Numbers (Y or N)’ if you desire page numbers to print on the reports you select.

6. Enter a ‘Y’ into the ‘Include Report (Y or N)’ column for each schedule, report and graph you want to be included in your printed report packet.

7. Enter a ‘Y’ into the ‘Print Y/N’ column for each report you want to print.

8. It is recommended that you enter a ‘Y’ or an ‘N’ into each print cell.

Note: The defaults have been entered as ‘N’s so only those reports selected will print. A blank field is treated the same as a ‘N’.

9. Click the Print button (cell ‘J73’) once you have made your selections and all desired reports will be automatically printed. Also pressing ‘Ctrl + e’ will print all reports selected.

10. The Model contains a print macro ‘Ctrl E’ located in the MACRO spreadsheet cells A1 through A80.

11. The reports are formatted to print on a HP 4L or HP 812C printers on 8 ½” X 11” letter stock. A color printer is recommend for optimum results.

P. Ratios - What They Mean, How They are Calculated and How to Use Them to Improve your Financial Performance and Image.Ratio analysis is the process of analyzing the relationship between two or more elements in your financial information. Financial and operational ratios expand the management tools available to the business executive. They provide a full financial and operational picture of your organization when used in conjunction with the income statement and balance sheet. Many of the key ratios contained in the model are explained, in detail, in this section. A glossary of terms and formulas are contained in the “Glossary” schedule in the model. Industry Standards are published for those ratios marked with an “*”.

1. Liquidity & Solvency ratios measure your organization’s ability to satisfy its current obligations with its current assets.a. The Current Ratio* is a general indication of your company’s capacity to meet its

current liabilities. It indicates the dollars available in current assets for each dollar of current liabilities.

= Current Assets / Current Liabilities

Generally the higher the value the more likely your firm will be able to meet its current obligations. However, an excessively high value may indicate an inefficient use of your current assets.

A value greater than 2.0 is considered liquid. However, check your industry standard.

Consideration should also be given to the quality of the inventory and receivables. Obsolete inventory or old receivables may make this ratio unreliable.

b. The Quick Ratio* is sometimes referred to as the “Acid Test”. It is a more conservative measure of liquidity. It excludes inventory from the current ratio because of the timing and ability to get the full value when converted to cash.

= (Cash + Cash Equivalent + Receivables) / Current Liabilities

Again ………….