basics in finance

Ashraf S. Youssef, Ph. D.,Senior Member, ASQ

Quality Assurance Manager

1 DVC Direct Variable Cost1. DVC Direct Variable CostCosts that are directly charged to the goods and services sold. They are composed by: Material Cost, Direct labor and Direct Expenses., p

2. MBC Manufacturing Based CostIt includes all costs related to the production but can not be directly traceable to a specific product/project, i.e., Plant management cost, maintenance cost,…

3 SFC Structure Fixed Cost3. SFC Structure Fixed CostNecessary fixed cost to run a company. They can be further split into 2 categories; CBC: Commercial Based costs; All costs related to sales, ; ,marketing, and commercial engineering which objective is to develop sales and promote; and ABC: Administrative Based Costs; Costs related to the company administration and generalthe company administration and general management (HR, Admin, Finance, IT, QA, and GM)

1. Current Assets Could be Liquid immediately Cash in BanksAccounts ReceivablesInventory

-Stock-WIP-Finished GoodsFinished Goods-Goods in Transit (GIT)

Prepaid Expenses-Insurance

R-Rent2. Fixed Assets Building

MachinesFurnitureFurnitureITLoss DepreciationNet ValueNet ValueTotal Assets Current + Fixed

3. Liabilities Short TermAccounts payables to vendorsAccounts payables to vendorsBanks & DraftsLiabilities to inter Company

Long TermLong TermEnd of ServiceLoans C l4. Partners Equity CapitalProfitDividendsTotal Liabilities Liabilities + PartnersTotal Liabilities Liabilities + Partners

EquityBalance 0

1 Sales1. Sales

2. Cost Cost of Sales-Direct Cost (Material, MBC)

Gross profit

SFC (Admin, HR, Finance, QA)Depreciations ValuepOperational Profit

EBIT

InterestTaxes

Net Profit

1. Current Ratio Current Assets / Current Liabilities

2. Current QuickRation

(Current Assets – Inventory)/current LiabilitiesRation3. Net profit Return - Based on Sales Profit/Sales

4. Return on Equity Profit/Equity

5. Return on Assets Profit/Assets

6. DSO: Days Sales outstanding (Net Rec. Averagey g ( g/Monthly Average sales) * 360

7. DIN Days in Inventory ((Inventory + WIP + GIT)/Monthly Avg.COGS) * 360

8. COGS Cost of Goods Sold DVC +MBC

9. DVC Margin Sales - DVC

10. GM Gross Margin Sales – COGS

11. EBIT Earning Before Interests & Taxis

GM - SFC

12. Backlog Booking YTD-Invoicing YTD12. Backlog Booking YTD Invoicing YTD

13. OWC Operation working Capital

Inventories + WIP + Receivables -PayablesPayables