## Value Chain Analysis Break-down

The primary purpose of any business is to produce goods or provide services in a way that they have a higher value for the customers than the original cost for the firm. Companies engage in numerous activities while converting inputs to outputs. Porter’s Value Chain helps us create a clear Read more…

## Internal Rate of Return (IRR) in Financial Analysis

Introduction to Internal Rate of Return Companies undertake various projects with the end goal to either increase earnings or cut down costs. These projects often require that the entities make significant investments. In capital budgeting, the management of the business wants to have an estimation of the returns on such Read more…

## Sales Trend Analysis and Forecasting in Excel

Introduction to Sales Trend Analysis Sales Trend Analysis looks at historical revenue data to identify patterns, used extensively in budgeting and forecasting. It is a useful method to detect short-term changes in revenue growth and performance. Trends A Trend is an upwards or downwards shift in the development of a Read more…

## Decision Trees in Financial Analysis

Introduction to Decision Trees We use Decision Trees to clarify the expected value of capital investment opportunities. Decision Trees can also be helpful in business operations, where companies continuously struggle with big decisions on product development, operations management, human resources, and others. With Decision Tree analysis, we can better evaluate Read more…

## Applying the Pareto Principle in Financial Analysis

Introduction The Pareto Analysis is a statistical technique employed in decision-making to identify a limited set of tasks to produce the most significant effect. We base it on the Pareto Principle, which stipulates that 20% of the work on a project generates 80% of the outputs. The technique is also Read more…

## Sensitivity Analysis in Financial Modeling

Introduction to Sensitivity Analysis We apply Sensitivity Analysis to a financial model to determine how different values of an independent variable affect a specific dependent variable under a given set of assumptions. We also refer to it as ‘what-if’ or simulation analysis. Performing such analysis helps us predict better the Read more…

## Cash Conversion Cycle Analysis

What is the Cash Conversion Cycle The Cash Conversion Cycle is a metric that tells us how long it takes the company to convert capital invested in inventory back to cash. Here’s a cool-looking process diagram to illustrate the cash conversion cycle: Elements of the Cash Conversion Cycle The Cash Read more…

## The Activity-Based Costing Model

Introduction to the Activity-Based Costing (ABC) Model The Activity-Based Costing method identifies the activities in the company and assigns their costs to production based on actual consumption. One of the most recognized definitions is of the Chartered Institute of Management Accounting (CIMA) and defines the ABC method as an ‘approach Read more…