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Re: Ratios edit

By: DigSpace in ALEA | Recommend this post (0)
Thu, 03 May 12 6:50 PM | 54 view(s)
Boardmark this board | The Trust Matrix 		Msg. 07525 of 54959
(This msg. is a reply to 07523 by Cactus Flower)
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Yes, its not just sales, its cash-flow .... in the end that reads out on the revs line and the PL line.

looking at dRev and dExp in percentages QtoQ one observes:


qtr dRev% dExp% dRev-dExp
Q2-09 21% -8% 28.96%
Q3-09 -5% 3% -8.65%
Q4-09 1% 14% -12.93% **
Q1-10 16% 6% 9.98%
Q2-10 9% 11% -1.60%
Q3-10 4% 6% -2.15%
Q4-10 5% 5% 0.28%
Q1-11 6% 15% -9.39% **
Q2-11 8% 4% 3.50%
Q3-11 15% 11% 4.34%
q4-11 12% 28% -15.49% **

Obviously Q1-11 (**) and Q4-11 (**) stand out as the big expense pulses that in some way could be argued to have obliterated the otherwise improving outlook with the recognition that Q4-09 (**) was presumably all about nailing GM with some authority. The last column (dRev-DExp) needs to be a positive value for the lines to intersect and profitability to follow.

Obviously (again), these numbers may be improved upon by breaking out SGA and RD, but I really don't know how representative those values actually are.

A better way would probably be to do moving averages on these values to get a better feeling for what is going on. It is still rather obviously a rather volatile, punctate of you will, data set.

edit, so while the general impression of exp outpacing revs holds, it is a consequence of rather discrete events, the broader trend is IMO more encouraging. If one removes the first and last quarter from the data set above and has software impose a trendline on dRev-dExp it is clearly a positive slope.

and now it is time to put the abacus back in the smoker.


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The above is a reply to the following message:
Ratios
By: Cactus Flower in ALEA
Thu, 03 May 12 3:41 AM 		Msg. 07523 of 54959

Hi dig,

Course, I forgot that Wave's revenues are probably less useful than Wave's orders in this kind of discussion.

The top line number is all well and good, but if you juice the top line by hiring more staff, but the demand isn't strong, then the company is going to show slightly increased sales (whoopy) but also costs that increase faster than sales (boo).

So sales goes up, but the loss expands.

This is the argument that folks like nfp make.

So you are looking to isolate costs related to sales (so COS plus selling and admin costs) and compare that number with the figure for orders in the quarter.

This way you can get an approximate sense of the productivity of the sales force which not only accounts for the top line but also takes into account the increasing cost burden.

If you use accrued revenues (so the smoothing effect), then the ratio of income to sales-related costs was 127% in Q3. It was 106% in Q4. Ouch. But bear in mind the Safend write-downs are in that figure.

If you use quarterly order numbers, then these are affected by big orders and you have to strip those out to get a useable number.

An increase of, say, 20% in sales by the ordering team looks good. But if this is produced by increasing staff costs by 30%, maybe this is not so good.


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