Understanding the Financial Impact of Operating Decisions
Created in partnership with: Ahmad Rahnema Alavi
About This Course
Managers make decisions every day that have an impact on the company’s financial performance. Reputable companies that went bankrupt during the financial crisis between 2007 and 2009 might have escaped that fate if managers had seen problems arising soon enough to take corrective actions to preserve the firm’s cash, and ultimately, its solvency.
In this Learning Sprint, you will learn how common management decisions related to inventory, marketing, sales practices, procurement and others can stress company cash flows. With deeper insight into the relationship between Working Capital and Working Capital Requirements, managers will better understand the impact their decisions have on company Profit & Loss (P & L) statements.
Ahmad Rahnema Alavi
Deputy Associated Dean for Faculty, Director of Financial Management Department and holder of the Fuel Freedom Chair for Energy and Social Development at IESE
What You Will Learn
Anticipate the impact of day-to-day operational decisions on the financial health of the business
Use ratios and other frameworks to identify the source of problems that are contributing to poor financial health
Investigate examples of how operating decisions impact the Balance Sheet and Income Statement
What You Will Do
Analyze company Profit & Loss (P&L) statements to calculate and trend the gap between Working Capital (WC) and Working Capital Requirements (WCR)
Recommend actions that consider cash flow management, customer service, cost and risk to optimize working capital performance
Pursue creative approaches to improve the organization’s cash positions, including suppliers’ terms and processes for receivables