Prof. Ian Giddy New York University Capital Structure Planning SIM/NYU The Job of the CFO.
CFO Career Grid Corporate Cost Accnt. Planning, Reporting, Investor Relations Business Analysis,...
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Transcript of CFO Career Grid Corporate Cost Accnt. Planning, Reporting, Investor Relations Business Analysis,...
CFO Career Grid
Corporate
CostAccnt.
Planning,Reporting,Investor
Relations
BusinessAnalysis,Treasury
StrategicPlanning
Acct.AuditTax
Entry
Manager
New Co.’s
International
Crossfunctional
Development of FinanceDevelopment of Finance
Tax - Responsibilities
• Federal– Social Security– Corporate– Sales
• State– Sales– Payroll
• Audit– Any of the above.
Tax - Personnel
• Personnel – Rules & Regs. Specialized/Technical People
who make it their career
• During Audit Time(s)– Need other Specialists & Best Negotiators to provide
support
Tax - Responsibilities
• Minimization of Given Tax Payments
• Effects of M&A’s
– Classification of Assets
– Ownership
– Depreciation
Tax - Responsibilities
• International Planning Function
– For at least 4-5 Countries
– (or different places with Impacts on Business)
• Incentives
• Tax-Sheltered Programs
International Tax PlanningU.S. GmbH Eire
35% 55% 10%
RoyaltiesTrademarks
Management Fees
(Same Scenario w/ States)• State Income Taxes •Property Taxes
•Sales Taxes •Corporate Payrolls
Lessons Learned - Tax
• Aggressively Challenge IRS
– But reserve aggressively as well
• Global Businesses demand
- World Class Planning
• Always include Tax Management in M&A
– Planning and Negotiations
– At the Beginning & Strategic Level
Operations & Cost Accounting
• Highly Competitive Global Economy
• Firms that Accurately Measure and Understand their Costs may Survive.
Those that Don’t, Will Not.
Operations & Cost Accounting
• Controlling Costs & Capital
– Raw Materials
– Processes
– Systems
• Capital Budgeting & Returns on Capital
-- Productivity
• CEO & Team Understand Concepts of System
– Shared commitment to making them work
efficiently.
• Timely & Accurate (System) Numbers
Operations & Cost Accnt. System Imperatives
• Integrated Systems One Forecast
– Marketing - Updated & Sensitized
– Manufacturing as necessary
– Distribution, etc…
(-bonuses based on the above One Forecast)
Operations & Cost Accnt. System Imperatives
Operations & Cost Accnt. Systems
• Management from Top to Bottom must Know the
Systems
• Lower Levels must be trained in the use of the
systems and the need for required discipline.
– i.e.: Time Lines & Accuracy
Operations & Cost Accnt. Systems Responsibilities:
• Sales & Production Forecasts
– Procurements
– Maintenance of Product Data Records
• Info. must be clearly defined & accepted by the members of
management
– Inventory Levels
• Shrinkage, Obsolescence
Operations & Cost Accnt. Systems
• Assigned to Specific Management Fxns.
• Computer Based Systems
– Updated on a Daily Basis
• For Key Items: Manufactured, Used, or Purchased
– Constant Training & Retraining
• Accountability for Training
Operations & Cost Accnt. Systems
• Manufacturing/Inventory Planning Systems
– Must be Soundly Conceived
» Integrated with:
• Financial/Cost Accounting Systems
Operations & Cost Accounting Capital Appropriation Needs:
1. Climate in which Innovation Flourishes
2. Acceptable method for Evaluation of Proposals
3. Expenditures on a project to be Controlled &
Periodically Reviewed
4. Planned Post-Audit Program
5. Shared Lessons Learned
Operations & Cost Accounting Budgeting & Financial Models
• Capital Expenditures
• Cost of Capital
• Capital Rationing
– i.e.: Strategically Important Projects
• NPV & EVA
Break-Even Point
• B.E.P. = Sales Revenue that Equals the Total Variable and Fixed Costs for a Given Volume at a Particular Capacity Utilization.
• BEP units = Fixed Costs
Unit Contribution
• BEP dollars = Fixed Costs
Contribution Margin
Contribution Analysis
• Contribution = Excess of Sale(s) over
the Variable Costs
or
the Amount of Money Available to
Cover Fixed Costs & Generate
Profit.
Variance Analysis
1. Volume Variance
Variance =
= (100 units – 110 units) * $4
= ($ 40) -- Unfavorable due to Fewer
Units
ActualQuantity
StandardQuantity
_ Standard ProfitPer Unit*
Variance Analysis
2. Price/Cost Variance
Variance =
= 110 units * ($9.5/unit - $10/unit)
= $ 55 -- Favorable if Price
Unfavorable if Cost
ActualQuantity
ActualPrice/Cost
StandardPrice/Cost*
_
Earnings Variance Analysis
Plan/Forecast Actual
Volume/Units 100 110
Revenue $ 1000 $ 1045
Costs 600 715
Profit $ 400 $ 330
Earnings Variance Analysis
Plan/Forecast Actual Earnings
Variance
Volume 100 110 $ 40
Revenue $ 1000 $ 1045 < $ 55 >
Costs 600 715 < 55 >
Profit $ 400 $ 330 < $ 70 >
Good Volume Offset by Lower Price Levels and Higher Unit Costs
Operations & Cost AccountingNeed to Account for & Manage:
• Overhead– Payroll, Benefits, etc…
• Absorption
• Sunk
• Fixed
• Semi-Variable
• Influenced– Affects of every addition
Costs
Operations & Cost Accounting Manage By:
• Standard Cost Accounting
– Std’s, Budgets, Variances
• Inventory Valuation and Control
– Avg., Std., LIFO, FIFO, Cost Specific LOT
Operations & Cost Accounting Manage By:
• Budgeting
– Cycles
• Annual are the most effective
– Gamesmanship
• Under promise, Over deliver
– Allocations
• Know their Influences
Lessons Learned - Restructuring
• Bite the Bullet, for everyone’s sake
• Cut Once and Cut Deep
• Collapse Layers
• Keep it Secret
• Do it Quickly
• Do All that You Can for Employees
• Continue Recruiting