Financial Analysis for Management Consultants & Analysts

1
Financial Analysis for
Management Consultants &
Business Analysts
Practical guide with case studies & real-life
examples

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In business you have to make a lot of important decisions
During consulting projects you will have to do a lot of financial
analyses to see whether proposed changes make sense or not

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A lot of such analyses require some skills in Excel but also a specific
approach to available data. Usually they don’t teach that at the university

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Luckily, there is a way to do fast and efficiently financial analyses in
Excel and I will show you how to do that in this course.

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Thanks to this presentation you will have a look at the most important essential financial
analysis you need to know to work without any problems during consulting projects

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We will cover all the essential things that you need to know to work well during
consulting
Analyzing Financial
Statements Financial indicators Modeling P&L
Introduction to Valuation
Analysis of Business Units
Financial analysis related to
M&A Investments Analysis

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What you will see in this presentation is a part of my online course where you
can find case studies showing analyses along with detailed calculations in Excel
Financial Analysis for Management
Consultants
$190
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Click here to check my course

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General Analysis of Financial
Statements

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General Analysis of Financial
Statements – Introduction

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In this section we will discuss the following things
3 financial
statements –
overview
Amazon financial
statements – Analysis
in Excel

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3 financial
statements –
overview
Amazon financial
in Excel
LPP financial
in Excel
Disney financial
in Excel

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There are 3 financial statements that you have to look at when
analyzing the firm
Profit & Loss /
Income Statement
Balance Sheet Cash flow
 Shows how much money you
have earned, and did you
make a profit or a loss?
 Shows how you did it, what
where the revenue and how
much you had to spend in
terms of costs to generate
them?
 Shows what you have / what
you need to have a
legitimate business
 Shows you also where you
got the money from to buy
the things you have
(shareholders, banks,
suppliers, other borrowers
etc.)
 Shows how much money the
firm has actually generated
and what has consumed the
cash on 3 levels
 You can see what the firm
spends the cash on:
investment, paying off debts,
buying back shares or maybe
paying of dividends
 Cash is divided into 3
streams: Operating CF,
Investing CF and Financing
CF

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Financial analysis of indicators

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Financial analysis of indicators –
Introduction

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Profitability ratios Liquidity ratios Activity ratios
Debt ratios Case study

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Profitability ratios –
Overview

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There are plenty of profitability ratios used. Below the most popular
ones
% Gross Margin
% Gross Profit
% EBIT
Return on Sales ROS
% Net Income
% EBITDA
ROE
ROA

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Let’s have a look at the definition of ratios and what they tell us
Gross Margin
% Gross Margin =
Net Sales

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Operating Income EBIT
% EBIT
Return on Sales - ROS =
Net Sales

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Net Income
Net Profit
% Net Income
Profit Margin =
Net Sales

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EBITDA
% EBITDA =
Net Sales

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Net Income
ROA
(Return on Assets) =
Assets

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Net Income
ROE
(Return on Equity) =
Equity

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ROE can be decomposed into other ratios. Below one example
Net Income
ROE =
Assets
x
Assets
Equity
ROE = xROA Equity Multiplier
Net Income
Equity
=
Net Income
Equity
=

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ROE can be decomposed into other ratios. Below one example
Sales
=
Assets
x
Assets
Equity
Net Income
Sales
x
Net Income
Equity
ROE = xAsset Turnover Equity Multiplierx% Net Income

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Liquidity ratios –
Overview

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There are plenty of liquidity ratios used. Below the most popular ones
Current Ratio (CR)
Quick Ratio (QR)
Cash Ratio (CshR)
Operating Cash Flow
Ratio

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Current Assets
Current Ratio (CR) =
Current Liabilities

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Current Assets
Quick Ratio (QR) =
Current Liabilities
-
Inventory &
Prepayments

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Cash & Cash
Equivalents
Cash Ratio (CshR) =
Current Liabilities

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Operating Cash Flow
Operating Cash Flow
Ratio
=
Total Debt

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Activity / Efficiency ratios –
Overview

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There are plenty of activity / efficiency ratios used. Below the most popular
ones
Inventory conversion
period
Receivables
conversion period
Payables conversion
period
Cash Conversion
Cycle
Asset turnover

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Conversion periods have alternative names that are widely used
period
Receivables
conversion period
Payables conversion
period
Days Inventory
Outstanding (DIO)
Days Sales
Outstanding (DSO)
Days Payable
Outstanding (DPO)
=
=
=

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Inventory
period
=
COGS
x 365 days

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Receivables
Receivables
conversion period
=
Net Sales
x 365 days

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Account Payables
Payables conversion
period
=
COGS
x 365 days

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Cash Conversion Cycle (CCC) we calculate using previous ratios
Cash Conversion
Cycle (CCC)
= -
Receivables
conversion period
Payables
conversion period
+
Inventory
conversion period
Cash Conversion
Cycle (CCC)
= -
Days Sales
Outstanding (DSO)
Days Payable
Outstanding (DPO)
+
Days Inventory
Outstanding (DIO)

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Net Sales
Asset Turnover =
Assets

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There are plenty of debt ratios used. Below the most popular ones
Debt Ratio
Debt to Equity ratio
(D/E)
Net Debt-to-EBITDA
Ratio

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Debt Ratio can be defined in 2 ways
Debt
Debt Ratio =
Assets
Liabilities
Debt Ratio =
Assets

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Debt
Debt to Equity ratio
(D/E)
=
Equity

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Debt
Net Debt-to-EBITDA
Ratio
=
EBITDA
-
Cash & Cash
Equivalents

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For more details and content check my online course where you can find case
studies showing analyses along with detailed calculations in Excel
Consultants
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48
Modeling of Profit & Loss
statement in practice

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Modeling of Profit & Loss statement
in practice – Introduction

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You can learn a lot by analyzing the business model in Excel. This is
one of the most insightful yet also most difficult financial analysis

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Modeling of the business in Excel should be done in stages. You first have to
understand the drivers
# transactions
Average
revenue per
transaction
Total revenuex
% Fee of the
marketplace
Average
transaction value
Total searches % conversion
x
x
Total Costs
Total margin
-
Rent
People
Cost of traffic
Ratio of visitors
to searches
Average cost of 1
visit
+
x
Development

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How to model Retail
in Excel
How to model SMCG
businesses in Excel
Moving from SMCG
to selling services –
financial analysis

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Main challenges in the business model
Main drivers / KPIs for the business model
The model of the business in Excel
Short introduction to the business model
For every business model we will do the following things

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Let’s have a look at the main challenges in Retail
Margin Management
Stock / Inventory
Management
Multichannel Strategy
Managing price across
channels
Expansion to new
markets
Saturation of existing
markets
New product
development
Managing customer
experience across
channels
Format evolution
(possible death)
People rotation and
knowledge
management
Disruption esp. from
external forces /
business models
Automation

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Business model of a Retailer
in Excel

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The retail business model is driven by some basic KPIs
# Transactions
Average Value
Transaction
Total store revenue Total store costs
x
Store EBITDA
Average Value
Transaction of basic
purchase
Average Value
Transaction of
additional purchase
# of Visitors % Conversion
Rent
People
# of People
Average wages
+
x
x
Others
+
# of sq. m
Fee per sq. m x
% Gross Margin
Gross Margin generated
by the store
x -

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Modeling SMCG Business Model in
Excel – Introduction

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SMCG are all branded goods that you consume infrequently during your life.
In this category we have cars, domestic appliances and other similar products

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There are 2 ways in which you can model SMCG
SMCG – sold as a product SMCG – sold as a service

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In this section I will talk about 3 main things
Main challanges in SMCG KPIs for SMCG business
Business models of SMCG
in Excel

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Brand Awareness
& Reach
Controling and
constantly lowering
production costs
Your strategy across
many channels
Managing customer
experience across
channels
Saturation point in
consumption and
penetration
Spreading beyond
original target group and
leveraging brand
Taking care of faulty
products
Managing older versions
of your product
Switch from product to
service
The software part of the
product / IoT
The value of your
customer base
Below a list of the most important aspect for SMCG business model

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Main KPIs for the SMCG
business model

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The SMCG business model is driven by some basic KPIs
# sold
Unit production
cost
Gross Margin Head office
Operational profit
Fixed Cost /
Quantity produced
Unit variable cost
+
Cost of sales &
marketing
Net Margin
-
-
Average price
Unit Gross Margin
-
x
Market share Market size

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SMCG business model –
modeling in Excel

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There are 2 ways in which you can model SMCG
SMCG – sold as a product SMCG – sold as a service

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Vaccum cleaner producer – modeled
as product seller
Smartphone firm– modeled as a
provider of a service
We will go through those 2 approaches using different cases

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SMCG business model in Excel –
basic assumptions

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as product seller
Let's start with the modelling vacuum cleaner producer

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as product seller
Let's start with the modelling vacuum cleaner producer

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Let’s go through basic assumptions of the model. We want to get to the
operational profit
SMCG product MarketingSales Channels
 Vacuum cleaners
 1 production site
 Own e-commerce
 Retail chain
 TV ads
 Market research
 Social Media
 Mailing
 Loyalty program
 Outdoor campaigns

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Modeling the SMCG as service –
Introduction

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as product seller
We said we will do modelling for 2 different products and also in
different way

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as product seller
We said we will do modelling for 2 different products and also in
different way

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He currently sells around 600 K
smartphones and has a bas of around 1
M customers
He has to acquire new customers to
cover for the lost ones and grow
He considers switching to offering
annual subsription model
To make the change more obvious we will first do a case of a firm that moves
from product to service and wants to do calculate whether it makes sense

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To make the change more obvious we will first do a case of a firm that moves
from product to service and wants to do calculate whether it makes sense
Why moving from
product to service
makes sense?
Case study of a
smartphone producer
Solution in Excel to
the case study
Modeling Head Office
costs
Modeling Head Office
profit & loss
statement

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Consultants
$190
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80
Business Units Analyses –
Introduction

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In many cases the business you want to analyze are very complicated. You have to look
deeper. You have to analyze specific business units to understand the result and the future

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This obviously means that you have to divide into business units that you
want to analyze separately and draw conclusions on their performance

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Why analysis of Business
Units makes sense
Analysis of Business
Units – Disney
Analysis of Business
Units – Grocery
Discounter

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Why analysis of Business Units
makes sense

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Let’s have a look why it makes sense to look at business units in details
On aggregated level you have
averaging effect
Business units may have different
business models
growth perspectives
margins
Business units may require
different Capex
competitors
Business units usually have
different drivers & KPIs
You can sell some business units

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Overview of Business models

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SaaS
E-commerce
Media site
2-sided market
User Generated Content
Mobile Applications
Retail
B2C Service
B2B Service
FMCG
SMCG
Commodity
There are 6 offline business models and 6 online models. Every business
model has its set of KPI

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SaaS
E-commerce Media site2-sided market
UGC
B2B Service
B2C ServiceRetail
Bear in mind that big companies can operate many business models

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Analysis of Business Units – Groceries
Discounter – Case Introduction

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Imagine that you have to analyze the performance of difference concepts
and regions of a Grocery Discounter. You have data on the store level.

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Let’s have a look at the data that we have on the Grocery Discounter
He currently has 700 stores
He operates 4 concepts: Mini,
Express, Regular, Big
He operates in 10 regions
Have a look at results on the level
of concepts & regions
Look at revenue and EBITDA per
store

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Valuation Case study–
Introduction

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Introduction to
Valuation
Introduction to DCF
methods
Difference between FCFF
and FCFE
Introduction to using
multipliers for valuation
Case study

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We are going back to our example of ceramic tiles producer and we will
see what kind of methods we can use to estimate its valuation.

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They have 4 groups of products
We have DCF models
Use DCF and multiplier method to
estimate their value
Just as a reminder a few information about the firm

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You can try to estimate the value of 2 different categories
Enterprise Value
Equity Value Net Debt Value

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For valuations you can use 2 groups of valuations methods
DCF methods
 DCF of Free Cash Flows to
Firm (FCFF)
 DCF of Free Cash Flows to
Equity (FCFE)
Multiplier methods
 EV/EBIT
 EV/EBITDA
 P/E ratio

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Introduction to
DCF methods

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In DCF model you use forecast of cash flows to estimate the value of the
company
Step 1 – Calculate the cash
flows
2018 2019 2020 2021 2022
𝐶𝐹2018 𝐶𝐹2019 𝐶𝐹2020 𝐶𝐹2021 𝐶𝐹2022
t+1
𝐶𝐹𝑡+1
𝐶𝐹2018
(1 + 𝑟)
𝐶𝐹2019
(1 + 𝑟)2
𝐶𝐹2020
(1 + 𝑟)3
𝐶𝐹2021
(1 + 𝑟)4
𝐶𝐹2022
(1 + 𝑟)5
𝐶𝐹𝑡+1
(1 + 𝑟) 𝑡+1
𝒊=𝟏
𝒕
𝑪𝑭𝒊
(𝟏 + 𝒓)𝒊
Step 2 – Calculate the
present value of CF
Valuation
𝑻𝒆𝒓𝒎𝒊𝒏𝒂𝒍 𝑽𝒂𝒍𝒖𝒆
(𝟏 + 𝒓) 𝒕+𝟏
Valuation
+
𝑇𝑒𝑟𝑚𝑖𝑛𝑎𝑙 𝑉𝑎𝑙𝑢𝑒 =
𝐶𝐹𝑡+1
(𝑟 − 𝑔)
Valuation
Step 3 – Calculate
Terminal (Continuing)
Value
𝑇𝑒𝑟𝑚𝑖𝑛𝑎𝑙 𝑉𝑎𝑙𝑢𝑒 = 𝐸𝐵𝐼𝑇𝐷𝐴 𝑥 𝑀𝑢𝑙𝑡𝑖𝑝𝑙𝑖𝑒𝑟

102
In the next lecture we will use 2 different methods for DCF valuation
Free Cash Flows to Firm
(FCFF)
Free Cash Flows to Equity
(FCFE)
Cash flow before financial
activities

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Difference between
FCFF and FCFE

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In the next lecture we will use 2 different methods for DCF valuation
Free Cash Flows to Equity
(FCFE)
 DCF Cash Flow before
financial activities
 As a discounting rate we use
Weighted Average Cost of
Capital (WACC)
 The Terminal Value is
calculated using 3% growth
rate assumed after the
period of forecast
 DCF Free Cash Flows to
Equity
 As a discounting rate we use
cost of equity
 The Terminal Value is
calculated using 3% growth
rate assumed after the
period of forecast
Free Cash Flows to Firm
(FCFF)

105
FCFF and FCFE evaluate different things
Enterprise Value
Net Equity Value Net Debt Value
 Cash flow before financial activities / Free Cash
Flows to Equity (FCFF) estimates the Enterprise
Value
 Afterwards using the Net Debt Value you can
estimate Equity
 Free Cash Flows to Equity (FCFF) estimates
Equity Value

106
Introduction to using
multipliers for valuation

107
For simplicity often valuation is calculated using multipliers. Multipliers also
help you check the valuation from DCF which is subject to many assumptions
EV/EBIT EV/EBITDA P/E ratio

108
Using the Multiplier method of valuation is relatively easy
Find comparable
companies
Estimate the
multipliers for the
comparable.
Eliminate outliers
Estimate the EBIT,
EBITDA and net profit
for the company and
adjust them
Apply the multiplier Estimate Equity Value

109
The methods we discussed estimate different values
Enterprise Value
Equity Value Net Debt Value
 Using EV/EBITDA multiplier and EV/EBIT you can
estimate the Enterprise Value
 Using P/E ratio you can estimate Equity Value

110
Below how we can use the EV/EBIT multiplier to estimate the Equity
Value in 2 steps
EV/EBIT
multiplier
x =
EBIT of the
company
Enterprise Value of
the company
Enterprise Value of
the company
- =
Debt of the
company
Equity Value of the
company

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Using P/E ratio is even easier
P/E ratio x =
Net profit of the
company
Equity Value of the
company

112
Consultants
$190
$19

113
Financial analyses related to M&A

114
Financial analyses related to M&A
– Introduction

115
Many companies grow by acquiring other firms. In this cases consultants do a lot of financial
analyses related to M&A. We will discuss examples of such analyses in this section.

116
What kind of financial
analysis consultants do
when it comes to M&A
Estimating the impact of
expanding via M&A –
plywood producer case
study
Vertical Consolidation
via M&As – fitness
sector case study
Sell non-core assets –
general framework
Sell non-core assets –
case study

117
Financial analyses that consultants
do when it comes to M&A

118
Let’s have a look at different types of analyses management consultants
do
Estimation of Potential Synergies
Valuation of potential targets
Value Creation Plan in Excel
Comparison of M&A vs organic
growth options
Forecasting of the firm after the
M&A
Valuation of the firm after the
M&A
Divestment analyses

119
Expand via M&A –
Plywood – Introduction

120
Let’s have a look at plywood producer that has 2 factories and is
considering taken over another one
2 plants
Considers taking over a
plant in Lithuania
Try to estimate the possible
benefits

121
Expand via M&A –
Plywood – Solution

122
Let’s have a look at plywood producer that has 2 factories and is
considering taken over another one
2 plants
Considers taking over a plant in
Lithuania
Try to estimate the possible
benefits

123
There are plenty of potential benefits that you can expect from this
particular M&A
Reducing Head Quarters costs
Savings on Capex
Less competition on price
Cross-selling among customer
baes
Lower Purchasing price on wood
Exchange of best practices

124
From the analysis of benefits we can see that we can gain up to $17 M
from acquiring the Lithuanian factory
2 100
3 500
3 720
2 739
576
4 280
16 915
Reducing Head
Quarters costs
Savings on Capex Less competition on
price
Lower Purchasing
price on wood
Exchange of best
practices
Cross-selling among
customer baes
Total benefit from
M&A
Annual additional benefits from M&A
In million of USD

125
Vertical Consolidation via M&As –
Case Introduction

126
Let’s imagine that you have to help a fitness card operator decide what will be
the impact of M&A on his strategy to vertically integrate
Fitness card operator wants to have 40%
of his revenue delivered by his own
fitness clubs
He is considering 2 options: only organic
growth or M&A with organic growth
Check what will be the impact of both
options on Revenues, EBITDA and
Market Cap

127
Let’s have a look at value chain in the fitness segment
Operator of the
fitness card
Fitness Clubs HR Managers
Developers
Landlords
Equipment
Producers
Others
Producers of
raw materials
and
components
Financing Fitness Clubs
Elements of value chain
where he is currently
present

129
Investment Analysis –
Introduction

130
Firms do a lot of investment. During consulting project quite often you have to check whether
they make sense. We will discuss investment analysis in detail using different case studies.

131
Time value of money NPV & IRR
Investment – General
thoughts
Replacement
Investment – case study
Required by customer
investment – case study
Investment in
bottleneck removal –
case study
Cost reduction
Investment – Retail –
case study
Cost reduction
Investment – Ceramic
Tiles – case study

133
Let’s first start by calculating what is the future value of 100 USD
100 100
Today After 1 year
100
After 2 years
Nominal Value
Interest rate you can earn
every year 5% 5%
Future Real Value of 100
that we have today 100 105 110
Nominal
Value x (𝟏 + 𝒓) 𝟏 Nominal
Value x (𝟏 + 𝒓) 𝟐

134
Now imagine that the you are getting 100 USD every year. You want to
calculate the Present value of the money
100 100
Today After 1 year
100
After 2 years
Nominal Value
every year 5% 5%
Present Value
100 95 91
Nominal
Value
(𝟏 + 𝒓) 𝟏
Nominal
Value
(𝟏 + 𝒓) 𝟐

136
Let’s start with a short definition
 NPV stands for Net Present Value
 NPV is the difference between the present value of cash
inflows and the present value of cash outflows over a
period of time usually related to some investment
 It’s used to determine whether something (action,
investment etc.) makes sense or not
NPV =

137
Just as a reminder Present Value of money is different than the Nominal
Value
100 100
Today After 1 year
100
After 2 years
Nominal Value
every year 5% 5%
Present Value
100 95 91
Nominal
Value
(𝟏 + 𝒓) 𝟏
Nominal
Value
(𝟏 + 𝒓) 𝟐

138
Let’s have a look at the NPV for a small investment
- 1 000 300
Year 1 Year 3
300
Year 5
Cash flows generated by
the investment in nominal
value
300
Year 2
300
Year 4
- 1 000 272 247
Present value of cash
flows generated by the
investment for interest
rate r=5%
286 259
64
NPV 5 year for the end of
Year 1; rate r=5%
300
(𝟏 + 𝟓%) 𝟏
Formula for the present
value calculations using
interest rate r=5%
300
(𝟏 + 𝟓%) 𝟐
300
(𝟏 + 𝟓%) 𝟑
300
(𝟏 + 𝟓%) 𝟒

139
NPV enables you to make decisions about specific investment
NPV 0>
 The investment can generate more cash than it
requires. Can be considered to be done
NPV 0<
 The investment will be eating away cash. Rather
consider not doing it
NPV 0=
 Neither creates nor destroys value. Look for
other criteria i.e. strategic, tactical factors

140
Let’s have a look at the NPV for a small investment
- 1 000 300
Year 1 Year 3
300
Year 5
Cash flows generated by
the investment in nominal
value
300
Year 2
300
Year 4
- 1 000 272 247
Present value of cash
flows generated by the
investment for interest
rate r=5%
286 259
64
NPV 5 year for the end of
Year 1; rate r=5%
300
(𝟏 + 𝟓%) 𝟏
Formula for the present
value calculations using
interest rate r=5%
300
(𝟏 + 𝟓%) 𝟐
300
(𝟏 + 𝟓%) 𝟑
300
(𝟏 + 𝟓%) 𝟒

142
Let’s start with a short definition
 IRR stands for Internal Rate of Return
 IRR is a discount rate that makes the net present value (NPV)
of all cash flows from a particular project equal to zero
 IRR tells us how much you would have to earn on saving
account every year to get to the same results as from the
investment you are analyzing
IRR =

143
If you want to decide on whether to do certain investment or not
compare IRR with the right interest rate
IRR
Interest
rate
>
 The investment can generate higher returns than
the alternatives. Can be considered to be done
IRR
Interest
rate
<
 The investment will generate lower returns than the
alternatives. Rather consider not doing it
IRR
Interest
rate
=
 The investment is as good as other alternatives.
Look for other criteria i.e. strategic, tactical factors

144
NPV and IRR gives you the same directional information
NPV 1 NPV 2>
 Investment 1 is better than Investment 2
IRR 1 IRR 2>
 Investment 1 is better than Investment 2

145
NPV – How to calculate it in
Excel

146
Investments –
General thoughts

147
Apart from capacity increase there are 4 main reasons why you do
investment
Investments
Replacement
Required by the
customer
Reducing costs Removing bottlenecks
Total cost of Ownership /
Usage – comparison
Margin that may be lost if you
don’t do the investment
Margin that can be gained if
you do the investment
Change in labor costs
Change in materials and
related costs
Change in energy & other
utilities costs
Margin gained thanks to the
removal of the bottlenecks
Reduction of costs related to
production
Reduction of other costs (not
related to production)
Change in maintenance costs

148
To decide whether something makes sense or not we compare Capex and
Benefits
Capex Benefits?
Cash outflow /
Negative cash flow
Cash inflow /
Positive cash flow
?

149
We usually use the NPV or IRR to decide whether the investment makes
sense
NPV IRR

150
In the next lectures we will go through different case studies
Replacement Investment –
Furniture Production
Required by customer
investment – Food Industry
Investment in bottlenecks
removal – Plywood

151
In the next lectures we will go through different case studies
Cost reduction Investment –
Retail
Cost reduction Investment –
Ceramic Tiles

152
Introduction

153
Imagine that you work for a furniture producer that operates in Europe
10 factories
Sells most of his production to
France & Germany
You have to calculate whether the
investment in new forklifts makes
sense

154
Solution

155
Just as a reminder you work for a furniture producer that operates in
Europe
10 factories
Sells most of his production to
France & Germany
You have to calculate whether the
investment in new forklifts makes
sense

156
Let’s have a look how to show the results of investment in replacing
forklifts in the Power Point
3 691
7 185
10 875
8 182
2 694
NPV of Difference in Maintenance
Costs
NPV of Difference in Fuel / Electricity
Costs
NPV of Total Benefit NPV of Capex NPV of the whole investment
NPV of benefits and investments
In thousands of USD

157
Required by customer investment –
Introduction

158
We will now have a look at a company selling branded juice in Romania.
They were asked to start using plastic bottles
Currently they sell juice in glass,
tetra pak and aluminum cans
One of the customers (a
discounter) wants to get juice in
plastic (PET) bottles
This will require significant
investment

159
Required by customer investment –
Solution

160
Just as a reminder we have to estimate wheter it makes sense to get
into PET bottles as we were asked by the customer
Currently they sell juice in glass,
tetra pak and aluminum cans
One of the customers (a
discounter) wants to get juice in
plastic (PET) bottles
This will require significant
investment

161
Let’s have a look how to show in Power Point the results of PET
investment
34 804
12 489
22 315
13 182
9 133
NPV of Additional margin from PET NPV of fixed costs related to PET NPV of Net Benefit NPV of Capex NPV of the whole Investment
NPV of benefits and investments – 10 year perspective
In thousands of USD

162
Investment in bottlenecks removal –
Introduction

163
Let’s have a look at a plywood producer that considers removing a
bottleneck for one of the factories he has
3 plants
They have a bottleneck in 1 of
the factory
They have a demand for
products from this factory

164
Below you can see the capacity for the factory in question by stages. As
you can see sanding is the bottleneck
200
100
90
80
120
100
50
90
120
Preparation of
the wood
Peeling Drying Repairing Cold Press Hot Press Sanding Foil Triming &
Packing
Production Capacity by stages
In thousands of cubic meters (m3)

166
Investment in bottleneck removal –
Solution

167
Just as a reminder we are working for a plywood producer that
considers removing a bottleneck for one of the factories he has
3 plants
They have a bottleneck in 1 of
the factory
They have a demand for
products from this factory

168
Let’s have a look how to show in Power Point the results from the
improvement of sanding line
6 565
1 004
5 561
209
5 352
NPV of Additional margin from
higher sales
NPV of Additional fixed costs NPV of Net Benefit NPV of Capex NPV of the whole Investment
In thousands of USD

169
Cost reduction investment – Retailer
– Introduction

170
Imagine that you are working for a fashion discounter that operates a
retail chain in Easter Europe
The retailer has 2 000 stores in
Europe
The retailer uses traditional lighting
He wants to switch to LED lighting

171
Cost reduction investment – Retailer
– Solution

172
Just as a reminder you are working for a fashion discounter that
operates a retail chain in Eastern Europe
The retailer has 2 000 stores in
Europe
The retailer uses traditional lighting
He wants to switch to LED lighting

173
Let’s have a look how to show the results from the change to LED bulbs
in the Power Point
15 624
1 250
620
17 494
3 636
13 858
NPV of Difference in electricity
costs
NPV of Difference in bulb costs NPV of Difference in labor
costs
In thousands of USD

174
Cost reduction investment – ceramic
tile producer – Introduction

175
Imagine that you are working for a ceramic tiles producer that has 10
factories in Eastern Europe
He has 10 factories
Every factory on average has 15
production lines
Currently loading the tiles is done
mannually (2 people per line)

176
Cost reduction investment – ceramic
tile producer – Solution

177
Just as a reminder you are working for a ceramic tiles producer that has
10 factories in Eastern Europe
He has 10 factories
Every factory on average has 15
production lines
Currently loading the tiles is done
mannually (2 people per line)

178
Let’s have a look how to show in Power Point the results from the
introduction of robots to ceramic tiles factory
156 890
37 566
16 657
102 668
27 273
75 396
NPV of Difference in labor
costs
NPV of Difference in electricity
costs
NPV of Difference in
maitenance costs
In thousands of USD

179
Consultants
$190
$19

180
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Project Management for
Management Consultants
Practical Guide
presentation
Check also my other presentations

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How to solve problems like
Management Consultants
Practical Guide
presentation

183
KPIs for Management
Consultants & Business Analysts
Practical Guide
presentation

184
Essential Accounting & Finance
for Management Consultants
Practical Guide
presentation

185
Strategy for Management
Consultants & Business Analysts
Practical Guide
presentation
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