The Ultimate Financial Management Cheat Sheet

* Financing (
Cash is King
Cash Runway
What is it?
Cash Runway is the maximum number of months to the next financing round.
Burn Rate is how much cash the business is consuming from both operations Example:
and required capital investments per month.
1. Awesome, Inc. has $200,000 cash in the bank
2. Last Quarter (Q2), costs exceeded revenues by $30,000
Cash Runway = Cash Burn Rate Burn Rate = $30,000 3 months = $10,000/month
Cash Runway = $200,000 $10,000/month
What does it mean? 3. Cash Runway = 20 months
Securing new financing takes time. Businesses should prepare for new
financing long before they run out of cash. Read more...

Net Operating Cash Cycle



 
What is it?
Net Operating Cash Cycle is the measure in days of how long cash is tied up





during the sales cycle. 





Net Operating Cash Cycle = DSI + DSO - DPO 




What does it mean? 

The shorter the Net Operating Cash Cycle, the more cash a business has to 




invest internally, thus increasing Cash Runway. Read more...
Days Payables Outstanding (DPO) indicates how many days of financing vendors are providing  
  
the company.   
  
Days Ending
Days In
Payables = Accounts Cost of
Sales Period
Outstanding Payable

Example:
Days Sales in Inventory (DSI) indicates how many days a product sits on the shelf before it sells.
1. Awesome, Inc. purchases inventory from a manufacturer
Days Sales Ending Cost of Days In
(vendor) in China
Inventory
in = Inventory Sales Period 2. Awesome, Inc. is required to pay the Chinese vendor 15 days
after the inventory is received (DPO)
Days Sales Outstanding in A/R (DSO) indicates how quickly credit sales are being collected. 3. On average, an order of inventory sells out in 45 days (DSI)
4. Customers are given 30 days to pay for their product (DSO)
Days Sales Ending Net Operating Cash Cycle = 45 + 30 - 15
Outstanding
= Accounts Sales Days In
Period
in A/R Receivable

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 Page 2

The Ultimate Financial Management Cheat Sheet

* Profit Margin (
More important than revenue
Gross Profit Margin (%)
What is it?
Gross Profit Margin indicates what percent of every product sale can be used
A
Related measures to watch
to finance business growth.

Cost of
Gross Profit Margin = ( Sales - Sales ) Sales
What does it mean?
As the margin increases, so do the net profits and the number of dollars from
every sale that can be spent on growth. Read more...
Example:
1. Awesome, Inc. sells $50,000 of their product
2. Products cost of sales (production, packaging & delivery) = $25,000
Gross Profit Margin % = ($50,000 - $25,000) $25,000
3. The Gross Profit Margin is 50%
Pricing Policy & Product Mix
Which products have the highest contribution margins (profit
per unit)? Watch constantly and adjust your pricing where
needed. Add or eliminate products to meet your target margin.
Annualized Gross Margin (%)
= 365 / Net Operative Cash Cycle.
Products that turn faster have better annualized yields. (i.e.
50% Gross Margin x 4 turns per year = 200% simple return
on cash invested). High margin products that take a long time
to sell may not be as healthy for the business as lower margin
products that move quickly. Looking at the Annualized Gross
Margin % makes this clear.

* Expenses (
Manage them, or be managed by them
Break-Even Sales
What is it?
Break-Even Sales indicates the minimum level of sales to obtain $0 profits,
or to break-even. Example:
1. Awesome, Inc.s developer salaries, rent, & office expenses are
Break-Even Sales = Fixed Expenses Gross Profit Margin $20,000 / month
2. Theyve previously calculated that their Gross Profit Margin is 80%
What does it mean? Break-Even Sales = $20,000 80%
Reducing fixed expenses reduces the required level of sales to be profitable. 3. Break-Even Sales are $25,000 / month
Read more...

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 V Page 3

The Ultimate Financial Management Cheat Sheet

v2.0

* Revenue (
The proof of market traction
Revenue Growth Rate
What is it?
Revenue Growth Rate indicates the rate at which the revenue is growing.
Example:
Revenue Growth Rate = % Change in Revenue Period 1. Awesome, Inc. grew 25% last quarter (0.25 of the year)
Revenue Growth Rate = 25% 0.25
What does it mean? 3. Revenue Growth Rate is 100%
Companies that are growing quickly and have a sales model to sustain that
growth will attract more investor capital.

Key Drivers of Revenue Growth

Payback Efficiency
What is it?
Payback Efficiency indicates the efficiency of sales and marketing efforts. Example:
It is the Gross Margin generated from new customer sales during the year 1. Awesome, Inc. spent $20,000 last quarter to acquire new
divided by the Acquisition Cost of Customers (Cost per Lead x Average
customers
Conversion Rate).
2. These new customers spent $50,000
Payback Efficiency = Gross Margin Acquisition Cost 3. After direct costs of $10,000
of Customers
Gross Margin = $50,000 - $10,000 = $40,000
What does it mean? Payback Efficiency = $40,000 $20,000
If the payback efficiency ratio is >1, its time to invest more capital into sales 3. Payback Efficiency is 2
& marketing. If its <1, its time to revisit sales & marketing techniques or
exploring deeper with your customers. Read more...

Average Revenue Per Customer Z

What is it? Additional Information
Average Revenue Per Customer indicates average revenue that each unique
customer generates. Also watch...
Average Revenue repeat sales, upsells, and cross-sells to appropriately measure retention
Per Customer = Total Revenue No. of Unique Customers and unique customer revenue.
For SaaS-based companies:
What does it mean? Clearly identify recurring vs. non-recurring revenue as well as other key
SaaS metrics. Read more...
Knowing the Average Revenue Per Customer helps business know the spread
of their revenue across their regular and new customers.

We provide expertly crafted financial solutions.

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