How poor business decisions affect credit
The demise of this company was probably due not to any single factor or even to poor business decisions, but to a lack of focus on vision. At the very least its vision became blurred. Scrambling with temporary solutions failed to address the company’s fundamental issue. As its market changed, it needed to clarify and [...]
Credit variance analysis
However diligently a budget is prepared, things will not turn out as planned. There will be a variance between what was anticipated and what happened. Understanding the differences between actual and planned performance is known as variance analysis. It is useful to analyse such variances in order to understand why things are going better or [...]
Return on equity and credit
Return on equity. One of the principal tests is how much money a business makes for its investors, who therefore pay considerable attention to it. It is calculated as net profit after tax divided by equity capital. Ratios and suppliers Suppliers’ prices and performance can be monitored using ratios. Fluctuations in prices are measured by [...]
Credit ratios and providers of capital
Price/earnings (p/e) ratio. The price/earnings ratio is simply the share price divided by the earnings per share (eps). It is the one that investors and analysts focus on and it forms part of the valuation of a company during acquisitions and disposals. The higher the ratio, the more the company is deemed to be worth, [...]
Quick (or acid-test) credit ratio
Quick (or acid-test) ratio. This is an assessment of a company’s liquidity, showing how quickly a company’s assets can be turned into cash, which is why it is known as the quick ratio or simply the acid ratio. The most common expression of the quick ratio (although there are several ways of deriving the same [...]
Payday Loans
I’ll be blunt on this one. Payday loans are a ridiculously bad idea! If you’ve used them, or are considering using them, you’re going to need to get out of that cycle right away. These loans, which can seem like a great way to make ends meet in a tight month, can often start someone [...]
Retirement Plan Loans
Over the last 20 years, 401(k) plans have become the primary form of retirement plan used by many Americans. In fact, the Investment Company Institute estimates that Americans now hold 4.5 trillion dollars in employer-sponsored retirement plans. One of the features that makes these plans so attractive for many employees is the promise that they [...]
A great investments example
Michael and Susan have been saving for retirement for 10 years. They are also, like all the characters in this book, a composite from interviews and people I have worked with during the past 21 years. Since Michael’s major promotion 10 years ago, they have invested about $50,000 a year. Prior to that, they had [...]
How to assess the payday loan time gap
To assess the gap between where the organization wants to be and what it currently can produce, I use the organizational process model shown in Figure 21. This tool helps me view the organization at the macro level and allows me to see at a glance what the organization is accomplishing from a task perspective. [...]
Multiple loans as integrated units
In the early 1900s, American engineer and efficiency expert Frederick W. Taylor experimented with methods of improving work processes, including the use of quantitative measurement, to increase production. The goal was to make these processes more efficient by simplifying the work, thereby reducing labor costs. The presumption was that since the task was simpler, employers [...]