The Cash Flow Statement, Strategic Financial Analysis and the Supply Chain

Week Two – The Cash Flow Statement, Strategic Financial Analysis and the Supply Chain

 In this week’s lesson, we will continue our look into the financial supply chain by looking at financial ratios and how they are key indicators into the financial health of the business.  These ratios are also key indicators of whether management made the correct supply chain decisions or not. 

 We will look at common-size analysis for the balance sheet and the income statement; we will look at several types of financial ratios (short term and long–term solvency and liquidity ratios, asset turnover ratios, profitability ratios, and market value ratios); we will take an in depth look at the DuPont/Strategic Profit Model, which can give us a high level view on the effectiveness of the supply chain and how to target supply chain initiatives to maximize return on investment.

 We will also learn about internal and sustainable growth, which gives an indicator if the supply chain is helping to generate adequate internal funds for future growth needs or will the business have to finance the growth; we will expound on the Strategic Profit Model when learning cash flow analysis; we will learn through cash flow analysis how the supply chain affects specific balance sheet and income statement accounts and tie the cash flow statement to the C2C for the firm.  Finally, we will learn about the concept of Economic Value Added and determine if the supply chain adds or “destroys” shareholder value.

 As you probably can see, it is important to link the supply chain to the financial performance of the firm!!