Every Business is the same on the inside:
Money making in a business has three basic parts:
1. Cash Generation
2. Return on Assets ( a combination of margin and Velocity)
How will your company make money?
This is determined how cash, ROA (Return on Assets), growth, & customers work together to create a profit.
Cash generation is the difference between all the cash that flows into and out of the business
* Payment To Supplier
CEOs want their people to be cash wise. (i.e From a sales representative negotiating a 30 day, payment down from the usual 45 or, a janitor turning off more lights .The little things count and add up at the end of the month.)
Accounts payable (money the company owes is suppliers)
Accounts Receivable (money customer owes the company)
The timing of these affect cash generation.
Return on assets
Your investment of things are called assets the Office Equipment, assembly plants, materials or components Regardless of the size of your business And you are using Investment Capital (Usually someone else’s money unless you’ve inherited in it) to grow your business.
Tangible assets are the things that can be seen or touched. They are sometimes called fixed assets.
A person with great business acumen will wonder how much money they are able to make on these assets
Velocity- ideal of speed, turnover, or movement
Even someone one the streets selling fruit has to sell her wares faster and rotate her inventory or turn the stock over if she is too make a good return on her investment. To Pay the interest on her loan for the fruit and to restock her cart she needs to sell more quickly and repeatedly through the day get back and make a profit over 5% interest.
The faster the velocity, the higher the return.
R=M x V
Return = Margin * Velocity
Wal-Mart sells the toilet paper so quickly it get back the money spent on...