Self-financeable Growth (SFG) – How Fast A Company Can Growth

Imran 05/05/2024 RMG Leave a comment 73 Views

Self-financeable growth is tools how to mesure your company growth. Everyone want to know that starting a business requires cash, and after day by day a business requires even more for working capital, facilities and fixed assest, and operating expenses. But few people understand that a profitable company that tries to grow too fast can run out of cash—even if its products are great successes.

The below calculation is the best measure is Self-financeable Growth (SFG) – How Fast A Company Can Growth?

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				Self-financeable Growth (SFG)
Operating Cash Cycle:		Lever -1 Speeding Cash Flow	Lever -2 Reducing Cost	Lever -3 Raising Price
Particular	UOM	Base Case
Account Receivable(DSO)	Day	(6)			(6)			(6)
Inventory ( DIO)	Day	89			89			89
OCC	Day	83			83			83
Account Payable ( DPO)	Day	9			9			9
Cost of Sales( CCC)	Day	74			74			74
Operation Exp. ( Payment Days)	Day	38			38			38

Income Statement:		Amount	Per BDT		Amount	Per BDT		Amount	Per BDT
Sales	Core	35.00	1.000		35.00	1.000		40.00	1.000
Cost of Sales		34.00	0.971		34.00	0.971		34.00	0.971
Operating Exp.		3.50	0.100		3.20	0.091		3.50	0.100
Total Cost		37.50	1.071		37.20	1.063		37.50	1.071
Profit (Cash)		-2.50	-0.071		-2.20	-0.063		2.50	0.071

Amount of cash Tied up per sales in BDT		Per BDT	Day	Total Per BDT	Per BDT	Day	Total Per BDT	Per BDT	Day	Total Per BDT
Cost of Sales		0.971	0.89	0.866	0.971	0.89	0.866	0.971	0.89	0.866
Operations		0.100	0.46	0.046	0.091	0.46	0.042	0.100	0.46	0.046
Cash Required for OCC				0.912			0.908			0.912

Cash Generated per Sale in BDT( Profit)				-0.071			-0.063			0.071

SFG Rate Caculation:
OCC SFG Rate				-7.83%			-6.92%			7.83%
OCCs Per Year			365	4.398		365	4.398		365	4.398
Annual SFG Rate				-34.45%			-30.44%			34.45%

Compounded Annual SFG Rate				-30.14%			-27.06%			39.33%