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?
Please keep in touch in this bog for better understanding for future-
| 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% |
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