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- Building Fundamentals ®. - How much do you know about Freeport-McMoRan Corporation’s Key Success Measures? Let’s find out! Important Questions.

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Presentation on theme: "- Building Fundamentals ®. - How much do you know about Freeport-McMoRan Corporation’s Key Success Measures? Let’s find out! Important Questions."— Presentation transcript:

1 - Building Fundamentals ®

2 - How much do you know about Freeport-McMoRan Corporation’s Key Success Measures? Let’s find out! Important Questions

3 - 1 - How much Cash was on hand? $______ 2 - How much Cash was generated by Operating Activities? $______ 3 - What was our Total Revenues? $______ 4 - What was our Operating Margin? ______% 5 - What was our Net Margin? ______% 6 – What was our Copper Reserves (billion lbs.)? ______ 7 – What was our total equity ratio? ______% 8 - How much did Total Revenue change YOY? ______% 9 - How much did Net Income change YOY? ______% 10 - How much did Earnings Per Share (EPS) change YOY? ______% 11- What was FCX’s Total recordable incident rate (TRIR)? ______ 12- Where would you go to get access to this information? ______ For fiscal year: 2010 Pop Quiz (Write your answers on Page 8-9)

4 - What’s your knowledge of Business terminology? Let’s find out! Group Activity

5 - The bills and coins in the register, petty cash, and cash in the bank. It also includes cash equivalents, like CD’s and other highly liquid investments, easily converted into cash within 90 days. 1. _____ Cash generation that is the difference between the cash that flows into the business and the cash that flows out of the business in a given period of time (month, quarter, annual) 2. _____ The total dollar payment received for goods & services during a specific period of time. It is the “top line” figure from which costs are subtracted to determine net income. Also synonymous with sales. 3. _____ The amount of profit realized from a business’s operations after taking out operating expenses such as costs of goods sold (COGS), SG&A, and depreciation. Also known as EBIT. 4. _____ A company's total earnings and is calculated by taking revenues and subtracting “all” expenses. This number is found on a company's income statement and is an important measure of how profitable the company is over a period of time. Often referred to as "the bottom line“. 5. _____ Amount of proven and probable copper available to be pulled out of our mining assets.6. _____ A number used to help determine how much shareholders would receive in the event of a company-wide liquidation. The number is expressed as a percentage, is calculated by dividing total shareholders' equity by total assets of the firm, and it represents the amount of assets on which shareholders have a residual claim. The figures are taken from the company's balance sheet. 7. _____ An increase of a company's sales when compared to a previous month, quarter or year's revenue performance.8. _____ An increase of a company’s net earnings compared to a previous month, quarter or year.9. _____ The portion of a company's profit allocated to each outstanding share of common stock. Calculated as: Net Income – Dividends on Preferred Stock / Average Outstanding Shares. 10. _____ Rate of recordable workplace injuries, normalized per 200,000 hours worked.11. _____ A. Revenue Growth B. Cash FlowC. GrowthD. CashE. TRIR F. Operating IncomeG. RevenueH. Net IncomeI. Equity RatioJ. EBITDA K. Net Income GrowthL. Cooper ReservesM. AssetN. LiquidityO. EPS Its OK to guess! (Write your answers on Page 10-11) Group Activity!

6 - Accurately define pertinent business and financial terminology such as revenue, cost of goods sold, gross profit, net income, unit costs, etc. Demonstrate in a team setting, an understanding of the 5 key drivers (cash, profit, assets, growth, people), that every business must focus on and how each driver influences business success. Accurately describe the key measures and metrics used to assess business performance. Identify and define each line item on a Basic Profit & Loss statement. Articulate to one’s team the importance of business and financial acumen and how their individual role impacts the business. Learning Objectives

7 -  Only 5-10% of business start-ups survive past 5 years.  16% of CEOs lose their job every year. Booz Allen Hamilton 5 th annual Study  70% of merger and acquisition activity do not live up to expectation. Wall Street Journal 2007 Why do businesses fail? Business Can Be Tough!

8 - Every business must focus on five business drivers.  If they do, they will be successful.  If they don’t, they’ll fail. Let’s Start a Business! 7 Introduction to the 5 Drivers

9 - Can a company have too much cash? 13 Earn it Cash from Operation Sell Assets Cash from Investing Borrow it Cash from Financing Pro: No Cost -Con: Time Pro: Immediate -Con: Reduces Assets Pro: Immediate -Con: Cost (Interest) Sources of Cash

10 - Can a company have too much Cash? 1)More attractive in a buy-out. 2)Low return. 3)Shareholders don’t like it. 4)May make poor decisions. 13 Cash Challenges of Too Much Cash

11 - D EFINITION : What is required to Grow and Maintain the business. H OW MUCH CASH SHOULD A COMPANY HAVE ? “Companies ought to keep just enough cash to cover their o Operational expenses o Interest expenses o Capital expenditures o ….plus a little bit more in case of emergencies.” ~Investopedia Fred Smith - FedEx ® Cash: Definition 12

12 - Cash (Cash position): “The bills and coins in the register, petty cash, and cash in the bank. It also includes cash equivalents, like CD’s and other highly liquid investments, that is easily converted into cash within 90 days.” K EY M EASURES Cash Flow: “Cash generation or “cash flow” is the difference between the cash that flows into the business and the cash that flows out of the business in a given period of time (month, quarter, annual)” Cash: Measures 12

13 -  Cash generated from operations activities  Cash generated from investing activities  Cash from financing activities  Cash management  Liquidity  Cash Equivalents Cash: Related Terms Cash generation or Cash from Operations refers to cash flow. Core operations or operating activities means the primary activities we perform in our business. What are our core operating activities? 13

14 - Balance Sheet - Entry: Cash and Cash Equivalents (some companies add short-term and long-term investments/securities when considering their Cash Position. Statement of Cash Flows – Entry: From Operations, or Cash Generated from Operations. Cash: Where Measured

15 - “Cash is more important than your mother." Al Shugart Former Seagate CEO “Cash is a company’s oxygen supply.” -Ram Charan What happens to a company who runs low on cash? Cash: Insights & Importance Cash is King!

16 - (In Millions) Cash Freeport McMoRan Corporation 13 Business Measures and Metrics Freeport McMoRan- FCX Revenues $18,982 $15,040 $17,796 $16,939 Cash Cash and Equivalents $3,738 $2,656 $872 $1,626 Cash from Operating Activities $6,273 $4,397 $3,370 $6,225

17 - WHY? They sell commodities Short sales cycle Predictable business model High Cash vs. Low Cash 1.8% 2.0% 1.7% High Cash % of Revenue WHY? Acquisitions Long sales cycle High risk industries (pharma, tech) S&P 500 Average: Cash = 14% Low Cash % of Revenue 75% 42% 32% 13

18 - High CashLow Cash Business Measures and Metrics Freeport McMoRan-FCX MicrosoftPfizerExxonMobilWal-mart 20106/30/ /31/2011 Revenues $18,982$69,943$67,809$383,221$421,849 Cash Cash and Equivalents $3,738$52,772$28,4797,8277,395 Cash as % of Revenue 19.69%75.45%42.00%2.04%1.75% Cash from Operating Activities $6,273$26,994$11,454$48,413$23,643 Cash Examples (In Millions) 13 S&P 500 Average: Cash = 14%

19 - To increase CASH:  Paying slower  Collecting faster … with the same sales revenues and costs. To increase CASH and CASH FLOW:  Increase revenues/sales  Reduce/cut costs  Adjust inventories Key Ways to Increase Cash & Cash Flow 13

20 - Action Plan: What Single Action are You Committed to do to Positively Impact CASH and CASH FLOW? Better training/faster ramp up Increase employee/customer retention Have clear policies & procedures that will enable better efficiencies Reduce/conserve utilities Reduce conflicts (systems, people, processes, IT technologies)  Your own idea… Review : CASH:  Increase Profits by increasing sale and/or reducing costs (next section)  Pay slower/JIT: (to Vendors strategies – A/P)  Collect faster (from customers strategies – A/R)  Manage inventory levels  Scrutinize capital expenditures Increase sales/revenues Compress A/R – Extend A/P Increase operational efficiencies Control expenses Reduce waste, re-work Manage/Reduce OT Maintain schedule/ship dates Vendor owned/Managed inventory 3838

21 - D EFINITION : The money made after all expenses are subtracted from your sales. It can be expressed in dollars ($) or as a percent (%). You can improve profit in two fundamental ways: ® Profit: Definition 1)Increase Sales Price (Revenues) 1)Reduce Expenses 14

22 - Gross Profit/Margin: Total Revenues (Sales) less Cost of Goods Sold. K EY M EASURES Net Profit/Net Profit Margin: Profit after all expenses have been subtracted from sales. Earnings Per Share (EPS): Profit allocated to each outstanding share of Common Stock. ® Profit: Measures 14 Operating Profit/ Margin: Reflects earnings before interest and taxes.

23 - Sales Price: $1.50 Water -.04 Label -.11 Bottle & cap -.15 Packaging -.20  Direct Labor Total: (.50) $ = $1.00 Gross Profit 66.7% Gross Margin Rent -.03 Salaries, Gen, Admin. (SG&A) -.30 Marketing -.08 Shipping -.19 Depreciation /Amortization-.02 Total: (.62) $ $.50 - $.62 = $.38 EBIT (Operating Income) 25.3% Margin Interest Expense-.04 Taxes-.06 Total: (.10) $ $.50 - $.62 - $.10 = $.28 Net Profit 18.6% Net Profit Margin Life Spring Artesian Water Difference Between Profit ($) & Margin (%)

24 -  Profit = Earnings = Income  Gross profit, gross margin, gross income: Sales from core operations less direct costs associated with those sales (before deducting overhead or indirect costs).  Net profit, net margin, net income: Total sales/revenue less all expenses. All these terms represent what is left over after certain categories of expense are deducted from revenue. Profit: Related Terms 15

25 - Consolidated Statement of Operations: Also referred to informally as the Profit and Loss Statement or P&L. Profit (earnings) is usually measured in dollars. Margin is frequently stated as a percent of sales (as in, “6% Profit Margin”) meaning Profit is 6% of Sales/Revenues. Profit: Where Measured 15

26 - “ Every business must earn a return that is greater than the cost of using other people’s money.” ~Ram Charan “No Margin, No Mission.” ~Stephen R. Covey Profit: Insights & Importance 15

27 - Profit Freeport McMoRan Corporation 11 (In Millions) Business Measures and Metrics Freeport McMoRan- FCX Revenues $18,982 $15,040 $17,796 $16,939 Net Income $4,273 $2,527 $(11,341) $2,769 Profit Operating Margin 47.8%43.2%-71.4%38.7% Net Margin 22.5%16.8%-63.7%16.3% Unit Cash Cost Copper (per lbs.) $0.79 $0.55 $1.16 $1.31 EPS $4.57 $2.93 $(14.86) $3.75

28 - WHY? They sell commodities. “If you’re not unique, you better be cheap!” To drive Profit($) you need either: High Margin (%) or High Volume 28% 32% 22% 3.6% 8.0% 1.7% High MarginsLow Margins WHY? They offer something Unique! S&P Averages: Net Margin = 13% High Margin vs. Low Margin 15

29 - 9 High ProfitLow Profit Business Measures and Metrics Freeport McMoRan-FCX Coca-ColaMicrosoftExxonMobilWal-mart 20106/30/ /31/2011 Revenues $18,982$35,119$69,943$383,221$421,849 Profit Operating Margin 47.8%24.1%38.8%13.8%6.1% Net Margin 22.5%33.6%33.1%7.9%3.9% Profit Examples (In Millions)

30 - 11 United Parcel Services (UPS) – Avoiding left-hand turns -92,000 trucks worldwide -Saved over 28,541,472 miles -Saved 3 million gallons of fuel -Reduced insurance premiums -Reduced maintenance frequency and costs Profit in Action

31 - Increase product sales prices Increase company sales Increase accessory sales (higher margin sales) Reduce/eliminate color copies Reduce expenses Decrease utilities Decrease equipment returns Decrease equipment replacement Decrease discounting Decrease credits Effective management of operational costs Educate employees on company products to enhance up-selling and cross-selling Manage/Reduce OCC’s (Other Credits & Charges) Decrease delinquent customers Book flights 4 wks in advance Faster on-boarding Reduce 0 – 12 month turnover ($24,000) Reduce overall company turnover Effective training (Personal action plan - page 11) What Single Action are You Committed to do to Positively Impact PROFIT? Action Planning: 3838

32 - What we have and how well we use what we have. D EFINITION Asset Strength: The ability to remain viable during ups and downs in the marketplace. Asset Utilization: The ability to remain viable during ups and downs in the marketplace. ® Assets: Definition 16

33 - Copper Reserves (Billion Lbs.) total estimated proven and probable copper reserves remaining K EY M EASURES Equity Ratio: indicates what proportion of equity and debt the company is using to finance its assets Asset Strength (Have) People: Property: Cash: Inventory: Plant & Equipment: Information: Asset Utilization (Use)  Increase employee productivity.  increase usage with lower number of buildings.  Buy back stock, acquire another company, invest in higher returns.  “just in time” inventory increasing inventory turnover.  Decrease cycle time.  Increase number of patents per year. Asset: Measures 17

34 -  Assets: Resources, investments, property.  Asset Strength: Liquidity, risk, measurement, risk profile.  Asset Utilization: Efficiency, effectiveness, operations, return on investment, return on assets, return on equity, return on investment, sales per employee, income per employee, worker productivity, process efficiency, process improvement. ROA = Net Income Total Assets Inventory Turnover = Sales Inventory Assets: Related Terms 17

35 - Balance Sheet - Entry: Current assets, and other (long-term) assets, Measurements include current ratio, quick ratio, debt-to-equity ratio, and others ratios and their trends, return on assets (ROA), return on equity (ROE), and return on investment (ROI). Assets: Where Measured 17

36 -  Assets are what the company has to work with to generate revenue. Asset Utilization is directly related to profitability.  Leaders must balance Asset Strength with Asset Utilization. Assets: Insights & Importance 17 Asset Strength (Have) Solid base of liquidity Low debt High capital Low risk Asset Utilization (Use) Efficiencies/Productivity Higher Inventory Turnover Higher ROA (Return on Assets)

37 - Assets Freeport McMoRan Corporation Equity Ratio = Total Equity $14,560 Total Assets $29, (In Millions) Business Measures and Metrics Freeport McMoRan-FCX Revenues $18,982 $15,040 $17,796 $16,939 Net Income $4,273 $2,527 $(11,341) $2,769 Assets Copper Reserves (Billion lbs) Equity Ratio 49.5%41.4%30.4%44.8% = 49.5% Bought Phelps Dodge

38 - High ROALow ROA Business Measures and Metrics Freeport McMoRan-FCX CoachRIMM Proctor & Gamble Abbott Labs 20106/2/ Revenues $18,982$4,158$19,907$82,559$35,166 Assets Return on Assets (ROA) 14.8%33.4%26.5%8.5%7.8% (In Millions) FCX ROA = Net Income = 4,336 = 14.8% Total Assets 29,386 Assets: High-Low ROA

39 - An increase over a period of time such as year, quarter, or month. Growth is most commonly measured by: D EFINITION There are two types of Growth: 1.Organic Growth: Comes from a company’s existing business 2.Inorganic Growth: Comes from a merger or an acquisition “In today’s business world, no growth means lagging behind in a world that grows every day…” ® Sales Profit Earnings Top-Line Bottom-Line Per-Share Growth: Definition 18

40 - Revenue Growth: Increase in revenues/sales K EY M EASURES Net Income Growth: Increase in Net Income EPS Growth: Earnings per share increase Growth: Measures ® 18

41 - Organic Growth: Growth that comes from company increase. Inorganic Growth: Growth through acquisitions. Top Line Growth: An increase is sales/revenues. Bottom Line Growth: An increase in net income, or profit. Other Terms: Merger & acquisition (M&A), expansion, business development, customer base, number of employees, number of offices, asset growth. Growth: Related Terms 19

42 - Any financial statement or other report can be used, by comparing figures from one time frame to another time frame. For example: Year over year, quarter over quarter, month over month, etc. 26.2% 16.7% 16.1% 5.7% Growth: Where Measured 19

43 - Business in Growth Mode Best & brightest leave first Productivity goes down Morale goes down Costs are cut, which limits ability to grow, and the company becomes less profitable. Business in Rapid Decline Attracts/Retains the best & brightest! Productivity goes up = more profit = more cash = more ability to grow! Morale is typically higher. You have the ability to grow in your career! Growth: Insights & Importance

44 - Growth Freeport McMoRan Corporation (In Millions) Business Measures and Metrics Freeport McMoRan-FCX Revenues $18,982 $15,040 $17,796 $16,939 Net Income $4,273 $2,527 $(11,341) $2,769 Growth Revenue Growth 26.2%-15.5%5.1%193.0% Net Income Growth 69.1%122.3%-509.6%98.4% EPS Growth 56.0%119.7%-496.3%11.8% Recorded Reserve Growth Copper 15.6%2.2%9.4%72.2% 19

45 - High Revenue GrowthLow Revenue Growth Business Measures and Metrics Freeport McMoRan-FCX AppleAmazon Wal-mart Yahoo! / Revenues $18,982$108,249$34,204 $421,849 $6,324 Growth Revenue Growth 26.2%65.9%39.6% 3.4% (2.1) (In Millions) FCX Revenue Growth = 2010 Rev - 1 x 100 = 26.2% 2011 Rev Growth: High-Low Revenue Growth

46 - GROWTH = Increase: -Sales, and/or -Profits, and/or -Earnings per share (EPS) for public companies.  Quarter over quarter, or year over year increases  Organic growth: comes from a company’s existing business  Inorganic growth: comes from merger and acquisitions. Increase: customers, revenues, and product offerings Up sell product sales Increase R2B sales Reduce churn (retain customers!) Increase subscribers/customers Increase add-a-line sales Sell value Create customer loyalty Increase global services Increase network forecasting Provide exceptional service (Int’l & Ext’l) Increase open protocol Invest in employees Better utilize marketing utilization Play a part in culture shaping and acquisition integration Hire talent that is strong and adaptable Develop great leaders Anticipate employee needs that will support a growth strategy What Single Action are You Committed to do to Positively Impact GROWTH? Action Planning: 3838

47 - People:  The “external customer” or consumer of your product.  The “internal customer” or employees. “Communicate a persons potential so clearly that they are inspired to see it within themselves.” Many great organizations have stumbled because they failed to anticipate their customers changing needs. In a competitive world wide market place, a company’s ability to innovate around customers needs or to improve the efficiency of core processes depends on having the right people. Keeping the right people requires having the right leaders. People People: Definition 2020

48 - What is more important than meeting customer expectations? Exceeding? Anticipating Customer Needs & Expectations! “If I would have asked my customer what they wanted, they would have said a faster horse!” ~Henry Ford People: 21

49 - What companies have failed to anticipate customer expectations? What were the results? What limits companies from anticipating their customers’ wants and needs? Anticipating External People

50 - There are no direct measures on financial statements. Revenues on the P&L measure customer sales and cost categories such as labor, measure associate payroll expenses and benefits. Companies keep track separately of data on external customers such as numbers of customers, patients, members, or other consumer and users of products and services; Customer satisfaction levels; turnover rates of customers; and numbers of new customers per period. Employees, or internal customers, are measured by management as to their satisfaction levels, turnover, productivity, etc. People: Measures 21

51 - People are the most important part of any organization – its most important “asset” or resource. People, through making decision, govern, control or direct all other resources. It is 3-5 times more expensive to obtain new external Customers than to retain existing Customers. It is simply more expensive to replace an Employee with a new hire than to retain and train, or redeploy, a current employee. As desirable as it is to meet and/or exceed Customer needs, it is better yet to anticipate those needs! People: Insights & Importance 21

52 - People Freeport McMoRan Corporation 21 (In Millions) Business Measures and Metrics Freeport McMoRan-FCX Revenues $18,982 $15,040 $17,796 $16,939 Net Income $4,273 $2,527 $(11,341) $2,769 People Total Recordable Incident Rate (TRIR-(Per 200K Man Hours Worked) Mine Safety & Health Admin TRIR Average: 2010= = = = 3.30

53 - High Revenue GrowthLow Revenue Growth Business Measures and Metrics Freeport McMoRan-FCX AppleAmazon Wal-mart Yahoo! 20109/ Revenues $18,982$108,249$34,204 $421,849 $6,324 Profit $4,336$25,922$1,152 $16,389 $1,231 People Employees 29,70060,40043,2002,100,00013,600 Revenue Per Employee $639,124$1,792,201$791,759$200,880$465,000 Profit Per Employee $145,933$429,172$26,666$7,804$90,514 (In Millions) People: High-Low Metrics

54 - INTERNAL: Develop teams into leaders Invest in employees Develop a learning culture Exceed deadlines Be positive Always follow through Increase vision Anticipate needs and expectations Increase employee education HR: Hire the best! EXTERNAL: Listen with empathy to resolve unhappy customers Ensure equipment functionality before customer takes it home Possess good product knowledge when selling Qualify each customer Better educate customers Set up customer phones Increase customer negotiations Increase customer awareness Accurately set customer expectations What Single Action are You Committed to do to Positively Impact PEOPLE? Action Planning: 39

55 - 5 Business Drivers & Financial Statements Income Statement Balance Sheet Statement of Cash Flows People Assets Profit Cash Growth

56 - 1.What is the basic equation for each statement? 2.What is the purpose of the statement? 3.What are the key numbers and how are they trending? 4.How can you impact each statement? The Annually Reported Financial Statements Statement of Cash Flows Statement of Income (P&L) Balance Sheet Financial Statements

57 - Basic Statement of Income Revenues (Sales) (Millions) $18,982100% - Production & Delivery$ 8,354 - Depreciation, Depletion, & Amort.$ 1,036 = Gross Profit/Margin$ 9,592 51% - Selling, General, & Admin. (SG&A)$ Exploration & Research$ 143 = Operating Margin$ 9,068 48% -Interest & Other Expense $ 556 -Taxes $ 2,983 = Net Income$ 5,544 29% -N.I. attrib. to Noncontrolling interest/Div.$ 1,271 = Net Income Attrib. FCX Com. Sto $ 4,273 23%

58 - Net Profit Margin Net Income: 4,273 Total Revenue: ÷ 18,982 = 22.5% S&P 500 Ave. = 11% Indicates: Profitability (SG&A) SG&A: Salaries Sales commissions Benefits/Severance Rental Expense Bad debt charges Merger integration costs Professional services: Attorney fees, Accounting (Revenue = Sales) = Top Line = Bottom Line = EBIT Equation: Revenues – Expenses = Income Operating Margin Total Revenue: 18,982 Operating Expense: - 9,914 = 9,068 ÷ 18,982 = 47.76% COGS P&L 26% 69% 19% 2% 19% 16% Gross margin = 51% 59% 16% Operating margin = 48% Net profit margin = 23%

59 - Impairment Charges During fourth-quarter 2008, we evaluated the carrying values of our long-lived assets, including goodwill associated with the acquisition of Phelps Dodge, for impairment. These evaluations resulted in the recognition of impairment charges of $10.9 billion associated with long-lived assets and $6.0 billion associated with goodwill. Refer to Notes 2 and 7 and “Critical Accounting Estimates – Asset Impairments” for further discussion of these impairment charges (pg. 65, K)

60 - Increase revenue by 100K 100K 44K 5K 49K 51K 18K 33K 7K 26K Statement of Operations (P&L)

61 - Lower costs by 100K 100K 35K 65K 22K 43K Statement of Operations (P&L)

62 - Raising Revenues $100M =$26 -or- Cutting Costs by $100M =$43 What are the implications of each action? Which has a greater impact?

63 - Freeport McMoRan Financial Statements 1.What is the basic equation for each statement? 2.What is the purpose of the statement? 3.What are the key numbers and how are they trending? 4.How can you impact each statement? The Annually Reported Financial Statements Statement of Income (P&L) Balance Sheet Statement of Cash Flows Financial Statements

64 - Becomes Cash < 1 year  Most Liquid  Least Liquid  Due First  Due Last Due in < 1 year Balance Equation: Assets = Liabilities + Equity Equity Position: 50% Snapshot in time Indicates: Financial (asset) Strength Current Ratio = 2.6

65 - The bills and coins in the register, petty cash, and cash in the bank. It also includes cash equivalents, like CD’s and other highly liquid investments, easily converted into cash within 90 days. 1. _____ Cash generation that is the difference between the cash that flows into the business and the cash that flows out of the business in a given period of time (month, quarter, annual) 2. _____ The total dollar payment received for goods & services during a specific period of time. It is the “top line” figure from which costs are subtracted to determine net income. Also synonymous with sales. 3. _____ The amount of profit realized from a business’s operations after taking out operating expenses such as costs of goods sold (COGS), SG&A, and depreciation. Also known as EBIT. 4. _____ A company's total earnings and is calculated by taking revenues and subtracting “all” expenses. This number is found on a company's income statement and is an important measure of how profitable the company is over a period of time. Often referred to as "the bottom line“. 5. _____ Amount of proven and probable copper available to be pulled out of our mining assets.6. _____ A number used to help determine how much shareholders would receive in the event of a company-wide liquidation. The number is expressed as a percentage, is calculated by dividing total shareholders' equity by total assets of the firm, and it represents the amount of assets on which shareholders have a residual claim. The figures are taken from the company's balance sheet. 7. _____ An increase of a company's sales when compared to a previous month, quarter or year's revenue performance.8. _____ An increase of a company’s net earnings compared to a previous month, quarter or year.9. _____ The portion of a company's profit allocated to each outstanding share of common stock. Calculated as: Net Income – Dividends on Preferred Stock / Average Outstanding Shares. 10. _____ Rate of recordable workplace injuries, normalized per 200,000 hours worked.11. _____ A. Revenue Growth B. Cash FlowC. GrowthD. CashE. TRIR F. Operating IncomeG. RevenueH. Net IncomeI. Equity RatioJ. EBITDA K. Net Income GrowthL. Cooper ReservesM. AssetN. LiquidityO. EPS Its OK to guess! (Write your answers on Page 10-11) Group Activity! D B G F H L I A F O E

66 ,068 3, ,982

67 - 9,068 14,560 29,386 18,982 15,040 4,273 2,527 3,738 6,273 18, ,982 4,273 18,

68 - Google and Reuters

69 - Time Content Retention Review Apply Teach 15% 40 Retaining Content Over Time

70 - Find a Partner now and: 1.Set up a specific date and time in 30 days to report your progress on your action plan. 2.Exchange s 3.Exchange phone numbers 4.Decide who will initiate the call 5.Determine a back-up plan 6.Transfer this information to your planner or PDA now. 53 Accountability Conversations

71 - 1.7 days:Teach one of the principals learned in class today, to someone in your department. 2.7 days: Discuss your action items with your manager in the next 7 days days: Read the first 90 pages of: “What The CEO Wants You to Know“ 4.30 days: Get with your class partner and give an account of your progress on your action item(s). Start now:  Build and practice your new business acumen skills.  When making decisions, determine how the outcome will impact Cash, Profit, Assets, Growth, People… Post Course Action Items

72 - Building Business Acumen 2 Day Course Build on your foundation of the 5 drivers model Gain greater understanding of Freeport- McMoRan Deeper dive into the financials Analyze our competitors Enhance your business decision making skills Develop a greater understanding of our key strategies Understand external realities impacting FCX Next Course May 9-10 Safford AZ

73 - Accurately define pertinent business and financial terminology such as revenue, cost of goods sold, gross profit, net income, unit costs, etc. Demonstrate in a team setting, an understanding of the 5 key drivers (cash, profit, assets, growth, people), that every business must focus on and how each driver influences business success. Accurately describe the key measures and metrics used to assess business performance. Identify and define each line item on a Basic Profit & Loss statement. Articulate to one’s team the importance of business and financial acumen and how their individual role impacts the business. Learning Objectives

74 - One final thought… People will work hard for a paycheck, harder for a person, and hardest for a reason.

75 - Thank You! Participant Feedback Form


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