Strategic Business Planning for Commercial Producers How Does a CFO Think?

Strategic Business Planning for Commercial Producers Financial Issues/Measures for CFO’s Profitability –Operating profit margins –Asset turnover –ROA (return on assets) –Leverage/financial structure –ROE (return on equity)

Strategic Business Planning for Commercial Producers Financial Issues/Measures for CFO’s Size –Breakeven volume –Viability Level of living Market access

Strategic Business Planning for Commercial Producers Financial Issues/Measures for CFO’s Growth –Resources Managerial Financial –Sustainable growth rate

Strategic Business Planning for Commercial Producers Economic Value Added (EVA) Economic profit A measure of value added Better than ROE as an indicator of creation of value Calculation reflects the idea that firm must earn enough to cover the cost of debt and the opportunity cost of equity before it even begins to create value

Strategic Business Planning for Commercial Producers Areas of responsibility for CFO’s Total Financial Resources –Liquidity –Leverage –Profitability –Cash Flows Cost of Capital –Interest rate –Dividend payout

Strategic Business Planning for Commercial Producers Areas of responsibility for CFO’s Insurance Coverage and Risk Management Financial Planning Procedures –Working capital –Capital budgeting Accounting Systems and Procedures –Cost control –Profit planning –Business performance –Auditing

Strategic Business Planning for Commercial Producers Areas of responsibility for CFO’s Capital Structure –Balance –Leverage –Ability to raise capital Relationship with Financial Stakeholders Tax Considerations and Management

Strategic Business Planning for Commercial Producers Areas of responsibility for CFO’s Inventory Management and Valuation Asset Management –Capital expenditures –Financial diversification

Strategic Business Planning for Commercial Producers