Welcome to
Building Business Acumen®
Acumen Learning
Pop Quiz (page 35):
For Fiscal Year 2010:
1. How much cash was on hand?
2. How much cash was generated from operating
activities?
3. What was EBITDA ($)?
4. What was the EBITDA Margin (%)?
5. What was the Operating Income ($)?
6. What were the Earnings Per Share?
7. What were Operating revenues?
8. What was your Return on Assets?
9. How much did Operating revenues grow year
over year?
10.How much did EBITDA grow year over year?
11.How much did Earnings per Share (EPS) grow
year over year?
After Business Acumen, You Will
(Objectives):
Know what measures are important to Darren,
and how you impact them.
Understand 5 fundamental drivers that all
businesses focus on.
Have a better understanding of the financial
statements and how you stack-up against
competitors.
Have an action plan on how you will positively
impact company results.
Become a better communicator of company
strategy and performance.
Business Can be Tough!
Only 5-10% of business start-ups survive
past 5 years.
16% of CEOs lose their job every year.
70% of merger and acquisition activities fail
to increase shareholder value.
Wall Street Journal, May 2008
When it comes to running a business
successfully, the street vendor and the
CEOs of some of the worlds’ largest and
most successful companies talk and think
very much alike.
-Ram Charan
Cash is King!
“Cash is a company’s oxygen supply.”
-Ram Charan
“Cash is more important than your mother."
Al Shugart Former Seagate CEO
Two Types of CASH
Business managers refer to CASH
in primarily two ways:
1. CASH Balances and Cash equivalents
2. CASH FLOW from Operations
“Cash Flow from Operations” = Core
Business Activity
Cash
“Particularly noteworthy for investors was the upswing
in free cash flow in 2010, up by 95 per cent to $947
million due to improved operating earnings and
reduced capital expenditures. The strong cash flow
position and prospects for continued earnings growth
allowed us to increase the dividend by 10.5 % last year
to a record high of $2.10 on an annual basis.”
TELUS 2010 Annual Report
Cash--Benchmark Companies
Key Ideas:
Cash and Cash Flow
(Page 9)
Anything we do to increase revenues or
cut costs impacts Cash and Cash Flow…
But we can also impact Cash by paying
slower or collecting faster with the same
sales revenue and costs.
Activity: How Functions Impact
CASH
How do you individually impact CASH and
CASH FLOW?
Capture your ideas on page 9 in the
participant guide.
Ideas:
-Increase Customer retention
-Pay slower
-Collect faster
-Improve understanding of company expenses
Profit
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 Covey
Two ways to impact Profit
Revenues (Sales)
$ 100
- Operations and restruct. $ 62.7
= EBITDA
$ 37.3 37.3%
- Depreciation/Ammort.
$ 17.8
= Operating Income
$ 19.5 19.5%
- Interest, Taxes, etc.
$
= Net Income
$ 10.6 10.6%
8.9
TELUS Averages for FY 2010.
Driving Profit
High and Low Profit Margins
S&P Average is:
11%
Who has much higher profit margins?
Microsoft
29%
Google
25%
Coca-Cola
22%
Why the high margins?
Driving Profit
High and Low Profit Margins
S&P Average is:
11%
Who has much lower profit margins?
WestJet
5.2%
Wal-Mart
3.5%
Costco
1.8%
Air Canada
0.9%
Why the low margins?
Profit
“We must continue to maintain
healthy profits and cash flow to
fund our core strategic growth
initiatives that sustain our future
performance”
TELUS Acquisitions
drive Profit2010
and Annual
GrowthReport
Long-term:
Robert to
McFarlane,
2005: Ambergris Solutions (call centers internationally)
2006: Assurent Secure Technologies
2007: Emergis
2008: FastVibe
Assets
(read from pg. 12 in manual)
Balancing
Asset Strength
&
Asset Utilization
Assets
Growth
In today’s business world, no growth
means lagging behind in a world that
grows every day…
Investors expect it, employees are
more energized by it, customers are
generally attracted to it and
executives are measured by it.
Growth
People
What’s more important than meeting
Customer Expectations?
Anticipate Customer Needs!
Henry Ford: “If I would have asked my customers what
they wanted, they would have said a faster horse.”
Peter Drucker: “Culture eats strategy for breakfast”
PEOPLE
pg. 17
Steps to assess focus and performance
Step 1: Who is your most critical customer right now?
Step 2: What does your customer most want from you?
Step 3: How would your customer rate you on your
performance?
Step 4: What 2 things can you do to improve your rating?
Business Drivers
(Page 18)
Cash
-On hand
-Generation
Growth
People
Profit
-Top Line
-Bottom Line
-Customers
-Employees
-Revenue
-Expenses
Assets
-Strength
-Utilization
Cash Example
(Page 20)
2004
2005
2006
2007
2008
2009
2010
Revenues $36,835 $39,788 $44,282 $51,122 $60,420 $58,437 $62,484
Cash & Equivalents $73,162 $48,755 $43,393 $33,528 $30,250 $36,380 $36,788
Profit Example
Automobiles:
Highest and lowest profit margin companies
Company A
Company B
Annual Sales
$10.1B
$181.1B
Net Profit Margin
23.5%
-24%
Asset Utilization Example
Company A
Company B
71
Door Handles
228
25
Cooling Systems
99
53
Antennas
171
6
Cars Mfg per
Line
Cost Advantage
per Car
1
$3,800
$0
Growth Example
Revenues
$420,000
$405,000
$390,000
$375,000
$360,000
in millions
$345,000
$330,000
$315,000
$300,000
$285,000
$270,000
$255,000
$240,000
$225,000
$210,000
$195,000
$180,000
$165,000
$150,000
$135,000
$120,000
$105,000
$90,000
$75,000
$60,000
$45,000
$30,000
$15,000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
TELUS Corporate Priorities - 2011
“P&L”
Top Line
EBITDA = $3,643 or 37.3%
Profit
+1.8%
+4.8%
Operating Profit Margin = 19.5%
Bottom Line
10.6%
Net Profit
Margin
(+3.6%)
+2.5%
Increase Revenues by
100K
+100
- 62
+ 38
+ 38
- 9 (24% Tax rate)
+ 29
Decrease
costs by 100K
- 100
- 100
+100
+100
- 24
+ 76
Assets =
Liabilities
+ Equity
Financial Strength
Most Liquid
Total Current Assets
Least Liquid
Total Assets
Due First
Total Current Liabilities
Due Last
Total Liabilities and Shareholders Equity
“Balance
Sheet”
2010
17M
2,546M
3,643M
37.3
1,908
3.22
9,779
5.30
1.8
4.8
2.5
Business Drivers
for Sustainable Profitable Growth
Cash
-On hand
-Generation
Statement of Cash Flows
Growth
People
Profit
-Top Line
-Bottom Line
-Customers
-Employees
-Revenue
-Expenses
Assets
-Strength
-Utilization
Balance Sheet
P&L
Where to Find Information
(page 55)
* nasdaq.com
* finance.google.com
* reuters.com
* hoovers.com
* yahoo.com
* smartmoney.com
Glossary: page 58
One final thought…
People will work hard for a paycheck,
harder for a person,
and hardest for a reason.