Tag Archives | profit

Progress Billing Example

Find a progress billing example below.

Progress Billing Example


UNCONDITIONAL FINAL WAIVER AND RELEASE OF LIENS AND CLAIMS

OWNER: Business X, LLC.

PROJECT NAME: PRIORITY MANAGEMENT

For and in exchange of the sum of $, the sufficiency of which is hereby acknowledged, the undersigned Contractor, subcontractor, consultant, materialmen or laborer (hereinafter the “Undersigned”) warrants and represents as follows:

(1) The Undersigned has been employed by Business X, LLC. to furnish labor, materials, or services in connection with the construction of improvements on or to the above referenced project.

(2) The Undersigned has performed all labor, materials, or services required under its Contract, Subcontract or Purchase Order in full compliance with all terms and conditions thereof, and all applicable plans and specifications.

(3) Any and all contractors, subcontractors, laborers, suppliers and materialmen that have provided labor, material, or other services to the Undersigned for use or incorporation into the construction of the improvements to the Project have been paid in full for all amounts due and owing to them on the Project, or shall be promptly paid in full from the proceeds of the payment referenced above and there are no outstanding claims of any character arising out of or related to the Undersigned’s activities on or improvements to the Project. If this Waiver is signed by the Prime Contractor, then attached hereto as Exhibit A is a complete list of all subcontractors and suppliers retained by such party as of the date of this Waiver.

(4) The Undersigned waives and releases any and all liens, lien rights, claims of liens, and any other claims for payment for labor, material or equipment of any type or description that it may have against the Owner, the Owner’s Project Manager, the Owner’s Engineering Consultant, the Architect for the Project, the Prime Contractor (if this Waiver is signed by a subcontractor or supplier) and/or any person with a legal or equitable interest in Project, arising out of or in any fashion related to, any labor, materials or services furnished by, through or under the Undersigned on, or used in connection with, the Project, without exception.

(5) This Final Waiver and Release constitutes a representation by the Person signing this document, for and on behalf of the Undersigned, that the payment referenced above constitutes full and complete payment for all work performed and costs or expense incurred (including, but not limited to, costs for supervision, field office overhead, home office overhead, interest on capital, profit and general conditions cost) by, through or under the Undersigned relative to the work of improvements at the Project, including all retainage. More specifically, the Undersigned hereby waives, quitclaims, and releases any claim of damages due to delay, hindrance, interference, acceleration, inefficiencies or extra work, or any other claims of any kind it may have against the Prime Contractor (if this Waiver is signed by a subcontractor or supplier), the Owner, the Owner’s Project Manager, the Owner’s Engineering Consultant, the Architect for the Project, and/or any other person or entity with legal or equitable interest in the Project.

IN WITNESS WHEROF, the person signing this document, acting for or on behalf of the Undersigned and all of its employees, subcontractors, laborers, suppliers and materialmen, executes this document this _________ day of _____________________ , 20_______ .

By:________________________

Title: _______________________________

This instrument was executed and acknowledged before me on this ____________ day of ___________________, 20___ , by _________________________ , on behalf of said entity.

Notary Public


If you want to take your financial leadership skills to the next level, then click below to learn more about our SCFO Lab.Progress Billing Example

See Also:
Progress Billing for a General Contractor

0

Partnership

Partnership Definition

A partnership is a type of business organization. Two or more individuals own and operate this business organization. These individuals are partners. Furthermore, it is unincorporated. Although it is not considered a legal entity separate from its owners, the details of this arrangement are stipulated in a contract. Call that contract a partnership agreement. This includes both profit and loss sharing and decision-making rights.

Types of  Business Partnerships

There are different types of business partnerships, including general partnerships and limited partnerships. Depending on the type of arrangement, the entity may be privately-owned or publicly-owned. The partners may have limited liability or unlimited liability for the activities and obligations of the business.

When there is a change in ownership or a change to the original partnership agreement, this relationship dissolves. If any partner dies or leaves the organization, then the other partners must dissolve the entity and create a new partnership. When any changes are made to the original contract, the partners must dissolve the entity and create a new organization.

Advantages and Disadvantages of Partnerships

There are several advantages to having this kind of entity. Business partnerships are easy to establish and are easy to dissolve. In addition, they give the partners a significant amount of operational freedom and flexibility. Also, partnerships do not pay corporate income tax (taxes are paid by the partners at the individual level). And as opposed to a sole proprietorship, a partnership can utilize the capital, entrepreneurial skills, and managerial expertise of more than one individual.

The disadvantages include the following:

  • Unlimited personal liability of the general partners
  • Limited access to capital resources

Partnership

See Also:
S Corporation

0

Operating Income (EBIT)

See Also:
Operating Income Example
EBITDA Definition
Net Income
Free Cash Flow
Operating Profit Margin Ratio
Time Value of Money (TVM)

Operating Income (EBIT) Definition

What is operating income? Earnings before interest and tax, also know as operating income (EBIT), is defined as a measure of a company’s profit from ordinary operations, excluding interest and tax. EBIT is also called net operating income, operating profit, or net operating profit. Calculate it using the following equation: revenues minus cost of goods sold (COGS) and other operating expenses.


Are you in the process of selling your company? The first thing to do is to identify “destroyers” that can impact your company’s value. Click to download your free “Top 10 Destroyers of Value“.

Download The Top 10 Destroyers of Value


What is Operating Income? Operating Income Explanation

Operating income is a measure of company operations. It is also one of the most common financial ratios used for valuing a company as a whole. Therefore, it is very valuable, as well, as a measure of the success of a company from period to period. Additionally, it is the measure of the ability of a company to cover costs and make profit. Operating income ratios leaves out interest and taxes, so it does not serve as a net value of the wealth created from a business. More, it is a general tool used to evaluate the operating process and efficiency which ultimately lead to company profits.

One of the overall advantages of using operating income (EBIT) over other financial ratios is in the simplicity and standardization of calculation. Though interest and taxes play an important role in the financial health of a company they do not, generally, make or break the model for success. When evaluating operating income vs net income, ask whether you need a measurement of company operations as a whole or company operations as they lead to profit.

Operating Income Formula

The operating income formula provides a simple calculation for evaluating common business models. Calculating this equation is fairly simple when one has the three following values: revenues, cost of goods sold, and operating expenses.

Operating Profit = Revenues – (COGS + Operating Expenses)

Now, you know your operating income which is an important factor of valuing a company. If you’re looking to sell your company, then download the free Top 10 Destroyers of Value whitepaper to learn how to maximize your value.

Operating income (EBIT), What is Operating Income

Strategic CFO Lab Member Extra

Access your Exit Strategy Checklist Execution Plan in SCFO Lab. The step-by-step plan to get the most value out of your company when you sell.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

Operating Income (EBIT), What is Operating Income

0

Key Performance Indicators (KPI’s)

See Also:
Flash Reports
Normalized Earnings
Continuous Accounting: The New Age of Accounting
Collection Effectiveness Index

Key Performance Indicators (KPIs) Definition

Key Performance Indicators (KPIs) are defined as the key drivers of economic activity for a company In essence, KPIs measure the productivity of an organization. By performing a key drivers analysis of the most important business activities that drive profit and cash flow you can then develop a set of key performance ideas. Included in your key drivers analysis should be a sensitivity analysis of your financial projections in order to identify the key financial drivers. The best way to manage and report KPIs is through the use of Flash Reports.

(Find out why KPI’s are important!)

Key Performance Indicators (KPIs) Metrics

Key performance metrics should include both financial and operational metrics, as well as, combinations of the two. Key performance measurement is as much an art as a science. The actual numbers themselves are not as important as the trends in the key performance measures. By combining financial measurements with operational performance measurements you can gauge the productivity of an organization.

Key Performance Indicators (KPIs) Calculation and Examples

KPIs measure productivityProductivity can be expressed as:

    Throughput    

Resource

Examples of throughput would include the following:

  • lbs concrete poured
  • widgets produced
  • # of invoices or tickets written
  • product shipped

Examples of resources would include the following:

  • man hours
  • # of full-time equivalent employees (FTE)
  • cubic feet of warehouse space
  • machine hours

So, in order to calculate productivity over a period (expressed as a KPI), we would take a measure of throughput such as widgets produced and divide it by a resource such as machine hours.  The resulting KPI would be widgets produced per machine hour.

Examples of key performance indicators (KPIs) would include the following:

Key Performance Indicators (KPIs) Dashboard

KPI reporting should be done on a daily or weekly basis. Furthermore, you should prepare a key performance indicators dashboard on the shortest timeframe feasible. The KPI dashboard should be easy to prepare and not take more than thirty minutes to generate. If it does, then you are making the process too complicated. A template should be used to generate the key performance indicators. This template should enable the CFO to identify both positive and negative trends.

Key Performance Indicators

Strategic CFO Lab Member Extra

Access your Flash Report Execution Plan in SCFO Lab. The step-by-step plan to create a dashboard to measure productivity, profitability, and liquidity of your company.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

Key Performance Indicators

0

Hedging Risk

Hedging Risk Definition

Hedging is a strategy for reducing exposure to investment risk. An investor can hedge the risk of one investment by taking an offsetting position in another investment. The values of the offsetting investments should be inversely correlated.

Hedge Your Bet

When an investor buys a stock, he will profit if that stock goes up in value. However, the investor doesn’t know if the stock’s value will go up or go down. If the stock’s value goes down, he could incur a loss.

In order to protect against potential losses, the investor may want to hedge the risk. He could do this by investing in a financial instrument that will profit if the stock he owns, or a related security, decreases in value. Once the investment is hedged, the investor’s exposure to the risk of incurring a loss is reduced.

Hedging is similar to insurance. A homeowner might purchase fire insurance to hedge against the risk of losing his home in a fire.

Hedging Investments

Investors can use various techniques and financial instruments to hedge investments, including options contracts, futures contracts, short selling, investing in currencies, investing in commodities, and investing in other assets or derivatives.

Download your free External Analysis whitepaper that guides you through overcoming obstacles and preparing how your company is going to react to external factors.

hedging risk

Strategic CFO Lab Member Extra

Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

hedging risk

See Also:
Currency Exchange Rates
Currency Swap
Transaction Exposure
Exchange Traded Funds
Translation Exposure
Covariance
Hedge Funds
Put Option
ROCE (Return on Capital Employed)

0

Earnings per Share (EPS)

See Also:
Price Earnings Growth Ratio Analysis
Price Earnings Ratio Analysis
Gross Profit Margin Ratio Analysis
Net Profit Margin Analysis
Financial Ratios

Earnings per Share (EPS) Definition

The earnings per share or EPS is the amount of profit that accrues to each shareholder based on their percentage ownerships or amount of shares owned within the company.

Earnings per Share (EPS) Explained

The earnings per share ratio is often a good measure of how a company is doing from year to year and is used by many investors in the market. However, companies know that the EPS is often a measure of how they are handling their businesses. This leads several companies to manipulate the EPS ratio. The ratio can be manipulated if the company were to buy or sell its own shares in the market, referred to as Treasury Stock. The net income aspect can also be manipulated through the recognition of revenue as well as other ways.

Earnings per Share (EPS) Formula

The EPS equation is as follows:
(Net Income – Preferred Dividends)/Shares Outstanding

Earnings per Share (EPS) Example

Tim is trying to calculate the EPS for Wawadoo Inc. He was given the following information to solve the problem.

Operating Income – $350,000
Interest expense – $20,000
Tax rate – 34%
Shares outstanding – 100,000 common (no preferred)

Tim will make the EPS calculation as follows:
$350,000 – (350,000 * .34) – $20,000 = $211,000 = Net Income
$211,000/100,000 = $2.11/share = EPS

Don’t leave any value on the table! Download the Top 10 Destroyers of Value whitepaper.

earnings per share

 

earnings per share

0

Contribution Margin Definition

See Also:
Margin vs Markup
Segment Margin
Marginal Costs
Segmenting Customers for Profit
Financial Ratios

Contribution Margin Definition

Contribution margin (CM), defined as selling price minus variable cost, is a measure of the ability of a company to cover variable costs with revenue. The amount leftover, the contribution, covers fixed costs or is profit.

Contribution Margin Meaning

Contribution margin means a measurement of the profitability of a product. In addition, express it as a dollar amount per unit or as a ratio. CM can be calculated for a product line using total revenues and total variable costs. It can also be calculated at the unit level by using unit sales price and unit variable cost. The metric is commonly used in cost-volume-profit analysis and break-even analysis.

Download the free Know Your Economics guide to monitor what’s happening in your business. 

Contribution Margin Formula and Contribution Margin Ratio Formula

Use the following contribution margin formula below:

CM = Unit Price – Unit Variable Cost

The contribution margin ratio, or contribution margin percentage, is the CM expressed as a percentage of the unit sales price. Calculate it using the following formula:

CM Ratio = (Unit Price – Unit Variable Cost) / Unit Price

Contribution Margin Calculation

After you collect all the information, it is fairly easy to calculate CM. For example, a company has a $1,000 unit price and a $150 unit variable cost

Contribution margin per unit= $1,000 – $150 = $850

Contribution Margin Ratio Calculation

The contribution margin equation can also be applied to create a ratio for the given values. For example, a company has a $1,000 unit price and a $150 unit variable cost

CM = ($1,000 – $150) / $1,000 = .85

Contribution Margin: Income Statement

The CM format income statement is a variation on the standard income statement that separates variable costs and fixed costs. It starts with revenues, subtracts variable costs, and then displays the CM, as well as, the CM percentage before subtracting fixed costs and giving the net operating income. A simplified CM format income statement might look like the following:

Revenue        $100,000

Variable costs
Raw material$15,000
Variable labor$20,000
Delivery charge        $5,000
Total variable costs$40,000
Contribution margin$60,000
Contribution margin percentage          60%

Fixed costs
Rent$25,000
Utilities               $5,000
Wages$20,000
Total fixed costs                               $50,000
Net operating income$10,000

Contribution Margin Example

For example, Isabel is the CFO of a private company, the holding company for a series of retirement homes, called Retireco. She has known the owner of Retireco since she was a child, noticing her unique drive to make her company a success. Isabel has turned her family friend into a lifelong business connection and now, having earned her expertise in the accounting world, is her CFO.

One day the CEO of Retireco asks Isabel to calculate the CM of her company. Her purpose is to know variable costs, fixed costs, and finally profit are derived from sales. Since she is familiar with it, this is a simple task.

Isabel begins by collecting all of the company financial records. Once she has done this, she sits down to perform CM analysis. Here, she finds a per unit value:

$1,000 unit price and a $150 unit variable cost

CM = $1,000 – $150 = $850

Isabel then converts this number to CM ratio:

$1,000 unit price and a $150 unit variable cost

CM = ($1,000 – $150) / $1,000 = .85

Isabel now knows that 85% of sales can move on to cover fixed costs or become company profits. Therefore, she can provide this information to the Retireco CEO with suggestions for how to best use this money for these purposes. By having effective financial ratios, doors open which can lead to further growth of Isabel’s career and the company as a whole. Want to check if your unit economics are sound?  Download your free guide here.

contribution margin

Strategic CFO Lab Member Extra

Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs


contribution margin

3

LEARN THE ART OF THE CFO