Finance for the Supply Management Professional: Supplier Financial Analysis

Course Objective:
- To learn what is important to look for in financial statements
- Identifying potential financial misstatements
- Recognizing the "Red-Flags" on financial statements
- Using ratios for quick analysis
- Using a range of Excel® models to analyze a supplier with little information.

WHAT YOU WILL LEARN

  • A proven set of decision-making tools and financial analysis techniques
  • How to effectively evaluate suppliers’ financial status
  • How to apply best-practice financial practices to SMP.
  • How to build a convincing case study for decision-making

WHO SHOULD ATTEND?

Supply Management professionals who want to learn about the relationship between finance and procurement while learning and/or revisiting the advanced concepts of the financial side of the business.

  • Financial professionals
  • Operational managers
  • Process owners
  • Project managers
  • Everyone tasked with the effective and efficient evaluation of potential investments, acquisitions, outsourcing agreements, or long-term contracts
  • Those responsible for the making or evaluating management of a decision-making process and want to use Excel® more effectively and an analytical tool

Each participant will receive an Excel® workbook of the case study templates to be worked through during the program so please bring your laptops loaded with Excel® 2010 or later.


Course Outline

I. Finance and Accounting introduction

  • a) Basic financial statement understanding
  • i) Balance Sheet
  • ii) Income Statement
  • iii) Cash Flow Statement

Case study: Find the Links between the 3 financial statements

  • b) Non-Cash Deductions & its Impact
  • i) Depreciation vs. Amortization vs. Depletion (with Excel examples)
  • c) Financial vs. Management Accounting (with Excel examples)

II. Key Ratios for Analysis

  • a) What are Ratios & why are they important
  • i) Liquidity; Turnover; Leverage & Profitability (Excel Ratio model)

Case study: ROE, ROA & Equity Multiplier calculations using the DuPont Model

  • b) Suppliers Benchmarking model

Case study: Compare Supplier Ratios to Peer group

  • c) Operating Cycle vs. Cash Cycle

Case study: Calculate the Cash & Operating cycles of a Supplier

III. Financial Analysis

  • a) Altman Z-Score to measure financial Solvency – 3 approaches

Case study: Calculate the Z Score model; predict bankruptcy

  • b) Beneish M-Score model & what it tells us about earnings manipulation

Case study: Apply the Beneish model to determine if earnings are real

  • c) The F-Score & how is reveals potential fraud

Case study: Calculate a supplier’s F-Score to determine accuracy of financials

  • d) The Sloan Index to compare cash flow to profits

Case study: Calculate this index to see how solid their cash flow is

IV. Supplier Analysis

  • a) Sourcing analysis (Excel model)
  • b) Sourcing alternative analysis (Excel model)
  • c) The value of taking/passing on a Discount

Case study of a Supplier Discount

  • d) What is the value of the Economic Order Quantity (EOQ) (Excel model)?
  • e) Target Costing Model (Excel example)
  • f) How do you know how much External Funding is Needed by a Supplier?

Case study: Calculate EFN to make sure they have enough