Yesterday evening, I attended the Business Opportunities Task Force meeting at school. The Business Opportunities Task Force consists of members of the Maumee Valley community, including faculty, staff, students, parents, and board members. The purpose of the task force is to find new sources of revenue to help support the school’s increasing costs. This is because the school needs more funds in order to give pay raises to our amazing staff and faculty. The problem with this is that the administration would like to increase pay at a higher rate than we can raise tuition. I am one of the two students with the privilege of being on the task force, and although I can’t speak about everything, I will speak in general terms about last night’s meeting.
The meeting yesterday primarily consisted of discussion of such business opportunities to create revenue. At a previous meeting, some business opportunities were already discussed, and individuals who had volunteered to research such potential business opportunities reported their thoughts and findings back to the task force.
The idea that we discussed about most at yesterday’s meeting was the idea of opening a satellite Maumee Valley campus in a foreign country. An example of an independent school that has done this is the Barstow School in Kansas City, Missouri. We spent quite a bit of time discussing the implications of an expansion in any foreign country. Firstly, it would be a very risky investment, and would require a risk analysis before the task force decides to move forward. Secondly, it would be very difficult to recreate the culture of Maumee Valley in an expansion located outside of the United States. There are so many experiences and traditions about Maumee Valley that make us Maumee Valley, like preschool concerts, the little/big buddy program in the Upper Intermediate, and Thanksgiving assembly, just to name a few. It would be difficult to transfer the culture of Maumee Valley to somewhere else, especially to a country with a different culture from ours. Thirdly, we would need to find out how we would be able to retain control of our school. It would do us no good if we invested money in any sort of expansion but can’t collect revenue or retain control over some day-to-day operations at the satellite campus. All of these implications led to a question: why are we so interested in a faraway satellite campus? After all, we spent a good portion of the meeting discussing these three main implications. These points of concern raise several questions that we will need to seriously discuss if we decide to continue with such an expansion.
One of the ideas that had not yet been researched in much detail was opening a makerspace at Maumee Valley for public use. Someone had brought up this idea sometime earlier, and although it sounds quite expensive (and also needs to take local demand into consideration, as well as a price we can charge individuals for using it), I figured that I would volunteer to look into the possibilities for this type of business opportunity. As team leader of the Maumee Valley Robotics Team, I know how to do some research as to some of the equipment costs, as well as individuals whom I could talk to in order to see what equipment would be wanted most in a makerspace. I will be doing just some basic research for now, and I intend to report my findings at the next meeting.
The next Business Opportunities Task Force meeting is after the intensive. My model will have been completed by then, and I will be explaining the model to the task force. I will also report back what I find about the logistics and costs of building a makerspace at the next meeting. As I have explained earlier, creating a financial model is the final project of my independent study, and the purpose of the model will be to allow the business opportunities task force to evaluate the feasibility of any possible business opportunity.
Today, my focus will be to continue building the model as I did during the day, yesterday. I will keep adding more formulas and tables with information, and this isn’t very different than what I did yesterday.
Wednesday, January 13, 2016
Tuesday, January 12, 2016
1-12-2016: Beginning to Build
Today was the day where several days’ worth of learning all came together!
I began the day by briefly reviewing financial ratios with Mrs. Spurgeon. We talked again about which financial ratios would be the most important, and even added new terminology and ratios to the list. This helped me make sure that I knew the basics, and would be ready to apply them for actually building the model.
I went back to the sources of income and expense that Mrs. Spurgeon and I had brainstormed on the first day of the independent study. These sources of income and expense are very important because without this information, I can’t calculate an operating gain/loss (also called net income) that I can use in my model. I also did some research (along with talking to Mrs. Spurgeon) about what data would be necessary for other important financial data categories so that I could know what other data would be important in order to make calculations. For example, I had to research what goes under the financial term “total liabilities,” which includes everything from accounts payable to long term debt and even loans payable.
I then began to build my model by first defining the parts of a financial ratio in my spreadsheet so that I could later use it to directly calculate that ratio within the spreadsheet. For example, the current ratio is defined by dividing current assets by current liabilities, so in order to find the current ratio, I first needed to find amount of current assets and current liabilities. But with the exception of accountants and other professionals who keep close tabs on financial information within an organization, few people can quickly find the amount of current assets and current liabilities of their company or organization. I needed to make the model as easy to use as possible, so I created formulas to calculate the total amount of current assets and total amount of current liabilities. As it works right now, the model that I’m building instructs the user to input data that is linked to calculating the amount of current assets and current liabilities; some examples of data that are needed include the amounts of all accounts receivable, cash, any money due from the government, all accounts payable, and accrued liabilities. If the user can simply find these data and input them into the model, the spreadsheet will calculate the current ratio for the user by using the information received to calculate the current assets and divide them by the current liabilities. In general, the intention when building a model is to make it easy to use, allowing users to quickly get information from the data they have without the need to do complicated calculations. All of the calculations are determined by formulas, which link cells together and can almost instantly find results based on the data it is given.
Additionally, I organized all these subparts of the financial ratios into the format of a balance sheet, making each of the subparts easy to find and the model easier to use. I could have created an interface that tells the user to input data all over the place on a spreadsheet, but that would be silly, given that most users are familiar with the look and feel of a balance sheet. Finally, I did more research in order to make sure that I wasn’t missing any subpart that should be included in any of the sections of the balance sheet.
Here is a more detailed breakdown of what I learned in the days leading up to now, and how it helped me today:
Understanding of sources of income and expenses for an independent school: 1-4-2016: The Beginning
Basic understanding and applications of financial ratios: 1-5-2016: Finance 101
Important financial metrics to keep in mind when evaluating a business expansion: 1-6-2016: Amy Yustick, Dana Holding Corporation
Use of table tools in order to easily display data in the spreadsheet: 1-7-2016: Microsoft Excel 2007
Tracing precedents and dependents to easily find and check errors: 1-7-2016: Microsoft Excel 2007
Basic uses of formulas for calculations in the spreadsheet: 1-7-2016: Microsoft Excel 2007 and 1-8-2016: Macros, Formulas, and Data Validation
It felt so good to be able to finally understand how everything would come together, and as a result, I am more excited about this project than before. I will continue working on my model tomorrow, adding more formulas and ratios to the spreadsheet. The more work I do, the more fun it gets!
I began the day by briefly reviewing financial ratios with Mrs. Spurgeon. We talked again about which financial ratios would be the most important, and even added new terminology and ratios to the list. This helped me make sure that I knew the basics, and would be ready to apply them for actually building the model.
I went back to the sources of income and expense that Mrs. Spurgeon and I had brainstormed on the first day of the independent study. These sources of income and expense are very important because without this information, I can’t calculate an operating gain/loss (also called net income) that I can use in my model. I also did some research (along with talking to Mrs. Spurgeon) about what data would be necessary for other important financial data categories so that I could know what other data would be important in order to make calculations. For example, I had to research what goes under the financial term “total liabilities,” which includes everything from accounts payable to long term debt and even loans payable.
I then began to build my model by first defining the parts of a financial ratio in my spreadsheet so that I could later use it to directly calculate that ratio within the spreadsheet. For example, the current ratio is defined by dividing current assets by current liabilities, so in order to find the current ratio, I first needed to find amount of current assets and current liabilities. But with the exception of accountants and other professionals who keep close tabs on financial information within an organization, few people can quickly find the amount of current assets and current liabilities of their company or organization. I needed to make the model as easy to use as possible, so I created formulas to calculate the total amount of current assets and total amount of current liabilities. As it works right now, the model that I’m building instructs the user to input data that is linked to calculating the amount of current assets and current liabilities; some examples of data that are needed include the amounts of all accounts receivable, cash, any money due from the government, all accounts payable, and accrued liabilities. If the user can simply find these data and input them into the model, the spreadsheet will calculate the current ratio for the user by using the information received to calculate the current assets and divide them by the current liabilities. In general, the intention when building a model is to make it easy to use, allowing users to quickly get information from the data they have without the need to do complicated calculations. All of the calculations are determined by formulas, which link cells together and can almost instantly find results based on the data it is given.
Additionally, I organized all these subparts of the financial ratios into the format of a balance sheet, making each of the subparts easy to find and the model easier to use. I could have created an interface that tells the user to input data all over the place on a spreadsheet, but that would be silly, given that most users are familiar with the look and feel of a balance sheet. Finally, I did more research in order to make sure that I wasn’t missing any subpart that should be included in any of the sections of the balance sheet.
Here is a more detailed breakdown of what I learned in the days leading up to now, and how it helped me today:
Understanding of sources of income and expenses for an independent school: 1-4-2016: The Beginning
Basic understanding and applications of financial ratios: 1-5-2016: Finance 101
Important financial metrics to keep in mind when evaluating a business expansion: 1-6-2016: Amy Yustick, Dana Holding Corporation
Use of table tools in order to easily display data in the spreadsheet: 1-7-2016: Microsoft Excel 2007
Tracing precedents and dependents to easily find and check errors: 1-7-2016: Microsoft Excel 2007
Basic uses of formulas for calculations in the spreadsheet: 1-7-2016: Microsoft Excel 2007 and 1-8-2016: Macros, Formulas, and Data Validation
It felt so good to be able to finally understand how everything would come together, and as a result, I am more excited about this project than before. I will continue working on my model tomorrow, adding more formulas and ratios to the spreadsheet. The more work I do, the more fun it gets!
Monday, January 11, 2016
1-11-2016: Financial Analysis in Microsoft Excel
After a nice weekend of rest, I spent time today learning about financial analysis in Microsoft Excel.
I began today by working with the What-If Analysis. The What-If Analysis can manage possible scenarios for a given situation. The Scenario Manager tool can store information for a hypothetical scenario in which values for a formulas would need to be changed. For example, the hypothetical scenario could be that one’s income has changed, but the individual’s income is part of several formulas in an Excel worksheet. One can input the amount of the hypothetical change in income into the Scenario Manager and tell Excel to evaluate the scenario, which would bring to attention all of the changes that could result from that hypothetical scenario. There is also a What-If Analysis tool called Goal Seek. This tool can find a solution to a set of conditions that the user sets. For instance, Goal Seek can find an interest rate that works for a loan amount, length of the loan, and how much one wishes to pay per month.
I also saw more applications of a PivotTable today. When I first learned about PivotTables last Thursday, I was confused about how they worked and the purpose of using one. The videos that I watched today went back to PivotTables, and everything suddenly made sense. I now realize how powerful a PivotTable actually is, and how it can help someone quickly make sense of a lot of information. Because all of the learning is at my own pace, and because my expectations are not to zoom through the courses as fast as possible, I created my own sample income statement to practice creating a table in Excel, and I spent some time playing around with the PivotTable functions and the several possible views one can choose.
Another concept that I learned today was common-sizing, and it is specifically related to finance. Common-sizing is the practice of mathematically converting financial data into information that can be compared across companies of all types and sizes. The online videos taught me about performing common-size analysis with sample income statements and balance sheets. Such common-size analysis may include comparing the percent of operating income or comparing the percent of liabilities between two companies. Common-size analysis makes sense because one only evaluates financial metrics that involve a percent, and can therefore apply this type of analysis to companies of different sizes. I also learned basic formulas to use for common-sizing analysis when working in Microsoft Excel, as well as the formulas’ uses and purposes.
Although I have learned a lot over these past few days, I am by no means proficient with Microsoft Excel. However, I am learning enough to recognize features and follow guided practices with the video courses. I am also trying to practice some of the features on my own, like I did with the PivotTables. I know that I still have a lot to learn, and for the purposes of this intensive, I am only focusing on features that pertain to basic finance.
I also realized that there were several concepts that I was able to better understand when they were presented a second time. I said this about PivotTables in one of the paragraphs above, but the same thing happened for tracing precedents/dependents, data validation, and adding filters to data. Seeing features more than once was helpful, allowing me to gain a more complete understanding of the tool being taught after getting an introduction the first time that I learned about it.
Tomorrow, I will be back at school, working with Mrs. Spurgeon to begin making my financial model. I hope that everything I’ve learned about Microsoft Excel beginning last week will be put to good use during these next several building days!
I began today by working with the What-If Analysis. The What-If Analysis can manage possible scenarios for a given situation. The Scenario Manager tool can store information for a hypothetical scenario in which values for a formulas would need to be changed. For example, the hypothetical scenario could be that one’s income has changed, but the individual’s income is part of several formulas in an Excel worksheet. One can input the amount of the hypothetical change in income into the Scenario Manager and tell Excel to evaluate the scenario, which would bring to attention all of the changes that could result from that hypothetical scenario. There is also a What-If Analysis tool called Goal Seek. This tool can find a solution to a set of conditions that the user sets. For instance, Goal Seek can find an interest rate that works for a loan amount, length of the loan, and how much one wishes to pay per month.
I also saw more applications of a PivotTable today. When I first learned about PivotTables last Thursday, I was confused about how they worked and the purpose of using one. The videos that I watched today went back to PivotTables, and everything suddenly made sense. I now realize how powerful a PivotTable actually is, and how it can help someone quickly make sense of a lot of information. Because all of the learning is at my own pace, and because my expectations are not to zoom through the courses as fast as possible, I created my own sample income statement to practice creating a table in Excel, and I spent some time playing around with the PivotTable functions and the several possible views one can choose.
Another concept that I learned today was common-sizing, and it is specifically related to finance. Common-sizing is the practice of mathematically converting financial data into information that can be compared across companies of all types and sizes. The online videos taught me about performing common-size analysis with sample income statements and balance sheets. Such common-size analysis may include comparing the percent of operating income or comparing the percent of liabilities between two companies. Common-size analysis makes sense because one only evaluates financial metrics that involve a percent, and can therefore apply this type of analysis to companies of different sizes. I also learned basic formulas to use for common-sizing analysis when working in Microsoft Excel, as well as the formulas’ uses and purposes.
Although I have learned a lot over these past few days, I am by no means proficient with Microsoft Excel. However, I am learning enough to recognize features and follow guided practices with the video courses. I am also trying to practice some of the features on my own, like I did with the PivotTables. I know that I still have a lot to learn, and for the purposes of this intensive, I am only focusing on features that pertain to basic finance.
I also realized that there were several concepts that I was able to better understand when they were presented a second time. I said this about PivotTables in one of the paragraphs above, but the same thing happened for tracing precedents/dependents, data validation, and adding filters to data. Seeing features more than once was helpful, allowing me to gain a more complete understanding of the tool being taught after getting an introduction the first time that I learned about it.
Tomorrow, I will be back at school, working with Mrs. Spurgeon to begin making my financial model. I hope that everything I’ve learned about Microsoft Excel beginning last week will be put to good use during these next several building days!
Friday, January 8, 2016
1-8-2016: Macros, Formulas, and Data Validation
Today was another learning day with Microsoft Excel. I finished the online video course that I worked on yesterday and later moved on to a more advanced course.
I started my morning by working with macros. Macros are a string of commands consisting of several steps that allow a user to repeat an action several times without having to manually perform each step. In other words, macros automate a repetitive task in Microsoft Excel by simply pressing a button. Users can create their own macros by the macro recorder. The recorder records and saves the user’s actions, so the macro can be run at a later time.
After finishing the course on the basics of Microsoft Excel, I moved on to a course about formulas and functions in Excel. As explained in yesterday’s blog post, formulas and functions take data and calculate them. I first began with basic formulas that calculated minimum and maximum values, medians, and modes. I then practiced creating some more complicated formulas with help from instructions in the video.
Some of what I learned today built upon what I had learned yesterday. In particular, some of these tools included table functions and lookup features. Today’s lessons covered advanced table functions, which helped me do more with tables, and went more in-depth with lookup features, which helps a user quickly find information. I now have more confidence using both of these features.
Later today, I got to data validation. Data validation adds rules to the range of information a cell can contain. When used correctly, this tool can be helpful because it prevents a user from adding incorrect data. For example, let’s say I’m a teacher creating a spreadsheet to record students’ grades. I might add a data validation to a column in that spreadsheet that contains students’ cumulative grades. I never give my students extra credit opportunities, so the highest possible grade a student could earn in my class is 100. Therefore, I would set a data validation rule to that column preventing myself from adding any grade that is not between 0 and 100. If I attempted to input a number greater than 100, an error message would show up, telling me that the inputted information does not fit the data validation rule, and I would be instructed to change it. This is how data validation can reduce errors, preventing obviously incorrect data from entering a spreadsheet.
Today was more interesting than yesterday. I got to explore other uses for Excel besides its basic functions, learning more about the powerful formulas that help me make sense of data, converting them into meaningful information. The more I learn, the more I see how powerful Microsoft Excel is and what the program can accomplish. As I’m progressing, I’m also seeing that the lessons get more and more interesting.
I will finish this video course on Monday, where I’ll go more in-depth with the What-If Analysis.
I started my morning by working with macros. Macros are a string of commands consisting of several steps that allow a user to repeat an action several times without having to manually perform each step. In other words, macros automate a repetitive task in Microsoft Excel by simply pressing a button. Users can create their own macros by the macro recorder. The recorder records and saves the user’s actions, so the macro can be run at a later time.
After finishing the course on the basics of Microsoft Excel, I moved on to a course about formulas and functions in Excel. As explained in yesterday’s blog post, formulas and functions take data and calculate them. I first began with basic formulas that calculated minimum and maximum values, medians, and modes. I then practiced creating some more complicated formulas with help from instructions in the video.
Some of what I learned today built upon what I had learned yesterday. In particular, some of these tools included table functions and lookup features. Today’s lessons covered advanced table functions, which helped me do more with tables, and went more in-depth with lookup features, which helps a user quickly find information. I now have more confidence using both of these features.
Later today, I got to data validation. Data validation adds rules to the range of information a cell can contain. When used correctly, this tool can be helpful because it prevents a user from adding incorrect data. For example, let’s say I’m a teacher creating a spreadsheet to record students’ grades. I might add a data validation to a column in that spreadsheet that contains students’ cumulative grades. I never give my students extra credit opportunities, so the highest possible grade a student could earn in my class is 100. Therefore, I would set a data validation rule to that column preventing myself from adding any grade that is not between 0 and 100. If I attempted to input a number greater than 100, an error message would show up, telling me that the inputted information does not fit the data validation rule, and I would be instructed to change it. This is how data validation can reduce errors, preventing obviously incorrect data from entering a spreadsheet.
Today was more interesting than yesterday. I got to explore other uses for Excel besides its basic functions, learning more about the powerful formulas that help me make sense of data, converting them into meaningful information. The more I learn, the more I see how powerful Microsoft Excel is and what the program can accomplish. As I’m progressing, I’m also seeing that the lessons get more and more interesting.
I will finish this video course on Monday, where I’ll go more in-depth with the What-If Analysis.
Thursday, January 7, 2016
1-7-2016: Microsoft Excel 2007
Today, I spent my entire day just learning about Microsoft Excel. Mrs. Spurgeon selected an online course for me to get started. I went through the course at my own pace, covering the essentials and most important parts of the program.
A screenshot of a video that I watched today on the difference between relative and absolute referencing in Microsoft Excel:
Everything that I learned today could fit three categories: visual functions, data display features, and data tools. Note that these are not formal categories; I am simply classifying the different tools and features that I learned as such for the purposes of simplification in this blog post.
For visual functions, I primarily learned about how I could customize tables in my spreadsheet. There are several other formatting features in Microsoft Excel, such as templates, styles, and conditional formatting. These are neat tools that save time when one wishes to make a spreadsheet look aesthetically and visually pleasing. I would categorize a formatting tool as a “visual function” because these tools have nothing to do with how data is presented in a workbook; they instead give the spreadsheet a nice look and feel.
For data display features, I learned about grouping data together and consolidating data of the same type. This allows me to easily see categories of data, which can help me quickly find data that I’m looking for. Table and chart tools are methods of displaying data in a way that can be easily visualized and understood more quickly. One can also manage lists and add filters to a group of data, commanding the spreadsheet to only return data that meets criteria that the user specifies. These are “data display” features because they visually help me find and rearrange data. These features do not analyze or change the data; rather, they change how data is presented or found, making it easier to find or understand them.
There are several types of data tools. Most of these are either functions or formulas. Formulas take data, either using them for computing or converting them into a different form. More often than not, formulas perform calculations that require multiple steps. Formulas are constructed using functions. Functions generally perform one calculation, and can be combined with other functions to perform a larger, more complex calculation. Some common functions include addition, average, minimum, and maximum (there are also useless functions like =ROMAN, which converts numbers written in Arabic numerals into Roman numbers, because everyone uses Roman numbers in a spreadsheet). Functions can be used for several different purposes, such as finance, dates, or even trigonometry. There are also other data tools besides functions and formulas, such as the what-if analysis, which can model situations and find an answer for the user, or even proofing tools that can even help check one’s work.
Even though I got to do all of this from home, today was probably my most difficult day so far. It wasn’t easy sitting all day in front of my laptop, trying to learn a complicated program with very little background knowledge about the program. I had to take a lot of mental breaks every now and then. The tools that I learned to use today were not easy to write about, either.
Although today was rather difficult, learning the basics of Microsoft Excel is important. Even though I didn’t like every minute of it, I have to admit that some things that I learned today can be applied to even the life of a normal person. For example, a person planning a budget for a party (or anything that would incur expenses) could use Microsoft Excel to group data together, add numbers and find totals, and make sure that the expenses remain within the budget that the party planner sets. But I know that all of this will eventually help me when I begin building the model with Mrs. Spurgeon, which will hopefully be next week.
A screenshot of a video that I watched today on the difference between relative and absolute referencing in Microsoft Excel:
Everything that I learned today could fit three categories: visual functions, data display features, and data tools. Note that these are not formal categories; I am simply classifying the different tools and features that I learned as such for the purposes of simplification in this blog post.
For visual functions, I primarily learned about how I could customize tables in my spreadsheet. There are several other formatting features in Microsoft Excel, such as templates, styles, and conditional formatting. These are neat tools that save time when one wishes to make a spreadsheet look aesthetically and visually pleasing. I would categorize a formatting tool as a “visual function” because these tools have nothing to do with how data is presented in a workbook; they instead give the spreadsheet a nice look and feel.
For data display features, I learned about grouping data together and consolidating data of the same type. This allows me to easily see categories of data, which can help me quickly find data that I’m looking for. Table and chart tools are methods of displaying data in a way that can be easily visualized and understood more quickly. One can also manage lists and add filters to a group of data, commanding the spreadsheet to only return data that meets criteria that the user specifies. These are “data display” features because they visually help me find and rearrange data. These features do not analyze or change the data; rather, they change how data is presented or found, making it easier to find or understand them.
There are several types of data tools. Most of these are either functions or formulas. Formulas take data, either using them for computing or converting them into a different form. More often than not, formulas perform calculations that require multiple steps. Formulas are constructed using functions. Functions generally perform one calculation, and can be combined with other functions to perform a larger, more complex calculation. Some common functions include addition, average, minimum, and maximum (there are also useless functions like =ROMAN, which converts numbers written in Arabic numerals into Roman numbers, because everyone uses Roman numbers in a spreadsheet). Functions can be used for several different purposes, such as finance, dates, or even trigonometry. There are also other data tools besides functions and formulas, such as the what-if analysis, which can model situations and find an answer for the user, or even proofing tools that can even help check one’s work.
Even though I got to do all of this from home, today was probably my most difficult day so far. It wasn’t easy sitting all day in front of my laptop, trying to learn a complicated program with very little background knowledge about the program. I had to take a lot of mental breaks every now and then. The tools that I learned to use today were not easy to write about, either.
Although today was rather difficult, learning the basics of Microsoft Excel is important. Even though I didn’t like every minute of it, I have to admit that some things that I learned today can be applied to even the life of a normal person. For example, a person planning a budget for a party (or anything that would incur expenses) could use Microsoft Excel to group data together, add numbers and find totals, and make sure that the expenses remain within the budget that the party planner sets. But I know that all of this will eventually help me when I begin building the model with Mrs. Spurgeon, which will hopefully be next week.
Wednesday, January 6, 2016
1-6-2016: Amy Yustick, Dana Holding Corporation
Today, I visited Amy Yustick, a controller for Dana Holding Corporation. Dana is a Fortune 500 company that primarily produces axles for automotive vehicles worldwide, for both original-equipment manufacturers and the aftermarket. I met Mrs. Yustick at the Dana World Headquarters, located in Maumee, Ohio, where her office is located. Mrs. Yustick is also a Maumee Valley parent, vice president of Maumee Valley’s Board of Trustees, chair of the Business Opportunities Task Force, and a member of several other task forces and committees at Maumee Valley.
Dana World Headquarters:
My visit today was for the purpose of researching for my financial model; in other words, I need to figure out what I will include in my model and any other potential issues or parts of the model that I will need to keep in mind. This falls into what I have referred to as the second part of my intensive: finding relevant information that pertains to an expansion. I discussed the two other parts of my intensive on my Introduction and Overview page.
Here is a picture of something that Dana makes:
My visit to the Dana World Headquarters began with Mrs. Yustick taking me on a tour of the main building. She pointed out what Dana does and the history of the company. Even though I learned more about Dana today than I had ever known about the company previously, I’m already considering Dana as a career option because of their free soft drinks for employees (yes, they have a soda fountain that is free and unlimited). Mrs. Yustick also took some time to explain how finance has to do with her job, which expanded upon what I learned yesterday.
But the main reason why I visited Mrs. Yustick today was to interview her so that I could get her perspective of what a business opportunity for the school would involve. She talked about the need to completely think through a business opportunity and its implications. For example, she said that one always needs to consider “what if” questions when thinking about a business expansion. Such potential problems for a Maumee Valley satellite campus could be “What if fewer students enroll at the location than we expect?” or “What if the economy changes while we’re in the middle of the expansion?” or “What if the company who owns the property that we’re renting goes out of business?” While some of them are unlikely, these types of scenarios cannot be ignored when one is in the decision making process of investing a lot of time and money in a huge project.
One thing Mrs. Spurgeon suggested that I ask everyone the question of which three financial metrics are the most important to them when considering a business opportunity. Mrs. Yustick said that her three most important financial metrics are profit, return on invested capital, and the time to cash flow neutral. It will be interesting to see what other individuals think.
I particularly liked the response that she gave me for a question regarding the market and demand if Maumee Valley were to perhaps expand with a satellite campus. She thinks that to evaluate the market for a satellite expansion, we would need to strategically survey individuals with young children. It would be unwise to ask questions like “Would you send your kids to Maumee Valley?” We instead need to ask questions such as “What are your top three important factors in looking for a school?” and give them several answers with boxes to check. If our survey returns results such as “an experiential, hands-on education,” “quality of teachers,” “school culture,” or even “college acceptance,” then it probably wouldn’t hurt to look into the idea of an expansion. But if the answers we received were “size of learning institution,” “price,” “Division I OHSAA athletics,” or even “religious faith,” we would definitely know that it wouldn’t be a good idea to expand with a satellite campus in that area.
Mrs. Yustick’s responses to my questions will keep me thinking over the next couple of days about the model I will create and how to approach these problems that the school needs to keep in mind about evaluating business opportunities.
I will also be interviewing other business professionals who are connected to Maumee Valley, as well as other MV administrators, to get other perspectives on what should go in my model. You can expect some posts on these types of interviews within the next week or so…
Dana World Headquarters:
My visit today was for the purpose of researching for my financial model; in other words, I need to figure out what I will include in my model and any other potential issues or parts of the model that I will need to keep in mind. This falls into what I have referred to as the second part of my intensive: finding relevant information that pertains to an expansion. I discussed the two other parts of my intensive on my Introduction and Overview page.
Here is a picture of something that Dana makes:
My visit to the Dana World Headquarters began with Mrs. Yustick taking me on a tour of the main building. She pointed out what Dana does and the history of the company. Even though I learned more about Dana today than I had ever known about the company previously, I’m already considering Dana as a career option because of their free soft drinks for employees (yes, they have a soda fountain that is free and unlimited). Mrs. Yustick also took some time to explain how finance has to do with her job, which expanded upon what I learned yesterday.
But the main reason why I visited Mrs. Yustick today was to interview her so that I could get her perspective of what a business opportunity for the school would involve. She talked about the need to completely think through a business opportunity and its implications. For example, she said that one always needs to consider “what if” questions when thinking about a business expansion. Such potential problems for a Maumee Valley satellite campus could be “What if fewer students enroll at the location than we expect?” or “What if the economy changes while we’re in the middle of the expansion?” or “What if the company who owns the property that we’re renting goes out of business?” While some of them are unlikely, these types of scenarios cannot be ignored when one is in the decision making process of investing a lot of time and money in a huge project.
One thing Mrs. Spurgeon suggested that I ask everyone the question of which three financial metrics are the most important to them when considering a business opportunity. Mrs. Yustick said that her three most important financial metrics are profit, return on invested capital, and the time to cash flow neutral. It will be interesting to see what other individuals think.
I particularly liked the response that she gave me for a question regarding the market and demand if Maumee Valley were to perhaps expand with a satellite campus. She thinks that to evaluate the market for a satellite expansion, we would need to strategically survey individuals with young children. It would be unwise to ask questions like “Would you send your kids to Maumee Valley?” We instead need to ask questions such as “What are your top three important factors in looking for a school?” and give them several answers with boxes to check. If our survey returns results such as “an experiential, hands-on education,” “quality of teachers,” “school culture,” or even “college acceptance,” then it probably wouldn’t hurt to look into the idea of an expansion. But if the answers we received were “size of learning institution,” “price,” “Division I OHSAA athletics,” or even “religious faith,” we would definitely know that it wouldn’t be a good idea to expand with a satellite campus in that area.
Mrs. Yustick’s responses to my questions will keep me thinking over the next couple of days about the model I will create and how to approach these problems that the school needs to keep in mind about evaluating business opportunities.
I will also be interviewing other business professionals who are connected to Maumee Valley, as well as other MV administrators, to get other perspectives on what should go in my model. You can expect some posts on these types of interviews within the next week or so…
Tuesday, January 5, 2016
1-5-2016: Finance 101
Today, I primarily focused on learning about financial ratios. Financial ratios are an important part in business. One can learn a lot about a business’s financial condition by simply looking at its financial ratios. Having an understanding of them is important in evaluating a business opportunity because financial ratios turn financial data into information that can be used to determine whether or not it would be beneficial to pursue such business opportunity. Understanding these will be important for when I’m researching information for my own financial model that will be my final project.
Here are the ratios that I learned today:
Mrs. Spurgeon likes the lo-tech method of gathering information on sticky notes and posting them to her wall, so I’m going along with it.
If you couldn’t see them clearly, here they are:
Debt to equity
Current ratio
Return on equity
Net profit margin
Debt ratio
Return on sales
Asset turnover
Quick ratio
And these are only a few. There are over a hundred ratios that are used in the financial world, but I am more focused on making sure that I know these ratios in particular for now, as these are the most applicable ratios to a nonprofit organization evaluating a business opportunity.
They all seem simple, and it looks like they all have a quick and easy formula, but they’re actually more difficult than they seem. Each ratio has its own nuances and terminology associated with it. For example, for the return on equity ratio, the formula is net income divided by equity, but in order to understand how exactly the ratio works, I had to learn what equity was and what net income was, and there was even more behind those two terms.
The most difficult of these financial ratios were the current ratio, the debt to equity ratio, and the return on equity ratio. I began my day studying these financial ratios with Mrs. Spurgeon. Again, each formula isn’t hard to understand, but what’s behind the ratio is more important and can be tricky at first. We discussed what each ratio measured (which often led to more “What’s that?” questions) and the reasons for using each ratio. Everything makes sense when applying it to an example. For instance, let’s say we want to evaluate Company A’s current financial health. We could use the current ratio, which is determined by dividing current assets by current liabilities. A current asset is a source of financial value that will soon become cash, and a current liability is some sort of obligation that I will soon pay with cash. This is a good ratio to evaluate current financial health because it only involves the amount of soon-to-become cash and the amount of cash that is soon-to-be-paid-with. In other words, because one only looks at short-term transactions, it shows how an organization or business is doing at the current time. This doesn’t necessarily mean that a higher current ratio is necessarily better than a lower current ratio in the long term, but it’s basically a way of evaluating if an organization or business is able to currently operate without running into trouble in the short-term.
I researched the other ratios listed above by using resources that I found online. After learning the first three ratios, the rest of them weren’t too difficult. I supplemented all of the material I learned today by watching several videos that, once again, explained each ratio, gave a reason for using it, and put it into use with an example.
Although it didn’t seem like I learned a lot today, Mrs. Spurgeon reminded me that all of what I learned today was new, and what you see in the picture was not everything I learned. I also went through applications of each of the ratios and made up my own examples (and checking with Mrs. Spurgeon) to make sure that I understood the trickier concepts. All of the ratios were abstract concepts, and when I was learning them, I could only understand them when I could give them some context.
Additionally, it is important to note that I have simplified some of the concepts that I wrote about in this blog post. However, these simplifications do not change the essence of any concept being discussed, and these simplified explanations will most likely be enough for me to create my financial model.
By the end of the day, I felt a lot better with these ratios, and I am now curious to see how these ratios will affect my research for model and the actual building of the model.
Here are the ratios that I learned today:
Mrs. Spurgeon likes the lo-tech method of gathering information on sticky notes and posting them to her wall, so I’m going along with it.
If you couldn’t see them clearly, here they are:
Debt to equity
Current ratio
Return on equity
Net profit margin
Debt ratio
Return on sales
Asset turnover
Quick ratio
And these are only a few. There are over a hundred ratios that are used in the financial world, but I am more focused on making sure that I know these ratios in particular for now, as these are the most applicable ratios to a nonprofit organization evaluating a business opportunity.
They all seem simple, and it looks like they all have a quick and easy formula, but they’re actually more difficult than they seem. Each ratio has its own nuances and terminology associated with it. For example, for the return on equity ratio, the formula is net income divided by equity, but in order to understand how exactly the ratio works, I had to learn what equity was and what net income was, and there was even more behind those two terms.
The most difficult of these financial ratios were the current ratio, the debt to equity ratio, and the return on equity ratio. I began my day studying these financial ratios with Mrs. Spurgeon. Again, each formula isn’t hard to understand, but what’s behind the ratio is more important and can be tricky at first. We discussed what each ratio measured (which often led to more “What’s that?” questions) and the reasons for using each ratio. Everything makes sense when applying it to an example. For instance, let’s say we want to evaluate Company A’s current financial health. We could use the current ratio, which is determined by dividing current assets by current liabilities. A current asset is a source of financial value that will soon become cash, and a current liability is some sort of obligation that I will soon pay with cash. This is a good ratio to evaluate current financial health because it only involves the amount of soon-to-become cash and the amount of cash that is soon-to-be-paid-with. In other words, because one only looks at short-term transactions, it shows how an organization or business is doing at the current time. This doesn’t necessarily mean that a higher current ratio is necessarily better than a lower current ratio in the long term, but it’s basically a way of evaluating if an organization or business is able to currently operate without running into trouble in the short-term.
I researched the other ratios listed above by using resources that I found online. After learning the first three ratios, the rest of them weren’t too difficult. I supplemented all of the material I learned today by watching several videos that, once again, explained each ratio, gave a reason for using it, and put it into use with an example.
Although it didn’t seem like I learned a lot today, Mrs. Spurgeon reminded me that all of what I learned today was new, and what you see in the picture was not everything I learned. I also went through applications of each of the ratios and made up my own examples (and checking with Mrs. Spurgeon) to make sure that I understood the trickier concepts. All of the ratios were abstract concepts, and when I was learning them, I could only understand them when I could give them some context.
Additionally, it is important to note that I have simplified some of the concepts that I wrote about in this blog post. However, these simplifications do not change the essence of any concept being discussed, and these simplified explanations will most likely be enough for me to create my financial model.
By the end of the day, I felt a lot better with these ratios, and I am now curious to see how these ratios will affect my research for model and the actual building of the model.
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