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Finance Guide with Formulated Solutions for Excel
Subtitle: Finance Applications, Formulas and Mathematics
BOOK UPDATES & CORRECTIONS:
The Table of Contents lists incorrect page numbers as follows: Page 80 is listed as 77, 79 as 78, 78 as 79, 81 as 80 and 77 as 81. The actual page numbers in the book and CD-ROM are the same
Page 76: A new page 76 is listed is listed below on this page.
Page 77 and 78 You can skip these pages and go to page 79. The applications on page 77 and 78 are both used on page 79.
Page 77: line 23 is $347,479.
Page 78: line 28 should read: gross margin %. This correction is also needed on the CD-ROM with the 2000 copyright date.
Page 79: To use data for a period other than one month, simply re-label and use the computer worksheet in the E column for one month (see the book). The quarter and annual data are extrapolations of the month data. If you are not doing an extrapolation then there is no need to use these calculations on your spreadsheet..
Page 98: line 6, the first line of text is sell.
Page 108: line 46 is twelve months.
Page 109: line 46 ys twelve quarters.
Page 120 et al, there is a reference to bond dividends. Bonds pay interest and stocks pay dividends. If you own a bond mutual fund, you are paid dividends but these are dividends of the mutual fund.
Page 190: line 4 should read: At exact annual interest.
Page 211: line 5 should read compounded annually (not bi-weekly).
Page 214: line 24 should read time in months.
Page 250 line 4 should read one semi-annual series (not quarterly).
CD-ROM CORRECTION 2000 version only.
On page 78, the correction is gross margin % instead of cost of goods sold. (CD-ROMs shipped after September 1,2001 have a copyright date of 2002.)

Page 76 revised:

Breakeven Sales and Profitability - Concept

A business makes money through a combination of sales, gross margin, and fixed and variable operating costs. You can manage profits to the dollar by managing these areas. Use the method for any kind of business including retail, service, and manufacturing, or a not-for-profit, such as a county hospital or a municipal water company.

· The breakeven point is the sales volume that equals the sum of operating costs plus cost of goods sold. For the breakeven calculation, all you need are fixed gross margin percentage, operating costs, and variable operating costs.

· Gross margin is the difference between sales and cost of goods sold.

· Fixed operating costs are unchanged over short periods of time regardless of sales activity.

· Fixed costs include expenses such as permanent employees, rent, utilities, equipment leases, supplies and insurance.

· Interest costs for long-term debt are not operating costs, they are a cost of capital.

· General and administrative costs (G & A) are another term for operating costs. Some businesses use the term marketing and administrative costs.

Variable operating costs change with sales activities. Expenses include advertising, sales supplies, sales commissions, credit card fees, and inventory financing costs. Variable costs typically are in the range of 4% to 7% of sales.

A word of caution: If you are analyzing a manufacturing business, do not attempt to substitute fixed and variable manufacturing costs in the formula instead of the gross margin percentage. The reason is timing differences. Material, labor, and overhead are capitalized into inventory and finished products are not necessarily sold in the same accounting period as produced.

Knowing breakeven sales, profitability, and profit that is possible will help you to assess the finances of your business, competitors, customers, potential acquisitions, and potential acquirers.

Author's note: Above is the rewritten page 76 text. The concept on page 76 in the book is correct. Roger S. Bennitt
By
Roger Bennitt
A How-To-Do-It
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