Documente Academic
Documente Profesional
Documente Cultură
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Best tool we have to build a business case
Motivator with dealers« Ego« dealer vs. others
Conversation starter into any departmental topic at a dealership.
Identifies areas of opportunity for training and growth
Leaving $ opportunity on the table
Another opportunity to create a relationship with dealer
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The Financial Statement is the fruit of a dealer¶s labor« sales and
profit
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Review current statement for general condition:
High or unusual values and items requiring explanation
Trend balances in order to identify:
Significant changes in balances
Increases in assets that might affect adversely cash and working
capital
Changes in accounts that usually don¶t change during the year
(e.g., LIFO)
Lack of change in accounts that should vary monthly (e.g.,
receivables, accruals)
Review ratios for:
Positive/negative trends, compare to standards
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Is there any cash?
Understanding cash flow begins with recognizing changes in the
balance sheet
V) $
Is there much vehicle equity?
How much of which has been floor planned?
Total NV/Demo inventory- line 30
Notes payable new PC/LT/Demo line 6
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Liquidity
The ability of the dealership to pay its bills and survive
adverse short term changes in sales or cash flow
Safety
The ability to meet long term obligations under adverse
conditions
ÈLiquidity Measures
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& > RORA requirement!
-& Dealers need Working Capital in order to carry out
day-to-day operations.
How can dealers increase it?
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One of the first lines of defense for identifying if a dealer has enough
capital, cash or owners¶ equity, invested specifically in the M-B
dealership to maintain a certain level of business operations.
, & The surplus of cash, vehicle inventory and money due
on sales over floor plan debt (Floor plan debt= customer deposits and
vehicle notes payable)
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& > RORA requirement of one month average expense
-& USA added this measure as a requirement in 2004.
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& Minimum 2.0:1 Higher is better.
-& Some manufacturers calculate this ratio before
deducting flooring debt from both current assets and liabilities because that
is the traditional definition. How soon will flooring be paid?!
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& Minimum 1.0:1 Higher is better
-& The reason this is called the "modified" ratio is that a
standard bank quick ratio only looks at cash + receivables over all current
liabilities. Dealers, however, do not expect to pay off the "short term"
flooring line
ÈSafety Measures
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-22%
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& Maximum 1.0:1 Lower is better
-& NADA and USA use this ratio. However, one large
risk from high leverage is an interest rate hike and this risk clearly applies
to Floor Plan
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, & For every dollar of the dealer¶s own money invested in
the dealership, we generate X¢ in profit each year
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& High enough to reward investment risk; at least 20%
-& Net worth may need more adjustments (e.g.,
shareholder loans and receivables, YTD Profit)
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& No common standard available; as close to 10% as
possible and certainly more than the cost of money
-& Assets often need to be adjusted (e.g., LIFO, Other
Assets and Receivables)