Alejandro Serrano - Practical Finance for Operations and Supply Chain Management

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List of Figures

The triangle, as drawn by Roger Bloemen. To be a supply chain professional, you have to understand the impacts of the decisions on the triangle.

Portrait of Luca Pacioli, attributed to Guidobaldo da Montefeltro. Source: Wikimedia Commons.

Zappos.com has a 365-day return policy. When should it recognize sales?

A simple supply chain: connection to suppliers and customers.

Cash stocks and flows are intimately related.

Double-entry refers to the two columns that make up the main report of a double-entry accounting system.

Right column includes the firms sources of funds, such as Sharons pocket.

Left column includes everything a firm owns, such as a box with money.

Money to acquire the laptop comes directly from the money box.

All items in the financial reports have to be measured in dollars (or other currency).

Note that something is wrong with this report, as the sums in the right and left columns do not coincide.

After selling ninety-five books, Sharons happiness has increased by $1,900, and the sum of the figures in the two columns matches.

After selling the laptop, Sharons happiness has decreased by $500.

After spoiling five books, Sharons happiness has decreased by $400.

T-account example. (Can you guess why it is called a T-account?)

Ten-share certificate at $100 per share issued in 1902 by the Baltimore and Ohio Railroad Company. Source: Wikimedia Commons.

Cash shows the available money that a firm has in a bank account. The alternative image of a money box may be a useful one.

According to the convention on the assets side, cash reductions are annotated on the right, fixed assets increases are annotated on the left.

After event 3, the firm owes the supplier $400, as shown in accounts payable.

The revenue and expense account shows the changes in Sharons happiness.

The revenue and expense account keeps track of increases and decreases in Sharons happiness. The good news, which makes Sharon happier, is annotated under the smiley face. The bad news, which makes Sharon sadder, is annotated under the frownie face.

Spoiling inventory makes Sharon sadder.

General ledger of the firm at the end of June.

General ledger of the firm after event 8.

General ledger of the firm after event 11.

General ledger of the firm after event 14.

In accordance with the accounting criterion, the value of the renting contract would theoretically decrease at a constant rate over time (left). However, monthly buckets used by accountants convert the straight line into a staircase function (right).

The general ledger of the firm after event 3.

The general ledger of the firm after event 7.

General ledger of the firm after event 11.

General ledger of the firm after event 16.

Building the logic of straight-line depreciation.

A too-simple solution for accountants regarding depreciation.

The accountants approach regarding depreciation.

General ledger of the firm at the end of January.

The seven-item balance sheet.

The informal seven-item balance sheet.

Annotations in the general ledger at Sell&Collect (in thousands).

Amazon.coms 2017 seven-item balance sheet (US$ millions).

A more intuitive version of the balance sheet, where the accounts height is proportional to the amount in it.

OWC and the seven-item balance sheet (excess cash is assumed to be zero).

Financial balance sheet when excess cash is zero.

Evolution of OWC over the year (smoothed average).

An illustration of the involvement of the OWC elements in the operations cycle.

A pictorial representation of accounts receivable.

A pictorial representation of accounts payable.

A pictorial representation of inventory.

Representation of OWC and WC when excess cash is zero.

Relationship between WC and OWC.

Januarys revenue and expense account.

Relative prevalence of the terms OPEX and CAPEX over time. Source: Ngram Viewer; parameters: case insensitive, smooth = 1.

The financial balance sheet typically grows with the firms sales.

Cash movements between sources and uses of funds.

A representation of the seven-item statement of cash flows. Funds flow from right to left.

Elements of the statement of cash flows change columns if they are negative.

Only four items are relevant in this case.

Ethan and Ryans new firm statement of cash flows from January 9 to January 31.

Ethan and Ryans new firm statement of cash flows from January 9 to January 31: OWC breakdown.

A pictorial representation of net fixed assets (a stock in the balance sheet) and the related flows.

Retailers inventory can be represented by the level of water in the tank.

A more detailed view of manufacturing inventories, including raw materials (RM), work in progress (WIP), and finished goods (FG).

Annotations in the general ledger at FancyStuff after event 2 (in thousands).

Annotations in the general ledger at FancyStuff after event 3.

From data to decisions. The ultimate goal of interpreting financial statements is to make better decisions.

Pictorial representation of Inditexs balance sheet at the end of fiscal years 20152016.

Pictorial representation of Inditexs income statement in years 20152016.

Pictorial representation of Inditexs statement of cash flows in 20152016.

A representation of operational risk (left weight), financial risk (right weight), and industry risk (bar strength).

Financial balance sheet when excess cash is zero.

Representation of cash conversion cycle (CCC) on a time line.

GMROI for selected retailers in 2015. Source: Authors elaboration from the firms financial statements.