On "Financial Traits" Of Bosses To Reduce Financial Risks

In many business processes, many business owners have different financial analysis and evaluation, but most of them have not paid close attention to the financial analysis ability of these managers. In fact, risk assessment and profit are the basis for financial managers to make the best strategic decisions.

For this reason, management consulting experts classify their financial characteristics into four categories according to their attitude towards profits and expenses: venture capitalists (such as Apple Com puter Inc's Steve Jobs), commercial Pirates (such as Sandy Weir of Citigroup), mercantilism (such as Chuck Conaway of Kmart group) and "discount store operators" (such as TLC Beatrice food company Rojena Luis).

Executives must match their financial traits with their real needs.

Do these methods have inherent advantages or defects in creating value?

To answer this question, we first need a set of methods to evaluate different financial behaviors of executives.

The financial idiosyncratic method can provide useful information to answer these questions by evaluating the way executives create value for enterprises and specific methods.

The standard models for measuring leadership generally tend to focus on such aspects as strategic vision and executive ability, communication skills and so on, instead of directly examining the financial methods adopted by leaders in practical work.

For example, they may focus on the ability of a leader to reduce costs in a given vision, but will not seriously explore the specific ways in which people deal with these problems.

This method of financial character can make up for this deficiency.

Management consulting experts say: "leaders of enterprises have two basic motivations: to add value to products or services and effectively allocate resources of enterprises."

The first driving force can be deduced from the gross profit margin of enterprises.

Gross profit margin is gross profit (business income minus sales cost) divided by revenue.

Usually, financial analysts use gross margin as a means of measuring the added value of products or services.

In terms of measurement results, it is much more accurate than profit, because profits can sometimes be very high, while value-added is very small. Sometimes, on the contrary, profits are very low and value-added is very high.

The second power can be deduced from the indirect cost ratio of enterprises.

The indirect cost rate is the cost excluding sales cost divided by operating income.

This data may not be the best criterion for measuring the utilization of resources, but it does provide a related fee.

Good clues, and

The relevant information can be found directly from the profit statement.

The financial idiosyncratic method combines the two types of data gross and indirect costs to determine the specific financial methods employed by executives in enterprises.

To ensure that the content is comparable, this method takes into account the average value of the two data in a particular industry or market.

One important thing is to be clear.

The law only measures the economic measures adopted by executives.

This is different from some similar psychological assessment methods. The evaluation of executives by financial trait law is not based on their personality, but is evaluated by different people's views on the financial risks and corresponding returns of enterprises in different situations.

To understand this method, we must first know that gross margin, which is linked to the performance of senior executives, is high and low, and the cost is the same.

Therefore, there are four kinds of extreme situations in the financial trait Law: first, high gross margin and high cost; two, high gross margin and low cost; three, low gross margin and high cost; four, low gross margin and low cost.

Each kind of situation has corresponding financial behavior, they are called "venture capitalist", "commercial pirate", "mercantilism" and "discount operator" respectively.

The details of these four characteristics illustrate how these four groups use resources and create value in different ways.