The Jockey, The Horse & The Course
Which is most important factor to win a race?
Jockey → Owner
Horse → Company
Course → Environment
Which one is the most important?
Management assessment
• Discretionary vs non-discretionary
• Elastic vs Inelastic
• Committed vs Non-committed
• Capex vs Opex
• Change in board management
• Changes in executive management
• Change in strategy
• Change in products
• Changes in markets
• Changes in Customers
Profitability – coupling GPM and NPM
| Revenue | GPM most likely affected by market forces |
| Less: COGS | |
| Gross Profit | |
| Less: Operating expenses | Overheads tells you about management’s capability; which affects your NPM |
| Net Operating Profit | |
| Less: Other expenses | |
| Add: Other income | |
| Net profit |
•MP’s 5 forces gives you a balanced view on the competitive forces in a market
•Which competitive forces is eating up into your GPM?
