Anil Lamba Quotes
“cash is used to purchase inventory.
The inventory then goes through a manufacturing process and gets converted to a finished product.
When a sale is made, the finished-goods inventory becomes debtors or receivables.
On the due date, when collection is made from debtors, it gets converted to cash again. This cycle of cash-to-cash is called the working-capital cycle.”
“An organization that • keeps inventory at a three-month consumption level, • takes one month to convert it to a finished product, • keeps a finished-goods inventory of another one month • and then sells the product on a three-month credit to customers, will have a working-capital cycle of eight months and be able to obtain 1.5 rotations in a year.”
“I must, however, warn you that the strategy of increasing fixed costs to increase profits is only recommended for good times, when markets are booming and the sales graph seems to be moving consistently upward. When recession sets in, it is time to begin swapping the fixed costs with variable costs wherever possible. This is because when sales drop, the variable costs will also decrease, but the fixed costs will remain fixed. And if the fixed cost component is high it can lead to a drastic and disproportionate fall in profit.”
“the ability to understand the impact of every decision you make on the organization’s profitability, and then to ensure that you take all those actions that will strengthen the bottom line and do nothing that weakens it.
This means that everyone whose actions have the power to affect the bottom line are Finance people.”
“the accountant is probably the only non-Finance person in the organization! The accountant is the only one whose actions do not impact the bottom line. After all the so-called non-Finance people have done their job, the accountant will compile the data, evaluate the result of their actions, and declare whether the organization has made a profit or a loss – basically just performing a post-mortem.”