Poh-Heng Tan, CFA’s Post

See below for this week's Capital Markets Update. #CBRE #CapitalMarkets

What is the Degree of Operating Leverage (DOL)? The DOL is a financial ratio that measures how sensitive a company’s operating income is to changes in its sales. In other words, it quantifies how much a company’s profitability responds to fluctuations in revenue. 📊 Breaking Down DOL: Operating Risk: DOL helps quantify a company’s operating risk, which arises due to the interplay between fixed and variable costs. Fixed costs remain constant regardless of sales volume, while variable costs fluctuate with production levels. Low DOL: If a company has a low DOL, it means that its variable costs outweigh fixed costs. Consequently, a significant increase in sales won’t lead to a substantial rise in operating income. Low DOL is useful during times of low sales as the company won't have to cover hefty fixed costs. High DOL: Conversely, a high DOL indicates that fixed costs exceed variable costs. Such companies can significantly boost operating income by increasing sales. However, they must maintain relatively high sales to cover all fixed costs. During times of low sales, high DOL would lead to losses as the sales wouldn't be able to cover fixed costs. Remember, understanding DOL helps businesses make informed decisions about cost structures, risk management, and profitability. #Finance #BusinessMetrics #OperatingLeverage

📉 Business order values at record low – down 49.9% YoY 📈 One in 11 hospitality businesses to fail over next year 💰 Payment defaults trending upwards since mid 2021 🏛 Court Actions up 37% over the past year Our latest Business Risk Index is out, read the full report ⬇

Hey Folks, today we will thoroughly explore the concept of Degree of Operating Leverage (DOL) 💥The degree of operating leverage (DOL) is a financial metric that measures the sensitivity of a company's operating income to changes in its sales revenue. In other words, it quantifies the relationship between a company's sales and its operating income, highlighting how changes in sales can impact profitability. 💥Alternatively, the degree of operating leverage (DOL) is defined as the percentage change in operating income (EBIT) that results from a given percentage change in sales: DOL = Percentage change in EBIT/Percentage change in sales DOL = [ΔEBIT/EBIT]/ [ΔQ/Q] 💥To calculate a firm’s DOL for a particular level of unit sales, Q, DOL is: DOL = [Q(P-V)]/[Q-(P-V)-F] where: Q = quantity of units sold P = price per unit V = variable cost per unit F = fixed costs Multiplying, we have: DOL = [S-TVC]/[S-TVC-F] where: S = sales TVC = total variable costs F = fixed costs Simply, we can write DOL = Contribution Margin/Operating Income Hence, the degree of operating leverage is a valuable tool for assessing the sensitivity of a company's operating income to changes in sales, providing insights for risk management, financial planning, and strategic decision-making. #leverage #operatingleverage #financialleverage #financialmodeling #investmentbanking #equityresearch #financematters #valuation #cfa

Property managers can boost their success by leveraging KPIs like net operating income (NOI), capitalization rate, occupancy rates, and cash-on-cash returns. 📊 These metrics provide valuable insights into a property's financial performance and investment opportunities, empowering managers to make data-driven decisions. #KPIsThatMatter #Consultant https://hubs.la/Q02y_QrD0

Ever wondered what lenders need to consider when reviewing feasibility studies for business expansions? Here are the key points: 🟢Market Demand: Lenders look for evidence of strong market demand to support the expansion. This includes analyzing market trends, customer needs, and potential market share. 🟢 Financial Projections: Accurate and realistic financial projections are essential. These should include expected costs, revenue forecasts, and projected profitability to assess the financial viability of the expansion. 🟢 Operational Plan: A detailed operational plan shows how the expansion will be executed. This includes timelines, resource allocation, and any required changes to current operations. 🟢 Risk Assessment: Identifying potential risks and mitigation strategies helps lenders understand the expansion's stability and sustainability. 🟢 Management Team: Lenders assess the capability and experience of the management team to successfully implement and manage the expansion. Let’s connect to discuss how to create a compelling feasibility study for your next business expansion! #FeasibilityStudy #BusinessExpansion #SBALoans #MarketDemand #FinancialProjections

What are the two most significant risks of poor cash management optimization? ❌ Unclear understanding of your profits vs. cash ❌ Poor insight into cash inflow vs. cash outflow On the other side, strong cash management can fuel business success for years to come: ✅ Better risk management, better prepared for the unexpected ✅ Improved loan eligibility and credit ✅ Stay ahead of the competition with freedom to create new strategies Learn the best practices for cash management optimization and elevate your business. #cashforecast #cashlogistics #cashmanagement

At first glance, one might assume that #CLO managers with higher portfolio spreads tend to perform well during favorable market conditions but struggle during downturns. However, upon closer analysis of the average alpha performance within each category, this assumption is only partially valid and not universally applicable. (Please note that this premium research piece is behind a paywall.)

#ValueVaporization is real. A review of "190 appraisals of major properties across all assets classes ... [found] an average 41.2% valuation decline in $10 billion in assets. Retail was down 57% while office was on its heels at 48.7%." Property owners & lenders with maturing #realestatedebt -> Let's Talk! #workout #restructuring #bankruptcy #receivership #realestate #cre #letstalkrealestate #default #defaults #leveragedfinance #leveragedloans #leaserenegotiation #renegotiation #realestateconsultants Keen-Summit Capital Partners LLC American Bankruptcy Institute Turnaround Management Association https://lnkd.in/evjUNWtA