Financial Planning & Analysis and Performance Management

3KEY ANALYTICAL TOOLS AND CONCEPTS

CHAPTER INTRODUCTION

There are a number of great analytical tools that can be used to understand business performance, identify problems and opportunities, and help set a course toward improving performance. In this chapter, I will share a few of my favorites that I have relied on time and time again. Most of these tools are utilized throughout this text, but they are worth introducing here as general tools and techniques because they are both useful and underutilized by finance professionals.

BASIC STATISTICAL TOOLS

There are several useful tools buried in that textbook from your college statistics course. Many of the most useful assist in the analysis of a population or data set such as inventory, costs, transactions, or revenue by product, by project, or by customer. To illustrate, we'll review the finished goods inventory list for Vance Corp in Table 3.1. Management has asked for an analysis of finished goods, believing that the inventory levels are high and need to be reduced. This is a relatively small population of only 40 products whereas many businesses have hundreds or even thousands of products. Yet, it will serve to demonstrate the power of these analytical tools. The raw table provides data but would require an analyst to spend considerable time to review and summarize it.

TABLE 3.1 Finished Goods Inventory – Vance Corp

Vance Corporation
Finished Goods Inventory
Product Number	Unit Sales	Quantity Y/E	Unit Cost ...