Join Rudolph Rosenberg for an in-depth discussion in this video Analyzing overall operating expenses performance, part of Financial Analysis: Analyzing the Bottom Line with Excel.
…Before we get into the detailed analysis of each category,…let's starts with analyzing OPEX as a whole.…OPEX is the missing link between gross margin and…operating income, which is very close to your profits before any tax is paid.…Operating income is the profitability of your business operations.…Operating income is equal to gross margin less OPEX.…That means that to generate any profit from your business,…you need to have more gross margin than OPEX.…
This is a very important point, since it means that having a positive gross…margin is not merely sufficient to keep your business afloat.…If your business generates $10,000 of gross margin per month, then it is…a good thing, but only if your monthly OPEX is equal to less than $10,000.…If you have more OPEX than gross margin then your business is in…trouble as it is losing money,…and in that case there are only three ways to make it profitable again.…First, either you reduce your spending to make your OPEX smaller than your…gross margin.…
Second, you make more business, which means more revenue, which will lead to…
Also check out the companion course, Financial Analysis: Analyzing the Top Line with Excel.
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- Finding data points
- Prepping data
- Calculating standard cost and gross margins
- Analyzing overall gross margin performance
- Analyzing individual and overall expenses