But a Profitable Return is still Relevant
Is your company healthy?How do you know?Do you just look at one indicator, or several?Combining the historical Dupont Model and Mobley Matrix tools can open your eyes to the real health of your business, especially when presented in a graphical format.
In 2004,I was part of a team that conducted a pre-published reviewed of Driving Your Company’s Value, Strategic Benchmarking for Value, by Mard, Dunne, Osborne, and Rigby. One approach used by these authors was combining the DuPont Model and the Mobley Index to gauge the health of a business.
The DuPont Model was created in 1919 by a finance executive at E.I. du Pont de Nemours & Company.It demonstrated that a company’s Return on Equity was actually a summary of the company’s profitability, turnover, and leverage.
The Mobley Matrix was created in the fifties by Lou Mobley, who became the founding director of the IBM Executive School.He discovered the relationship between cash flow and financial statements.
This is better shown in ROE-Mobley Example.Click here:
As you can see, there is a correlation between the two tools displaying many metrics that gauge the health of your business.These measures can open your eyes to operating cash problems, excessive debt, and many other hidden ailments.
However,this could be a little overwhelming to the business owner who is an expert in his/her business and did not have time to go to business school.So, we place the model, and matrix, in an interactive graphical format.The measures are presented in a concise format for the owner to utilize.Please click here:
Business owners need to have a complete handle on their operations.Just knowing Sales and whether you have enough cash to make payroll is not enough.In fact, by time a business owner discovers what was obvious from out tools, it is usually too late.
We’re here to help.