Money Archives - Females In Food

The Financial Metrics You Need to Know

September 2, 2021 by Danielle Doolen

Business people hands do chart analysis and statistics. Marketing metrics planning. Colleagues discuss financial charts. Brainstorm the team.

Money makes the world go round. It keeps businesses running and employees compensated. So as a business professional, it’s important to know important financial metrics and key performance indicators (KPIs) that impact your business to measure and analyze the health and success of your company. Whether you’re a manager or an individual contributor, developing financial acumen is a business skill that every professional should hone as they develop their careers.

Where You See These Metrics

There are a lot of metrics used in financial reporting, but before we dive in, here’s a brief rundown of the financial statements you need to know.

Balance Sheet: The balance sheet is a snapshot of a company’s assets, liabilities, and shareholders’ equity at a specific point in time

Income Statement: The income statement shows a company’s revenues and expenses over a period of time.

Cash Flow Statement: The cash flow statement includes the company’s cash inflow and outflow due to its operating, financing, and investing activities.

Annual Report: An annual report is a comprehensive document that public companies must prepare annually for shareholders that details their operations and financial performance. The annual report includes the balance sheet, income statement, and cash flow statement, in addition to other important company information.

The Metrics You Need to Know

Contribution Margin: Contribution margin is the revenue generated from a product or unit sold after subtracting variable costs. It can be calculated two ways: gross and per unit.

Gross: Contribution Margin = Sales Revenue – Variable Costs
Per Unit: Contribution Margin = Selling Price per Unit – Variable Cost per Unit

Cost of Sales: Costs of Sales, also known as Cost of Goods Sold, is the cost of producing goods. It takes into account all the direct costs of producing goods and excludes indirect costs, like marketing.

Cost of Sales = Inventory + Purchases – Ending Inventory

Current Ratio: Current Ratio measures a company’s ability to meet short-term obligations.

Current Ratio = Current Assets / Current Liabilities

Debt to Equity Ratio: A company’s debt to equity ratio measures a company’s financial leverage. It’s a metric that shows how much a company is financing operations through debt versus their own funds.

Debt to Equity Ratio = Total Liabilities / Total Shareholders’ Equity

EBITDA: EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It’s a measure of a company’s overall financial performance.

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization

Earnings per Share (EPS): EPS measures a company’s profitability per outstanding shares of stock.

EPS = (Net Income – Preferred Dividends) / Average Outstanding Common Shares

Profit Margin: Profit margin gauges how a company is handling its finances (i.e., profitability).

Profit Margin = ((Sales – Total Expenses) / Revenue) x 100

Return on Investment (ROI): ROI is a ratio between net income and the cost of an investment to measure profitability. It compares the gain or loss of an investment to its cost.

ROI = (Current Value of Investment – Cost of Investment) / Cost of Investment

Working Capital: Working capital measures a company’s liquidity (i.e., the ability of a company to raise cash if it needs it). It looks at the difference between current assets, like cash, accounts receivable, and inventory, and current liabilities, like accounts payable.

Working Capital = Current Assets – Current Liabilities

Financial acumen is one of our core content pillars for the Females in Food community. We can’t stress enough how important it is for working professionals to develop this skillset as it’s a critical competency when advancing into senior leadership positions. Join the Females in Food community today to surround yourself with high-performing women who can help you hone your financial acumen, achieve your goals, and more!

3 Things You Need to Know About Your 401(k)

February 7, 2021 by Angela Dodd

You’re lying on a beach soaking up the sun at 11 am. Or maybe you’re traveling with your partner through Europe seeking out adventure. I’m not talking about going on vacation. I’m talking about retirement. That lovely time in the distant future where the world is your oyster and the possibilities are endless. Or are they? That depends on what you save in your 401(k) today.

What is a 401(k)?

A 401(k) is a company-sponsored retirement account you can contribute to that many employers offer their employees. Employees can contribute to a 401(k) directly from their paycheck, and many employers offer a match. This means that when you contribute a percentage of your salary to your 401(k), your employer will match it up to a predefined percentage.

There are two basic types of 401(k)s: traditional and Roth. The main difference between the two is how your money is taxed. In a traditional 401(k), your money is taxed when you withdraw your funds during retirement. For a Roth 401(k), your contributions are taxed now, so you can make withdrawals tax-free in retirement.

We all know we should contribute to a 401(k). But why? Besides having money saved to live your best life when you retire, what’s the benefit to contributing your hard-earned money now when it could be better spent saving for a home or paying off debt. Long story short, your money works harder for you now, so you don’t have to work as hard later.

Here are three things you need to know to take hold of your retirement today.

Start Investing in Your 401(k) ASAP

The earlier you start investing, the better. Your money will work harder for you over the years because of compound interest. Compound interest is when you gain interest on your interest, which results in more money for you. When you contribute to your 401(k), you accrue interest based on where your funds are invested. Let’s check out a few examples:

You start with nothing in your retirement account and begin contributing $100 a month to a 401(k) today for the next 30 years. Assuming a 7% interest rate, at the end of those 30 years, you’ll have $121,997.10. Your original contribution during that time is $36,000, meaning you gained $85,997.10 in interest.
Now, let’s take the same example, but instead of $100 a month, let’s up it to $500 a month. At the end of those 30 years, you’ll have $609,985.50. Your original contribution was $180,000, meaning you gained $429,985.50 in interest.

Compound interest is your friend. Think of it as free money. The sooner you start investing, the sooner you can reap its benefits. Try out this calculator to see for yourself.

You Can Choose Your Investments (If You Want To)

When you opt in to your employer’s retirement plan, a target fund is usually identified based on how many years you have until you retire. This slew of investments is predetermined, and there’s nothing you need to do on your end to allocate funds. But did you know you have a choice on where you invest your money? Instead of selecting a premade investment mix, you can choose where you want your money to be invested based on your risk tolerance.

That being said, if you want to choose your own investments, make sure to do your research and consult with a financial advisor to ensure your investments align with your retirement goals.

It Pays to Vest with Your Company…Literally

You know that awesome employer match many employers offer? It turns out it comes with a few strings attached. I’m talking about vesting. Simply put, vesting is how much of the funds your employer contributes to your 401(k) that you own. You might think that as soon as that money hits your account, it’s yours, but not exactly.

Most employer contributions are on a vesting schedule. It could go something like after one year with the company, you vest 20% of your employer match, after two years you vest 40%, and so on until after five years with the company, you own 100% of that money. If you were to leave the company anytime before those five years, you essentially forfeit those contributions and only walk away with your vested percent.

So if you’re considering leaving an organization, be sure to check your vesting schedule and where you fall on their timeline. It may pay to stay an extra month or two if that means you can walk away with more money in your pocket for retirement.

How to Be The Boss of Your Money

February 7, 2021February 1, 2021 by Angela Dodd

Money is great. It helps us buy the things we need, like a roof over our heads and food on the table. It also affords us the opportunity to buy what we want, like a good bottle of wine or a plane ticket to a tropical destination. As the saying goes, money makes the world go round. But then why is it that we work every day to make money, and yet, we’re not always the best at taking care of it?

According to Charles Schwab’s 2019 Modern Wealth Survey, 59% of adults in the U.S. admitted to living paycheck to paycheck in 2019, and only 38% have built up an emergency fund. How can we take control of our money so our funds can flourish? Here are six ways you can be the boss of your money today.

Establish a Budget

There’s no shock here. You’ve heard countless times that you need a budget. But have you actually made one? Maybe it’s that task on your to-do list you keep pushing off. Well, now is the time to do it.

Start by looking at your bank statements for the past few months. Take note of how you spend your money and opportunities for savings. It may be time-consuming, but it’s worth it. The first step in taking control of your money is knowing where it goes.

Start Saving Something

If you’re living paycheck to paycheck and think saving is impossible, here me out. Saving something, no matter how small, is better than nothing. Start with setting $10 aside from each paycheck. Then after a couple of months see if you can bump it up to $20. Any little bit you can set aside to an emergency fund will help when unexpected expenses arise because they always do.

The biggest bang for your buck when it comes to saving is a 401(k), especially if your employer offers a match. That’s essentially free money in your retirement account. Try to contribute the minimum amount to receive your employer’s match, so you’re not leaving money on the table.

Get Acquainted with Your Debt

Debt sucks. Plain and simple. But the only way you can do something about it is to face it head-on. This means getting real about how much you owe. Pull up statements for your credit cards, student loans, mortgage, medical bills, and whatever else you owe. Take inventory of your balances and interest rates, and then make a plan.

There are two basic strategies you can use to approach your debt: the debt snowball method or the debt avalanche method. In the debt snowball method, you pay the minimum balances on all your accounts and start contributing any extra funds to your lowest balance. Then once your smallest balance is paid off, you take that money and start paying off your second lowest balance until you’re debt-free. The debt avalanche method uses a similar concept, except instead of focusing on your smallest balance first, you concentrate on your balance with the highest interest rate and then the second-highest interest rate, and so on. Debt is personal, so whichever method you choose is entirely up to you.

Spend Within Your Means

This seems simple enough, but the hard part is actually doing it. Spending within your means simply means don’t spend more money than you bring in. Be smart with your money and stick to your budget. Understandably, you may need to use credit cards to pay for unexpected expenses that you can’t cover with your emergency savings, but defaulting to using your credit card shouldn’t be the norm.

Gain an Understanding of Taxes

Taxes can seem overwhelming, but unfortunately, they’re unavoidable. You don’t need to be an expert, but it’s helpful to have a basic understanding of your taxes. There are a lot of great resources online, like this set from Investopedia. If that still feels like too much, find a tax professional or accountant who can help walk you through it.

Remember, You’re in the Driver’s Seat

When you’re trying to be the boss of your money, the biggest thing to remember is that you’re in the driver’s seat. It’s your money, after all, and you need to take ownership of it. That includes how much you make, how much you spend, and how much you save. Hold yourself accountable to leveling up, so you can have a brighter and more prosperous future.

The Financial Metrics You Need to Know

3 Things You Need to Know About Your 401(k)

How to Be The Boss of Your Money

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