This is a quick overview of key concepts of business growth sustainability. It explains how the financial structure of the business affects growth and shows options for better managing business growth.

1. What growth level can your business sustain? Understanding business growth & adopting ways to manage more of it better

2. What you need to know 1 2 3 Case study: the QuestCo corporation Conclusions

7. Structure of balance sheet and sustainable growth: the most quantitative assessment Tangible assets Assets = uses Liabilities = resources Intangible assets Inventory Cash Accounts receivable Equity Long term debt Retained profits Short term debt (arising from operations) Accounts payable Working capital Net working capital Increase of net working capital absorbs financial resources 1

8. Structure of balance sheet and sustainable growth: the most quantitative assessment Working capital Increase of net working capital absorbs financial resources 1 Fixed assets = committed to long term use by the business Assets = uses Liabilities = resources Current assets of business operations = working capital Long term financial resources Net working capital Current liabilities (arising “spontaneously” from operations)

9. Funding requirements stemming directly from the growth of existing operations Net working capital Growth  increase of current assets  need to fund growth of net working capital 1 Fixed assets = committed to long term use by the business Assets = uses Liabilities = resources Current assets of business operations = working capital Long term financial resources Working capital Current liabilities (arising “spontaneously” from operations)

10. Biggest managerial impact is through allocation of resources: priorities matter a great deal! 1 Liquidity at start of FY Labor Materials General expenses Maintenance & replacements Discretionary investments Inventory Accounts receivable Liquidity at end of FY Retained earnings Taxes Interests Equity returns New resources New capital New debt Resources Uses Key

12. What you need to know 1 2 3 Case study: the QuestCo corporation Conclusions

14. QuestCo’s Financials & Sustainable Growth Number of Operating Cash Cycles = 365 / OCC = 2.23 SG per OCC = Cash generated per sales dollar / Cash required per OCC = 12.51% Sustainable year on year growth = 27.8% 2

15. Option 1: Speeding Cash Flow A 5.8% drop of current assets… … causes an 8% drop in days of cash tied up… … and an increase of sustainable growth to 30.2% up from 27.8%, i.e. an improvement of almost 8.5% 2

16. Option 2: Reducing Costs Reducing cost of sales by 1.9% and operating expenses by 1.5%… … dramatically improves cash generation… … which pushes sustainable growth to 33.7% up from 27.8%, i.e. an improvement of over 20% 2

17. Option 3: Raising prices Raising prices by a mere 1.5%… … dramatically improves cash generation… … which pushes sustainable growth to 33.1% up from 27.8%, i.e. an improvement of 19% 2

18. What if all options were combined? Improved cost efficiency, higher prices and reduced current assets… … dramatically improve cash usage & generation… … which pushes sustainable growth to 36.2% up from 27.8%, i.e. an improvement of almost 30% 2

19. What you need to know 1 2 3 Case study: the QuestCo corporation Conclusions

21. Sustainable growth also depends on non-financial factors, e.g. talent, natural resources… Growth Company A Financial limit to growth Human capital limit Environmental limit Company B Financial limit to growth Human capital limit to growth rate Environmental limit Company A sustainable growth Company B sustainable growth 3

23. Where quests of people yield value for business ® Helping your business grow better