In this course, you'll learn how to use financial ratios to evaluate a company's performance. We will cover key ratios such as profitability, liquidity, and solvency ratios, and explain how to interpret and analyze them to gain insights into a company's financial health.
Hello there! My name is Vincent and I’m a data analysis professional with over a decade of experience working with software companies.
In this short video, I’ll do a short introduction to the topic of how to use financial data to make better decisions as a first-time manager.
As a manager in the software industry, you're likely dealing with a lot of different financial reports and metrics, such as income statements, balance sheets, and cash flow statements. It can be overwhelming to make sense of it all, but by understanding how to use financial data effectively, you'll be able to make informed decisions that positively impact your team and your company.
Here's an example:
A software company I used to work with had a problem with high customer churn rate. We used financial data to identify the main causes of churn, by analyzing the customer lifetime value(CLV) of the customers who left and comparing it to those who stayed.
We found out that customers who had been with the company for less than 6 months had a much lower CLV. After further research, we discovered that the onboarding process for new customers was not effective enough.
By improving the onboarding process and providing more support to new customers during the first 6 months, we were able to reduce the churn rate by 7% and increase the CLV by 15%.
This example shows how by using financial data and understanding the underlying trends, we were able to make a data-driven decision that positively impacted the company's revenue.
The key to using financial data effectively is to remember that it's not just about the numbers themselves, but also the story they tell. By looking at the data in context and understanding the underlying trends, you'll be able to make more informed decisions.
One important thing to keep in mind is that financial data can be easily manipulated, so it's important to make sure that you're using reliable sources and that you're interpreting the data correctly. It's also important to consider multiple sources of data, such as comparing your company's financial data to industry averages, and to validate your findings with others, to get a more accurate picture.
Another tip is to use visualization tools, such as charts and graphs, to help you understand and present the financial data in a clear and concise way. This will make it easier for your team and stakeholders to understand the data and the decisions you're making based on it.
Finally, don't be afraid to ask for help or advice. Whether it's from a financial analyst or a mentor, getting a fresh perspective can help you see the data in a new light and make better decisions.
Thanks for watching, and I’ll see you next time.