Marketing Analytics by Wayne L. Winston

Author:Wayne L. Winston
Language: eng
Format: epub
Publisher: John Wiley & Sons
Published: 2014-01-04T05:00:00+00:00

Summary

In this chapter you learned the following:

A firm's customers drive the firm's revenues and profits. Therefore, if you can build a model that accurately generates a firm's number of customers, you can model the firm's future cash flows and estimate the firm's value. Key relationships used in this type of model include the following equations: (1) Before-Tax Profits = Revenues – (Variable and Nondepreciated Costs) – Depreciation

(2) After-Tax Profits = (1 – Tax Rate) * Before-Tax Profits

(3) Working Capital = Current Assets – Current Liabilities will be modeled as a fixed percentage of revenue.

(4) Cash Flow = After-Tax Profits + Depreciation – Change in Working Capital

(5) End Period t + 1 Customers = Beginning Period t + 1 Customers + New Period t + 1 Customers – (1– Retention rate) * (Beginning Period t Customers)

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