FAQ's

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Frequently Asked (Loading) Questions

Question?
How does the software deal with a company that has no debt?

Answer!
In the unlikely event that the business has no borrowings, the Cash and Equivalent box in the Current Assets should be used for all short-term investments. The actual bank balance can be loaded into short-term debt as a negative figure.

Question?
When I load my numbers into the software I notice that the Accumulated Retained Earnings for the current year are calculated for me. How does it do this? Can I change this number?

Answer!
The software calculates the Accumulated Retained Earnings for each period by adding the Retained Earnings from the current year Income Statement to the Accumulated Retained Earnings from the previous year. You cannot change this number, except for Period 1, which is important from a data integrity perspective. However in some rare circumstances you may wish to change Accumulated Retained Earnings using the Adjustment account.

Question?
There are 15 lines of detail . What if I have more than 15 items of detail? (e.g. Operating Expenses)

Answer!
The software is a Strategy and Analysis tool . It is designed to provide an overview of the business and assist you in the strategic financial management of your business. Details such as a list of all overheads do not aid in this process. Therefore a limit of 15 items of detail has been deliberately set. You should combine similar items into categories, e.g. selling costs.

Question?
What if my company is in the Service Industry and does not have any COGS?

Answer!
Almost all companies do have a Cost of Generating Services (COGS) figure, although this is not always evident from the Income Statement. In order to generate Revenue, a company has costs that are directly related to the generation of that Revenue. In the service industry this is usually the cost of paying the people that earn the revenue. This amount should be put into the COGS field, rather than the Operating Expenses.

Question?
What if a business operates through a trust and has no Share Capital?

Answer!
Most trusts have beneficiary loan accounts, which in effect are the equity of the trust. It is suggested that the beneficiary loans accounts are loaded into the other equity field and the settled sum into Share Capital .

Question?
How does the software calculate an accurate Cash Flow without knowing the depreciation figure?

Answer!
The overheads or COGS you load include depreciation. By loading your net fixed assets, depreciation has been taken into account. The depreciation in the Prof it and Loss will be the same as the depreciation in the balance sheet .

Question?
Is there any restriction on the type of numbers that I can enter into my Balance Sheet or Prof it and Loss fields for Optimist?

Answer!
For any Balance Sheet and Profit and Loss fields, Optimist will only accept numeric cell values up to nine characters long and to a maximum of two decimal places, eg. 888,666,888.66. The application will therefore accept any numeric entries between the values of –999,999,999.99 and 999,999,999.99

Strategy
Frequently Asked (Strategy) Questions

Question?
Why does the software assume that all operating expenses are variable?

Answer!
From a budgeting perspective, most operating expenses are neither totally variable nor totally fixed; most operating expenses are semi-variable. The software assumes the operating expenses are variable to allow you to easily change the operating expenses driver to reflect what you expect the operating expenses to be.

Question?
We calculate ROCE % differently. How do I change the formula for a result?

Answer!
This is a very important issue. The software does not al low you to change any of the calculations. This ensures that a report can be understood and accepted by outside parties, eg an Accountant. Any users of the software will get consistent results.

Question?
How can I make more than one change and see the impact? When I make a series of changes, the net change only shows the last change.

Answer!
The net change feature only shows the impact of the last change. You can see the impact of multiple changes through the What If? Monitor and What If? Report.

Question?
What if I purchase an asset using a Long Term Debt facility, and not a Short Term Debt facility?

Answer!
All we need to do is to complete the transaction, by inputting the R100,000 into long term debt . Note the effect, the short term debt has reduced by R100,000. Note also that the additional interest (less Tax) is still included in the short term debt figure.

Question?
Can I use Change in Net Debt as a simple cash flow indicator?

Answer!
Yes. Change in Net Debt looks at the current position of Short Term Debt, Long Term Debt and Cash at Bank versus the previous posit ion. This basis is a perfectly simple measure of cash flow.

Analysis & Reports
Frequently Asked (Analysis) Questions

Question?
Most of our clients have fee earning/service businesses (lawyers and engineers) that don't necessarily have COGS. The reports and analyses appear to rely heavily on entities with COGS. Are these reports and analyses not as useful if a business doesn't have COGS?

Answer!
In these cases the Revenue will be the fees or Main revenue related items. The direct costs or the "cost of Fee earning revenue" will be loaded into the COGS field. In Version 7 you can customise the loading templates to reflect accurate wording relating to Fees and Direct costs or whatever one wants to call the Narration. This will also flow through to the reports. No matter what the industry, Gross Margin % and EBIT % are important results, and the point to note in any ratio/financial analyses is what the numbers are telling you as far as the "Marginal" movement from one period to the next. The result will still be relevant, and the movement between the periods and over a period of time will be pertinent to your analysis (assuming you're comparing equal time periods).

Question?
The reports & analyses appear to be always based on a company. How useful are these reports if you have a non-company entity - i.e. partnerships and trusts? Does the software take into account that the entity won't always be a company? (E.g. Equity of a trust will always be the settlement sum + accumulated losses?)

Answer!
The reports and analyses will reflect what is loaded and where it is loaded. The numbers give us a story on performance. With Partnerships and Trusts we take the view (management accounting) that they should be treated as "Other Equity" or "Quasi Equity" as apposed to an asset/liability of the business. Often there won' t be a tax situation as this is taxed after the dividend is given to the beneficiary. To load the movement in the beneficiary account one should take: Opening balance in the Partnership loan OR Beneficiary Loan (Trust) plus current years profit and deduct closing loan balance and the result will be the dividend or drawings for that period. Once again it is the "Marginal" movement in the ratios/results and trends that one should be looking at from period to period

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