Housing Giants - July 10, 2008 - (Page 26)

f e at u r e Builders must still look at their own internal data, too. A company’s financial ratios can reveal a lot about how to trim operations, produce more cost-effective products or decide whether to hold or sell a parcel of land during the downturn. Along with the financial data, Steven Mungo, CEO of the Mungo Co., says that because sales drive home builders, it is one of the most important things that a CEO or president can track. Mungo constantly sifts through sales reports and regularly observes referrals, weekly sales and weekly cancellations. In a downturn, Mungo says builders will likely pay more attention to reports and data than they did in the past. “[Reports] are more important than they used to be, and that is because everyone has much greater financial constraints on them than they did before. It used to be you could make up your mistakes with excess credit,” says Mungo. TOP 5 REPORTS AND RATIOS fOR UPPER mANAGEmENT 1. Traffic Reports Traffic numbers and reports are the backbone of sales. Builders should carefully track traffic to gauge the viability of their marketing efforts and price points. 2. Conversion Rates These ratios identify the rate of sales that result from traffic. Upper management should watch these rates to sustain or improve closing skills and forecast sales and revenues. 3. Debt to Equity Ratios A measure of the company’s financial leverage that indicates the portion of equity and debt the company is using to finance its assets. In uncertain times, higher liquidity can better prepare home builders to take advantage when an upturn comes. 4. Return on Invested capital The financial measure that quantifies how well a company generates cash flow relative to the capital that it has invested in the business. monitoring ROIc can help home builders become more efficient and productive. 5. Production Reports Broken down by region and community, production reports that include costs of labor, materials and cycle time can help builders monitor and improve their construction efficiencies. 26 HOUSING GIANTS.7.10.08 www.HOUSINGGIANTS.cOm http://www.housingzone.com/giants/article/CA6364724.html?q=chuckshinn http://www.housingzone.com/giants/article/CA6364724.html?q=chuckshinn http://www.housingzone.com/giants/article/CA6491719.html?q=mungo http://www.housinggiants.com

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Housing Giants - July 10, 2008

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