R Tutorial: Business Models & Writing R Functions

Want to learn more? Take the full course at https://learn.datacamp.com/courses/financial-analytics-in-r at your own pace. More than a video, you'll learn hands-on coding & quickly apply skills to your daily work. --- The first step for valuations analysis is understanding the business model: how and when your project earns revenues and incurs expenses. This varies greatly by project, but generally the components are: operating revenue, direct expenses, and operating expenses. We'll examine each of these. Operating revenue is generated directly from your product or service. For a consumer product like a cup of coffee, revenue equals the number of units (or cups) sold times the price per unit. In contrast, for a subscription product like music streaming, revenue includes other components. Enrollment and churn rates affect the number of subscribers, and revenues might come from both subscriptions or advertisting. Of course, revenue can also take many other forms for different consumer and commercial products. Direct expenses are expenses directly related to the good or service we offer and scale with them. The more we produce, the greater the expense. For_example, the cost of goods sold – like coffee_cups and beans – is a direct cost. This can also include servicing costs like labor directly related to production. In contrast, operating expenses (or overhead) are necessary to run our business but not directly tied to production. A standard example is sales, general, and administrative costs (called SGA) like advertising or the salary of staff accountants. Another type of operating expense is wear and tear on equipment. While this is related to production, it’s not a direct expense since it doesn’t scale directly with the units produced. Note that the timing of our revenues and expenses is on an accrual basis. This_means we recognize revenue as it's earned (versus paid) and expenses concurrently with the revenue they support. For_example, we might purc