People matter – Accounting for Population

Today the city of Detroit filed for the largest city bankruptcy in the history of the U.S. listing $18 billion in debt it cannot pay.  A picture is worth a 1,000 words.  The following graph is courtesy of zerohedge.com:

In analyzing Annual Reports and financial statements for clients, I focus on many intangibles which many traditional analysts overlook.  One such key metric is headcount or the number of people employed by a given firm.  As a past manager in a larger corporate environment where I was closely involved in the budgeting process, I know first-hand how difficult it is to justify the addition of headcount as ‘labor’ is the highest operation cost in many organizations.

I’ve found that rising headcount in conjunction with rising revenue a very good indicator of continued growth in corporate profits.  In particular, the rate of change in payroll in the context of the rate of change in other accounting metrics is key.  If for example, the growth rate in employment ebbs while rosy projections emanate from the executive suite; that can be a warning sign.  Actions speak louder than words and I view growth in headcount a positive leading indicator.

Now consider Detroit.  Population metrics for a given city can be used to project a city’s financial health as well.  As fewer and fewer residents are available to support the fixed cost of government, services decline which serve to accelerate the decline in population.  They say it takes over 50 minutes for understaffed Detroit police to respond to a call.  Do you know the population trend for your city?

If you find my insights beneficial and would like assistance with your accounting and investment activities, please contact me, Christine Meder at Christine Meder’s Accounting Advisory Services.  My email is mederchristine1526@gmail.com and you can tweet me at @christinemeder1.  I’m offering a free 30 minute consultation during the month of July.  #unrbrand

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About Christine Meder
Leveraging my insights and professional experience of 25 years in the accounting profession, I and my firm Christine Meder's Accounting Advisory Services provide our high net worth clients expert advice on their business activities and investments. In addition to performing traditional accounting functions in a confidential manner, I pride myself in giving clients a competitive edge whether it be in running their businesses or managing their investment portfolio. My studies leading up to completion of the EMBA program at the University of Nevada, Reno this August provide me with latest skills and techniques utilized across a broad spectrum of business functions. This breadth of education is complemented with experience as an accountant in the construction, mining, real estate and technology fields during my career. If you are looking for a trusted adviser or consultant in addition to someone you can rely on to properly keep your books, please contact me.

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