Business Planning - Keys to Success - Chase Morrison

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Chase Morrison, B2B CFO partner talks to the North Valley Regional Chamber of Commerce about Business Planning.

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Business Planning - Keys to Success - Chase Morrison

  1. 1. Business Planning Key to Success Workshop Presented by Chase Morrison, Partner B2B CFO® Prepared ForNorth Valley Regional Chamber of Commerce
  2. 2. Workshop Objectives• Attendees will: – Gain a better appreciation for financial information that will help you understand your business – Be able to more proactively manage cash – Better understand the pros and cons of different funding options – Learn how to get more value from their accounting reports – Know how to get started on a three-year business plan – Improve decision making skills ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  3. 3. Agenda• Workshop objectives• Overview of financial statements – Profit & Loss (P&L) – Balance Sheet – Cash Flow Statement• Discussion of Financial Ratios• Review how the financial statements relate to one another• Step by step plan to generate a three-year plan• Discuss how to use your plan – Make decisions about debt (or business loans) – Develop method of evaluating investments – Review options for growing your business ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  4. 4. Financial Statements• The Onion Analogy – Sliced into thirds – Profit & Loss, Balance Sheet and Cash Flow – Each financial statement represents a different aspect of the whole – Each third contains layers – Onion quality is dependent on all three sections – Generally, the larger the business the greater the interest in “peeling off each layer” to better understand the business – This workshop only focuses on the top layers Cash Flow Balance Sheet Profit & Loss ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  5. 5. Valley Professional Services• Specifics regarding the business used through the workshop: – Business is a sole proprietorship – To date, business has been funded by owner – Cash basis accounting (vs. accrual) – Been in business for three years – Owner plus two employees – No inventory – Owner is using QuickBooks to track revenue & expenses ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  6. 6. Balance Sheet YE 2012 ASSETS Current Assets Cash 105,463 What can you quickly determine from the Accounts Receivable 35,810 balance sheet? (Note: Assets = Liab. + Equity) Other Current Assets 7,647 Total Current Assets 148,920 Fixed Assets 12,025 • What the company owns – Assets TOTAL ASSETS 160,945 • Of total assets, how much is owned by LIABILITIES & EQUITY others outside the company – Liabilities Current Liabilities • Of total assets, how much is owned by the Accounts Payable 2,579 Total Credit Cards 1,474 stakeholders – Total Equity Other Current Liabilities 6,087 Total Current Liabilities 10,140 Long Term Liabilities What are some important question you might Loans (Debt) 29,213 want to immediately ask? Total Long Term Liabilities 29,213 Total Liabilities 39,353 Equity • Is the company solvent? Owners Equity 146,970 • Is there sufficient liquidity (cash) to pay Retained Earnings -25,378 Total Equity 121,592 near-term bills? TOTAL LIABILITIES & EQUITY 160,945 • What do the assets consist of? ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  7. 7. Balance Sheet -- Assets Understanding assets YE 2012ASSETS Current Assets • Assets represent things that have value Cash 105,463 extending into the future. Accounts Receivable Other Current Assets 35,810 7,647 • The value of assets represent what the Total Current Assets 148,920 company could be liquidated for as of the Fixed Assets 12,025 statement date.TOTAL ASSETS 160,945 • If an asset cannot be liquidated for the recorded value, then it is consideredSource of assets impairedCash Cash is King! • Typically assets are listed in order of liquidityAccts Receivable Invoicing (cash, accts receivable, inventory, etc.)Inventory Made or bought Important considerations:Fixed Assets Book valueOther LT Assets Various • How efficiently are assets being put to use • Asset utilization will impact the level of require profitability. Assets Current and Long Term ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  8. 8. Balance Sheet -- Liabilities Understanding liabilitiesLIABILITIES & EQUITY Current Liabilities • Liabilities represent money that the Accounts Payable 2,579 company owes to others and thus represent Total Credit Cards 1,474 Other Current Liabilities 6,087 claims on assets. Total Current Liabilities 10,140 • Again, categories are separated into those Long Term Liabilities Loans (Debt) 29,213 that are due with 12 months—current—and Total Long Term Liabilities 29,213 those beyond 12 months—long term.Total Liabilities 39,353 • Liabilities are listed relative to when payment is due, with nearest due toward the top of the list.Source of liabilities • Includes loans and/or debt as component ofAccts Payable Vendor invoices long term liabilities.Credit Cards CC statements Important considerations:Other Current Mostly payrollLoans/Debt Borrowed cash • Liabilities should be posted to your accounting system to assess book value. • Liabilities present opportunity to leverage other people’s money. Liabilities Current and Long Term ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  9. 9. Balance Sheet – Owner’s Equity Understanding equityLIABILITIES & EQUITY • Equity represents how much of the businessEquity the owner’s actually own, after creditorsOwners Equity 146,970Retained Earnings -25,378 have been accounted for.Total Equity 121,592 • Equity is short hand for book value to theTOTAL LIABILITIES & EQUITY 160,945 owners. • Includes retained earnings or deficit (as in our example).Source of Equity Important considerations:Owner’s Equity Owner’s invest- • Book value does not necessarily equal what ment the business could be sold for.Retained Earnings Accumulated net • Note that total liabilities and owner’s equity income or loss equal total assets • Think of assets as things and liabilities and equity as people. So the balance sheet in essence connects things to people. Equity Equity and Retained Earnings (or Deficit) ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  10. 10. Profit & Loss Statement Understanding profit and loss statementOrdinary Income/Expense YE 2012 • Determines if, after associating all invoiceTotal Income 98,610 for services with expenses from same Cost of Goods Sold 7,561 period, the is business making money fromGross Profit 91,049 those services (1st half of promise to pay)Operating Expense • Cost of goods sold is expense activity that is Payroll Expense 145,243 directly related to revenue activity. Automobile Expense 1,665 Other Expenses 1,053 • Operating expenses tend to be more fixed in Insurance 2,335 nature Job Expenses 3,850 Professional Fees 375 • On accrual basis, net income does not Other Supplies 1,143 represent cash, more a promise of cash. Rent & Utilities 5,146 Repairs 120 Important considerations: Interest Expense 1,269Total Operating Expense 162,199 • Accrual basis accounting matches expensesOperating Income/(Loss) (71,150) to related revenue activities and is a more Interest Income 854Net Income/(Loss) (70,297) effective mgmt tool than cash basis acctng. • Operating or ordinary income reflects profitability of business core activities Revenue • Other income and expense are related to Operating Income none core business activities. Net Income | ChaseMorrison@b2bcfo.com 818.436.0781 | www.chasemorrisoncfo.com
  11. 11. Cash Flow (Cash is King!)STATEMENT OF CASH FLOWS YE 2012 Understanding statement of cash flows Net Income/(Loss) 12,148 • Reflects actual money moving in and out Operating Activities Change in Accounts Receivable (114,727) business for various purposes (2nd part of Change in Prepaid (2,120) promise to pay – actual payment) Change in Inventory (4,773) Change in Payables 2,266 • Categorizes inflow and outflow of cash into 3 Change in Payroll Liabilities Net cash provided by Operating Activities 5,520 (113,834) activities—operating, investing & financing • Operating activities – directly related to Investing Activities Change in Accumulated Depreciation 575 revenue generation. Net cash provided by Investing Activities 575 • Investing activities – purchase of fixed assets, Financing Activities depreciation and other activities in support of Change in Bank of Anycity Loan 19,933 Change in Other Loans (3,442) business Opening Equity Balance Owners Equity Draw (67,601) (5,000) • Financing activities – pertains to securing and Retained Earnings 43,955 servicing debt used in the business Net cash provide by Financing Activities (12,155) Net cash increase/(decrease) for period (113,266) Important considerations: Cash at beginning of period Cash at end of period 218,839 105,573 • Each activity reveals important aspects of company performance. • Ending cash = beginning cash + cash change Operating Investing Financial ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  12. 12. Putting it all back together Connections Summarizes between the actual company’s assets payments from and the claims on customers and those assets by made to vendors, lenders vendors and owners Summarizes commitments to pay company (revenue) and company’s commitments to pay others (expenses) ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  13. 13. The big picture1• Note that all three financial statements are related• This format would help you analyze why cash is going up or down over a given period• Basic formula is beginning balance +/- P&L, +/- cash flow equals ending balance sheet• For example starting A/R + sales – collections = ending A/R balance Beginning Balance Sheet (12/31/2011) Income Statement Cash Statement Ending Balance Sheet (12/31/2012) Cash 57,908 Cash Change (38,316) Cash 19,592 Accounts Receivable 34,521 Sales 181,000 Collections (OCF) 141,137 Accounts Receivable 74,384 Inventory - Cost of Goods 7,600 Inventory Paid (OCF) (7,600) Inventory - Prepayments 5,500 Prepayments (OCF) - Prepayments 5,500 Gross Fixed Assets 25,000 Fixed Asset Investment (ICF) - Gross Fixed Assets 25,000 Accumulted Depreciation 5,000 Depreciation 5,000 Accumulted Depreciation 10,000 Net Fixed Assets 20,000 Net Fixed Assets 15,000 Total Assets 117,928 Total Assets 114,475 Accounts Payable 9,250 Operating Expenses 160,112 Expenses Paid (OCF) (165,309) Accounts Payable 4,053 Debt 21,000 Borrow/(Pay Back) (FCF) (4,000) Debt 17,000 Other Operating Liabilities 9,208 Interest & Other Expenses 1,269 Interest & Other Paid (OCF) 1,606 Other Operating Liabilities 12,083 Income Tax Due - Income Tax Expense - Income Tax Paid (OCF) - Income Tax Due - Non Operating Liabilities - Non Operating Inc & Expense (850) Non Operating Exp Paid (FCF) 850 Non Operating Liabilities - Owners Equity 180,000 Owner Paid In/(Draw) (FCF) (5,000) 175,000 Retained Earnings (101,530) Net Income 7,869 Dividend & Other (FCF) 0 Retained Earnings (93,661) Total Liabilities & Equipty 117,928 Total Liabilities & Equipty 114,475 Return on Avg Assets 6.8% Operating Cash Flow (30,166)1 Cash flow statement format sourced from Managing by the Numbers, Chuck Kremer, Ron Rizzuto, et al. ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  14. 14. Basic Financial Ratios and MetricsAt 32,000 feet what should our objectives be? - Need to deliver consistent net income Proof of a successful business model Reflects costs are being managed - Positive operating cash flow (OCF) Shows that there is cash to pay the bills Also demonstrates potential ability to pay the owners - Need to have reliable return on assets (ROA) Return needs to be competitive vs. other investments Ability to attract investors and/or lenders ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  15. 15. Ratios for ProfitabilityP&L ratios are generally a function of revenue Gross Margin Gross Profit / Revenue (GP = Revenue - Cost of Goods) Not as useful for service businesses Operating Margin Operating Profit / Revenue (OP = Gross Profit - Operating Exp.) Very relevant to our service business. Effectively shows the profitability of the business’ primary activities Return on Sales Net Income / Revenue (Operating Profit - Other Inc/Exp) Final income or profit figure, typically after taxes ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  16. 16. Trended Profit Ratios PROFIT AND LOSS STATEMENT YE 2010 YE 2011 YE 2012 Total Income or Sales 125,000 145,000 181,000 Cost of Goods Sold 1,500 3,500 7,600 Gross Profit 123,500 141,500 173,400 Gross Margin % (Gross Profit / Sales) 98.8% 97.6% 95.8% Operating Expense Payroll Expense 115,000 130,000 145,000 Automobile Expense 500 1,750 1,665 Other Expenses 150 500 478 Insurance 2,000 2,150 2,335 Job Expenses 800 4,000 3,850 Professional Fees - 250 375 Depreciation 5,000 5,000 5,000 Other Supplies 750 2,000 1,143 Rent & Utilities 3,500 4,500 5,146 Repairs - - 120 Interest Expense 2,000 1,680 1,269 Total Operating Expense 129,700 151,830 166,381 Operating Income/(Loss) (6,200) (10,330) 7,019 Operating Margin (Operating Income / Sales) -5.0% -7.1% 3.9% Interest Income - 500 850 Net Income/(Loss) (6,200) (9,830) 7,869 Return on Sales (Net Income / Sales) -5.0% -6.8% 4.3% ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  17. 17. Return on Assets (ROA)Return on Assets = Net Income / Total Assets What is ROA telling us? Net Income Return on assets is effectively the % return Owner’s on all money invested Stake by both the (Equity) stakeholders and others Cash that the business uses Inventory as a resource to Accts Rec. generate revenue. Equipment Lenders (Assets) As an investor, would Vendors you purchase a bond Others from GE for 5% or in (Liabilities) our landscape service business?How can Von’s successfully operate with “razor thin” Risk vs. Returnmargins, while a pharmaceutical company requiresmassive profits? ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  18. 18. Trended Balance SheetASSETS YE 2010 YE 2011 YE 2012 Current Assets Return on Assets: Cash 131,239 115,992 119,968 Accounts Receivable 61,644 63,562 59,507 Prepaids 4,500 5,500 5,500 2010 2011 2012 inventory - - - Net Inc* (6,200) (9,830) 7,869 Total Current Assets 197,383 185,053 184,975 Assets 222,383 203,053 199,975 Fixed Assets 25,000 20,000 15,000TOTAL ASSETS 222,383 205,053 199,975 ROA (2.8%) (4.8%) 3.9%LIABILITIES & EQUITY Current Liabilities Accounts Payable 3,000 7,000 2,579 Total Credit Cards 1,000 2,250 1,474 Payroll Liabilities 9,583 10,833 12,083 Total Current Liabilities 13,583 20,083 16,136 Long Term Liabilities Loans (Debt) 25,000 21,000 17,000 Total Long Term Liabilities 25,000 21,000 17,000Total Liabilities 38,583 41,083 33,136Equity Starting Balance 200,000 190,000 180,000 Owners Draw (10,000) (10,000) (5,000)Owners Equity 190,000 180,000 175,000Retained Earnings (6,200) (16,030) (8,161)Total Equity 183,800 163,970 166,839TOTAL LIABILITIES & EQUITY 222,383 205,053 199,975 ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  19. 19. Cash Flow Metrics•Should look at cash flow over time•Primary focus is operating cash flowSTATEMENT OF CASH FLOWS YE 2010 YE 2011 YE 2012 Four key cash flow metrics you should Net Income/(Loss) (6,200) (9,830) 7,869 evaluate: Operating Activities Change in Accounts Receivable (61,644) (1,918) 4,055 1. Is OCF positive? If not you need to Change in Prepaid (4,500) (1,000) - quickly determine why. Change in Inventory - - - Change in Payables 4,000 5,250 (5,197) 2. Is OCF greater than net profit (or Change in Payroll Liabilities 9,583 1,250 1,250 income)? It should be if you are Net cash provided by Operating Activities (58,761) (6,248) 7,977 depreciating fixed assets. Investing Activities 3. Is OCF greater than fixed asset Change in Fixed Assets (25,000) 5,000 5,000 Net cash provided by Investing Activities (25,000) 5,000 5,000 investment? If it is, then company can self fund fixed assets. Financing Activities Change in Bank of Anycity Loan 25,000 (4,000) (4,000) 4. If OCF trending in the same direction Change in Other Loans - - - as net profit? If profit is going up, but Opening Equity Balance - - - OCF is going down, you may have a Change in Owners Equity (10,000) (10,000) (5,000) Retained Earnings - - - problem. Net cash provide by Financing Activities 15,000 (14,000) (9,000) Net cash increase/(decrease) for period (68,761) (15,248) 3,977 ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  20. 20. Summarizing our key metricsKey Performance Measures (The Big Three) 2010 2011 2012Return on Sales (5.0%) (6.8%) 4.3%Return on Assets (2.8%) (4.8%) 3.9%Operating Cash Flow ($58,761) ($6,248) $7,977Other Important P&L MeasuresSales $125,000 $145,000 $181,000Operating Margin (5.0%) (7.1%) 3.9%Other Important Asset Utilization MeasuresSales/average assets 1.12 0.68 0.89Receivables days 180 160 120Net Inc/Avg Fixed Assets (49.6%) (43.7%) 45.0%Receivables days = the number of days of receivables on balance sheet, based on SalesReceivables days = Receivables $s / (Sales / 365 days) = 59,507 / ($181,000/365) = 120 days[This means we have approximately 4 months of unpaid receivables on balance sheet] ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  21. 21. Generating a three year planWhere to start• Generate summary of key performance measures for your business• Analyze historical trends for potential issues (what are our example company’s issues?)• Spend significant amount of time forecasting and validating revenue• Make decisions on entering new market, adding a new service• Will contemplated changes require adding fixed assets, headcount, etc.? ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  22. 22. Profit & Loss Statement PROFIT AND LOSS STATEMENT YE 2010 YE 2011 YE 2012 YE 2013 YE 2014 YE 2014 CAGR* Total Income or Sales 125,000 145,000 181,000 190,000 205,000 220,000 6.7% Cost of Goods Sold 1,500 3,500 7,600 7,500 7,500 8,500 3.8% Gross Profit 123,500 141,500 173,400 182,500 197,500 211,500 6.8% Gross Margin % (Gross Profit / Sales) 98.8% 97.6% 95.8% 96.1% 96.3% 96.1% Operating Expense Payroll Expense 115,000 130,000 145,000 148,000 155,000 165,000 4.4% Automobile Expense 500 1,750 1,665 2,000 2,500 2,500 14.5% Other Expenses 150 500 478 500 650 700 13.6% Insurance 2,000 2,150 2,335 3,000 4,000 4,500 24.4% Job Expenses 800 4,000 3,850 7,000 7,500 9,000 32.7% Professional Fees - 250 375 500 750 900 33.9% Depreciation 5,000 5,000 5,000 5,000 5,000 4,000 -7.2% Other Supplies 750 2,000 1,143 1,500 1,500 1,750 15.3% Rent & Utilities 3,500 4,500 5,146 5,500 5,500 6,500 8.1% Repairs - - 120 250 300 300 35.7% Interest Expense 2,000 1,680 1,269 1,160 960 2,480 25.0% Total Operating Expense 129,700 151,830 166,381 174,410 183,660 197,630 5.9% Operating Income/(Loss) (6,200) (10,330) 7,019 8,090 13,840 13,870 25.5% Operating Margin (Operating Income / Sales) -5.0% -7.1% 3.9% 4.3% 6.8% 6.3% Interest Income - 500 850 500 500 500 -16.2% Net Income/(Loss) (6,200) (9,830) 7,869 8,590 14,340 14,370 22.2% Return on Sales (Net Income / Sales) -5.0% -6.8% 4.3% 4.5% 7.0% 6.5% * CAGR = Compound annual growth rate Maintain expense growth rate a less than or equal to revenue growth ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  23. 23. Cash Flow STATEMENT OF CASH FLOWS YE 2010 YE 2011 YE 2012 YE 2013 YE 2014 YE 2014 Net Income/(Loss) (6,200) (9,830) 7,869 8,590 14,340 14,370 Operating Activities Change in Accounts Receivable (61,644) (1,918) 4,055 2,247 (4,521) (4,521) Change in Prepaid (4,500) (1,000) - (1,500) - (2,000) Change in Inventory - - - - - - Change in Payables 4,000 5,250 (5,197) - - - Change in Payroll Liabilities 9,583 1,250 1,250 250 583 833 Net cash provided by Operating Activities (58,761) (6,248) 7,977 9,587 10,403 8,683 Investing Activities Change in Fixed Assets (25,000) 5,000 5,000 5,000 5,000 (17,000) Net cash provided by Investing Activities (25,000) 5,000 5,000 5,000 5,000 (17,000) Financing Activities Change in Bank of Anycity Loan 25,000 (4,000) (4,000) (2,500) (2,500) 19,000 Change in Other Loans - - - - - - Opening Equity Balance - - - - - - Change in Owners Equity (10,000) (10,000) (5,000) (5,000) (5,000) (5,000) Retained Earnings - - - - - - Net cash provide by Financing Activities 15,000 (14,000) (9,000) (7,500) (7,500) 14,000 Net cash increase/(decrease) for period (68,761) (15,248) 3,977 7,087 7,903 5,683 Cash at beginning of period 200,000 131,239 115,992 119,968 127,055 134,958 Cash at end of period 131,239 115,992 119,968 127,055 134,958 140,640 ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  24. 24. Balance Sheet ASSETS YE 2010 YE 2011 YE 2012 YE 2013 YE 2014 YE 2014 Current Assets Cash 131,239 115,992 119,968 127,055 134,958 140,640 Accounts Receivable 61,644 63,562 59,507 57,260 61,781 66,301 Prepaids 4,500 5,500 5,500 7,000 7,000 9,000 inventory - - - - - - Total Current Assets 197,383 185,053 184,975 191,315 203,738 215,942 Fixed Assets 25,000 20,000 15,000 10,000 5,000 22,000 TOTAL ASSETS 222,383 205,053 199,975 201,315 208,738 237,942 LIABILITIES & EQUITY Current Liabilities Accounts Payable 3,000 7,000 2,579 2,579 2,579 2,579 Total Credit Cards 1,000 2,250 1,474 1,474 1,474 1,474 Payroll Liabilities 9,583 10,833 12,083 12,333 12,917 13,750 Total Current Liabilities 13,583 20,083 16,136 16,386 16,969 17,803 Long Term Liabilities Loans (Debt) 25,000 21,000 17,000 14,500 12,000 31,000 Total Long Term Liabilities 25,000 21,000 17,000 14,500 12,000 31,000 Total Liabilities 38,583 41,083 33,136 30,886 28,969 48,803 Equity Starting Balance 200,000 190,000 180,000 175,000 170,000 165,000 Owners Draw (10,000) (10,000) (5,000) (5,000) (5,000) (5,000) Owners Equity 190,000 180,000 175,000 170,000 165,000 160,000 Retained Earnings (6,200) (16,030) (8,161) 429 14,769 29,139 Total Equity 183,800 163,970 166,839 170,429 179,769 189,139 TOTAL LIABILITIES & EQUITY 222,383 205,053 199,975 201,315 208,738 237,942 ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com
  25. 25. Key Performance Measures Trending YE 2010 YE 2011 YE 2012 YE 2013 YE 2014 YE 2015 CAGRKey Performance Measures (The Big ThreeReturn on Sales -5.0% -6.8% 4.3% 4.5% 7.0% 6.5% 14.5%Return on Assets -2.8% -4.8% 3.9% 4.3% 6.9% 6.0% 15.3%Operating Cash Flow ($58,761) ($6,248) $7,977 $9,587 $10,403 $8,683 2.9%Other Important P&L MeasuresTotal Sales $125,000 $145,000 $181,000 $190,000 $205,000 $220,000 6.7%Operating Margin -5.0% -7.1% 3.9% 4.3% 6.8% 6.3% 17.6%Other Important Asset UtilizationSales/average assets 1.12 0.68 0.89 0.95 1.00 0.99 3.3%Receivable days 180 160 120 110 110 110 -2.9%Net Income/Average Fixed Assets -49.6% -43.7% 45.0% 68.7% 191.2% 106.4% 33.3%$250,000 10.0% $20,000 200 250,000 10.0% 8.0% $10,000 180 8.0% 240,000$200,000 6.0% $0 160 6.0% 4.0% 140 230,000 4.0% ($10,000)$150,000 2.0% 120 220,000 2.0% ($20,000) 0.0% 100 0.0% ($30,000) 210,000$100,000 -2.0% 80 -2.0% -4.0% ($40,000) 60 -4.0% 200,000 $50,000 -6.0% ($50,000) 40 -6.0% 190,000 -8.0% ($60,000) 20 -8.0% $0 -10.0% ($70,000) 0 180,000 -10.0% 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 Sales Return on Sales Operating Cash Flow Receivable Days Assets ROA ChaseMorrison@b2bcfo.com | 818.436.0781 | www.chasemorrisoncfo.com

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