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The zen of finance 1

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The zen of finance 1 The zen of finance 1 Presentation Transcript

  • The Zen of Finance
    Welcome
  • The Zen of Finance
    Workshop Objectives:
    • Understand basic financial concepts and terms including YOUR key performance indicators (KPIs) and ratios
    • Explore YOUR three basic financial statements and their relationship to each other
    • Create and exercise YOUR financial model to project future financial performance under “what if” scenarios
  • The Zen of Finance
    Not Accounting $?X@*!
  • The Zen of Finance
    • This is not about Debits and Credits!
    • It is not about General Ledgers or Journal Entries!
    • It is not about esoteric tax laws, GAAP or other gobbledygook
  • The Zen of Finance
    It’s about…understanding financial statements and basic underlying concepts!
  • The Zen of Finance
    The general path of this course:
    Review critical concepts using generic statements
    “Solidify” your historic financial statements in a common format and analyze via ratios, breakeven and drivers
    Create and exercise your projected financial performance using scenarios and what-ifs
    Assemble elements of your financial plan
  • The Zen of Finance
    10
    Things you should know
  • The Zen of Finance
    1
    Assets – Liabilities = Equity
    or
    Assets = Liabilities + Equity
  • The Zen of Finance
    2
    Revenue – Expenses = Profit
    or
    Receipts – Disbursements = Cash balance
  • The Zen of Finance
    3
    “Double Entry”
  • The Zen of Finance
    “Double Entry”
    Asset
    Liability
    Equity
    Revenue
    Expense
    An activity always comes in TWOs:
    Increase + Increase
    Increase + Decrease
    Decrease + Decrease
  • The Zen of Finance
    4
    Cash vs Accrual
  • The Zen of Finance
    Have “Revenue” when you invoice a customer or when you receive cash?
    ---------------------------------
    Incur an “Expense” when you receive an invoice or when you write a check?
  • The Zen of Finance
    5
    Cash Flow
  • The Zen of Finance
    Assume Revenue and Expenses are all cash
    Receipts
    Cash Flow
    Expenses
    Cash
    Repay
    Debt
    Cash
    Capital
    Expenses
    Cash
    Owner’s
    Pocket
  • The Zen of Finance
    Revenue
    Income vs. Cash Flow?
    Expenses
    Profit
    Things like A/R and Inventory “absorb” cash A/P “provides” cash
    Working
    Capital
    Cash
    Repay
    Debt
    Cash
    Capital
    Expenses
    Cash
    Owner’s
    Pocket
  • The Zen of Finance
    Calculating Cash Flow:
    Profit XX
    + or – Changes in the Balance Sheet XX
    Cash Flow XX
  • The Zen of Finance
    Calculating Cash Flow:
    Operating Income XX
    + or – Changes in the Balance Sheet XX
    Cash Flow XX
    Working Capital, Long-term (“Fixed”) Assets, Long-term Liabilities
  • The Zen of Finance
    What are the financial statements you should always have for your business?
  • 6
    The Zen of Finance
  • 7
    The Zen of Finance
  • 8
    The Zen of Finance
  • The Zen of Finance
    9
    How do the 3 statements relate to each other?
  • The Zen of Finance
  • The Zen of Finance
  • The Zen of Finance
    What information is missing???
    ?
  • The Zen of Finance
    Calculating Cash Flow:
    Profit XX
    + or – Changes in the Balance Sheet XX
    Cash Flow XX
  • The Zen of Finance
    Also need details about Assets and Liabilities
  • The Zen of Finance
    Increase A/R $5
    Buy more Equipment
    $5
    Pay Debt $5
  • The Zen of Finance
    10
    No let’s look at the template you will use for your financial statements
  • The Zen of Finance
  • The Zen of Finance
  • The Zen of Finance
  • The Zen of Finance
    Time to Complete
    YOUR
    FINANCIAL STATEMENTS
    using this format.