Financial Strategy and
“Running by the Numbers”
answers these ?
How much will it cost to startup?
How much will it cost to run the venture?
term cash needs when revenue low
Revenue and Expenses- operations
Capital (for fixed assets and business
expansion), how much and when.
Sources of capital
Loans - debt
Financial Strategy Components
Return on Investment
details about when
and how much
money is needed
estimates of future
For sales, profits and
Financial Planning Process
Prepare a Personal
Prepare a cash
Prepare a personal
Used to “capitalize”
A –L = OE
How much Owners
How much Debt?
All companies need money, therefore, financial
objectives must be established and reached.
Examples of financial objectives:
Canadian Cancer Society
Raise $5 for every Canadian
To increase market share to 10%
•The point at which total revenues equal the total costs.
• The Acme Corporation had a total production cost of $2000. Its
selling price of its product is $10. How many units must it produce to
Breakeven point = TOTAL COSTS = $2,000 = 200
The percentage of one company’s sales in relation to the total sales
of the industry.
Example-If the ACME company had a 15% market share of a
$1,500,000 industry, what is Acme’s market share in dollars?
= 15% x $1,500,000
= $225,000 of Sales
• The percent of the final selling price that represents the profit
• Profit margin =Selling price-Cost price * 100
• Example-The Acme Corporation has a selling price of $30 and a cost of $20.
•What is the profit margin?
= 30 – 20 =
Return on Investment
•The amount of profit earned in return for the amount of capital invested.
Return on = Net Income
•Example-What is the return on investment for the Acme Corporation if it had
$150 000 in sales and $120 000 in expenses on its business investment of
= 150,000-120,000 =
3 = .0666 = 6.7%
Startup Costs vs. Operating Expenses
•All costs associated with getting the venture up and
•Fixed and variable, capital and expense
•Often funded with equity or debt
•All costs needed to keep the business going after
startup (i.e. support of revenue generation)
•Fixed or variable , expenses.
•Should be “funded” from revenues (NB)