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Agenda Please Silence Your Cell Phone

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Agenda Please Silence Your Cell Phone

  1. 1. <ul><li>Agenda </li></ul><ul><li>Please Silence Your Cell Phone  </li></ul><ul><li>Q&A </li></ul><ul><li>Learning Objectives </li></ul><ul><li>Chapter 8 Financial Strength & Viability </li></ul><ul><li>Reminders </li></ul>
  2. 2. <ul><li>Completed Phase 1 – Concept </li></ul><ul><li>Completed Phase 2 – Industry </li></ul><ul><li>Complete Phase 3 – Organization </li></ul><ul><li>… This Chapter – Phase 4 </li></ul>
  3. 3. <ul><li>Identify Financial Management Objectives and Tools </li></ul><ul><li>Estimate Sales Forecast and Expenses </li></ul><ul><li>Draft Proforma Cash Flow Statement </li></ul><ul><li>Review Purpose of Financial Ratios </li></ul>
  4. 4. <ul><li>How Will You Know When Your Business is Successful? </li></ul>
  5. 5. <ul><li>What Have You Learned in College or Through Experience That Has Prepared You to Manage the Financial Aspects of Your Business? </li></ul>
  6. 6. <ul><li>Raising Money (Chapter 10): </li></ul><ul><ul><li>Sales (Internally Generated) </li></ul></ul><ul><ul><li>Loans/Debt (Externally Generated) </li></ul></ul><ul><ul><li>Investment/Equity (External) </li></ul></ul><ul><li>Tracking and Managing Money: </li></ul><ul><ul><li>Seek Highest Return </li></ul></ul><ul><ul><li>Track How Much and Where It Is </li></ul></ul><ul><ul><li>Able to Pay Bills and Obligations? </li></ul></ul>
  7. 7. <ul><li>Profitability – Earn Profit </li></ul><ul><li>Liquidity – Pay Bills </li></ul><ul><li>Efficiency – Cut Costs </li></ul><ul><li>Stability – Avoid Financial Problems </li></ul>
  8. 8. <ul><li>Historical Financial Statements: </li></ul><ul><ul><li>Income Statement – Moving Picture </li></ul></ul><ul><ul><li>Balance Sheet – Snapshot </li></ul></ul><ul><ul><li>Cash Flow Statement – Checkbook </li></ul></ul><ul><li>Proforma Financial Statements - Forecasts of Projected Sales and/or Expenses </li></ul><ul><li>Budgets (Itemized Forecasts) </li></ul>
  9. 9. <ul><li>Individually Read Case Study 8.2 on Page 252 </li></ul><ul><li>Individually Formulate Answers to Discussion Questions </li></ul><ul><li>Teams Discuss </li></ul><ul><li>Class Discussion: </li></ul><ul><ul><li>Profitability </li></ul></ul><ul><ul><li>Liquidity </li></ul></ul><ul><ul><li>Efficiency </li></ul></ul><ul><ul><li>Stability </li></ul></ul><ul><li>Prioritize: Profitability, Liquidity, Efficiency, Stability </li></ul>
  10. 10. <ul><li>Who Already Has 3 Reliable Estimates of First Year Sales? </li></ul><ul><li>Who Has Completed Pro Forma Cash Flow Statement? </li></ul><ul><li>How Can Any New Business Estimate Sales and Expenses? </li></ul>
  11. 11. <ul><li>Trade Association </li></ul><ul><li>Magazine or Journal Articles </li></ul><ul><li>Distant Competitor/Mentor </li></ul><ul><li>Multiplication Method </li></ul><ul><li>Feasibility Report Requirements: </li></ul><ul><ul><li>Three Estimates </li></ul></ul><ul><ul><li>From Two of Above Sources </li></ul></ul><ul><ul><li>Indicate Reliability (High, Medium, Low) </li></ul></ul>
  12. 12. <ul><li>“ We Make Doohookies an Art Form” </li></ul><ul><li>Definition: doo·hick·ey </li></ul><ul><ul><li>n. pl. doo·hick·eys Informal </li></ul></ul><ul><ul><li>An unnamed gadget or trinket </li></ul></ul><ul><li>http://www.stratsplace.com/rogov/doohickeys.html </li></ul><ul><li>Our Sales Forecast… </li></ul>
  13. 13. <ul><li>Start-Up Expenses: </li></ul><ul><ul><li>. </li></ul></ul><ul><li>On-Going Expenses: </li></ul><ul><ul><li>. </li></ul></ul><ul><ul><li>What Expense Categories Will </li></ul></ul><ul><ul><li>Your Company Have? </li></ul></ul>
  14. 14. <ul><li>Cash Flow Statement vs. Income Statement </li></ul><ul><li>Sources of Income Other Than Sales </li></ul><ul><li>Typical Expense Categories </li></ul><ul><li>Documenting Start-Up Costs </li></ul>
  15. 15. <ul><li>Task: Team Will Fill Out Groovy Doohickies’ Cash Flow Statement </li></ul><ul><li>Three Months of Activity </li></ul><ul><li>Must Identify Where Information Should Be Written on Form </li></ul><ul><li>Might Need Calculator </li></ul>
  16. 16. <ul><li>Personal Investment - $30,000 </li></ul><ul><li>First Month’s Rent - $250 </li></ul><ul><li>Placed Newspaper Ad - $5,000 </li></ul><ul><li>Purchased Goods/Materials - $5,000 </li></ul><ul><li>Allocated to Petty Cash - $100 </li></ul><ul><li>Paid Self & Partner - $2,000 </li></ul><ul><li>Lunch w/ Prospective Customers/Vendors - $50 </li></ul><ul><li>Travel Expenses - $150 </li></ul><ul><li>Contracted for Monthly Janitorial Services - $150 </li></ul><ul><li>Purchased Equipment - $10,000 </li></ul><ul><li>Paid Attorney for Incorporation - $500 </li></ul><ul><li>Miscellaneous Expenses - $20 </li></ul><ul><li>Loan from Bank - $10,000 </li></ul>
  17. 17. <ul><li>Interest on Loan - $350 </li></ul><ul><li>Contracted with Accountant - $500 </li></ul><ul><li>Purchased More Inventory - $500 </li></ul><ul><li>Replenish Petty Cash - $25 </li></ul><ul><li>Monthly Janitorial Service - $150 </li></ul><ul><li>Travel for Business - $150 </li></ul><ul><li>Developed & Placed Radio Ads - $4,000 </li></ul><ul><li>Sales - $1,500 </li></ul><ul><li>Paid Self and Partner - $2,000 </li></ul><ul><li>Luncheon Meetings with Vendors - $50 </li></ul><ul><li>Rent - $250 </li></ul><ul><li>Taxes - $200 </li></ul><ul><li>Loan Principal Payment - $50 </li></ul>
  18. 18. <ul><li>Purchased Inventory - $3,000 </li></ul><ul><li>Contracted for Telemarketing Service - $200 </li></ul><ul><li>Rent - $250 </li></ul><ul><li>Interest on Loan - $350 </li></ul><ul><li>Dinner w/ Prospective Customers - $150 </li></ul><ul><li>Travel Expenses - $150 </li></ul><ul><li>Website - $5,000 </li></ul><ul><li>Hired Consultant - $300 </li></ul><ul><li>Replenished Petty Cash - $75 </li></ul><ul><li>Payment on Loan Principal - $150 </li></ul><ul><li>Paid Self and Partner - $2,000 </li></ul><ul><li>Taxes - $200 </li></ul><ul><li>Monthly Janitorial Service - $150 </li></ul><ul><li>Purchased Laptop - $1,000 </li></ul>
  19. 19. <ul><li>What Happened? </li></ul><ul><li>Why Did it Happen? </li></ul><ul><li>How To Prevent? </li></ul><ul><li>Implications for Seasonal Businesses? </li></ul><ul><li>Where to Get Estimates? </li></ul><ul><li>When to Apply for Loan? </li></ul><ul><li>Why Have Assumptions in Writing… </li></ul>
  20. 20. <ul><li>Complete Projections Before Opening Business </li></ul><ul><li>Open Business Checking Account Before Opening Business </li></ul><ul><li>Accountant, QuickBooks Pro, or Quicken </li></ul><ul><li>Bootstrap! </li></ul><ul><li>Remember Murphy’s Laws? </li></ul>
  21. 21. <ul><li>Everything That Can Go Wrong… Will </li></ul><ul><li>Everything Costs More Than You Think </li></ul><ul><li>Sales Will Be Worse Than You Project </li></ul><ul><li>Everything Will Take Longer Than You Ever Thought It Could </li></ul><ul><li>You Will Be Missing Some Important Document </li></ul>
  22. 22. <ul><li>Sources of Budget Estimates </li></ul><ul><li>Compare With Sales Forecast: </li></ul><ul><ul><li>Will You Generate Enough Sales to Cover These Budgeted Costs? </li></ul></ul><ul><li>Control Tool: </li></ul><ul><ul><li>Accuracy of Estimate/Forecast </li></ul></ul><ul><ul><li>Efficiency in Spending Budgets </li></ul></ul>
  23. 23. <ul><li>Develop Draft of Your Company’s Cash Flow Statement </li></ul><ul><li>Must Be Included in </li></ul><ul><li>Feasibility Report </li></ul>
  24. 24. <ul><li>Illustrate Relationships Between Items in Financial Statements </li></ul><ul><li>Reveal Internal Financial Trends </li></ul><ul><li>Compare Firm’s Financial Condition to Competitors in Your Industry </li></ul><ul><li>Use Ratios to Explain Financial Strengths and Needs to Lenders and Investors </li></ul>
  25. 25. <ul><li>How Many Products or Services Must Be Sold Before Earning a Profit? </li></ul><ul><li>Various Ways to Calculate </li></ul><ul><li>Required for Feasibility Report </li></ul>
  26. 26. <ul><li>Identify Financial Management Objectives and Tools </li></ul><ul><li>Estimate Sales Forecast and Expenses </li></ul><ul><li>Draft Proforma Cash Flow Statement </li></ul><ul><li>Determine Usefulness of Financial Ratios </li></ul>
  27. 27. <ul><ul><li>Exam 2 Chapters 6, 9, 8 </li></ul></ul><ul><ul><li>Networking Report </li></ul></ul><ul><ul><li>Chapter 7 – Ethics & Legal Issues </li></ul></ul>

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