Finance is one of the fundamental pillars of any business, but when it comes to numbers, many entrepreneurs and business owners struggle and get a lot of headaches. Well, there is an “aspirin” for those headaches: Financial Intelligence. In this workshop, you will learn why numbers matter, the nuts and bolts of financial statements and how to use financial information like a boss.

1. Handling Your
Business’ Number
Like a Boss
Julio C. Canas

2. 72% of adults feel stressed about money
Source: American Psychology Association. Stress in America (2015)

3. Top
Financial Mistakes
Running out of cash
Lack of internal controls
Setting unrealistic goals

4. What is
Financial Intelligence?
A set of skills that we all can learn

5. Agenda
03 Handling Your Business Numbers Like a Boss
02 The Nuts & Bolts of Financial Statements
01 Why Numbers Matter?

6. Why Numbers Matter?
01

7. Numbers matter because
they…
Are central to most human activities
Communicate economic information
Help make decisions

8. What are the most common obstacles to overcome?

9. Misunderstood Purpose
No Business
=
Businesses need financial resources to keep going
No Profit

10. Lack of Time
Does not help
You need to set some time to check the numbers
Procastination

11. Innumeracy
people suffer from this…
But it’s not their fault and we can solve it!
8 out of 5
Or is it the other way around?
(number or mathematical illiteracy)

12. You don’t need to be a genius!
All you need is focus& practice!

13. FinanceArt Science

14. The Nuts & Bolts of
Financial Statements
02

15. Balance Sheet Statement
Source: Marshall, D.; McManus W. and Viele, D. (2011) Accounting: What the Numbers Mean. New York, NY: McGraw-Hill Irwin

16. Balance Sheet Statement
Assets
Liabilities
Equity
What you have How you got it
Assets = Liabilities + Equity

17. Balance Sheet Statement
Assets = Liabilities + Equity
Liquidity
Valuation
Assumptions
Depreciation
vs.
Amortization
Tangibles
vs.
Intangibles
Elements to consider:

18. Balance Sheet Statement
Assets = Liabilities + Equity
Liquidity
Valuation
Assumptions
Contingent
Liabilities
Gross
vs.
Net
Purchases
Elements to consider:

19. Balance Sheet Statement
Assets = Liabilities + Equity
Paid-in
Capital
Distributions
Retained
Earnings
Elements to consider:

20. Income Statement
Source: Marshall, D.; McManus W. and Viele, D. (2011) Accounting: What the Numbers Mean. New York, NY: McGraw-Hill Irwin

21. Income Statement
Revenues
Expenses
Profit
Revenues – Expenses = Profit/Loss

22. Income Statement
Revenues – Expenses = Profit/Loss
Recognition
Material
Changes
Assumptions
Elements to consider:

23. Revenues – Expenses = Profit/Loss
Income Statement
Matching
Principle
COGS or COS Overhead
Valuation
Assumptions
Elements to consider:

24. Income Statement
Revenues – Expenses = Profit/Loss
Gross Profit Net Profit
Operating
Profit (EBIT)
Elements to consider:

25. Cash Flow Statement
Source: Marshall, D.; McManus W. and Viele, D. (2011) Accounting: What the Numbers Mean. New York, NY: McGraw-Hill Irwin

26. Cash Flow Statement
Inflows
Outflows
Net Cash
Flow
Inflows – Outflows = Net Cash Flow

27. Profit ≠ Cash
Diego’s Lemonade: Cash without profit
1 2 3
Sales 5,000 6,500 8,000
COGS 3,500 4,550 5,600
Gross Profit 1,500 1,950 2,400
Expenses 3,000 3,000 3,000
Net Profit (1,500) (1,050) (600)
Monthly P&L Statement
1 2 3
Beg. Balance 2,500 4,500 8,000
Inflows 5,000 6,500 8,000
Outflows 3,000 3,000 6,500
Net Flow 2,000 3,500 1,500
End Balance 4,500 8,000 9,500
Monthly Cash Flow Statement
Assumptions:
• Vendors to be paid in 60 days.
• Clients pay in cash.
Diagnostic:
• Operational problems.
• Reduce costs or increase revenue.

28. Profit ≠ Cash
1 2 3
Sales 5,000 7,500 11,250
COGS 3,000 4,500 6,750
Gross Profit 2,000 3,000 4,500
Expenses 2,500 2,500 2,500
Net Profit (500) 500 2,000
Monthly P&L Statement
1 2 3
Beg. Balance 2,500 0 (5,500)
Inflows 0 0 5,000
Outflows 2,500 5,500 7,000
Net Flow (2,500) (5,500) (2,000)
End Balance 0 (5,500) (7,500)
Monthly Cash Flow Statement
Assumptions:
• Vendors to be paid in 30 days.
• Clients pay in 60 days.
Diagnostic:
• Financial problems.
• Need additional source of cash.
Andrea’s Cupcakes: Profit without Cash

29. Keep an eye on your
Cash Flow

30. 03
Handling Your Business’
Numbers Like a Boss

31. The Right Moves
Spread the Knowledge
Visuals & Technology
Use Financial Ratios & Key Metrics

32. Financial Ratios
Profitability
Gross Margin
Gross Profit / Revenue
Operating Margin
EBIT / Revenue
Net Margin
Net Profit / Revenue
Return on Assets
Net Profit / Total Assets
Return on Equity
Net Profit / Total Equity
Leverage
Interest Coverage
EBIT / Interest Charges
Debt-to-Equity
Total Liabilities / Total Equity

33. Financial Ratios
Liquidity
Quick Ratio
Current Assets – Inventory
Current Liabilities
Current Ratio
Current Assets
Current Liabilities
Efficiency
Days in inventory
Average Inventory
COGS/day
Inventory Turnover
360
Days in Inventory
Days Sales Outstanding
Ending A/R
Revenue/360
Total Asset Turnover
Revenue
Total Assets
Days Payable Outstanding
Ending A/P
COGS/360

34. Key Metrics
Burn Rate Revenue Growth Sales Efficiency
Customer Metrics Customer Growth Time Efficiency
Use metrics that fit your needs

35. Visuals & Technology
Dashboards Accounting Software
65% of people are visual learners
Leverage technology to facilitate the process

36. Spread the Knowledge
Train your team members
Have periodic “numbers” meetings
Share ratios & key metrics

37. Financial Intelligence
will help you succeed!

38. Best of luck!
SCORE Julio C. Canas
https://miamidade.score.org/ www.jccanas.com