The document discusses the key components of developing a financial plan for a creative industry project. It covers estimating sales forecasts and costs, calculating operating cash flows, determining investment needs for fixed assets and working capital, and developing multi-year budgets and forecasts to evaluate project viability. Financial concepts like revenues, expenses, profits, assets, liabilities, and debt are defined. Methods for assessing and mitigating risk are also outlined. The document provides an example financial model and projections for a film production project.
Financial analysis for juhayna & domty co . graduation project zagzig uni...Eslam Fathi
ย
Financial Analysis is the process of selecting, evaluating, and identifying the financial
strength and weaknesses of the firm by properly establishing relationship between
items of financial statements. Firms, bank, loan officers and business owners all use
Financial analysis to learn more about a companyโs current financial health as well as its
potential.
Financial analysis for juhayna & domty co . graduation project zagzig uni...Eslam Fathi
ย
Financial Analysis is the process of selecting, evaluating, and identifying the financial
strength and weaknesses of the firm by properly establishing relationship between
items of financial statements. Firms, bank, loan officers and business owners all use
Financial analysis to learn more about a companyโs current financial health as well as its
potential.
Cinema and Industry Alliance for Knowledge and Learning II Module โ Market Research in Media Arts and Entertainment. Co-financed by the European Commission.
The Future of Higher Education in the Digital EraAdrian J. Ebsary
ย
The future of universities is a popular topic in higher education and visions of how higher education will adapt to the digital era abound. The only certainty amongst the wealth of predictions is that post-secondary institutions are on the brink of a massive disruption; the earliest signs of the popping economic bubble of higher education are evident in the United States, which will surely spread to markets with less competition worldwide. In this presentation, I'll take you through some of the major predictions from futurists and experts about how universities will evolve in the coming decade. From ร la carte degrees, to gamified online education, to the dissociation of research and teaching, to innovative digital marketing tactics, university professionals of tomorrow will have to contend with altered funding and new demands from students.
Cinema and Industry Alliance for Knowledge and Learning II Module โ Market Research in Media Arts and Entertainment. Co-financed by the European Commission.
The Future of Higher Education in the Digital EraAdrian J. Ebsary
ย
The future of universities is a popular topic in higher education and visions of how higher education will adapt to the digital era abound. The only certainty amongst the wealth of predictions is that post-secondary institutions are on the brink of a massive disruption; the earliest signs of the popping economic bubble of higher education are evident in the United States, which will surely spread to markets with less competition worldwide. In this presentation, I'll take you through some of the major predictions from futurists and experts about how universities will evolve in the coming decade. From ร la carte degrees, to gamified online education, to the dissociation of research and teaching, to innovative digital marketing tactics, university professionals of tomorrow will have to contend with altered funding and new demands from students.
Financial Control
The phase in which financial plans are implemented, control deals with the feedback and adjustment process required to ensure adherence to plans and modification of plans because of unforeseen changes.
Financial Planning:
The projection of sales, income, and assets based on alternative production and marketing strategies, as well as the determination of the resources needed to achieve these projections
NCV 4 New Venture Creation Hands-On Support Slide Show - Module 5Future Managers
ย
This slide show complements the learner guide NCV 4 New Venture Creation Hands-On Training by Bert Kirsten, published by Future Managers Pty Ltd. Visit our website at www.futuremanagers.net
*
13
Producer Choices and
Constraints
Notes and teaching tips: 8, 16, 19, 37, 40, 44 and 66.
To view a full-screen figure during a class, click the red โexpandโ button.
To return to the previous slide, click the red โshrinkโ button.
To advance to the next slide, click anywhere on the full screen figure.
*
After studying this chapter, you will be able to
Explain the firmโs economic problem and function
Explain the relationship between a firmโs output and its inputs in the short run
Derive and explain a firmโs short-run cost curves
Explain the relationship between a firmโs output and costs in the long run and derive a firmโs long-run average cost curve
*
ยฉ 2013 Pearson Australia
What do a big electricity supplier, Origin Energy, and Samโs T-Shirts, a small (fictional) producer, have in common?
Like every firm, They must decide how much to produce. How many people to employ. How much and what type of capital equipment to use.
How do firms make these decisions?
*
ยฉ 2013 Pearson Australia
A firm is an institution that hires factors of production and organises them to produce and sell goods and services.
The Firmโs Goal
A firmโs goal is to maximise profit.
If the firm fails to maximise its profit, the firm is either eliminated or taken over by another firm that seeks to maximise profit.
The Firm and Its Economic Problem
*
ยฉ 2013 Pearson Australia
Accounting Profit
Accountants measure a firmโs profit to ensure that the firm pays the correct amount of tax and to show its investors how their funds are being used.
Profit equals total revenue minus total cost.
Accountants use rules based on standards established by the accounting profession.
The Firm and Its Economic Problem
*
ยฉ 2013 Pearson Australia
Economic Accounting
Economists measure a firmโs profit to enable them to predict the firmโs decisions, and the goal of these decisions is to maximise economic profit.
Economic profit is equal to total revenue minus total cost, with total cost measured as the opportunity cost of production.
The Firm and Its Economic Problem
*
ยฉ 2013 Pearson Australia
A Firmโs Opportunity Cost of Production
A firmโs opportunity cost of production is the value of the best alternative use of the resources that a firm uses in production.
A firmโs opportunity cost of production is the sum of the cost of using resources
Bought in the market
Owned by the firm
Supplied by the firm's owner
The Firm and Its Economic Problem
*
Another day; another dollar profitโor 15 cents, after implicit costs. Emphasise the difference between accounting profit and economic profit when a firm owner is using cost information to make business decisions. Point out that only economic profit reflects the full opportunity cost of making a business decision and it is vital for assessing the true financial health of a firm. Stress that accountants are limited in their ability to interpret and report the costs of production: All accounting costs must ei.
Discussion 1ย Analysis of Financial Statements.A. This discussi.docxfelipaser7p
ย
Discussion 1:ย Analysis of Financial Statements
.
A. This discussion assignment will allow for the completion of a ratio analysis.ย It will also provide information that will be useful as you prepare the written report for Assignment 1: Financial Research Report, which is due at the end of Week 9.
Step 1
: Select a publicly-traded company that you will (or might) use for Assignment 1: Financial Research Report, which is due at the end of Week 9.
Step 2
: Locate financial ratio data from Mergent Online.ย Financial statements, ratios, and other useful information are available from the Mergent Online database that is available through the Strayer University Learning Resource Center (online).ย Please notice that financial ratios are grouped into appropriate categories (Profitability Ratios, Liquidity Ratios, Debt Management Ratios, and Asset Management Ratios), which makes it easy to set up the ratios and use them in the analysis.
Accessing the Mergent Online Database โ Financial Statements for companies, financial ratios, and Form 10K annual reports can be obtained from the Strayer University Learning Resource Center, which is accessible from the Online Classroom (see tab at the top of the screen).
Select โ Learning Resource Center
Select โ Databases
Select Mergent Online
Then, in the block titled โCompany Search โ Enter Symbol or Company Nameโ enter the companyโs name or its Stock Ticker Symbol (e.g., for McCormick & Company, enter MKC).ย Next, select the company from the drop-down menu.
For Financial Statements โ Select โCompany Financialsโ tab
For Financial Ratios โ Select โCompany Financialsโ tab and โRatiosโ sub-tab
For Form 10K Annual Reports โ Select โFilingsโ tab (and then select the most recent Annual Form 10K report)
Step 3
: Enter the financial ratio data into the Financial Ratio Analysis Model (the attached Excel spreadsheet).ย The data need to be entered into the yellow-coded cells (column is titled โOldest Yearโ) progressing to the most recent year on the left (column is titled โMost Recent Yearโ).
The model presently contains financial information for McCormick & Company (Stock Ticker MKC).
You will note that the Excel spreadsheet model is programmed to identify if each ratio improved or deteriorated over the time period.ย And, the spreadsheet is programmed to calculate the percentage change in each of the ratios during the same period.ย This information should be helpful as you prepare your analysis.
(Note: This spreadsheet could be โimportedโ into the Assignment 1: Financial Research Report due at the end of Week 10.)
Step 4
:ย Prepare an analysis and discussion of the financial ratio data that are examined in the Financial Ratio Analysis Model.ย It is always appropriate to include the actual ratio data in the written analysis in addition to its presentation in a table, chart or graph.
(Note: In addition to Mergent, another good source of financial data and company information is:ย ย
http://www.advfn.com
ย .)
B. Fr.
This slides tackles about the Financial statement of the organisation and the needs to analysing it. It is very important especially that the company needs to make a sound judgment and decision to the operation of the company.
Investor Pitch Deck Pe Powerpoint Presentation SlidesSlideTeam
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If you are looking for investor for your business, our content-ready investor pitch deck pe PowerPoint presentation slides will prove to be a must-have component in your toolkit. You can leverage these equity crowdfunding PPT templates to get familiar with topics such as organizational structure, executive summary, milestones achieved, product/services, USP, competitive landscape, technology trend, marketing strategy, financial summary, geographical expansion, and many more. Apart from these, related topics such as start-up funding, fundraising, seed funding, financial modelling, investor business proposal, angel investment and venture capital financing are also covered. It will help convince potential investors about your idea and hopefully encourage them to invest into your business. Download investor pitch deck pe PowerPoint presentation to deliver an impactful presentation in front of the investors. This can surely make your job of obtaining finance much easier. Get a sturdy leg up with our Investor Pitch Deck Pe Powerpoint Presentation Slides. Ascend the ladder of success with elan. https://bit.ly/3ynxZXU
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
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๐๐ ๐๐จ๐ฆ๐ฌ (๐๐ ๐๐จ๐ฆ๐ฆ๐ฎ๐ง๐ข๐๐๐ญ๐ข๐จ๐ง๐ฌ) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
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"๐๐ฏ๐๐ซ๐ฒ ๐๐ฏ๐๐ง๐ญ ๐ข๐ฌ ๐ ๐ฌ๐ญ๐จ๐ซ๐ฒ, ๐ ๐ฌ๐ฉ๐๐๐ข๐๐ฅ ๐ฃ๐จ๐ฎ๐ซ๐ง๐๐ฒ. ๐๐ ๐๐ฅ๐ฐ๐๐ฒ๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐ ๐ญ๐ก๐๐ญ ๐ฌ๐ก๐จ๐ซ๐ญ๐ฅ๐ฒ ๐ฒ๐จ๐ฎ ๐ฐ๐ข๐ฅ๐ฅ ๐๐ ๐ ๐ฉ๐๐ซ๐ญ ๐จ๐ ๐จ๐ฎ๐ซ ๐ฌ๐ญ๐จ๐ซ๐ข๐๐ฌ."
Accpac to QuickBooks Conversion Navigating the Transition with Online Account...PaulBryant58
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This article provides a comprehensive guide on how to
effectively manage the convert Accpac to QuickBooks , with a particular focus on utilizing online accounting services to streamline the process.
India Orthopedic Devices Market: Unlocking Growth Secrets, Trends and Develop...Kumar Satyam
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According to TechSci Research report, โIndia Orthopedic Devices Market -Industry Size, Share, Trends, Competition Forecast & Opportunities, 2030โ, the India Orthopedic Devices Market stood at USD 1,280.54 Million in 2024 and is anticipated to grow with a CAGR of 7.84% in the forecast period, 2026-2030F. The India Orthopedic Devices Market is being driven by several factors. The most prominent ones include an increase in the elderly population, who are more prone to orthopedic conditions such as osteoporosis and arthritis. Moreover, the rise in sports injuries and road accidents are also contributing to the demand for orthopedic devices. Advances in technology and the introduction of innovative implants and prosthetics have further propelled the market growth. Additionally, government initiatives aimed at improving healthcare infrastructure and the increasing prevalence of lifestyle diseases have led to an upward trend in orthopedic surgeries, thereby fueling the market demand for these devices.
What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
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It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Explore our most comprehensive guide on lookback analysis at SafePaaS, covering access governance and how it can transform modern ERP audits. Browse now!
Premium MEAN Stack Development Solutions for Modern BusinessesSynapseIndia
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Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
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CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
Business Valuation Principles for EntrepreneursBen Wann
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This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
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A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
Remote sensing and monitoring are changing the mining industry for the better. These are providing innovative solutions to long-standing challenges. Those related to exploration, extraction, and overall environmental management by mining technology companies Odisha. These technologies make use of satellite imaging, aerial photography and sensors to collect data that might be inaccessible or from hazardous locations. With the use of this technology, mining operations are becoming increasingly efficient. Let us gain more insight into the key aspects associated with remote sensing and monitoring when it comes to mining.
1. EUROPEAN COURSE IN ENTREPRENEURSHIP FOR THE CREATIVE INDUSTRIES
1
Financial Plan
2. EUROPEAN COURSE IN ENTREPRENEURSHIP FOR THE CREATIVE INDUSTRIES
2
Financial plan
Sources:
๏ท Harold L. Vogel, โEntertainment Industry Economicsโ, Sixth Edition, John
Wiley & Sons, Inc., 2001
๏ท Alan B. Albarran, โThe Media Economyโ, Routledge, 2010
๏ท Richard A. Brealey & Stewart C. Myers, โPrinciples of Corporate Financeโ,
MacGrawHill, 1998
To finance a viable project
Purposed objectives and review of internal resources determine needs of investment,
in fixed assets and working capital. The financial plan aggregates cost/benefit
calculations that fix amounts in investment needs, break-even point, profit, return on
investment (return of total assets involved in the project) and return on equity
(shareholders return). Decisions must be made to access project viability (enough, e.g.,
if it is worth taking the correspondent risk) and, if so, how will it be financed, either
through equity capital, funding or both.
With the exception of rare cases of notoriety pursuit or philanthropy, the investorโs
choice depends on which available project is likely to provide a higher return at a
reasonable risk. Entrepreneurs need to bear in mind that they should go through with
their strategic decisions only if they are profitable, or if, at the very least, there will be
no unrecoverable financial losses, even when those losses are only theirs. Cost and
revenue projections should be as accurate and objective as possible, and final
feasibility indicators should be recalculated at risk-adjusted present value (taking into
account inflation, interest, minimum required return and risk associated with the
endeavour).
Basic financial concepts
In its simplest form, finance refers to the funds that flow in and out of a business
entity. Most businesses fail as a result of poorly managed finance. Financial
management refers to the systematic process of budgeting, monitoring, and
controlling the flow of funds in an organization.
๏ท Equity refers to the ownership of the firm or business
๏ท Assets represent things that have value and can ultimately be converted into
cash
3. EUROPEAN COURSE IN ENTREPRENEURSHIP FOR THE CREATIVE INDUSTRIES
3
๏ท Fixed assets are long-term tangible piece of property that the firm owns and
uses in the production of itโs income and is not expected to be consumed or
converted into cash any sooner than at least one yearโs time.
๏ท Depreciation is the allocation of cost of a fixed tangible asset over its useful
time
๏ท Current assets are short term tangible piece of property that are likely to be
converted into cash no later than one yearโs time. Examples: inventory (stock),
accounts receivables (credit to clients or other entities)
๏ท Liabilities refer to debt or money that is owed
๏ท Fixed costs (also known as overhead or structure costs): existing costs
independent of sales
๏ท Variable costs (cost of goods sold): related to sales (usually raw materials used
in product sold or number of personnel hours in services sold)
๏ท Working Capital = current assets โ current liabilities
o In a project corresponds to the value of cash funds + permanent stocks
+ receivables (credit to clients) minus accounts payable (credit from
suppliers)
๏ท Payback period or Break-even point (BEP) represents the moment where there
is no loss or gain. Total revenues minus total costs = 0.
Revenues
2400
1800
.BEP
1200
600
600 1.200 1800 2400
Costs
๏ท Balance sheet A firmโs balance sheet shows its assets (what it owns) and its
liabilities (what it owes) at a point in time.
๏ท Income Statement summarizes the profitability of the firm over a period of
time, in this case a year. Income, profits and earnings all mean the same thing โ
the difference between revenues and expenses.
4. EUROPEAN COURSE IN ENTREPRENEURSHIP FOR THE CREATIVE INDUSTRIES
4
Risk assessment and management
Examples of business risk
External risks
๏ท Environmental causes: areas often subject to natural disasters
๏ท Regulations, taxes and subsidies: political swaps in government can
cause sudden change of legal and fiscal regulations
๏ท Macro-economics: growth versus recession, inflation rates, interest
rates, exchange rates
๏ท Price risk of inputs: supplies prices change unpredictably
๏ท Price risk of outputs: sudden change in demand or competitors can
cause prices to fall
Internal risks
๏ท Production risks: break down of machines, workers do not show up for
work, new technologies make the companies equipment obsolete
๏ท Time frame in which a certain project is undertaken. Risks increases as
the project takes more time
Risk transfer
๏ท Hedging: reducing exposure to risk, for example selling future
production at a fixed price (forward contract) or negotiating fixed
exchange rates with banks; eliminates potential loss but give up the
potential gain
๏ท Insuring: paying a premium (to the insurance) to avoid losses. For
example making an insurance for a film release
๏ท Diversifying: holding many risk assets at lower price instead of
concentrating in just one big investment.
Introducing a time frame
Time units could be quarter, semester, and year, usually related to interest rate. Time
frame is the shortest of the following:
๏ท Product/service life
๏ท Lifespan of facilities (lease contract) or equipment
๏ท Entrepreneurs decision
The excel model used in the below example of a film production will be provided to
students.
5. EUROPEAN COURSE IN ENTREPRENEURSHIP FOR THE CREATIVE INDUSTRIES
5
๏ท Sales forecast Sales forecast is connected with market research (number of
service users expected, or quantity of product expected to be sold) and
installed capacity. It should never be considered 100% capacity usage due to
probable down time in equipment maintenance, malfunction or breakdown. In
the case of a theatre a reasonable but not excessive percentage of total seats
capacity should used. Unreasonable optimism should be avoided since it leads
to overestimating sales projections. This is a recurrent error in this type of
analysis which brings disastrous results. A sensitivity analysis should be made in
sales projections (best case, expected case and worst case scenarios).
SALES FORECAST
Year 2013 2014 2015 2016 2017
Local distributor 600.000
TV Sales 400.000
DVD duplication 150.000 100.000
Distribution other territories 200.000
Others
TOTAL 0 0 600.000 750.000 100.000
Territory: North America, Latin America, South East Asia, Middle East, Western
Europe (U.K., Germany, France, Italy, Spain), Smaller Western Europe (Benelux,
Scandinavia, Greece, Portugal, Switzerland, Iceland), Eastern Europe, Africa
๏ท Cost analysis Costs should never be underestimated; either in quantity used
neither in unit price.
6. EUROPEAN COURSE IN ENTREPRENEURSHIP FOR THE CREATIVE INDUSTRIES
6
VARIABLE COSTS
VARIABLE OR PRODUCTION COSTS
Year 2013 2014 2015 2016 2017
Copyrights - author 10.000
Screenplay writers 2.000 2.000
Director 5.000
Producers 10.000
Actors 500.000
Director of photography 12.000
Editor 6.000
Sound-track
Make-up 1.000
Assistants 3.000
Shootage costs 20.000
Location costs 10.000
Wardrobe 15.000
Travelling 10.000 30.000
Hotels, food and beverage 5.000 20.000
Others 1.000 1.000
TOTAL 43.000 620.000 0 0 0
FIXED (overhead) COSTS
Year 2013 2014 2015 2016 2017
# months 13 13 13 13 13
Annual increment 2,0% 2,0% 2,0% 2,0%
8. EUROPEAN COURSE IN ENTREPRENEURSHIP FOR THE CREATIVE INDUSTRIES
8
Other Costs
Food allowance 1239,04 3.717 3.717 3.717 3.717 3.717
Work Insurance 1,00% 377 385 392 400 408
Training 0 0 0 0
Comissions 0 0 0 0
Health Insurance 0 0 0 0
Car and fuel 0 0 0 0
Mobile phone 0 0 0 0
Others 0 0 0 0
Total Benefits 4.094 4.102 4.109 4.117 4.125
Total Payroll Taxes+benefits 12.556 12.733 12.914 13.098 13.285
TOTAL OFFICE SALARIES 50.256 51.187 52.137 53.105 54.093
Year 2013 2014 2015 2016 2017
Annual
increment 2,0% 2,0% 2,0% 2,0%
OFFICE SUPPLIES 2013 2014 2015 2016 2017
Stationery 1.200 1.224 1.248 1.273 1.299
Office supplies 600 612 624 637 649
Comunication 2.400 2.448 2.497 2.547 2.598
Others 300 306 312 318 325
TOTAL Office Supllies 9.090 9.272 9.457 9.646 4.871
Year 2013 2014 2015 2016 2017
Annual increment 2,0% 2,0% 2,0% 2,0%
LEGAL AND PROFESSIONAL SERVICES 2013 2014 2015 2016 2017
Layers 1.440 1.469 1.498 1.528 1.559
Accountants 1.440 1.469 1.498 1.528 1.559
Network assistance 360 367 375 382 390
Other Office equipment assistance 240 245 250 255 260
Others 0 0 0 0
TOTAL Legal and professional services 3.480 3.550 3.621 3.693 3.767
9. EUROPEAN COURSE IN ENTREPRENEURSHIP FOR THE CREATIVE INDUSTRIES
9
FIXED OR OVERHEAD COSTS
Year 2013 2014 2015 2016 2017
Office Salaries 37.700 38.454 39.223 40.008 40.808
Employee Benefits 4.094 4.102 4.109 4.117 4.125
Payroll Taxes 8.462 8.632 8.804 8.980 9.160
Advertising 5.000 5.000 5.000
Stationery, Office Supplies & Postage 9.090 9.272 9.457 9.646 4.871
Legal and Professional Services 3.480 3.550 3.621 3.693 3.767
Dues & Subscriptions 500 500 500 500 500
Data Processing 200 200 200 200 200
Rent or Mortgage 6.000 6.000 6.000 6.000 6.000
Building Maintenance 600 600 600 600 600
Interest on Loans or Mortgages 300 300 300 300 300
Insurances & Taxes 1.500 1.500 1.500 1.500 1.500
Depreciation 1.400 1.400 1.400 400 400
Utilities 100 100 100 100 100
TOTAL 73.426 79.609 80.814 81.044 72.331
Financial evaluation
๏ท Operating free cash flow Corresponds to earnings before depreciation and
after taxes, e.g., available funds for investment and return.
OPERATING FREE CASHFLOW Year 2013 2014 2015 2016 2017
Sales + 0 0 600.000 750.000 100.000
Variable Costs - 43.000 620.000 0 0 0
Gross margin = -43.000 -620.000 600.000 750.000 100.000
Fixed costs - 73.426 79.609 80.814 81.044 72.331
Operating income = -116.426 -699.609 519.186 668.956 27.669
Income tax (25%) - 0 0 0 93.026 6.917
Operating income after tax = -116.426 -699.609 519.186 575.929 20.752
Depreciation costs of fixed assets + 1.400 1.400 1.400 400 400
OPERATING FREE CASHFLOW = -115.026 -698.209 520.586 576.329 21.152
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๏ท Investment needs
o Total fixed assets purchase cost: price of property facilities, equipments
and other fixed assets.
o Working capital: amount of retained cash in stocks and credit.
INVESTMENT - FIXED ASSETS
Description # Unit price Amount
Camera 2 700 1400
Mainframe 1 1000 1000
Desktop 2 600 1200
Software 1 800 800
Office furniture 1 600 600
Others 0 0 0
TOTAL 5000
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DEPRECIATION OF FIXED ASSETS
Year 2013 2014 2015 2016 2017
Cameras
Expenditure 1400
Useful life Years 5
Depreciation 20% 280 280 280 280 280
Acumulated depreciation 280 560 840 1120 1400
Hardware
Expenditure 2200
Useful life Years 3
Depreciation 33% 733 733 733
Acumulated depreciation 733 1467 2200
Software
Expenditure 800
Useful life Years 3
Depreciation 33% 267 267 267
Acumulated depreciation 267 533 800
Office furniture
Expenditure 600
Useful life Years 5
Depreciation 20% 120 120 120 120 120
Acumulated depreciation 120 240 360 480 600
Total Depreciation per Year 1400 1400 1400 400 400
Acumulated depreciation 1400 2800 4200 4600 5000
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Calculation of working capital:
WORKING CAPITAL Year 2013 2014 2015 2016 2017
Clients (credit given to clients) + 0 0 20.000 115.000 115.000
Stocks (permanent stock) + 0 0 0 0 0
Suppliers (credit from suppliers) - 22.626 115.855 134.770 52.816 42.414
Working Capital = -22.626 -115.855 -114.770 62.184 72.586
WORKING CAPITAL VARIATION -22.626 -93.229 1.085 176.954 10.402
Working Capital Variation = WC(n+1) - WC (n)
The amount to be considered is working capital variation, or the amount to be
increased or decreased from the initial amount.
Project net cash flow. Total earnings at constant prices.
PROJECT NET CASFLOW Year 2013 2014 2015 2016 2017
Sales + 0 0 600.000 750.000 100.000
Variable Costs - 43.000 620.000 0 0 0
Gross margin = -43.000 -620.000 600.000 750.000 100.000
Fixed costs (OVERHEAD) - 73.426 79.609 80.814 81.044 72.331
Operating income = -116.426 -699.609 519.186 668.956 27.669
Income tax - 0 0 0 93.026 6.917
Operating income after tax = -116.426 -699.609 519.186 575.929 20.752
Depreciation + 1.400 1.400 1.400 400 400
OPERATING FREE CASHFLOW = -115.026 -698.209 520.586 576.329 21.152
Investment in fixed assets - 5.000 0 0 0 0
Investment in working capital - -22.626 -93.229 1.085 176.954 10.402
PROJECT NET CASHFLOW = -97.400 -604.980 519.501 399.375 10.750
ACCUMULATED PROJECT CASFLOW = -97.400 -702.380 -182.880 216.495 227.245
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๏ท Internal Rate of Return (IRR): measures the profitability of the project
It is the interest rate at which the net present value of all the cash flows (both
positive and negative) from a project or investment equal zero
= โ +
(1 + )
= 0
Co = initial investment
Cn = cashflows
r = IRR
IRR = 19%
IRR can be calculated in a scientific calculator or excel (function IRR)
๏ท Net present value (NPV)
Corresponds to total earnings at market value at a certain time (current prices).
It compares the value of the euro today with the value of the same euro in the
future. It is determined using a discount rate. Condition for project feasibility is
NPV > 0. Highly profitable projects have high NPVโs.
= โ +
(1 + )
Co = initial investment
Cn = cashflows
i = discount rate
๏ท Discount rate: includes inflation, interest rate (for financed projects) and risk-
adjusted return rate (also called investorโs rate and should include return for
investor + risk). Discount rates should differ throughout the project periods
according to inflation and interest rate projections for each of those periods.
Risk-adjusted return rate also differs from year to year (the longest the project
the higher the risk)
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๏ท Risk-adjusted capital return rate = (1+Re) x (1+Ri) โ 1
Re - return rate
Ri - risk associated to the project
Discount rate = (1+I) x (1+R) โ 1
I โ interest rate (for financed projects)
R โ risk-adjusted return rate
NET PRESENT VALUE
Year 2013 2014 2015 2016 2017
n 1 2 3 4 5
Discount rate 12% 12% 12% 12% 12%
PROJECT CASHFLOW -97.400 -604.980 519.501 399.375 10.750
NET PRESENT VALUE -86.965 -482.286 369.770 253.810 6.100
ACCUMULATED NET PRESENT VALUE -86.965 -569.251 -199.481 54.330 60.429
NPV = 60.429 (NPV should be as high as possible)
Example:
NPV4 =399375/(1+12%)^4
๏ท Payback period or Break-even point (BEP)
Corresponds to the moment (n) where revenues = costs
= โ +
(1 + )
= 0
Co = initial investment
Cn = cashflows
i = discount rate
The project is not viable if BEP > Project period
BEP in the example = 4 โ (54330/253810) = 3,79 years = 3 years, 9 months and 48 days
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Financing a project
The ability/possibility of financing a project depends upon the investors trust on the
project (good returns, objective analysis and projections) and on the entrepreneursโ
(their previous experience and background, their personality and behaviour. Various
possibilities of funding are presented in chapter 12.
๏ท Financial leverage Total earnings of the project can be increased using financial
leverage. Financial leverage in financed endeavours is savings in income taxes
due to financing costs (interest paid for financed amounts). In effect financial
costs reduce operating earnings thus reducing income tax amount. In previous
analysis income tax was calculated over operating income, disregarding the
way the project would be financed. Total project earnings are then NPV + AV.
๏ท Adjusted value (AV) is the amount of savings in income tax at market value at a
certain time.
LONG TERM LOAN 5% 25%
Discount
rate
n Loan debt
Loan
amortization
Interest
Savings in
income tax
Interest x
Inc.Tax
Adjusted
value
12% 1 50.000 0 2.500 625 558
12% 2 50.000 10.000 2.500 625 498
12% 3 40.000 10.000 2.000 500 356
12% 4 30.000 10.000 1.500 375 238
12% 5 20.000 10.000 1.000 250 142
Total adjusted value AV1 1.650
SHORT TERM LOAN 4% 25%
Discount
rate
n Loan debt
Loan
amortization
Interest
Savings in
income tax
Interest x
Inc.Tax
Adjusted
value
12% 1 0 0 0 0 0
12% 2 650.000 500.000 32.500 8.125 6.477
12% 3 150.000 150.000 7.500 1.875 1.335
12% 4 0 0 0 0 0
12% 5 0 0 0 0 0
Total adjusted value AV2 7.812
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TOTAL ADJUSTED VALUE AV1+AV2 9462
NPV AV
NET PRESENT VALUE: 60.429 + 9462 = 69.892
Financial Statements
INCOME STATEMENT 2013 2014 2015 2016 2017
Sales revenue 0 0 600.000 750.000 100.000
Cost of goods sold 43.000 620.000 0 0 0
Gross margin -43.000 -620.000 600.000 750.000 100.000
General, selling ,administrative expenses 72.026 78.209 79.414 80.644 71.931
Depreciation costs 1.400 1.400 1.400 400 400
Operating Income -116.426 -699.609 519.186 668.956 27.669
Interest expense 2.500 35.000 9.500 1.500 1.000
Taxable Income -118.926 -734.609 509.686 667.456 26.669
Income tax - 25% 0 0 0 80.901 6.667
Net Income -118.926 -734.609 509.686 586.554 20.002
Allocation of net income:
Dividends 0 0 0 250.000 0
Retained earnings -118.926 -734.609 509.686 336.554 20.002
(1)
Accumulated income -118.926 -853.535 -343.850 323.606 N/A
Income tax 0 0 0 80.901
Per Portuguese law one is allowed to recover previous losses (up to 4 years) for income tax purposes
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BALANCE SHEET
Assets 2013 2014 2015 2016 2017
Property, plant and equipment (PP&E) 5.000 5.000 5.000 5.000 5.000
Accumulated depreciation 1.400 2.800 4.200 4.600 5.000
Net PP&E 3.600 2.200 800 400 0
Current assets
Inventories 0 0 0 0 0
Receivables 0 0 20.000 115.000 115.000
Cash and marketable securities 100 120 120 120 120
Total current assets 100 120 20.120 115.120 115.120
Total Assets 3.700 2.320 20.920 115.520 115.120
Liabilities and Stokholders' Equity 2013 2014 2015 2016 2017
Paid-in capital 50.000 50.000 50.000 50.000 50.000
Retained earnings -118.926 -853.535 -343.850 -7.296 12.706
Stockholders' equity -68.926 -803.535 -293.850 42.704 62.706
Long term debt 50.000 40.000 30.000 20.000 10.000
Current liabilities
Short-term debt 0 650.000 150.000 0 0
Accounts payable 22.626 115.855 134.770 52.816 42.414
Total current liabilities 22.626 765.855 284.770 52.816 42.414
Total liabilities and stockholders' equity 3.700 2.320 20.920 115.520 115.120