Entrepreneurship I Class #11 Finances: VOSG II

11/6/022 VOSG 1 reaction 1 st person Page numbers Executive summary Management sectoin Market research –Pick your market segement(s) –Survey those not others Technology in search of a market Barriers to entry

Finances – VOSG II

11/6/024 Finances goal Need to understand: –Money coming in –Money going out –Money sitting there How you are going to fund venture Value creation

11/6/025 Financial statements GAAP FASB SEC Weird but true!

11/6/026 Three statements Income Statement Balance Sheet Statement of Cash Flows

11/6/027 Income statement Results of operating activities for a specified period of time Revenues Expenses –COGS –SG&A –Other Net income = revenues - expenses

11/6/028 Blue, Inc. income statement

11/6/029 Income statement Revenues - total number of products/services you realistically expect to sell each time period, month, quarter, year. Cost of sales (or cost of goods sold: COGS) - direct costs of selling all products/services for that time period. Includes direct labor, materials, no SG&A (selling, general, and administrative).

11/6/0210 Gross profit - subtract total cost of sales from total net revenues. Gross profit margin - percentage of total sales. Divide gross profits by total net sales. SG&A - all other expenses. Net profit (before taxes) - subtract total expenses from gross profit Net margin - divide net profit by total sales

11/6/0211 Breakeven analysis Variable costs+fixed costs=total costs Plotted against revenues based on price and volume

11/6/0212 Breakeven at $1 per unit Number of Units

11/6/0213 Breakeven at $.75 per unit Number of Units

11/6/0214 Total costs Fixed –Administrative –Most salaries for a start up are fixed Variable –Directly related to production –Can be percentage of some fixed costs

11/6/0215 Balance sheet Snapshot in time Short term/long term Assets - PP&E, FF&E = big stuff Liabilities - what you owe Shareholders equity –Owner’s claim on assets –Capital –Retained earnings

11/6/0216 Balance sheet Assets reflect investment decisions Liabilities and equity reflect financing decisions Thus, assets = liabilities + equity So, equity = assets - liabilities

11/6/0217 Blue, Inc. balance sheet

11/6/0218 Blue, Inc. balance sheet cont.

11/6/0219 Blue, Inc. balance sheet cont.

11/6/0220 Balance sheet summary

11/6/0221 Cash flows Net cash flows for specific period of time. Operating (day to day) Investing (for future) Financing (how you paid)

11/6/0222 Blue Inc. - cash flows

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