Presented by: Cooper Cochran

 Provide a historical picture of your Company  Highlight your Company’s strengths and weaknesses  Identify potential areas of improvement  Help you make better decisions for the future

 Balance Sheet  Income Statement  Cash Flow Statement Financial Ratios

 Snapshot” of what the Company owns and owes, along with what is left over  Assets – items owned that have value  Liabilities – debts owed that must be paid in the future  Equity – the portion of the Company that belongs to the Owners  Assets = Liabilities + Equity

Items owned that have value  Cash  Accounts Receivable  Inventory  Fixed Assets  Investments  Loans to Others (including owners)  Current vs. Non-Current Assets

Debts owed that must be paid in the future  Accounts Payable  Taxes Payable (Payroll, Sales, Income)  Loans  Current vs. Long-Term Liabilities

The owner’s investment in the Company  Paid-In Capital  Retained Earnings  Owner Withdrawals/Dividends

Company liquidity – the ability to turn an asset into cash  Working capital  Quick or Acid Test ratio  Current ratio  Leverage (debt to worth) ratio

WORKING CAPITAL Current Assets -Current Liabilities Working Capital $ 170, ,000 $ 20,000

QUICK RATIO Total Current Assets -Inventory Total Current Liabilities 170, ,000 = 85,000 = ,000

CURRENT RATIO Total Current Assets Total Current Liabilities 170,000 = ,000

DEBT TO WORTH Total Liabilities Total Capital 204,000 = ,000

 Do we have too little (or too much) cash on hand?  Do we need to make changes to our collection policy?  Do we need to restructure our existing debt?  Do we need to seek additional financing, either from lenders or from our owners?

 Summary of the Company’s revenue and expenses over a period of time  Revenue – what the Company has earned during the period  Expenses – costs incurred to run the Company during the period  Net Income or Loss – the difference between the two

 Sales or Service Revenue  Interest/Dividend Income  Gain/Loss on Sale of Assets

 Cost of Goods Sold  Operating Expenses  Interest Expense  Income Tax Expense

 Gross Profit/Profit Margin  Net Income/Profit  Horizontal Analysis  Vertical Analysis

PROFIT MARGIN ON SALES Net Profit Net Sales 53,000 = 5.9% 900,000

 Should we increase or decrease our prices?  Should we look for ways to reduce product costs?  Are there ways we can reduce overhead or administrative costs?  Do we need to consider refinancing our debt?  What should we do with the profit earned by the Company?  How can we continue operating if the Company suffers a loss?

 Summary of cash inflows and outflows during the period  Operating Activities – cash generated from or used in operating the business  Investing Activities – cash generated from or used in business investments (assets)  Financing Activities – cash generated from or used in financing the business (liabilities or equity)  Reconciliation of net income and cash

 Net Income  Non-cash expenses (depreciation)  Change in operating assets/liabilities  Purchase of plant assets, investments  Sale of plant assets, investments  Proceeds from new debt  Principal payment on debts  Investments made by owner(s)  Dividends paid to owner(s)

 Where your cash is coming from  Where your cash is going  How the cash generated from the Company’s profit is being used  How the balance of the Company’s cash has changed during the year

 If our operations are not generating enough cash, what can we do to change this? (credit and collection policies for example)  How can we generate sufficient cash to repay our debts?  If we take out a loan, what amount can we afford in monthly payments?  If we have excess cash, how should we be using it? (investing in Company assets, paying down debt, returning profit to the owners)

 Accounts receivable turnover  Inventory turnover  Accounts payable turnover  Debt service ratio

ACCOUNTS REC TURNOVER AR x 365 = Days to Collect Net Sales 75,000 x 365 = 27,375,000 = ,000

INVENTORY TURNOVER Inv x 365 = Days to Turn Cost of Goods 85,000 x 365 = 31,025,000 = ,000

ACCOUNTS PAY TURNOVER Accounts Pay x 365 Purchases 41,000 x 365 = 14,965,000 = ,000

DEBT SERVICE RATIO Net Profit + Depreciation Current Portion of LT Debt 53, ,0000 = 66,000 = $11 6,000

Who else is relying on our financial statements in order to make decisions about our Company?  Owners/Investors  Lenders/Creditors  Customers  Employees or potential employees  Government Entities (regulators, IRS, etc.)

What information are they looking for?  Profitability  Liquidity  Sustainability  Leverage  Return on investment to the owners  Comparability with others in the industry  Trends from year to year

 Analyze your own Company  Compare with others in the industry  Look for areas of improvement  Make decisions and implement changes  Start all over!

LaTech-TBDC 509 W. Alabama Ave. Ruston, LA

PLEASE COMPLETE AND RETURN THE EVALUATION