1. Presented by: Cooper Cochran

2.  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

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

4.  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

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

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

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

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

9. WORKING CAPITAL Current Assets -Current Liabilities Working Capital $ 170,000 - 150,000 $ 20,000

10. QUICK RATIO Total Current Assets -Inventory Total Current Liabilities 170,000 - 85,000 = 85,000 =.56 150,000

11. CURRENT RATIO Total Current Assets Total Current Liabilities 170,000 = 1.13 150,000

12. DEBT TO WORTH Total Liabilities Total Capital 204,000 = 2.34 87,000

13.  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?

15.  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

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

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

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

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

20.  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?

22.  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

23.  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)

24.  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

25.  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)

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

27. ACCOUNTS REC TURNOVER AR x 365 = Days to Collect Net Sales 75,000 x 365 = 27,375,000 = 30.4 900,000

28. INVENTORY TURNOVER Inv x 365 = Days to Turn Cost of Goods 85,000 x 365 = 31,025,000 = 57.4 504,000

29. ACCOUNTS PAY TURNOVER Accounts Pay x 365 Purchases 41,000 x 365 = 14,965,000 = 42.7 350,000

30. DEBT SERVICE RATIO Net Profit + Depreciation Current Portion of LT Debt 53,000 + 13,0000 = 66,000 = $11 6,000

32. 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.)

33. 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

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

36. LaTech-TBDC 509 W. Alabama Ave. Ruston, LA 318-257-2835 www.latech.www.latech.edu cooper@latech.edu

37. PLEASE COMPLETE AND RETURN THE EVALUATION