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Financial Analysis. Methods to monitor the fiscal status of the organization over a period of timeMonthly, quarterly, annuallyMethodsBreak even analysisIncome statementsCash flow statementBalance sheetBudget statement. Break Even Analysis. How many units of a product must be sold in order t
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1. Financial analysis & statements
2. Financial Analysis Methods to monitor the fiscal status of the organization over a period of time
Monthly, quarterly, annually
Methods
Break even analysis
Income statements
Cash flow statement
Balance sheet
Budget statement
3. Break Even Analysis How many units of a product must be sold in order to cover all costs of production of that unit
Method #1
BE=F+(V*Units sold)/Units sold
4. Break Even - Example
5. Break Even - Example
6. Break Even - Example
7. Break Even Analysis How many units of a product must be sold in order to cover all costs of production of that unit
Method #2
Formula
BE=F / (P – V)
BE= Break even point
F = Fixed costs
P = Selling price per unit
V = Variable costs per unit
8. Break Even BE=F / (P – V)
P=$60
BE=2650 / (60-7)
BE=2650 / 53
BE=50 people
9. Break Even Analysis Bike rental business
Fixed costs = $8000
Variable costs = $10/person
Bike rental = $50/bike
10. Break Even Analysis Bike rental business
Fixed costs = $8000
Variable costs = $10/person
Bike rental = $50/bike
BE=F / (P – V)
BE=8000/(50-10)
BE=8000/40
BE=200 bikes
11. Break Even Analysis
12. Break Even Analysis Profit
$40 profit per bike over 200
250 bikes = 50*$40=$2000
350 bikes – 150*$40=$6000
Loss – 150 bikes
Expenditures
8000+($10*150)=$9500
Revenues
$50*150 bikes=$7500
13. Income Statement Measures profitability over a period of time
i.e. annually, quarterly, or monthly
Income = revenues – expenses
Shows how profitable your company is—how much money will be made after all expenses are taken out
With a new company…
Typically 1st year you prepare monthly projections
Years 2-3 Quarterly projections (4 times a year)
Years 4-5: Annually (once a year)
Example….
14. Income Statement
15. Cash Flow Statement Income statement provided information about revenues coming in and expenses going out, but not cash in and cash out
What’s in the bank
Eliminates some of the creative accounting of the income statement (ex. depreciation)
Negative cash flows okay, but not sustainable forever
16. Cash Flow Statement Negative monthly cash flow – means that you dipped into the savings in this seasonal business.Negative monthly cash flow – means that you dipped into the savings in this seasonal business.
17. Cash Flow Statement Negative monthly cash flow – means that you dipped into the savings in this seasonal business.Negative monthly cash flow – means that you dipped into the savings in this seasonal business.
18. Balance Sheet Financial condition of a business at a single point in time
End of month, quarter, year
Provides information about a company’s assets, liabilities, and owner’s equity (capital)…owes vs. owns
Assets = liabilities + equity or
Equity = assets – liabilities
Terms…
19. Balance Sheet Current assets
Cash & assets that can be turned to cash quickly (within a year)
Inventory
Bank deposits
Accounts receivable
Amts not yet collected from customers but are due
Fixed assets
Used to produce good & aren’t for sale
Land, building, machinery, equipment
Depreciation
Declining value of a fixed asset
20. Balance Sheet Accounts payable
What is owed to suppliers for things bought on credit
Salaries
Current liabilities
Debts for regular business operations that will come due within a year)
Long term liabilities
Due after a year
Mortgages, bonds, large loans
Net worth (owner’s equity)
Portion of business owned free and clear of all debts
21. Assets – what you have of value; liabilities – what you owe; Equity is the net worth or what you own free and clear. Assets – what you have of value; liabilities – what you owe; Equity is the net worth or what you own free and clear.
22. Budget Statement Expended monies
Allocated monies
Revenues received
% of allocated that is commited
23. Budget Statement