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Financial analysis & statements

Financial analysis & statements. 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. Break Even Analysis.

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Financial analysis & statements

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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

  4. Break Even Analysis • Method #1 • BE=F+(V*Units sold) / Units sold • BE=break even • F= fixed costs • V= variable costs

  5. Break Even - Example

  6. Break Even – Pool Tourney Eg

  7. Break Even – Pool Tourney Eg

  8. Break Even – Pool Tourney Eg

  9. Break Even – 5K Example

  10. Break Even – 5K Example

  11. Break Even Method #2

  12. Break Even Analysis • How many units of a product must be sold in order to cover all costs of production of that unit • Formula • BE=F / (P – V) • BE= Break even point • F = Fixed costs • P = Selling price per unit • V = Variable costs per unit

  13. Break Even • BE=F / (P – V) • F=$2,650 • V=$7 • P=$60 • BE=2,650 / (60-7) • BE=2,650 / 53 • BE=50 people Total revenue = 50*$60=$3,000

  14. Break Even Analysis • Bike rental business • Fixed costs = $8,000 • Variable costs = $10/person • Bike rental = $50/bike • BE=F / (P – V) • BE=8,000/(50-10) • BE=8,000/40 • BE=200 bikes

  15. Break Even Analysis • Profit • $40 profit per bike over 200 • 250 bikes: 50*$40=$2,000 • 350 bikes: 150*$40=$6,000 • Loss – 150 bikes • Expenditures (total fixed & variable costs) • 8000+($10*150)=$9,500 • Revenues • $50*150 bikes=$7,500 Fixed Variable $2,000 loss

  16. Worksheet • BE=F / (P – V)

  17. Worksheet Loss – lower than BE BE= 2650/(100-7) BE=29 units

  18. Worksheet Loss – lower than BE Expenditures: $2650 (fixed) + $140 (variable cost per unit..20*$7) $2790 Revenues: $2000 (20 people * $100) Loss: -$790

  19. Worksheet Profit – higher than BE Revenue: (40) $100-$7/person over BE (29) $93 * (40-29) Profit: $1023 Revenue: (60) $100-$7/person over BE (29) $93 * (60-29) Profit: $2883

  20. Do all break even calculations first Calculate all profits Calculate all losses Problems

  21. 1. Income Statement 2. Cash Flow Statement 3. Balance Sheet 4. Budget Statement reports

  22. Income Statement Usually monthly, quarterly & annually Clear Water Rafting Company Income Statement as of July 1- 31, 2012 • Starting a new company: • 1st year prepare monthly projections • Years 2-3 Quarterly projections • Years 4-5: Annually

  23. Budget Statement • Expended monies • Allocated monies • Revenues received • % of allocated $$ that is committed

  24. Budget Statement

  25. Budget Statement

  26. Balance Sheet

  27. 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 • Terms…

  28. 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 goods & aren’t for sale • Land, building, machinery, equipment

  29. Balance Sheet • Current liabilities • Debts for regular business operations that will come due within a year • Accounts payable • What is owed to suppliers for things bought on credit • Salaries • Long term liabilities • Due after a year • Mortgages, bonds, large loans • Equity (owners net worth) • Portion of business owned free and clear of all debts

  30. Balance Sheet • Assets = liabilities + equity or • Equity = assets – liabilities

  31. Clear Water Rafting Company Balance Sheet as of December 31, 2007 AKA: Net worth Adjust equity to make it “balance” to reflect the remaining value “owed” to the owners

  32. Problems

  33. Cash Flow Statements

  34. Cash Flow Statement • Income statement provided information about revenues coming in and expenses going out, but not cash in and cash out • What’s already in the bank • Negative cash flows okay, but not sustainable forever

  35. Cash Flow Statement Matches income statement figures Clear Water Rafting Company Cash Flow Statement - 1st & 2nd Quarters * Note that the numbers in parenthesis indicate a negative balance In the bank

  36. Cash Flow Statement Matches income statement figures Clear Water Rafting Company Cash Flow Statement - 1st & 2nd Quarters * Note that the numbers in parenthesis indicate a negative balance In the bank

  37. Cash Flow Statement First month to exceed savings at start of fiscal year Clear Water Rafting Company Cash Flow Statement - 1st & 2nd Quarters * Note that the numbers in parenthesis indicate a negative balance Positive cash flow In the bank

  38. Questions

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