Transcript Financial Analysis Notes


Please find a laptop in the back
› If you are having trouble logging in, please
raise your hand

Please go to ‘moodle.ltsd.k12.pa.us’ to
get to Moodle
› Log into Moodle and open up Thursday’s Bell
Ringer (1/24)
 Edit your answer and place 1 of the 6
categories we discussed last week next to
each of your 10 costs
 Look in your notes if you need to remember
those 6 categories

Ways to classify costs:
› By Categories
Cost of sales:
Product inventory, raw materials,
manufacturing equipment, shipping,
packaging, shipping insurance,
warehousing
Professional fees:
Setting up a legal structure for your
business (e.g. LLC, corporation),
trademarks, copyrights, patents, drafting
partnership and non-disclosure
agreements, attorney fees for ongoing
consultation, retaining an accountant
Technology costs:
Computer hardware, computer software,
printers, cell phones, PDAs, website
development and maintenance, highspeed internet access, servers, security
measures, IT consulting
Administrative costs:
Various types of business insurance, office
supplies, licenses and permits, express
shipping and postage, product
packaging, parking, rent, utilities,
phones, copier, fax machine, desks,
chairs, filing cabinets – anything else you
need to have on a daily basis to operate
a business
Sales and marketing costs:
Printing of stationery, marketing materials,
advertising, public relations, event or
trade show attendance or sponsorship,
trade association or chamber of
commerce membership fees, travel and
entertainment for client meetings,
mailing or lead lists
Wages and benefits:
Employee salaries, payroll taxes, benefits,
workers compensation

Other ways to classify costs:
› Fixed vs. Variable
› One-time Fee vs. Ongoing Cost

Seed Money

Revenue- Amount of money that a
business earns from selling their product
or service.

Costs - Something spent or required to
be spent.

Profit - The amount a business makes
when total revenue exceeds total
expenses.
Revenue > Costs
Loss - The amount a business loses when
the total revenue is less than the total
expenses.
Costs > Revenue
 Debt - Money that is owed. Can
accumulate when costs are higher than
revenue for a business.

If you want a profit, you have to plan!
 That is why a business plan includes a
financial analysis

Please get in the following groups:
Group 1: Sara, Bryce, Ashley, Emily
Group 2: Tala, Emma, Kyle
Group 3: Austin, Rocco, Samantha

The entrepreneur borrows money from a
person or an institution
› They sign a promissory note, which commits
them to making regular payments, which
includes interest

Secured Loans
› Loans that are backed up by personal
property
› If you cannot repay your loan, you give up
your personal property

Examples:
› Line of Credit
› Long-term Loan

Unsecured Loans
› Loans that are not backed up by personal
property
› Loans that are made to a banks most
creditworthy customers

Examples:
› Short-term loans that have to be repaid
within a year
Lender has no say in the decisions of the
business
2. You don’t give up ownership
3. You keep all the profits
4. Payments are always the same
1.
You have a monthly payment, that
includes interest
2. If loan payments are not made, the
lender can force the business into
bankruptcy
1.
-Close the business and sell assets (if you are
not incorporated, you have to sell personal
assets)

The entrepreneur trades a percentage
of ownership for money
› The investor will receive a percentage of
future profits
Friends and family contributions
 Venture Capitalists
 Sale of stock

A venture capitalist cannot force you
into bankruptcy if you can’t pay
2. You only pay them if your business
makes money
1.
1.
You have to give up some ownership of
your company
-You have to give them some of your profit
2.
3.
They have a say in how your business is
run
You may end up paying them much
more than they gave you
-Anita Roddick Story

“Pulling yourself up by the bootstraps”
› Goal is to keep start-ups costs low and
finance with your profits as you go

Suggestions
› Hire as few employees as possible
› Borrow or rent equipment instead of buy
› Use personal savings
› Arrange small loans from friends or relatives

Advantages
› You don’t go into major debt
› You don’t give away any of your company

Disadvantages
› You have to start very small and inexpensive
› It may take a while to save up enough

Please log into Moodle and complete
today’s Exit Slip
The business is a startup
2. Lack of a solid business plan
3. Lack of adequate experience
4. Lack of confidence in the borrower
5. Inadequate personal investment in the
business
1.

Show’s the business’s revenues and
expenses over a period in time
› Shows if you received a profit or a loss
› Sometimes called the Profit/Loss Statement

This statement can help you do the
following:
1. Examine how sales, expenses, and income
are changing over time
2. Forecast how well your business can expect
to perform in the future
3. Analyze your costs to determine where you
may need to cut back (or where you can
increase spending)

Look at the example on the back of your Bell
Ringer
1.
Revenue – money made from the sale of
goods or services
Cost of Goods Sold – Cost of the inventory or
the materials to make the item
Gross Profit = Revenue – Cost of Goods sold
Operating Expenses – costs necessary to run a
business (fixed costs such as rent, utilities,
advertising, etc)
2.
3.
4.
5.
6.
7.
Net income before taxes – the amount
remaining after COGS and operating
expenses are subtracted from revenue
Taxes –the amount of taxes you have to
pay
Net income/Loss after taxes – After taxes
are subtracted, the Net Income (Profit)
or Loss for the period