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Financial analysis & statements

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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. Fixed Variable Costs that remain steady regardless of volume Maintenance Salaried staff Mortgage Costs that change in proportion to a change in volume Supplies T-shirts Costs
  5. Break Even Analysis Method #1 BE=F+(V*Units sold)/Units sold BE=break even F= fixed costs V= variable costs
  6. Break Even - Example
  7. Break Even – Climbing Tourney Eg
  8. Break Even – Climbing Tourney Eg
  9. Break Even – Climbing Tourney Eg
  10. Break Even

    Method #2
  11. 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
  12. Break Even BE=F / (P – V) F=$2650 V=$7 P=$60 BE=2650 / (60-7) BE=2650 / 53 BE=50 people Total revenue = 50*$60=$3000
  13. 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
  14. 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
  15. Worksheet
  16. Worksheet Loss – lower than BE BE= 2650/(100-7) BE=29 units
  17. Worksheet Loss – lower than BE Expenditures: $2650 (fixed) $140 (variable cost per unit..20*$7) $2790 Revenues: $2000 (20 people * $100) Loss: -$790
  18. 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
  19. Income Statement Usually monthly, quarterly & annually Clear Water Rafting Company Income Statement as of July 1- 31, 2011 Starting a new company: 1st year prepare monthly projections Years 2-3 Quarterly projections Years 4-5: Annually
  20. 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…
  21. 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
  22. 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
  23. Balance Sheet Assets = liabilities + equity or Equity = assets – liabilities
  24. 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
  25. Budget Statement Expended monies Allocated monies Revenues received % of allocated $$ that is committed
  26. Budget Statement
  27. Budget Statement
  28. 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
  29. 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
  30. 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
  31. 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