185 lines
6.3 KiB
Org Mode
Executable file
185 lines
6.3 KiB
Org Mode
Executable file
#+title: Section 6 | Lesson 34 - Balance Sheet, Cash Flow Statement
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#+HTML_HEAD: <link rel="stylesheet" type="text/css" href="../_share/media/css/business.css" />
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* Links
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- [[./../mba-main.org][TOC | Business]]
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- [[https://www.udemy.com/course/an-entire-mba-in-1-courseaward-winning-business-school-prof/learn/lecture/4311526#overview][S06:L34 Income Statement, Balance Sheet, Financial Risk]]
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- [[https://www.udemy.com/course/an-entire-mba-in-1-courseaward-winning-business-school-prof/learn/lecture/4311576#overview][S06:L35 Cash Flow Statement]]
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* Notes
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** tips
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- confidence leads to perceived competence, especially in sales
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- confidence is king
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- in baseball you miss more often, so the best hitters are insanely confident
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- when presenting to investors get into the confident state
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** financial analysis
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- don't focus on memorization
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- if you understand you will remember it
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*** years 3-4
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- growth is accelating
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- running out of cash
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** copyright and trademarks
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- ™️
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- meaning: brand, logo, or phrase that is claimed but not yet registered with a government trademark office
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- legal: limited protection, intent to claim but not the legal weight of a trademark
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- ©️
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- meaning: creator of a work owns the copyright
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- legal: automatically granted as soon as work is created and fixed in a tangible medium. symbol serves as a public notice
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- applies to creative works, not brand identifiers
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- ®️
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- meaning: officially registered with a government agency
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- legal: strongest protection for brand, logo or phrase. allows the owner to sue for damages if someone infringes on the trademar
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** balance sheet
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*** banks
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- you shouldn't deal with banks early on
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- you want to deal with multiple banks
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- best deal
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- options
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*** terms
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- balance sheet: tracks everything you own or owe
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- equity: what people own
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- debt: what banks own
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- assets: what you own
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- current: stuff you can sell in less than one year
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- equipment
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- long term: stuff you can't sell in less than one year
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- factory
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- liabilities
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- current
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- stuff you have to pay back in a year
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- credit card
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- payroll
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- long term
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** Income Statement
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- tells you about your income
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- top line is sales / revenue
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- bottom line is net income
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*** Financial Summary
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The following is a fictional summary of a the finances of a watch company
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**** Gross Profit
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| Category | Quantity | Per Unit | Total |
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|----------------+----------+----------+--------|
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| Sales | 1000 | $300 | $300k |
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| Cost | 1000 | $200 | -$200k |
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| **Gross Profit** | | | **$100k** |
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**** Earnings Before Interest and Taxes (EBIT)
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| Expense Type | Amount |
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|------------------------------+----------|
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| Marketing expenses | -$10k |
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| Employee expenses | -$30k |
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| Rent expense | -$17k |
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| Depreciation | -$2k |
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| **EBIT** | **$41k** |
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**** Earnings Before Taxes (EBT)
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| Item | Amount |
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|-----------------+----------|
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| Interest | -$1k |
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| **EBT** | **$40k** |
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**** Net Income
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| Item | Amount |
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|-----------------+----------|
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| Taxes (25%) | -$10k |
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| **Net Income** | **$30k** |
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*** Explanation of the Financial Summary
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**** Gross profit
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the monty you bring in taking away only the cost of manufacture
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**** Earnings Before Interest and Taxes (EBIT) / Operating Profit
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- this is also called "The Line"
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- this composes operating expenses and depreciation
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- depreciation is the wear and tear on your equipment
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- in the US you can deduct that cost
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- this means you can deduct from the use of even a car
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** Cash Flow Statement
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*** A. Cash Flow From Operation
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| Expense Type | Pos/Neg | Amount |
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|-----------------------------------+---------+----------|
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| NetIncome | Pos | $30k |
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| Increase in Depreciation | Pos | $2k |
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| Increase in Accounts Receivable | Neg | -$10k |
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| Increase in Accounts Payable | Neg | $20k |
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| A = Net cash flow from operations | Pos | **$42k** |
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*** B. Cash Flow From Investing
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| Expense Type | Pos/Neg | Amount |
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|-----------------------+---------+-----------|
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| Increase in equipment | Neg | $40k |
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| | Neg | **-$40k** |
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*** C. Cash flow from Financing
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| Expense Type | Pos/Neg | Amount |
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|----------------------------------+---------+--------|
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| Increase in Loans | Pos | $20k |
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| C = Net cash flow from financing | Pos | $20k |
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*** Total Net Change in Cash
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| Category | Amount |
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|------------------------+----------|
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| A + B + C | $22k |
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| Beginning Cash Balance | $60k |
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| **Ending Cash Balance** | **$82k** |
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What we are determining in this category is ACTUAL CASH
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money we can actually use
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That's why in some cases, like Depreciation or Loans, we take off on the Income Statement but add it back here. Or Accounts receivable, which haven't been received, we take off.
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**** Depreciation
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- it's important to understand that "depreciation" is actually just bullshit meant to help you on your taxes
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- you are "detracting" from your earnings what the depreciation should have been worth
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- but in reality, you didn't lose anything
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- so you have to add it back if you want to know what you really got
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**** Accounts Receivable
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- listed under 'current assets'
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- collection typically occurs within a year
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- money owed to a company by its customers for goods or services
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- expected to be receives
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- we have to deduct that b/c even tho we "should get it" we HAVEN'T got it
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**** Accounts Payable
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- listed under 'current liabilities'
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- payments generally made within a year
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- money a company owed to suppliers or venders for goods or services purchased on credit
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** Financial Ratios
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- understand them
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- don't memorize them
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*** why do we care
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1. so equity investors can decide to invest or assess our performance
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2. so lenders can decide to lend / assess loan performance
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3. business owners can track performance
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*** what matters
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- when you get to B round
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- otherwise cash burn rate / month
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- friends, family
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- first venture capital firm
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- cash flow is REALLY important at the end of the process
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*** how to read financial statements
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- treat it like a good book
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- look for patterns
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