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Technology

Entrepreneurship

Enterprise Mastery #7
3. Enterprise Mastery
Business Models
Funding Sources
Marketing & Sales
Production & Supply Chain Management
Financial Management
Business Start-up Processes
Business-enabling Technologies
Enterprise Operations
Marketplace

Corporate Strategy

Finance Strategy Operations Strategy Marketing Strategy

Production & Supply


Chain Management (SCM)

People Plants Parts Processes


Materials & Products &
Customers Services
Planning and Control

Input Output

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#1 Business (Revenue) Model

#2 Gross Margin Model

#3 Operating Model

#4 Working Capital Model

#5 Funding (Financing) Model


Contents
Overview of Fianancial Management

Objectives of Financial Management

Fundamental Principles

Financial Reporting

Income
Inventory Statement
Management

Balance Sheet

Financial Analysis

Summary & Applications

5-5
Financial
Management
aims to maximize
the wealth of the
owners of the
organization .

5-6
Task of Financial Manager

Financial manager’s task is to balance


Profit = revenue-cost ; and
Risk = threat of an undesirable outcome

5-7
Fundamental Principles For every additional expected return,
there is an additional risk
(GAAPP – Generally
Accepted Accounting The value of money diminishes over time
Principles & Practices)
Wealth or value of an organization is
measured in its assets, not profit.

Revenue is recognized when earned

Expenses are recognized by matching them


with the revenue generated

Financial figures must be conservative

All relevant information is disclosed to the


users of the company’s financial reports.
The organization is assumed to go on
forever.

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2 Kinds of Accounting
 Financial accounting - concerned with the
recording and reporting of economic data and
activities for an entity. Generates principal
reports for owners, creditors, governmental
agencies and the public
 Managerial accounting - uses both financial
accounting and estimated data to aid
management in running day to day operations
and in planning future operations. Focus is to
provide managers with relevant and timely
information and reports.

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Financial Statements
1. Income Statement (Statement of
Comprehensive Income) - states how much the
company sold, spent, & profited “during a time”
2. Balance Sheet (Statement of Financial
Position) – states the financial condition
(balances of what the company owns & owes)
“as of a time.”
3. Statement of Cash Flow - a financial statement
that provides a summary of the activity in a
company‟s cash account over a period of time.
Divides cash activity into three categories:
operating, investing, financing.
4. Statement of Changes in Equity - explains the
changes in the accounts of the stockholders‟
equity section of the balance sheet during an
accounting period. 10
Format of an Income Statement
REVENUES - EXPENSES = PROFIT (LOSS)
<Name of the Company>
Income Statement
For the period ended <Date>

Gross Sales or Revenue Pxxxx


Cost of Goods Sold (xxx)
Gross Profit Pxxx
Other Income xxx
Total Income Pxxx
Operating Expenses:
Rental Expenses (xx)
Utility Expenses (xx)
Salary & Wages (xx)
Other Expenses (xx) (xxx)
Earnings Before Interest, Taxes, Pxxx
Depreciation, Amort’n (EBITDA)
Interest Expenses (xx)
Depreciation Expenses (xx)
Amortization Expenses (xx) (xxx)
Net Income Before Taxes (NIBT) Pxx
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Income Statement
Accounts
 Gross Sales / Sales Revenue - monetary
amount of goods and services delivered during
the accounting period.
 Cost of Goods Sold - amount of direct
materials, direct labor and factory overhead
placed in the goods that were delivered during
the accounting period.
 Other Income - revenues earned from activities
not associated with the sale of the company‟s
goods and services arising from the regular
operations of the business.
 Gross Profit - difference between net sales
revenue and cost of sales.
5-12
JetFan Sales & Gross
Revenue Target

5-
13
JetFan Projected
Income Statement

5-
14
JetFan Technology Ltd*
Income Statement for the year ended December 31, 200X
(Year 2, in „000 USD)

Gross Revenue 6,200


Less: Cost of Goods Sold (3,560)
Gross Profit 2,640
Other Income 0
Total Income 2,640
Less Operating expenses:
Wages expense (1,000)
Rent expense (550)
Utilties expense (200)
EBITDA 890
Interest expense (50)
Depreciation (20)
Amortization (10)
Net Income Before Tax (NIBT) 810
*USD 1.8M raised, additional Investment: of USD 2.5 MM
required at start of Year 1 operations
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Financial Analysis:
 Break-Even Analysis (Sales volume required to cover
CGS and Expenses but zero Net Income)
 Profit Margin Ratio (Fraction of each Dollar of Sales
that trickles down to Profit)
= Gross Profit / Gross Sales Rev
 Payback Period (No. of Years for Investment to be fully
recovered based on projected Income)
= Total Investment / Average Annual Net Income
 Return on Investment (Investment Profitability over a
given period as basis for comparing with other
investments on same period)
= (Cumul. Net Income during period – Cumul. Investment) /
Cumulative Investment x 100%
 Financial Ratios
◦ Current Ratio = Current Assets / Current Liabilities
◦ Debt-to-Equity Ratio = Total Liabilities / Total Equity 5-
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Homework for Week 11

Prepare a 5-10 minute group presentation with


Powerpoint slides on topic matching your group #:
1. Getting web domain names and corporate email accounts
(Go Daddy, etc)
2. Website development and hosting basics, tools, subscriptions
(Weebly.com, Amazon Web Services, etc)
3. Paid Marketing Online tools (Google, Facebook, OLX, etc)
4. Free communication & collaboration, mass web
posting/emails/text blasts (Google hangouts, Skype, etc)
5. Free office productivity tools (Google apps/docs, Open Office,
Kolab.org, etc)
6. Free small business accounting software & tools
(WaveApps.com, etc)