Entrepreneurship I

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Entrepreneurship I

• Class 11
• Finances VOSG II

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VOSG 1 reaction

• 1st person
• Page numbers
• Executive summary
• Management sectoin
• Market research
• Pick your market segement(s)
• Survey those not others
• Technology in search of a market
• Barriers to entry

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Finances VOSG II
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Finances goal

• Need to understand
• Money coming in
• Money going out
• Money sitting there
• How you are going to fund venture
• Value creation

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Financial statements

• GAAP
• FASB
• SEC
• Weird but true!

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Three statements

• Income Statement
• Balance Sheet
• Statement of Cash Flows

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Income statement

• Results of operating activities for a specified
  period of time
• Revenues
• Expenses
• COGS
• SGA
• Other
• Net income revenues - expenses

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Blue, Inc. income statement
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Income statement

• Revenues - total number of products/services you
  realistically expect to sell each time period,
  month, quarter, year.
• Cost of sales (or cost of goods sold COGS) -
  direct costs of selling all products/services for
  that time period. Includes direct labor,
  materials, no SGA (selling, general, and
  administrative).

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• Gross profit - subtract total cost of
• sales from total net revenues.
• Gross profit margin - percentage of total sales.
  Divide gross profits by total net sales.
• SGA - all other expenses.
• Net profit (before taxes) - subtract total
  expenses from gross profit
• Net margin - divide net profit by total sales

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Breakeven analysis

• Variable costsfixed coststotal costs
• Plotted against revenues based on price and
  volume

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Breakeven at 1 per unit
Number of Units
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Breakeven at .75 per unit
Number of Units
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Total costs

• Fixed
• Administrative
• Most salaries for a start up are fixed

• Variable
• Directly related to production
• Can be percentage of some fixed costs

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Balance sheet

• Snapshot in time
• Short term/long term
• Assets - PPE, FFE big stuff
• Liabilities - what you owe
• Shareholders equity
• Owners claim on assets
• Capital
• Retained earnings

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Balance sheet

• Assets reflect investment decisions
• Liabilities and equity reflect financing
  decisions
• Thus, assets liabilities equity
• So, equity assets - liabilities

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Blue, Inc. balance sheet
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Blue, Inc. balance sheet cont.
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Blue, Inc. balance sheet cont.
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Balance sheet summary
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Cash flows

• Net cash flows for specific period of time.
• Operating (day to day)
• Investing (for future)
• Financing (how you paid)

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Blue Inc. - cash flows
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