Financial analysis statements
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Financial analysis & statements. 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. Break Even Analysis.

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Financial analysis statements

Financial analysis & statements


Financial analysis

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


Break even analysis

Break Even Analysis

  • How many units of a product must be sold in order to cover all costs of production of that unit


Costs

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


Break even analysis1

Break Even Analysis

  • Method #1

    • BE=F+(V*Units sold)/Units sold

      • BE=break even

      • F= fixed costs

      • V= variable costs


Break even example

Break Even - Example


Break even climbing tourney eg

Break Even – Climbing Tourney Eg


Break even climbing tourney eg1

Break Even – Climbing Tourney Eg


Break even climbing tourney eg2

Break Even – Climbing Tourney Eg


Break even

Break Even

Method #2


Break even analysis2

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


Break even1

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


Break even analysis3

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


Break even analysis4

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


Worksheet

Worksheet


Worksheet1

Worksheet

Loss – lower than BE

BE= 2650/(100-7)

BE=29 units


Worksheet2

Worksheet

Loss – lower than BE

Expenditures:

$2650 (fixed)

$140 (variable cost per unit..20*$7)

$2790

Revenues:

$2000 (20 people * $100)

Loss: -$790


Worksheet3

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


Income statement

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


Balance sheet

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…


Balance sheet1

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


Balance sheet2

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


Balance sheet3

Balance Sheet

  • Assets = liabilities + equity or

    • Equity = assets – liabilities


Financial analysis statements

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


Budget statement

Budget Statement

  • Expended monies

  • Allocated monies

  • Revenues received

  • % of allocated $$ that is committed


Budget statement1

Budget Statement


Budget statement2

Budget Statement


Cash flow statement

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


Cash flow statement1

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


Cash flow statement2

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


Cash flow statement3

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


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