Show me your GBER

1. Show me yourGBER By Gaylen Bunker

2. 1. FUNCTIONAL CategoriesConcept Income Statement Operating Revenue Expense Profit A/R & Inv A/P $ Financing Liabilities & Equity Operate PP&E Investing Balance Sheet

3. Statement of Cash Flow

4. http://www.iasb.org/NR/rdonlyres/58BF2A4E-B650-423D-BA13-29D2EB1DE05B/0/Upd0703.pdfhttp://www.iasb.org/NR/rdonlyres/58BF2A4E-B650-423D-BA13-29D2EB1DE05B/0/Upd0703.pdf “Under most of the presentation alternatives being considered jointly by FASB/IASB each comprehensive income item would need to be classified in one of the functional categories (operating, investing, or financing).”

5. 2. The WACC Concept A calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All capital sources - common stock, preferred stock, bonds and any other long-term debt - are included in a WACC calculation. http://www.investopedia.com/terms/w/wacc.asp

6. FUNCTIONAL Categories Income Statement Operating Revenue Expense Profit A/R & Inv A/P $ Financing Liabilities & Equity Operate PP&E Investing Balance Sheet

7. Cost of Capital Return Capital Structure Financial Leverage Risk and Return Trade-off (potential return rises with an increase in risk.) Risk Financing D E Cost of Capital Return to the Provider of funds is a cost to the User of those funds Cost of Debt (Interest) Liabilities & Equity Cost of Equity Dividend Yield & Growth Opportunity cost of Equity WACC "Anyone who lives within their means suffers from a lack of imagination.“ Oscar Wilde

8. 3. Residual IncomeConcept Residual income is a performance measure that consists of some measure of operating income minus some charge for the capital used by the manager (or unit) being evaluated. The concept appeared as early as the 1920s (e.g., in DuPont's bonus plan calculation of its "Executive Trust Fund"), and has been discussed in management accounting texts since General Electric adopted it in the 1950s. Despite its merits, residual income was not widely used in practice until recently [with EVA].

9. Economic Value Added (EVA) is the financial performance measure that capturing the true economic profit of an enterprise. EVA® also is the performance measure most directly linked to the creation of shareholder wealth over time. Stern Stewart & Co. Put most simply, EVA is net operating profit minus an appropriate charge for the opportunity cost of all capital invested in an enterprise. http://26.8e.3845.static.theplanet.com/evaabout/whatis.php

10. Leftovers “…for 30 years [my mother] served the family nothing but leftovers. The original meal has never been found." Calvin Trillin

11. 4. Classical Break-Even Concept FC Revenue RBE = CM% Dollars (Y axis) Contribution Margin Total Costs Variable Costs Fixed Costs 0 Volume (X axis) “Variables won't, constants aren't.” Osborn’s Law

13. Integration Functional Categories Break-Even WACC EVA Of Concepts

14. Revenue + (Cap Chrg. / (1 – Tax Rate) FC RBE = Dollars (Y axis) CM% Contribution Margin Total Costs Capital Charge Line Fixed Costs New Total Cost Line Tax Line Pivot Point Variable Costs 0 Volume (X axis) OBER GBER “Success is the ability to go from one failure to another with no loss of enthusiasm.”Winston Churchill

15. Cost of Equity

18. GBER The revenue level required to cover all operating, investing, and financing costs.