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Course Title. "Math for Musicians". (How to Read a Financial Statement). Presented by. Alan Friedman & Daniel Jobe Friedman, Kannenberg & Company, P.C. OBJECTIVES. “Dissect” a Financial Statement (Balance Sheet & Income Statement) Teach you “how to read” a F/S “Q&A” along the way.

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Presentation Transcript
course title

Course Title

"Math for Musicians"

(How to Read a Financial Statement)

Presented by

Alan Friedman& Daniel JobeFriedman, Kannenberg & Company, P.C.

slide2

OBJECTIVES

“Dissect” a Financial Statement (Balance Sheet & Income Statement)

Teach you “how to read” a F/S

“Q&A” along the way

slide3

Financial terminology test…

What does “F.S.” stand for?

This is the type of scaling used on a bass guitar…. “Full Scale”

slide4

Financial terminology test…

What does “I.S.” stand for?

It’s what comes on every keyboard… “Internal Sounds”

slide5

Financial terminology test…

Finally, what is BS?

That’s right…a balance sheet 

slide6

What’s a “financial statement”?

Balance Sheet

Income Statement (a.k.a. “P&L”)

Statement of Cash Flows

Supporting Schedules (i.e. oper. expenses)

Footnotes

CPA firm letter (compilation, review, audit)

slide9

Dissecting a “balance sheet”

  • Current Liabilities
  • Long-term Liabilities
  • Related party debt
  • Owner’s Equity

Current Assets

Fixed Assets

Rental Assets

Other Assets

slide10

Dissecting an “Income Statement”

Primary Operating Income (i.e. sales)

Secondary Oper. Income (i.e. rentals, lessons, repairs, tuning & delivery)

Operating Expenses (a.k.a. “SG&A”)

Other (non-oper.) Expenses & Taxes

Net Income (a.k.a. “the bottom line”)

slide11

What does a “balance sheet” tell us?

(1) Liquidity

(2) Debt Structure

(3) Owner’s Investment in the Business (a.k.a. “Net Worth”)

slide12

What does an “income statement” tell us?

(4) Profitability by Revenue Activity

(5) Excessive Operating Expenses

(6) Overall Profitability (a.k.a. the “bottom line”) for the Period

slide13

What do they tell us “together”?

(7) Inventory management effectiveness

(8) Return on rental pool investment

(9) Ability to service company’s debt

slide14

#1 – Current Ratio = Liquidity

“Your Current Ratio is one of the most important metrics a bank considers when deciding whether to lend you money and in what form.”

slide15

Bad Boy Music

Live long, play louder!

#1 – Current Ratio = Liquidity

Most bankers want to see a “Current Ratio” of 2.00 to 1.00 or better!

slide16

#2 – Debt Structure

“A lack of long-term financing is like being a one-man band – you’re carrying a heavy load all by yourself which limits what you can do.”

slide17

Bad Boy Music

Live long, play louder!

#2 – Debt Structure

slide18

Item #3 – Owner’s Equity

“Your employees, bankers & suppliers all think your profits are like an Alan Friedman guitar solo… unending”.

slide19

Bad Boy Music

Live long, play louder!

Item #3 – Owner’s Equity

“Bankers like to see how much money an owner has invested in their business…or if the bank is merely funding an extravagant lifestyle (or even another business) of the owner!”.

slide20

#4 – Profitability by Activity

“The biggest income statement blunder made by retailers and their accountants is lumping “all” revenues into sales.”

slide21

Excellence Music

Bad Boy Music

Live long, play louder!

#4 – Profitability by Activity

Knucklehead Music, Inc.

slide22

#5 – Managing Operating Expenses

“Manage expenses at their most basic level, then review them as a “percentage of sales” to make sure you are in-line with industry averages.”

slide23

Bad Boy Music

Live long, play louder!

#5 – Managing Operating Expenses

slide24

#6 – Net Income (the bottom line)

“Sales, rentals, lessons, repairs and every related operating expense need to be managed to deliver both a profitable bottom line and a greater chance of staying in business.”

slide25

Bad Boy Music

Live long, play louder!

#6 – Net Income (the bottom line)

slide26

#7 – Inventory Management

“Is a tornado the only way for you to get rid of your aging inventory?”

slide27

Bad Boy Music

Live long, play louder!

#7 – Inventory Management

Most retailing experts (across all industries) suggest a GMROI target of $1.50 or better

slide28

#8 – Return on your Rental Pool

“Not managing your Rental Pools is like having a tent sale with a bunch of drummers playing drum solos all at the same time.”

slide29

Bad Boy Music

Live long, play louder!

#8 – Return on your Rental Pool

This formula tells you how long it takes to recover the cost you’ve invested in your rental instrument pool

(12 months divided by .75 = 16 months)

slide30

#9 – Debt Service Coverage

“While you may be profitable, you could still be crushed under the weight of poor cash flow and a burdensome debt service!!”

slide31

Bad Boy Music

Live long, play louder!

#9 – Debt Service Coverage

Most bankers like to see at least a 1.5 debt service coverage ratio!

slide32

Don’t fall into the trap…

…of not generating and acting upon monthly financial statements – it’s by far your company’s “most vital” financial health report!!

slide33

Need some help?

www.fkco.com

ContactJen Lowe after this seminar

to set up a meeting time during the show

slide35

“Enjoy the Show!”

“Printz” Saturday Night – Hilton 10:00pm