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Course Title

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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Course Title

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  1. Course Title "Math for Musicians" (How to Read a Financial Statement) Presented by Alan Friedman& Daniel JobeFriedman, Kannenberg & Company, P.C.

  2. OBJECTIVES “Dissect” a Financial Statement (Balance Sheet & Income Statement) Teach you “how to read” a F/S “Q&A” along the way

  3. Financial terminology test… What does “F.S.” stand for? This is the type of scaling used on a bass guitar…. “Full Scale”

  4. Financial terminology test… What does “I.S.” stand for? It’s what comes on every keyboard… “Internal Sounds”

  5. Financial terminology test… Finally, what is BS? That’s right…a balance sheet 

  6. 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)

  7. The “Balance Sheet”

  8. The “Income Statement”

  9. Dissecting a “balance sheet” • Current Liabilities • Long-term Liabilities • Related party debt • Owner’s Equity Current Assets Fixed Assets Rental Assets Other Assets

  10. 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”)

  11. What does a “balance sheet” tell us? (1) Liquidity (2) Debt Structure (3) Owner’s Investment in the Business (a.k.a. “Net Worth”)

  12. 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

  13. What do they tell us “together”? (7) Inventory management effectiveness (8) Return on rental pool investment (9) Ability to service company’s debt

  14. #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.”

  15. 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!

  16. #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.”

  17. Bad Boy Music Live long, play louder! #2 – Debt Structure

  18. Item #3 – Owner’s Equity “Your employees, bankers & suppliers all think your profits are like an Alan Friedman guitar solo… unending”.

  19. 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!”.

  20. #4 – Profitability by Activity “The biggest income statement blunder made by retailers and their accountants is lumping “all” revenues into sales.”

  21. Excellence Music Bad Boy Music Live long, play louder! #4 – Profitability by Activity Knucklehead Music, Inc.

  22. #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.”

  23. Bad Boy Music Live long, play louder! #5 – Managing Operating Expenses

  24. #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.”

  25. Bad Boy Music Live long, play louder! #6 – Net Income (the bottom line)

  26. #7 – Inventory Management “Is a tornado the only way for you to get rid of your aging inventory?”

  27. 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

  28. #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.”

  29. 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)

  30. #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!!”

  31. 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!

  32. 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!!

  33. Need some help? www.fkco.com ContactJen Lowe after this seminar to set up a meeting time during the show

  34. Any Questions?

  35. “Enjoy the Show!” “Printz” Saturday Night – Hilton 10:00pm

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