FINANCIAL ANALYSIS & STATEMENTS
Financial AnalysisMethods 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 AnalysisHow 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
Break Even AnalysisMethod #1
◦BE=F+(V*Units sold)/Units sold
BE=break even F= fixed costs V= variable costs
Break Even - ExampleP.H.I.T. Climbing Tournament
Fixed:First place $1000Second place $500Third place $250Equipment & supplies $400Marketing $500
Total Fixed $2650Variable:
T-shirts per person $7
Break Even – Climbing Tourney Eg
10 20 30 40 50
Fixed costs $2650
Variable costs ($7/person) $70
Total costs $2720
Cost per participant $272
Break Even – Climbing Tourney Eg
10 20 30 40 50
Fixed costs 2650 2650 2650 2650 2650
Variable costs ($7/person) 70 140 210 280 350
Total costs 2720 2790 2860 2930 3000
Cost per participant $272.00 $139.50 $95.33 $73.25 $60.00
Break Even – Climbing Tourney Eg
10 20 30 40 50
Fixed costs 2650 2650 2650 2650 2650
Variable costs ($7/person) 70 140 210 280 350
Total costs 2720 2790 2860 2930 3000
Cost per participant $272.00 $139.50 $95.33 $73.25 $60.00
Break EvenMethod #2
Break Even AnalysisHow 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 Even BE=F / (P – V)
F=$2650V=$7P=$60
BE=2650 / (60-7)BE=2650 / 53BE=50 people
Variable
$7*50 $350
Fixed $53*50 $2650
Total $3000
Total revenue = 50*$60=$3000
Break Even AnalysisBike rental business
◦Fixed costs = $8000◦Variable costs = $10/person◦Bike rental = $50/bike
BE=F / (P – V)BE=8000/(50-10)BE=8000/40BE=200 bikes
Break Even AnalysisProfit
◦$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
WorksheetProfit /loss
P= 100 20 40 60F= 2650V= 7
break even=Round up
WorksheetProfit /loss
P= 100 20 40 60F= 2650V= 7
break even=Round up
BE= 2650/(100-7)BE=29 units
Loss – lower than BE
WorksheetProfit /loss
P= 100 20 40 60F= 2650V= 7 -$790
break even= 29Round up
Expenditures:$2650 (fixed) $140 (variable cost per unit..20*$7)$2790
Revenues: $2000 (20 people * $100)
Loss: -$790
Loss – lower than BE
WorksheetProfit /loss
P= 100 20 40 60F= 2650
V= 7 -$790 $1023 $2883
break even= 29Round up
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
Profit – higher than BE
Income Statement
RevenuesTrips $12,320Concessions $2,486Store receipts $3,345Total revenues $18,151
ExpendituresStaff $9,562Supplies $527Utilities $452Mortgage $2,342Marketing $732Maintenance $622Total expenditures $14,237Net revenue/(loss) $3,914
Clear Water Rafting CompanyIncome Statement as of July 1- 31, 2011
Usually monthly, quarterly & annually
Starting a new company:•1st year prepare monthly projections•Years 2-3 Quarterly projections•Years 4-5: Annually
Balance SheetFinancial 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 SheetCurrent 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 SheetCurrent 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 SheetAssets = liabilities + equity or
◦Equity = assets – liabilities
Assets LiabilitiesCurrent Assets Current Liabilities
Cash & investments $3,546,975
Accounts payable $25,729
Accounts Receivable $1,243,785
Long term debt
Total Current Assets $4,790,760 Mortgage $376,971
Fixed Assets Total Liabilities $402,700
Store fixtures $243,876
Office equipment $7,659Equity $5,175,923
Rafting inventory $543,987
Total fixed assets$787,863
Total assets $5,578,623 Total liabilities & equities
$5,578,623
Clear Water Rafting CompanyBalance Sheet as of December 31, 2007
Adjust equity to make it
“balance” to reflect
the remaining
value “owed” to
the owners
AKA: Net worth
Budget StatementExpended moniesAllocated moniesRevenues received% of allocated $$ that is
committed
Budget StatementClear Water Rafting Company
Budget Statement - 1st & 2nd Quarters - End July 31
Actual Budget Committed % Balance
Revenues
Trips $42,113 $72,500 $0 58.1% $30,387
Concessions $8,671 $14,000 $0 61.9% $5,329
Store receipts $11,148 $20,000 $0 55.7% $8,852
Total revenues $61,932 $106,500 $0 58.2% $44,568
Expenditures
Staff $35,963 $52,100 $1,500 71.9% $14,637
Supplies $2,147 $3,100 $0 69.3% $953
Utilities $1,610 $2,430 $0 66.3% $820
Mortgage $8,051 $16,000 $0 50.3% $7,949
Marketing $2,684 $4,300 $500 74.0% $1,116
Maintenance $3,221 $4,300 $0 74.9% $1,079
Total expenditures $53,676 $82,230 $2,000 65.3% $26,554
Budget StatementClear Water Rafting Company
Budget Statement - 1st & 2nd Quarters - End July 31
Actual BudgetCommitte
d % BalanceRevenues
Trips$74,53
4 $72,500 $0 102.8% -$2,034Concessions $8,671 $14,000 $0 61.9% $5,329
Store receipts$11,14
8 $20,000 $0 55.7% $8,852
Total revenues$94,35
3$106,50
0 $0 88.6% $12,147
Expenditures
Staff$35,96
3 52100 $1,500 71.9% $14,637Supplies $2,147 $3,100 $0 69.3% $953Utilities $3,245 $2,430 $0 133.5% -$815Mortgage $8,051 $16,000 $0 50.3% $7,949Marketing $4,478 $4,300 $500 115.8% -$678Maintenance $3,221 $4,300 $0 74.9% $1,079
Total expenditures
$57,105 $82,230 $2,000 69.4% $23,125
Cash Flow StatementIncome 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 Statement
February March April May June July Total
A. revenues $ 1,276 $ 4,985 $ 8,076 $ 12,486 $ 16,958 $ 18,151 $ 61,932
B. Expenses $ 4,978 $ 6,890 $ 7,013 $ 9,213 $ 11,345 $ 14,237 $ 53,676
C. Monthly cash flow (A-B)
$ (3,702) $ (1,905) $ 1,063 -
D. Cumulative cash flow
$ (3,702) $ (5,607) $ (4,544) -
E. Cash position at beginning of month
$ 12,000 $ 8,298 $ 6,393 -
F. Cash position at end of month (E+C)
$ 8,298 $ 6,393 $ 7,456 -
Clear Water Rafting CompanyCash Flow Statement - 1st & 2nd Quarters
* Note that the numbers in parenthesis indicate a negative balance
Matches income
statement figures
In the
bank
Cash Flow Statement
February March April May June July Total
A. revenues $ 1,276 $ 4,985 $ 8,076 $ 12,486 $ 16,958 $ 18,151 $ 61,932
B. Expenses $ 4,978 $ 6,890 $ 7,013 $ 9,213 $ 11,345 $ 14,237 $ 53,676
C. Monthly cash flow (A-B)
$ (3,702) $ (1,905) $ 1,063 $ 3,273 $ 5,613 $ 3,914 -
D. Cumulative cash flow
$ (3,702) $ (5,607) $ (4,544) $ (1,271) $ 4,342 $ 8,256 -
E. Cash position at beginning of month
$ 12,000 $ 8,298 $ 6,393 $ 7,456 $ 10,729 $ 16,342 -
F. Cash position at end of month (E+C)
$ 8,298 $ 6,393 $ 7,456 $ 10,729 $ 16,342 $ 20,256 -
Clear Water Rafting CompanyCash Flow Statement - 1st & 2nd Quarters
* Note that the numbers in parenthesis indicate a negative balance
Matches income
statement figures
In the
bank
Cash Flow Statement
February March April May June July Total
A. revenues $ 1,276 $ 4,985 $ 8,076 $ 12,486 $ 16,958 $ 18,151 $ 61,932
B. Expenses $ 4,978 $ 6,890 $ 7,013 $ 9,213 $ 11,345 $ 14,237 $ 53,676
C. Monthly cash flow (A-B)
$ (3,702) $ (1,905) $ 1,063 $ 3,273 $ 5,613 $ 3,914 -
D. Cumulative cash flow
$ (3,702) $ (5,607) $ (4,544) $ (1,271) $ 4,342 $ 8,256 -
E. Cash position at beginning of month
$ 12,000 $ 8,298 $ 6,393 $ 7,456 $ 10,729 $ 16,342 -
F. Cash position at end of month (E+C)
$ 8,298 $ 6,393 $ 7,456 $ 10,729 $ 16,342 $ 20,256 -
Clear Water Rafting CompanyCash Flow Statement - 1st & 2nd Quarters
* Note that the numbers in parenthesis indicate a negative balance
Positive cash flow
In the
bank
First month to exceed savings at
start of fiscal year