Finance Accounting

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MEGA

FINANCE
COMPILATION

177 PAGES

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THE KEY
DIFFERENCES
BETWEEN
FINANCE &
ACCOUNTING

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Accounting Vs. Finance

How are they different?

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Accounting

Approach: Historical & Current Financial


Information

Focus: Compliance

Direction: Backward

Verb: Report

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Finance

Approach: Current & Future Cash Flows

Focus: Value creation through capital allocation

Direction: Forward

Verb: Plan

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Accounting
Evolved through accounting principles:

1. to smooth out the results of economic


activity over time to match revenues and
expenses.
2. to be conservative in the recording and
reporting of the results of economic activity.

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Finance
Evolved in response to accounting principles:

1. to transition from profits to cash through


EBITDA, operating cash flow, and free cash
flow.
2. to distribute and invest financial resources
with the goal of increasing efficiency and
maximizing profits.

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Key Soft Skills in Accounting
1. Detail Oriented
2. Conservative thinking
3. Organized
4. Analytical
5. Efficient
6. Process driven
7. Business acumen
8. Communication
9. Problem solving
10. Critical thinking

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Key Soft Skills in Finance
1. Research Oriented
2. Analytical
3. Risk-taking
4. Innovative thinking
5. Results driven
6. Business acumen
7. Collaboration
8. Communication
9. Problem solving
10. Negotiation

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Specialized Technical
Knowledge in Accounting

1. Financial Accounting
2. Audit
3. Tax
4. Business Law
5. Management Accounting

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Specialized Technical
Knowledge in Finance

1. Corporate Finance
2. Capital Budgeting
3. Capital Markets
4. Portfolio Management
5. Financial Modelling

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Value in Accounting

Driven by the conservatism principle:

1. lower of projected asset values and


higher of estimated liability values
2. when value isn't known it's recorded as
$0 to ensure the business doesn't
overestimate assets and underestimate
liabilities.

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Value in Finance

Driven by the valuation process:

1. future cash flows are projected over a


period of time.
2. a discount rate is applied to the stream
of cash flow values to bring their value
into the present.
3. the discount rate is reflective of
opportunity cost, inflation, and risk.

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Accounting vs. Finance

How are they working together?

1. both invested in the profitability and


success of the company
2. reliable accounting data is critical for
financial planning
3. partnership with coordinated efforts

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3 THINGS
YOU
DIDN'T KNOW
ABOUT
FINANCE

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There are many ways to
describe what finance is and
what it does.

But here are 3 important


things finance is not.

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1. Finance is not really
about money

It’s about information and


incentives.

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Company shareholders
(Principals) hire
managers (Agents) to run
their companies and
make decisions that are in
their best interest as
owners.

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However, Agents hold
most of the information,
and they can choose to
make decisions that
benefit them to the
detriment of the Principals.

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The right incentives
structure can help align
the interests of the Agents
and the Principals, but this
is fundamentally the big
challenge of finance.

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2. Finance is not rocket
science.

But it pays to present it


that way.

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Money flows from savers
to users through layers
and layers of
intermediaries.

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Information is
asymmetrically held and
shared across the
intermediaries.

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Deliberately showcasing
finance as overly
complicated means
Agents with expertise
become necessary to help
Principals read the map
and navigate their boats.

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3. Finance is not
accounting.

But most people think


they’re the same.

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Accounting is backward-
looking, and many of the
accounting principles are
focused on smoothing out
performance, which also
obscures the inflows and
outflows of cash.

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Finance is forward-
looking, and modern
finance responded to
accounting by
emphasizing cash and
cash flow metrics.

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If you’re looking to learn
more:

Check out the work of


Professor Mihir Desai
The Harvard Mizuho
Financial Group Professor
of Finance.

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4 STEPS TO
MANAGE
YOUR
CASH FLOW

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1. UNDERSTAND
2. CALCULATE
3. OPTIMIZE
4. FINANCE

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1. UNDERSTAND
YOUR CASH
INFLOW AND
OUTFLOW DRIVERS

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3 Types of Cash
Inflows & Outflows

Operating Cash Inflows/Outflows


Investing Cash Inflows/Outflows


Financing Cash Inflows/Outflows

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Operating Cash Inflows
Any cash coming into your company from
operating activities

Operating Cash Outflows


Any cash leaving your company as a result of
operating activities

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Operating
Cash Flow Drivers

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Account Receivable Days
(DSO)

the average number of days


necessary to receive cash from
credit sales
(receivables conversion period)

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Account Receivable Days
(DSO)

= Average Accounts Receivable/


Revenues x 365

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Days Inventory
Outstanding (DIO)

the average number of days required


to sell inventory
(inventory conversion period)

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Days Inventory
Outstanding (DIO)

= Average Inventory/
Purchases x 365

Purchases = Ending Inventory -


Opening Inventory + COGS

simplified formulas use COGS instead of


Purchases in the denominator

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Days Payable Outstanding
(DPO)

the average number of days


suppliers are willing to wait for a
cash payment
(payables conversion period)

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Days Payable Outstanding
(DPO)

= Average Accounts Payable /


Purchases x 365

Purchases = Ending Inventory -


Opening Inventory + COGS

simplified formulas use COGS instead of


Purchases in the denominator

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2. CALCULATE THE
CASH CONVERSION
CYCLE

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The Cash Conversion Cycle

measures on average how long a


company’s cash is tied up in
net working capital assets

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The Cash Conversion Cycle
(days)

➕Days Inventory Outstanding DIO


➕Days Sales Outstanding DSO
➖Days Payable Outstanding DPO

= Cash Conversion Cycle CCC

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3. OPTIMIZE THE
CASH CONVERSION
CYCLE

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Accelerate the collection
of Accounts Receivable

Offer discounts to customers for early


payment.

Charge penalities for overdue invoices.

Speed up invoicing after each sale.

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Accelerate the sale of
Inventory

Analyze your product lines to clear out


slow selling inventory.

Optimize inventory management by


establishing and tracking specialized
KPIs.

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Manage the payment of
Accounts Payable

Renegotiate payment terms with suppliers


as possible, without straining your
relationship.

Align customer and supplier payment terms

Arrange customer payments via


transferrable letters of credit and transferr
to your supplier.

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4. FINANCE THE
CASH CONVERSION
CYCLE

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Financing the Cash
Conversion Cycle

A positive Cash Conversion Cycle


number means business operations
are tying up cash, and covering
operating expenses will require
financing.

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Sources of Financing

The Cash Conversion Cycle (CCC) can


be financed using internal capital
(retained earnings = equity) or
external capital (debt or equity).

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Internal Financing

Because companies have limited


resources, using internal cash reserves
for the financing of the cash conversion
cycle reduces cash available for use in
other areas of the business.

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ROI & External Financing

An ROI analysis will identify if the


business is better off allocating
internal resources elsewhere, and
leveraging external financing for the
cash conversion cycle instead.

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Sample allocation of $1MM:

CHOICE BETWEEN
> 5% savings by avoiding borrowing costs
and financing CCC internally
OR
> 17% ROI from new internal automation
project

OPTIMIZED SOLUTION
> borrow externally at 5%, invest internally
at 17%, net benefit of 12%

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Negotiating External
Debt Financing

External debt financing for the CCC can


typically be negotiated by leveraging
up to 90% of good Accounts Receivable
and up to 50% of Inventory balances
(borrowing base).

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Negotiating External
Equity Financing

Equity financing for the CCC typically


comes from external sources when
the business is not profitable, or when
it has an excessive risk profile (high
growth, cash flow volatility, high
leverage).

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THE COST OF
WORKING
CAPITAL

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Working capital

A measure of short-term liquidity

Calculated as current assets less current


liabilities

Source of short-term operating cash flows

Helps determine if there are sufficient


current assets available to pay off current
liabilities

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Working capital

Q: What is the key business objective for


working capital?

A: To optimize it by finding the right balance


of customer trade terms to be competitive;
stocking only as much inventory as as
necessary to fulfil orders per customer
agreements; and delaying payables as long as
possible without straining vendor
relationships.

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Working capital

Q: Why is optimizing working capital


important?

A: Because of the significant costs associated


with the management of working capital, and
the resulting financing requirements which
will either reduce cash balances available for
other projects, or will require external
financing increasing the overall cost of capital.

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The Cost of Working Capital

1. Costs of extending credit to customers

2. Costs of carrying inventory

3. Costs of foregoing early payment discounts


from suppliers

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The costs of customer credit

People costs - processing and collecting


Financing costs – financing receivables
Bad debt costs – customer delinquency

How to manage?
Timely invoicing
Credit controls
Discounts for early payments

How to measure?
Days Sales Outstanding (DSO)
= Average Accounts Receivable/Revenues x 365

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The costs of carrying inventory

Storage & Handling (order, receive, ship)


Obsolescence & Spoilage costs
Theft & Insurance costs
Financing costs

How to manage?
Economic Order Quantity to optimize
Just-In-Time Inventory Mngmt to minimize

How to measure?
Days Inventory Outstanding (DIO)
= Average Inventory/Purchases x 365

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The costs of foregoing early
payment discounts

Supplier discounts for early payment could be


cheaper than typical borrowing costs
“2/10, net 30” => 2% when paid in 10 days

How to manage?
Negotiate extended credit terms
Take advantage of early payment discounts

How to measure?
365 days/20 days = 18.25 periods per year
2% x 18.25 periods per year = 36.5% per year

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CONTRIBUTION
MARGIN IS NOT
GROSS
MARGIN

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Gross Margin vs. Gross Profit
vs. Contribution Margin
Gross profit is a measure of absolute value calculated in
currency units ($).
Gross Profit = Revenue - COGS

Gross (profit) margin is a ratio calculated in


percentages (%).
Gross Margin = (Revenue - COGS)/Revenue

Contribution margin is (despite name suggesting a ratio)


another measure of absolute value (currency units $)
Contribution Margin = (Price /unit- Variable Cost / unit)

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Gross Margin
The gross margin (GM) is the sales price of a product
or service, less all direct costs of the product or
service expressed as a percentage of sales.

It represents each dollar of revenue that the


company retains after paying for COGS.

It is used to understand the percentage of revenue


generated to cover the operating expenses of the
business.

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Contribution Margin

The Contribution Margin (CM) is the sales price of a


product or service, less all its variable costs.

It represents the incremental profit per unit earned on


the sale after covering variable costs (direct
materials, direct labor, and variable overhead).

It is used to understand the dollar value of revenue


required to cover all fixed costs and drive either a
break even, or a certain dollar value of profit in the
business.

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Contribution Margin Example

A product that sells for $100 and has variable


costs of $75 would have a Contribution Margin of
$25

Sales price per unit of $100 – Variable cost per


unit of $75 = Contribution Margin per unit of $25

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Contribution Margin Ratio

The Contribution Margin Ratio (CM Ratio) is the


Contribution Margin (CM) converted to a
percentage by dividing the CM dollar value by
the sales value.

Contribution Margin Ratio = (Sales Price per unit


- Variable Cost per unit) / Sales Price per unit

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Contribution Margin Ratio Example

A company with fixed costs of $500, which sells a


product with variable costs of $75 for $100, will
break even after selling 20 units or $2,000 of
revenue.

Sales price per unit of $100 – Variable cost per


unit of $75 = Contribution Margin per unit of $25
and Contribution Margin Ratio of 25% ($25 /
$100)

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Break-Even

The break-even point is the point where revenues


equal costs.

It can be calculated in terms of units of sales or dollars


of sales, and it is used to determine the level of sales
needed to cover all costs, both fixed and variable, and
start earning a profit.

Break-even (units) = Fixed cost / CM per unit Break-


even (dollars) = Fixed cost / CM ratio

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Break-Even Example

A company with fixed costs of $500, which sells a


product with variable costs of $75 for $100, will break
even after selling 20 units or $2,000 of revenue.

Sales price per unit of $100 – Variable cost per unit of


$75 = Contribution Margin per unit of $25 and
Contribution Margin Ratio of 25% ($25 / $100)

Fixed costs of $500 / CM per unit of $25 = 20 units

Fixed costs of $500 / CM Ratio of 25% = $2,000 sales

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Break-Even + Profit Example
Once a company breaks even, it starts earning a profit.

To calculate, add the desired profit value to the fixed


costs in the break-even formula.

Assuming desired profit is $100:

Fixed costs of $500 + Profit of $100 / CM per unit of $25


= 24 units

Fixed costs of $500 + Profit of $100/ CM Ratio of 25% =


$2,400 sales

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Operating Leverage
1. In periods of steady and profitable growth,
adding fixed costs will increase operating
leverage, which will also increase the number of
units that must be sold and the revenue that
needs to be realized in order to break even.
2. In periods of revenue volatility, converting some
fixed costs to variable costs (e.g. salaries to
commissions) will reduce operating leverage,
which will also reduce the number of units that
must be sold and the revenue that needs to be
realized in order to break even.

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Financial vs. Management
Reporting
Income statements traditionally present information
based on accounting standards, which reduces their
usefulness for management decision-making.

A more useful reporting format presents expenses


based on their behaviors, splitting the traditional
income statement between variable and fixed costs.

While the contribution margin format is not acceptable


for external reporting, it is an internal goldmine for
management planning and analysis purposes.

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Traditional vs. Contribution
Margin Format

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4 STEPS TO
ASSESS
BUSINESS
FINANCIAL
HEALTH

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Who benefits from analyzing
business financial health?

Owners / Entrepreneurs
Managers
Employees
Investors

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How Owners Benefit

making more informed decisions


allocating resources effectively
preparing for financing
negotiations
understanding their leverage in
negotiations

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How Managers Benefit

directing the team effectively


understanding the business
investment criteria
aligning individual and
organizational goals
strategically prioritizing for
maximum impact

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How Employees Benefit

understanding the business


priorities and performance
drivers
aligning personal and
organizational goals
deciding when to increase
committment and when to seek
other opportunities

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How Investors Benefit

understanding the business


fundamentals
understanding how aggressive
management decisions are
understanding drivers and
sustainability of cash flow
determining whether investment
aligns with their objectives

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Business Financial Health
in 4 steps

1. Balance Sheet Analysis

2. Income Statement Analysis

3. Cash Flow Statement Analysis

4. Ratio Analysis

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1. Balance Sheet Analysis

Objectives: evaluate liquidity,


solvency and asset values to
determine the business ability
to generate cash flow

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What to focus on:

-Proportion of debt relative to equity


-Short term business liquidity
-Percentage and make up of tangible
vs. intangible assets
-Average time to collect payment from
customers and pay suppliers
-Concentration of customers/suppliers
-Average time to sell inventory
-Asset values in the ordinary course of
business

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2. Income Statement Analysis

Objective: evaluate operating


performance to determine the
business ability to generate
cash flow

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What to focus on:

-Revenue growth over time


-Gross profit margin
-Net profit and net profit margin
-Proportion of fixed vs. variable costs
-The ability of the business to cover
mandatory interest payments on debt
-The proportion of capital distributions
vs. capital reinvestment in the
business

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3. Cash Flow Statement
Analysis

Objective: evaluate sources


and uses of cash to assess the
business ability to generate
cash flow

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What to focus on:

-The company's liquidity position


-The company ’s sources and uses of
cash
-The free cash flow generated by the
company and available to be
reinvested in business assets or
operations
-The overall changes in the cash
position of the company

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4. Ratio Analysis

Objective: use in conjunction


with trend analysis to
understand business
performance, liquidity, solvency,
efficiency and cash flow
generation ability

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Ratio Analysis Basics

Identify the ratios that fit your


business objectives, both internal and
external

Tailor financial analysis to the


business and its individual situational
factors (industry, geography, size, etc)

Track ratios over time to identify


trends and inform strategic planning

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Gross profit margin: The percentage of
profit generated after the direct cost
of sales were deducted from revenue

Net profit margin: The percentage of


profit generated after all expenses
have been deducted from revenue,
including interest and tax.

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Interest Coverage ratio: The
company’s ability to cover borrowing
costs on financial obligations

Debt Service/Fixed Charge Coverage


ratio: The company’s ability to service
the full principal and interest cost
associated with its financial
obligations

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Current ratio: The company’s ability to
meet short-term obligations over the
next 12 months

Quick ratio: The company’s ability to


meet short-term obligations over the
next 12 months using only highly liquid
assets (i.e. excluding inventory)

Debt-to-EBITDA ratio: The proportion


of annual cash flows versus the total
funded/financed debt (subject to
principal and/or interest)

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Debt-to-equity ratio: The proportion of
debt versus equity used by the
company to finance its assets and
operations

Return on equity (ROE): The


company’s ability to use its equity
resources to earn profits

Return on assets (ROA): The


company’s ability to use its assets to
earn profits

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Inventory turnover: The number of
times per period that the entire
inventory was sold (the inverse of DIO)

Receivables turnover: How many times


per period the company has collected
its accounts receivable (the inverse of
DSO)

Payables turnover: How many times per


period the company has paid its
accounts payable (the inverse of DPO)

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HOW TO
PREPARE
A CASH
BUDGET

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Direct vs. Indirect

A cash budget can be prepared using either the


direct method or the indirect method.

A cash forecast will be the similar to a budget but


instead of showing the company's plan, it will
show the company's actual expectations for
results for the period.

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Direct Method

Compiles the cash inflows and outflows to arrive


at the net change in cash.
Tracks directly how cash is received and spent
Inflows:
✅cash from customers
Outflows:
✅cash paid to vendors
✅cash paid to employees
✅cash paid for taxes
✅cash paid for interest

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Indirect Method

Starts with net income & adjusts:


✅items that do not require a cash outlay
(depreciation and amortization, share-based
compensation, gains or losses from the sale of fixed
assets or investments)
✅non-operating items considered elsewhere
(dividend payments received)
✅changes in current assets and current liabilities
(receivables, payables, inventories, prepaids,
accruals)

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Income statement Vs. Cash budget.

Sales revenue Cash from sales

Cost of goods sold Product costs paid

General and General and


administrative administrative costs
expenses paid

Income tax expense Income tax paid

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Capital Asset Transactions

Gain/loss on Cash paid and


disposal of capital received for capital
assets assets

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Financing Transactions

Cash paid and


Investment earnings received for
investments

Cash paid and


Gain/loss on sale of
received for
investments
investments

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Remember to Link:

✅the calculated net cash flows and

✅ the budgeted beginning cash balance with

✅the budgeted ending cash balance and

✅the ending cash balance on the budgeted


balance sheet

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Remember to Communicate:

✅that the cash budget/forecast is based on


expectations that may or may not be realized

✅ that there are key underlying assumptions for the


cash flow budget/forecast and what they are

✅that there are factors that may be particularly


uncertain, and what their effect is expected to be
on the cash budget/forecast based on a sensitivity
analysis

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Cash Flow Statement Comparison - Direct Vs. Indirect
Cash Flow from Operations Cash Flow from Operations

Cash Flow from Investing Cash Flow from Investing


Cash Flow from Financing Cash Flow from Financing
Total Cash Flow Total Cash Flow

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EBITDA
IS
NOT
CASH
FLOW

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Earnings before Interest, Taxes,
Depreciation and Amortization
is calculated just as the name
implies:

+ Net profit before tax


+ Interest expense
+ Depreciation expense
+ Amortization expense

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3 Benefits of EBITDA:

1. It is easy to calculate, and has


become universally used as the
language of cash flow.

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3 Benefits of EBITDA:

2. It allows financial performance


comparisons across businesses.

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3 Benefits of EBITDA:

3. It levels the analysis playing field


by removing the impact of the
company’s capital structure
(interest payments), operating
leverage (depreciation &
amortization), and related tax
implications (tax).

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10 Flaws of EBITDA:

1. It implies that all net income


translates into cash the same
way, allowing companies to use
non-cash items to artificially
increase it.

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10 Flaws of EBITDA:

2. It does not consider the amount


of required reinvestment,
especially for companies with
short-lived assets.

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10 Flaws of EBITDA:

3. It does not account for working


capital changes caused by sales
growth or declining efficiency.

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10 Flaws of EBITDA:

4. It implies that loan repayment


will be prioritized as part of cash
flow uses.

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10 Flaws of EBITDA:

5. It doesn’t say anything about


the quality of earnings.

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10 Flaws of EBITDA:

6. It is an inadequate stand-alone
measure for comparing
acquisition multiples.

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10 Flaws of EBITDA:

7. It can be severely misleading


used as a single measure of cash
flow without consideration of other
factors.

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10 Flaws of EBITDA:

8. It can be easily manipulated


through aggressive accounting
policies (revenue and expense
recognition, asset write-downs and
concomitant adjustments to
depreciation schedules, excessive
adjustments)

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10 Flaws of EBITDA:

9. It is a poor measure of
profitability

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10 Flaws of EBITDA:

10. It is not a GAAP metric so it’s not


formally defined and thus every
company defines and calculates it
however they like.

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How to Use EBITDA - Externally

EBITDA is often the numerator for the


Debt Service Coverage ratio, which
divides EBITDA by the sum of the
interest expense and the current
portion of long-term debt
(EBITDA/Principal + Interest)

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How to Use EBITDA - Externally

Tracking coverage ratios is


important to manage a company's
external financing relationships.
Whenever CAPEX or Distributions
become material, banks will
typically change the DSC covenant
to control for these cash outflows.

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How to Use EBITDA - Externally

The coverage ratio typically used to


replace Debt Service Coverage Ratio
(DSC) to account for the known
flaws of EBITDA is Fixed Charge
Coverage Ratio (FCCR)

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How to Use EBITDA - Externally

Fixed Charge Coverage Ratio (FCCR)

FCCR = (EBITDA - Cash Taxes -


Distributions - CAPEX) / (Principal +
Interest)

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How to Use EBITDA - Externally

Note that working capital isn’t


usually adjusted for in the FCCR
formula due to the fact lenders
typically finance the working capital
assets, so they don't need to control
for these cash outflows reducing
EBITDA.

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How to Use EBITDA - Externally

The strength of the underlying cash


flow can be better understood by
breaking down EBITDA into EBIT and
depreciation and amortization. The
greater the depreciation and
amortization in EBITDA, the weaker
the underlying cash flow.

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When to Use EBITDA - Internally

Appropriate as a cash flow tracking


metric when a company has:
-few non-operating income sources
-very little sales growth
-constant cash flow drivers
-capital expenditures approx. equal
to annual depreciation expense

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THE 3 SOFTSKILLS
THAT WILL
ACCELERATE YOUR
FINANCE &
ACCOUNTING
CAREER

The Financing Advisory Firm for Growing Businesses


1. COMMUNICATION

The Financing Advisory Firm for Growing Businesses


Understanding the
numbers has become
table stakes in finance
and accounting.

The Financing Advisory Firm for Growing Businesses


To stand out,
explain.

What do the numbers mean?

The Financing Advisory Firm for Growing Businesses


To become invaluable,
recommend.

How do we bring the numbers


where the organization needs
them to be?

The Financing Advisory Firm for Growing Businesses


2. EMPATHY

The Financing Advisory Firm for Growing Businesses


Many times the key to
achieving your
objectives is by listening
instead of speaking.

The Financing Advisory Firm for Growing Businesses


To make your audience
feel heard,
listen to them.

What's on their mind?

The Financing Advisory Firm for Growing Businesses


To earn your audience’s trust,
connect with them.

What are they thinking and


feeling?

The Financing Advisory Firm for Growing Businesses


3. SERVICE

The Financing Advisory Firm for Growing Businesses


We all work in the
service of something or
someone.

The Financing Advisory Firm for Growing Businesses


Your work may serve a
team, an organization, or
a mission.

The Financing Advisory Firm for Growing Businesses


Be genuinely approachable.

Contribute your skills


generously.

Act with integrity.

Care to help.

The Financing Advisory Firm for Growing Businesses


LEADERSHIP
STYLES
AND
FINANCIAL
PERFORMANCE

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"The most effective
executives use a collection of
distinct leadership styles—
each in the right measure, at
just the right time"

(Daniel Goleman - Harvard Business Review)

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Organizational Climate &
Financial Performance

The organizational climate through the


various management leadership styles
has a profound and direct impact on
financial results, and can account for up
to 30% of financial performance.

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Organizational Climate &
Financial Performance

A leader's ability to master multiple


leadership styles and to switch among
them as necessary enables the best
organizational climate and optimizes
business performance.

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6 Basic Leadership Styles

1. The Coercive Style

2. The Authoritative Style

3. The Affiliative Style

4. The Democratic Style

5. The Pacesetting Style

6. The Coaching Style

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6 Basic Leadership Styles
The Coercive Style

“Do what I say” approach

Inhibits flexibility and reduces employee


engagement

Can be very effective in a turnaround


situation

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6 Basic Leadership Styles
The Authoritative Style

“Come with me” approach

Gives people the freedom to choose their own


means of achieving objectives

Less effective when the leader is less


experienced than their team

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6 Basic Leadership Styles
The Affiliative Style

“People come first” attitude

Useful for building team harmony or increasing


morale

Rarely offers advice and focuses exclusively on


praise which can leave people feeling uncertain
and allow poor performance to go uncorrected

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6 Basic Leadership Styles
The Democratic Style

Focused on giving workers a voice in decisions

Builds organizational flexibility and


responsibility, and helps generate fresh ideas

Can become higly inefficient due to endless


meetings and can leave peple confused and
feeling leaderless

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6 Basic Leadership Styles
The Pacesetting Style

Focused on leading a high-performing team


through example

Has a very positive impact on employees who are


self-motivated and highly competent

Can leave other employees feeling overwhelmed


and resentful of the leader's high standards and
tendency to take over a situation.

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6 Basic Leadership Styles
The Coaching Style

Focused on personal development

Works really well with employees who are already


aware of their weaknesses and want to improve

Not driven by performance on work-related tasks


which can frustrate employees who aren't
focused on self-motivation and self-
improvement

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Adapted from "Leadership That Gets Results" by
Daniel Goleman

Harvard Business Review • march–april 2000

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EMOTIONAL
INTELLIGENCE
AND
FINANCIAL
PERFORMANCE

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Research has shown that the most
successful leaders have strengths
in the following emotional
intelligence competencies:

1. self-awareness
2. self-regulation
3. motivation
4. empathy
5. social skill

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Emotional Intelligence

The ability to manage ourselves and our


relationships effectively

Consists of four fundamental


capabilities: self-awareness, self-
management, social awareness, and
social skill

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Self-Awareness
Emotional self-awareness: read and
understand your emotions as well as recognize
their impact on work performance,
relationships, and the like

Accurate self-assessment: a realistic


evaluation of your strengths and limitations

Self-confidence: a strong and positive sense of


self-worth

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Self-Management part I

Self-control: keep disruptive emotions and


impulses under control

Trustworthiness: display honesty and integrity


on a consistent basis

Conscientiousness: manage yourself and


your responsibilities

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Self-Management part II

Adaptability: adjust to changing situations


and overcome obstacles

Achievement orientation: develop and meet


an internal standard of excellence

Initiative: a readiness to seize opportunities

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Social Awareness
Empathy: sense other people’s emotions,
understand their perspectives, and take an
active interest in their concerns.

Organizational awareness: understand the


organization, build decision making
capabilities, and navigate politics.

Service orientation: recognize and meet


customer needs

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Social Skill part I
Visionary leadership: take charge and inspire
others with a compelling vision.

Influence: use a wide range of persuasive


tactics.

Developing others: develop the abilities of


others through coaching and feedback

Communication: listen and send clear,


convincing, and well-tuned messages.

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Social Skill part II
Change catalyst: initiate new ideas and lead
people in a new direction

Conflict management: de-escalate


disagreements and orchestrate resolutions

Building bonds: cultivate and maintain a wide


range of relationships

Teamwork and collaboration: promote


cooperation and build teams

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Adapted from "Leadership That Gets Results" by
Daniel Goleman
Harvard Business Review • March–April 2000

Free EQ tests are available below(click the title to


access the link)

How Emotionally Intelligent Are You?


OR

Global Leadership Foundation - Emotional Intelligence Test


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10 TIPS FOR
EFFECTIVE
FINANCIAL
STORYTELLING

The Financing Advisory Firm for Growing Businesses


1. START WITH A CLEAR
PROBLEM DESCRIPTION.

The Financing Advisory Firm for Growing Businesses


2. DELIVER KEY
MESSAGES UPFRONT.

The Financing Advisory Firm for Growing Businesses


3. TAILOR YOUR
DELIVERY TO YOUR
AUDIENCE AND THEIR
INFORMATION NEEDS.

The Financing Advisory Firm for Growing Businesses


4. CRAFT YOUR
NARATIVE FROM YOUR
DATA, NOT THE OTHER
WAY AROUND.

The Financing Advisory Firm for Growing Businesses


5. PROVIDE CONTEXT
FOR THE DATA
PRESENTED.

The Financing Advisory Firm for Growing Businesses


6. EXPLAIN THE CAUSE
AND EFFECT BEHIND
THE NUMBERS.

The Financing Advisory Firm for Growing Businesses


7. FRAME YOUR
ANALYSIS AND
CONCLUSIONS.

The Financing Advisory Firm for Growing Businesses


8. USE ANALOGIES TO
EVOKE EMOTIONS.

The Financing Advisory Firm for Growing Businesses


9. CHOOSE THE MOST
IMPACTFUL KEY
METRICS.

The Financing Advisory Firm for Growing Businesses


10. USE THE RIGHT DATA
VISUALIZATIONS FOR
YOUR STORY.

The Financing Advisory Firm for Growing Businesses


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The Financing Advisory Firm for Growing Businesses

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