finance and cash management for entrepreneurs
DESCRIPTION
This is a refresher for an entrepreneur who lacks complete knowledge and confidence in financial and cash management. These are mostly stock and common knowledgeTRANSCRIPT
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Financial and Cash Management for Entrepreneurs
Lecture for entrepreneurship students at the Ateneo
Graduate School of Businesss
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CASH IS KING
The gravest mistake that an entrepreneur can make is to
run out of cash
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Cash
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Problem of most start-ups
…Its not the capital, but lack of sufficient liquidity to support the business at the initial stages….
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Sources of funds at the start-up stage:
Savings Relatives and friends Credit cards Informal often usurious lenders Suppliers (rarely)BANKS DO NOT LEND TO START-
UPS!
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Must have for a start-up enterprise:
MVP Sufficient cash flow Sufficient profits/margins Large enough number of
customers
THE TEST OF FEASIBILITY
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Break even analysis
Short cut:
Fixed cost (Plus profit and taxes)/ gross profit rate = break even number of units.
Break even sales: break even number of units x selling price. (Factor in the vat or grt)
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Break even point
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Du Pont Analysis
Return of Investment = Net Income divided by Total Stockholders Equity:
Efficiency= Net Income/Total Sales x
Turn-over= Total Sales/Total Assets x
Leverage = Total Assets/Total Stockholders Equity
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Tagalog version of Du Pont
Patong
Paikot
Laway
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Other financial ratios
Liquidity ratios Profitability ratios Leverage ratios
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Financial statements
Statement of conditions
Cash flow statements
Balanced statement of conditions
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Financial statements
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Guides on financial statement evaluation/due diligence It is as of; as snapshot Examine the status of inventory as to
whether it is current or saleable; The manner of recognizing income,
expenses and inventory must be consistent and approved by management
Integrithy on the part of accountant/controller
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For financial projections: The financials must support the strategic
plans, as capex, spend for advertising; The sources of funds must be specified: bank loans, new equity, retained earnings; The assumptions for sales projections
must come from market research, from thorough micromarket, external opportunity and competitive analysis
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Advanced tools:
Discounted Cash Flow Analysis Net Present Value IRR
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DCF FORMULA
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Business valuation
Replacement cost approach
Market approach
Capitalized income approach
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Acknowledgement:
The pictures and graphs are from google images;
The ideas are common stock knowledge
from finance management. This is a review of basic finance
and cash management concepts