financial management for...
TRANSCRIPT
Financial Management for Entrepreneurs
Presented by:Haroon Bhatti MBA/MSF
Importance of Financial Management
• Most small businesses fail because of poor Financial Management
• You can always trust the numbers
• Make decisions based on objective data
• Assist with future planning• Assist with future planning
• Lowers overall business risk
• Enables you to sell your business in the future for a great price
• Helps you with managing expenses
• A key requirement for raising capital
Types of Financial Statements
Income Statement
• Simple & Straightforward report on a business’ ability to generate a profit.
• Components of an Income Statement
Income/RevenueIncome/RevenueIncome/RevenueIncome/Revenue
Cost of Goods SoldCost of Goods Sold
Gross Profit MarginGross Profit Margin
Operating ExpensesOperating Expenses
DepreciationDepreciation
Interest & TaxesInterest & Taxes
Net ProfitNet Profit
Balance Sheet
• Shows the financial position of a Business at given point
• It’s called a balance sheet because it has to balance
• Assets – Liabilities = Equity
Cashflow Statement
• Shows how much cash is generated and used during a given time period.
• The cashflow statement reflects the actual amount of money the company receives from its operations.
Main Components of a Cashflow Statement:• Main Components of a Cashflow Statement:
What do Financial Statements Tell you?
• Understand trends
• Compare Actual Performance to Expected Performance
• Help you manage and understand your business
• Financial Ratios:• Financial Ratios:
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Return on Assets (ROA)
Return on Investment
(ROI)Quick Ratio
How do financials relate to the value of your Business?
• Without Proper Financials, you cannot value a business properly.
• Buyers do not trust buying business with poor financial management.
• A business is valued by its ability to create cashflow.
• Most commonly a small business (Under $2MM) is valued by Multiplying • Most commonly a small business (Under $2MM) is valued by Multiplying its Seller’s Discretionary Cashflow (SDE) by a Multiple.
• Lower & Middle cap businesses ($2MM - $50MM) are valued based on their EBITDA.
Current Multiples for Business Valuation
Thank you for your time!
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