Chapter 10 – Understanding a Firm’s Financial Statements
This chapter reviews the income statement and the basic equation. The income statement answers the question ‘How profitable is the business?’ The Balance Sheet is reviewed and represented by the formula Total assets = Debt + Owners’ equity. The balance sheet is a snapshot in time of the financial condition of the company. The balance sheet can be created for the beginning and the end of the year. Cash flow statements and financial ratios are discussed.
Chapter 11 – Forecasting Financial Requirements
This chapter covers the purpose of financial forecasting for future profitability and projected sales or expected sales expenses. A projection may be needed for the type of financing. How much will be needed depends on the current cash flow. A pro forma income statement is discussed along with the drivers of the company’s profit.
Chapter 12 – Financing the Small Business
This chapter discusses the four characteristics of a company that determines how it is financed. For example, a firm with big-growth economic potential can usually access more funding sources. Choosing between debt or equity financing is reviewed along with bringing in equity investors. You will explore the banker’s priorities when making a loan and recouping the principal of the loan. You will also learn the five ‘Cs’ of credit.
Chapter 13 – Planning for the Harvest
This chapter reviews the importance of having a harvest or exit plan. This involves capturing value (cash flows), reducing risk, and creating future options. Harvest options drive investors in some ways. This chapter will discuss how to value the company and how to develop an effective harvest plan. Finally, entrepreneurs need to carefully consider their motives and plans for exiting a company.
Case 10 – Page 669– Guinn Associates Understanding a Firm’s Financial Statements
This is an interesting case of an entrepreneur and the journey from one product to another. The sale of one company and the beginning of another company. The owner’s review of the financial reports and the analysis may bring about a company change or even a sale of the company. This week’s discussion is based on this company.
Case 11 - Page 672– Ashley Palmer Clothing, Inc. Financial Forecasting
This is an interesting scenario of a company with an innovative idea that customers loved. Sales took off and retail stores such as Neiman Marcus and Saks Fifth Avenue increased orders. A new product was added that also made it a hit with customers. At this point, the owners realized a change was needed to maintain the growth of the company.
Case 12 - Page 675– Rose Properties, LLC: Negotiating a Bank Loan: Understanding the Banker’s and Entrepreneur’s Mindset?
This case is an interesting review of a company that decides to purchase a building with the intent to lease a portion of it. The proposed buyer has determined that the building will fit nicely with his other buildings and company growth plans. The loan request is presented to the bank and the bank responds with their terms.
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