LIFESTYLE BUSINESS

ACCELERATOR90 Day Program | 7

Balance Sheet, Cash Flow, & Startup Assumptions

P&L

WHAT DOES P&L TELL YOU? (PROFIT AND LOST IS ALSO CALLED THE INCOME STATEMENT)

This shows the summary of revenue and expenses over a specific period of time.

Example P&L of January 2016

Revenue $100- Cost of Goods Sold $50=Gross Profit $50

-Operating Expenses $30=Operating Profit $20

-Interest $3-Taxes $5=Net Profit $12

It can tell you if you are making $ or if not why you are not.

It can also tell you when compared to your budget how you are doing compared to how you planned to do.

All of this is summed up on the Profit & Loss Statement.

There are 2 other important financial statements for you to understand: balance Sheet and Cash Flow Statement

ACCRUAL ACCOUNTING

Revenue & Expenses recorded before cash actually changes hands. Recorded when sale is made or expense incurred.

CASH ACCOUNTINGRevenue & Expenses recorded when cash changes hands.

PAYMENT TERMSBetween you and your vendors/providers and you and your customers

CASH ON DELIVERY - COD Net 7, 10, 15, 30, 45, 60 or 90 usually

CASH FLOWDifference between

Profit & Loss and Cash Flow

CASH FLOWWatch Video

Why it matters - Example of inventory

CASH FLOW EXAMPLE

Handout

CASH FLOW EXAMPLE

Cash problems

Times when inventory is outpacing Revenue

Problems with collecting Accounts

Receivable

BALANCE SHEET DEFINITION

A balance sheet is a financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by shareholders.

BALANCE SHEET

Why?

WHAT A BALANCE SHEET CAN SHOW YOU

BALANCE SHEETThe balance sheet adheres to the following formula:

ASSETS = LIABILITIES + SHAREHOLDERS’ EQUITY

DEPRECIATIONIs a method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both tax and accounting purposes.

AMORTIZATIONThe spreading out of capital expenses for intangible assets over a specific period of time (usually over the asset's useful life) for accounting and tax purposes. Amortization is similar to depreciation, which is used for tangible assets, and to depletion, which is used with natural resources. Amortization roughly matches an asset’s expense with the revenue it generates.

GOODWILLGoodwill is an intangible asset that arises as a result of the acquisition of one company by another for a premium value. The value of a company’s brand name, solid customer base, good customer relations, good employee relations and any patents or proprietary technology represent goodwill. Goodwill is considered an intangible asset because it is not a physical asset like buildings or equipment. The goodwill account can be found in the assets portion of a company's balance sheet.

LIQUID ASSETSAn asset that can be converted into cash quickly and with minimal impact to the price received. Liquid assets are generally regarded in the same light as cash because their prices are relatively stable when they are sold on the open market.

BALANCE SHEET DEFINITIONS

CURRENT ASSETS (LIQUID ASSETS) CashAccounts ReceivableInventory Deposits

FIXED ASSETSCapital Assets (Things that can be moved or sold - furniture, furnishings, etc) Depreciation - loss of value in capital assets

OTHER ASSETSIntangible assets (Goodwill, Trademarks, Patents)

CURRENT LIABILITIES (WILL COME DUE IN LESS THAN 1 YEAR)Accounts payableShort-term notesOther ST liabilities

LONG TERM LIABILITIES MortgagesDeferred TaxesLong Term Loans

CAPITAL INVESTMENTSRetained EarningsOwner’s withdrawals & Dividends

ASSETS LIABILITIES EQUITY- =BALANCE SHEET CONT.

Handout

BALANCE SHEET

EXAMPLE

Go over the worksheet

STARTUP ASSUMPTIONS

ACTION ITEMS

Watch Finance Videos

Complete financials and

send to accountability

partner by 7/12/16

1 2