Class 11-Finance-Nov2.pdf BA 101
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Miss Kenyon Williamson
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This 0 page Class Notes was uploaded by Jillian Rogers on Monday November 2, 2015. The Class Notes belongs to BA 101 at University of Oregon taught by Tom Durant in Fall. Since its upload, it has received 82 views. For similar materials see Business 101 in Business at University of Oregon.
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Date Created: 11/02/15
Introduction to Business November 2 2015 Class 11 SALES FORECAST Two techniques recommended 0 Market Share and DCS methods Determines how much product to produce 0 The forecast drives the data on the proforma statements Growth Rates and Demand Analysis 0 LOW TECH 10 0 HIGH TECH 20 CHECK PERFORMANCE TARGETS Proforma Income Statement Expected forecast Contribution margin at least 30 0 Pro t gtO Proforma Balance Sheet 0 Cash balance no emergency loan 0 Inventory gt1 unit but lt60 days and ensure that you meet at least 95 of the demand for your product Proforma Ratios Projected stock price Worst case in Sales forecast marketing Check that your cash position is not red Look at the total units available and inventory Best caseworst case sales and What was quotleft over from last year FINANCING YOUR BUSINESS Operate Using investments 0 Financing Where do you get money Funds to start and grow a business debtequityretained earnings 0 Investing What do you do With money Acquire assets stuff to run a business lending to others who earn higher return 0 Operating Using the money you have for da ytoda y operations Create goods amp create transactions change goods into dollars at a pro t OPPORTUNITY RECOGNITION 0 Identify an opportunity in the market 0 Develop a strategy for serving customers Acquire resources commitments Where to get the money resources Financing strategyborrow or from owners PLANNING AND FINANCE How much do you need Operations and growth The you receive less what you spend Revenues Expense More cash than you need INVEST Less cash than you need SEARCH FOR SOURCES Short Term VS Long Term Short Term Long Term 0 Accounts receivable credit sales 0 Equipment automation to customers 0 Facilitiesadditional capacity 0 Inventory 0 Buy other companies not in New product Foundation development Put the money to good useor quotgive it backquot Leave the accounts receivable at 8 for the rst two rounds and then increase to 60 days SOURCES Too little cash 0 BORROW Take on DEBT Pay interest on use of someone else s 0 RElNVEST EARNINGS Retained Earnings Use your net income to nance future investments 0 SELL STOCK Dilute OWNERSHIP Share the ownership of the company with more people investors DEBT Borrowing Funds Borrow money from nancial institutions Loans from banks Savings amp Loans etc Short or long term 110 years 0 Borrow money from the market Bonds Long term 10 year loans 0 Risk Rated by Standard amp Poors or Moodys 0 Return Degree of risk and interest rate BOND MARKET SUMMARY 0 Bond Series Series quotSquot 0 Face The cash you received and how much you will have to pay back at maturity 0 Yield Bond InterestTrading Price 0 Close What it is trading for today and what you would pay to retire early SampP Risk Rating AAA AA A BBB BBB BB D EQUITY FINANCING issue stock 0 Another way to bring cash into the business is through equity nancing 0 Rather than borrowing funds it involves taking on new owners sellingissuing shares of stock but 0 This can dilute the ownership of previous stockholders and can be a nega ve SECURITIES MARKET Primary Markets 0 Firm sells new issues of security stock or bonds publicly for the rst time to investment bankers underwriters Secondary Markets 0 Subsequent owners trade previously issued shares of stock and bonds 0 NYSE AMEX London Jakarta OWNER S RIGHTS Stocks If you as an individual purchase stock in an initial public offering 0 You give the company money 0 You now own a piece of the company 0 You bene t when stock price goes up 0 You bene t when the company issues a dividend Stock owners share in risk and reward When a company issues stock o The corporation receives money paidin capital as quotCommon Stockquot in exchange for ownership 3 STOCK SUMMARY 0 Close The value of a share at the end of a trading day 0 Change How much higher lower price today than yesterday in Foundation last year Shares The amount shares of outstanding stock Dividend The cash payment to owners Yield Dividend Stock Price PE or Price Earnings Ratio Closing Price EPS EPS or Earnings Per Share Net Income Shares STOCK VALUE 0 Book Value Per Share balance sheet Owners Equity Number of Shares 0 Earnings Per Share Total Net Income Number of Shares 0 Dividend The cash payment per share of stock to owners from pro ts Yield Dividend Stock Price Market Capitalization Shares X Close price How much is the entire company worth on the market It is as if every share were sold at the closing price Price Earnings Ratio PE Close price EPS Investors pay 810 for every 100 pro tlt would take 81 years of pro t to pay for a share For Foundation Debt bonds Equity stocks Leverage Use debt over equity to get money Raises Return on Investment ROI because bonds are not investment