1. Accounting and Finance 101
Cassie Davis and Marissa Milligan

2. Agenda Develop sources and uses of cash One unit cost
Operating cash flow projection
Debt: business loans, (will not be using personal debt to fund business – not be using your credit card)
Main source of cash is Equity that investor is going to purchase
Uses: Two Types (1) Start up –Example: Andrew and Sarah the costs incurred for start up will include the designing of the dispenser, manufacturing the product and holding inventory, advertising expenses to show that your product exists
Everything you need to be able to sell your product
2) The costs incurred after you begin selling your first unit will include storage, continuing advertising, manufacturing additional runs of your product.

3. Uses of Cash (1) Start-up Costs
Uses: Cash outlays before selling one unit
(1) Start-up Costs
Organizational Costs: professional fees, legal fees, patent fees
Expenses incurred to produce prototype
Hire/train people before production
Advertising expenses
Capital expenditures
Programmers
Graphic Designers
Debt: business loans, (will not be using personal debt to fund business – not be using your credit card)
Main source of cash is Equity that investor is going to purchase
Uses: Two Types (1) Start up –Example: Andrew and Sarah the costs incurred for start up will include the designing of the dispenser, manufacturing the product and holding inventory, advertising expenses to show that your product exists
Everything you need to be able to sell your product
2) The costs incurred after you begin selling your first unit will include storage, continuing advertising, manufacturing additional runs of your product.

4. Uses of Cash (2) When Revenue is less than Operating Expenses
Cash you need to have in order to keep your business running until you are able to make a profit
Direct Materials
Direct Labor
Overhead

5. Debt: borrow money bank Equity: how much money the investor gives you
Sources of Cash
Debt: borrow money bank
Equity: how much money the investor gives you

6. Direct Materials Direct Labor
One Unit Cost
Direct Materials
Direct Labor

7. Revenue Revenue = Selling Price x Units Sold
Selling Price = Direct Material + Direct Labor + Profit Markup
Units Sold: Following Marketing Assumptions
Who is your market?
How big is your market?
What percentage of the market do you expect to capture?
How many units is each person buying?

8. Breakeven Analysis Revenues > Expenses Positive Cash Flow
Need to know how much cash need to make a profit

9. Questions?
Kirk Help

10. Appendix

11. Why is Accounting Important for Entrepreneurs?
Ability to account for sales and expenses
Understanding sources and uses of cash to develop a budget
Needs to be factual and reliable
When will I reach $100,000 in sales?
Accounting is going to develop platform for how your business can be successful. The tools of understanding sales and expenses will help to provide guidance to how much money you need to get your business up and running.

12. What is Accounting
Accounting is a record of the financials of your company
Fundamental accounting equation
Assets = Liabilities + Owners Equity
Financial Statements
Income Statement, Statement of Cash Flows, Balance Sheet
The basics include:

13. Definitions
Balance Sheet: Snapshot: summarizes financial position at a give point in time
Asset: a resource with economic value that is owned or controlled with expectations to provide a future benefit
Cash, Accounts Receivable, Inventory, Land, Property
Liabilities: financial debt or obligations; used to finance operations
Accounts Payable, Debt (long term and short term)
Owners Equity: shareholders interest and accumulated earnings of a company
Common Stock and Retained Earnings
Asset example: Joe the finished product of your wearable products (inventory)
Liabilities example: Marharita you still owe money to your manufacturer who produced your product (Accounts Payable)
Equity example: Shannon you own 60% of your company, BGSU owns 7.5% of your company, and the investor owns 32.5%
Long term: more than a year vs Short term: less than a year

14. Balance Sheet Assets Cash 100,000 Accounts Receivable 120,000
Inventory ,000
Total Assets ,000
Liabilities and Owners’ Equity
Accounts Payable 50,000
Debt ,000
Total Liabilities ,000
Common Stock 100,000 Retained Earnings 120, Total Owners’ Equity ,000
Total Liabilities and Owners’ Equity 370,000
Here is an example of the Balance Sheet, it shows assets, liabilities, and equity. Totals Assets = Total Liabilities + Owners Equity

15. Definitions
Income Statement: Shows the bottom line: whether the company is making a profit. (Revenue – Expenses = Net Income)
Sales: Selling Price x Number of Units Sold
Cost of Goods Sold: total cost to make product
Gross Profit (Loss): the profit a company makes after deducting the cost associated with making its products
Other Expenses: Advertising, Interest, Insurance, and Taxes
Net Income: Profit or Loss
Cost of Goods Sold: Would be manufacturing costs such as direct material, direct labor, and variable overhead. Fatima this would be your material and the labor involved in sewing your product
Other Expenses: Fixed Costs such as Selling, General Administrative (service costs) Fatima your fixed costs would be storage for your inventory and advertising

16. Income Statement Sales (Revenue) 500,000 Cost of Goods Sold (200,000)
Gross Profit (Loss) 300,000
Other Expenses (100,000)
Net Income ,000
Here is an example of an Income Statement. Which shows your Revenue – Expenses = Net Income
Also = a P/L

17. Statement of Cash Flow Operating Activities
Cash Received from Customers ,000
Cash Paid to Suppliers and Employees (50,000)
Cash Flow from Operations 50,000
Investing Activities
Capital Expenditures (50,000)
Cash Flow from Investing Activities (50,000)
Financing Activities
Debt 50,000
Stock 50, Cash Flow from Financing Activities 100,000
Change in Cash Position 100,000
This is the BREAD AND BUTTER. The basic idea with cash flow is to make sure you have enough funds to get your business up and running and to continue to run until you produce a profit
If you want to be successful, you need enough cash.

18. Pricing and Profit Target Costing
Selling Price – Desired Profit = Maximum Cost of Product
Cost Plus Pricing
Cost of the Product + Markup Percentage = Selling Price
Return On Sales (ROS): Net Income/Net Sales = Profit Margin %
It measures a company's performance by analyzing what percentage of total company revenues are actually converted into profit

19. Projected Financial Statements
Using certain assumptions and projections to make future financial statements
We would like to individually meet with each team to discuss and put together these financial statements

20. Questions?
Kirk Help