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					Critical Financial Calculators

          Jill Edwards
      Ben Franklin Venture
       Investment Forum
 Balance Sheet Basics
• Current Assets
• Current Liabilities
• Total Assets
• Total Liabilities
• Equity
Income Statement Basics

 • Net Sales

 • Variable Expenses

 • Fixed Expenses

 • Net Income
     What Does it Cost to
     Add an Employee?

Old SG&A = $100,000 = 25% of sales

So Old Sales = $400,000

Add an employee at $25,000 compensation

So New SG&A = $125,000 = 25% of sales

So New Sales = $500,000
                 Ratios
Current ratio         current assets
                      current liabilities

Gross margin %        gross margin
                      net sales

Debt/worth            total liabilities
                      net worth
               More Ratios
A/R Turnover         Net Sales
                     Accounts Receivable
A/R Days             365
                     A/R Turnover
Inventory Turnover   CGS
                     Inventory
Inventory Days       365
                     Inventory Turnover
A/P Turnover         CGS
                     A/P
A/P Days             365
                     A/P Turnover
        Operating Cycle

Inventory Days + A/R Days = Operating Cycle

If Operating Cycle > A/P Days → Cash Gap

If A/P Days > Stated Payment Terms → May have
   trouble with suppliers
 Calculating Breakeven

  How many units do I have to
     sell to break even?

    Breakeven = Fixed Cost/
(Unit Price – Variable Cost Price)
                Breakeven Calculation
                       Scenario 1           Scenario 2
Fixed Costs               $140,000.00          $140,000.00
Variable Unit Cost                   $.97                 $.97
Expected Unit Sales           150,000              150,000
Unit Price                          $1.99                $2.79
Total Variable Cost       $145,500.00          $145,500.00
Total Costs               $285,500.00          $285,500.00
Total Revenue             $298,500.00          $418,500.00
Profit/Loss                 $13,000.00         $133,000.00
Breakeven                     137,255               76,923
Growth Calculations
  Net Income     100,000

  Total Assets   400,000

  ROA                .25

  Dividends       40,000

  Equity         300,000

  ROE                .33

  Plowback (B)       .60
Internal Growth Rate


   IGR = (ROA x B) ÷
     [1-(ROA x B)]
Sustainable Growth Rate


    SGR = (ROE x B) ÷
     [1 – (ROE x B)]
RMA Statement Studies

       http://www.rmahq.org/RMA/

       • Available in Most
         College Libraries

       • Or Ask Your Banker
Critical Financial Calculators
          Jill Edwards
      Ben Franklin Venture
       Investment Forum

       jilledwards@psu.edu