Docstoc

Residential Real Estate Leaseback Agreement

Document Sample
Residential Real Estate Leaseback Agreement Powered By Docstoc
					Chapter 3 Financial Management
             Part 2
     BCN 4772 Summer 2007
          Financial Management
   What are the two main reasons
    businesses fail?
     Lack of a good Idea
     Under Capitalization

   Capitalization
     Start-up Capital
     Working Capital
     Expansion Capital
            Financial Management
   Start-up Capital
       Rents and deposits
       Starting Inventory
       Salaries
       Advertising
       Equipping and making repairs
       Organizing Costs
       Insurance Premiums
       Taxes and Licenses
       Attorney and accounting fees
       Management, consultant and counseling fees
       Utilities
       Garbage removal
          Financial Management
   Sources of Start-up Capital
     Personal Savings
     Borrow from friends, banks, other
     Borrow from life insurance policies
     Mortgage residential real estate
     Sell stock
     Venture Capital from public or private sources
             Financial Management
   Working Capital
       Cost of doing business
       Direct costs
       Indirect costs
       Short term
       Long term
       Seasonal
       Equipment costs
       Applicable start-up costs
          Financial Management
   Sources of Working Capital
     Some of the same sources for Start-up capital
     Mortgage Commercial or industrial real estate
     Good money management
     Trade credit from suppliers
     Finance A/R’s
     Factor AR’s
          Financial Management
   Expansion Capital
     Requires a great deal of capital
     Easier to identify?
     Needed to purchase new equipment
     New Building
     Finance a large project
     May require sustained business period 2-5 yrs
        Financial Management
   Sources of Expansion Capital
     Same as Start-up and Working Capital
     Equipment leaseback option
     Borrow from government
     Bond
     Community economic development program
          Financial Management
   Debt Restructuring
     4th type of capital need
     Need if business is failing
     Seek professional accounting and legal
      services
        Financial Management
   Sources for Capital
     Bank Loans
     Common Stock
     Debentures
     Notes Payable
     Mortgages Payable
     Capital Leasing
          Financial Management
   Bank Financing
     How much?
     Is it enough?
     How long?
     When and how to repay loan?
     Is the debt secured?
     What is the opportunity cost?
     Is there a better way to get the money?
            Financial Management
   Bank Financing Terminology
       Principal
       Term
       Rate
       Maturity Value
       Single Payment Loan
       Ordinary Interest
       Compounded Interest
       Discount
       Installment Loan
            Financial Management
              Corporate Financing
   Common stock                     Class B Common Stock
   Preferred Stock                  Mortgage Payable
   Par Value                        Note Payable
   No Par Value Stock               Debentures
   Additional Paid in Capital       Convertible Debentures
   Convertible Preferred Stock      Letter of credit
   Cumulative Preferred Stock       Capital Lease
         Financial Management
   Record keeping and creating
     Estimating Records
     Job Cost Records
     Change Order Records
     Equipment Records
     Contracts
     Accounting Records
             Financial Management
   Estimating Records
       Direct and Indirect Job Costs
       Amounts of Material Needed
       Man-power Needed
   Estimating process
       Determine labor, material and equipment needs
       How much subcontracting?
       Assign prices to quantities
       Add in: indirect costs, overhead and profit
          Financial Management
   Job Cost Records
     Must account for several jobs at same time
     Each contract is treated as separate company
     Bad record keeping leads to company failure
     Include all costs
     Also should contain data from original
      estimate
         Financial Management
   Change orders
     Contract modification
     Agreement between owner and contractor
     Initiated by either owner or contractor
     Must be reflected in contract files
     Must update job cost records
            Financial Management
   Equipment Records
       Assigning cost of equipment to job
          Depreciation
          Repairs
          Maintenance
          Insurance
          Operating   costs
     Establish per hour rate for equipment
     Daily rate
          Financial Management
   Construction Contracts
     Fixed-price / lump-sum
     Unit-price
     Cost-plus
     Time and material
            Financial Management
   Contract Completion
     How do you know when the job id done?
     Percentage of Completion Method
         Revenue   recognition
         Required for tax purposes if $10,000,000 + annual
          sales
         Cost to cost

       Complete Contract Method
         No revenue is recognized until contract is fully or
          nearly completed
          Financial Management
   Accounting Unique to Contractors
     Accounting for Retainages
     Accounting for Overhead Costs
     Provision for losses on Uncompleted
      Contracts
     Cost and Estimated Earnings in Excess of
      Billings
           Financial Management
   Financial Ratios
     Liquidity ratios
     Leverage ratios
     Activity ratios
     Profitability ratios
    Financial Management
   Liquidity ratios
     Current Ratio
     Quick Ratio
   Leverage ratios
     Debt to equity ratio
     Times interest earned ratio
   Activity ratio
       Number of days of contract revenue in
        receivables
           Financial Management
   Profitability ratios
     Gross profit margin
     Net income as a percentage of sales
     Return on beginning stockholders’ equity
      percentage
          Financial Management
   Acquiring Assets
     Lease
     Purchase

   Evaluation of purchase decisions
     Present value method
     Return on investment method
     Cash payback method
           Present value method
   Present Value
       Purchase the equipment if:
          The   annual costs are < The present value of the
           annual savings
          The cost of the equipment < the present value of
           the expected return on the equipment
          The opportunity cost of purchasing the equipment
           is < the present value of the savings or expected
           return.
          You must consider foregone income

				
DOCUMENT INFO
Description: Residential Real Estate Leaseback Agreement document sample