Session 2

Question 1

What do asset intensive businesses need the most

Answer 1

Asset intensive business - more external finance to get going with the business

Question 2

subscription business - mechanics of there assets (3)

Answer 2

subscription business (asset light - cash not converted into asset, customer financing/funded, negative asset light so can start with 0 external finance , deferred revenue

Question 3

Asset intensity of business meaning

Answer 3

Asset intensity of business (core that drives the difference between the cash flow and business - how much cash tied into the assets) because critical when you are scaling business

Question 4

Correlation between assets and profitability for subscription based businesses

Answer 4

Subscriptions cause low asset intensity and profitability goes down

Question 5

3 drivers of cash flow

Answer 5

“p”: Profitability
“a”: Asset intensity
“g”: Growth rate of sales

Question 6

If a is positive or negative while growth is going up - what happens top free cash flow

Answer 6

If a is positive, then growth going up leads to free cash flow going down, fcf less than profits
If a is negative, g going up, fcf goes up, fcf greater than profits