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1ZM20 > Week 6 - Financial Planning > Flashcards

Week 6 - Financial Planning Flashcards

1
Q

Why should you make a financial planning

A

To map out:

  1. Profitability
  2. Efficiency
  3. Liquidity
  4. Risk
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2
Q

How do you track Profitability and Risk?

A

Via an income statement, which provides an overview of all the costs and revenue within a certain time frame.

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3
Q

How do you track Efficiency?

A
  1. Income Statement

2. Balance sheet (an overview of different ownings of the company and how these ownings are financed.)

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4
Q

How do you track Liquidity?

A

Cashflow statement (All the money that goes in to the company and that goes out)

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5
Q

What is part of an income statement?

A 
	Gross margin
•	- Services and other goods 
•	- remunerations and other social costs
•	- depreciations
•	- Provisions
	Operational result (EBIT)
•	+ Financial results
•	+ Exceptional result
	Results before taxes
•	- Taxes
	Results after taxes
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6
Q

What are the (8) bases for sales?

A 
	Product sale
	Renting/leasing
	Service package
	Licensing
	Usage fee
	Brokerage fee
	Subscription fee
	Advertising
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7
Q

What are the two pricing structures?

A
  1. Fixed pricing

2. Dynamic pricing

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8
Q

When to apply fixed pricing?

A
  • Product feature based
  • Customer segment based
  • Volume based
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9
Q

When to apply dynamic pricing

A

• Negotiation
• Yield management
o Uses price elasticity, based on supply and demand (airline)
• Real-time-market

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10
Q

What are the four parts of the cost structure?

A 
	Direct + Variable
•	            Flour for biscuit
	Direct + fixed
•	            Machine rent biscuit X
	Indirect + variable
•	             Electricity for machine biscuit x, y, z
	Indirect + fix
•	             Rent of factory
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11
Q

What is a cash flow statement

A

• Cash flow statement is a projection of the future cash ins and cash-outs

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12
Q

How is it different from an income statement?

A

o While income statement = A projection of future revenues and costs
o Not all cash-ins are revenues, and vice versa, same goes for cash-outs and costs

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13
Q

What are the two principles that affect a cashflow statement?

A
  1. Matching principle
    o Cashout depends on the moment when you buy the product, costs are spread
    over a period (difference between costs and cashout)
  2. Operational Principle
    o Need for networking capital to bridge this cap (customer pays later while supplier requires money earlier than payment)
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14
Q

From the operational costs onward, what comes in a cashflow statement?

A 
o	Operational Results
	+/- operational results
	+ depreciations
	– change in NWC
o	Cash flow from operations
	- Reimbursements
	- Interests
	- investments
	+ Capital raised
	+ financing from other sources
o	Cash flow for period
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15
Q

What does a balance sheet exist of?

A
  1. left side, assets

2. Right side, Equity & liabilities

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16
Q

Balance sheet, How are assets ordered? and what are the points being ordered?

A

ordered based on speed on cash conversion (liquidity)

	Formation expenses
	Intangible fixed assets
	Tangible fixed assets
	Financial fixed assets
	Stocks and work in progress
	Accounts receivable
17
Q

Balance sheet, how are equity and liabilities ordered, and what are the factors that are ordered?

A

ordered based on possibility to claim repayment (low to high)

	Capital
	Reserves
	Accumulated P&L
	Debts payable > 1 year
	Debts payable < 1 year
	Accounts payable
18
Q

What are the sources of funding?

A
  1. Equity
  2. Long- and medium-term loans
  3. Crowdfunding (equity or loan)
19
Q

What are the advantages and disadvantages of Angles & VC? What are their main considerations?

A 
o	Advantages
	   Secure & longterm
	   Larger amount
	   Added value investor
	   No interest or capital repayments
	   Business > security

o	Disadvantages
	   Growth prospects
	   Share value
	   Exit route (5-10 years)
	   Time & effort
	   Interference

o Main consideration of angel & VC
 Risk and return
• Typically, 30% to 60% p.a. return
 Exit route
• Typically, liquidation of investment within 5 to 10 years

20
Q

How to sell equity?

A
  1. 3F’s (family, friends, fools)

2. Angles & Venture Finance

21
Q

What are the advantages and disadvantages of 3F’s with regards to equity?

A

o Advantages
 Security unlikely to be required
 Loans maybe informal
 Interest payments may not be required or may be deferred

o Disadvantages
 Can strain relationships if repayments not made as expected
 If business fails, family friends may suffer
 May interfere in the business

22
Q

How to get loans?

A
  1. Personal, family, friends

2. bank

23
Q

What are the advantages and disadvantages of 3F’s with regards to loans? And what are their considerations?

A

o Advantages
 Term is fixed
 Capital repayments fixed
 Interest: fixed or variable, but lower than overdraft

o Disadvantages
 Collateral
 Good cash flow and break even forecast

•	Bank considerations:
o	Loan
	Purpose, amount and repayments terms
o	Financial
	Cash flow, breakeven and gearing
o	Personal
	Character ability
24
Q

How to make sales? What are the approaches to make a reliable estimation of sales?

A
  1. bottom-up approach

2. top-down approach

25
Q

What is the bottom up approach?

A
  1. means at hand
  2. sales pipe
  3. ## salesit is field research
26
Q

What is top-down approach?

A
  1. potential market
  2. total available market
  3. served available market
  4. ## made salesdesk research
27
Q

Advantages & disadvantages of top-down approach?

A

 Advantages
• Cheap
• Quick
• Good for background information

 Disadvantages
• Not specific for your business
• Can be incomplete or inaccurate
• Can be out-of-date

28
Q

Advantages & disadvantages of bottom-up approach?

A

 Advantages
• Reflects your needs
• You control quality
• Up-to-date

 Disadvantages
• Expensive (unless you do it yourself)
• Takes time
• Can tell competition what you are up to

29
Q

What steps to take to make an reliable sales pipe estimation? and why does this need to be done?

A 
Q1
•	Estimate the effort needed to sell …..
o	Identify leads
	Calls
	First contact
	Meeting

Q2
o To avoid
 Overestimation of sales
 Underestimating costs needed to generate sales

30
Q

What depends on the buyer and what buyers are there (context: sales pipe)?

A

Q1
How long it will take and how much effort it takes to sell

Q2

  1. economic buyer
  2. user buyer
  3. technical buyer
    (4. sometimes a coach)
31
Q

What is an economic buyer?

A 
	Gives final approval to buy
	Decision criteria
•	ROI
•	Bottom line impacts the organization
	Challenges
•	Identifying
•	Get to the person
32
Q

What is an user buyer?

A 
Uses the product:
	Makes judgement about impact on job performance, can block
	Criteria
•	Will it make my job easier?
	Challenges
•	Key user buyers cannot be neglected
33
Q

What is a technical buyer?

A

 Sceptical gatekeeper (manager/maintain)
 Criteria
• Judge quantifiable aspects
 Challenges
• Can say no based on “objective parameters”

1ZM20 (7 decks)

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