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CF3-2 Financial Planning-Balance Sheet

Course video 17 of 31

Financial planning of a startup and seeking funding from outside investors.

Finance is one of the key ingredients for successful startups. Many entrepreneurs, however, lack knowledge of finance. This course teaches basic financial knowledge needed in starting and operating startups to entrepreneurs or would-be entrepreneurs who did not major in finance. Students of this course will learn to read and understand financial statements such as balance sheets, income statements and cash flow statements. They will also practice simple financial planning of a startup. This course also covers the concept company valuation as well as how startups get funding. This is a practical course aimed at direct application of the knowledge gained into running real startups. It also aims to enable entrepreneurs and would-be-entrepreneurs to understand the "language of finance" so that they can talk to professionals with confidence.

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教学方

Steve Ahn
Professor

脚本

In the previous session,

we did financial planning of

PEN Company in the second year,

based on nine key assumptions.

We then constructed the cashflow statement.

From this, we determined the amount of Angel funding.

Now, based on the cashflow statement,

let's construct a balance sheet of

PEN Company at the end of the second year.

This is the balance sheet of

PEN Company in the beginning of Year 2.

The first line of the balance sheet at the end

of the Year 2 comes from the previous slide.

In the first action,

the company gets an Angel funding of $5,000.

So, the cash has increased by 5,000,

and so has the shareholder's equity.

The company purchases raw materials

worth $4,000 with cash,

and so there is a decrease of cash by

4,000 and an increase of

materials inventory with the same amount.

In action 3, the company collects accounts

receivable from last year's revenue that was $2,500.

So, increase of cash by

that amount and now company has no accounts receivable.

In the beginning of the year,

the company hires a production worker

and the annual salary is $1,200.

So, by the end of this year,

cash will have decreased by $1,200

and since the production worker is

working to produce products,

the value of finished goods inventory

is increased by this amount.

Action 5 is related to the production.

The company produces a total of 12,000 pens and

the remaining material inventory at

the end of the year is $1,000.

So, the company uses $4,000 worth of materials.

There is a decrease of material inventory by $4,000,

and this same amount

appears in the column for the finished goods inventory.

The next action is depreciation,

and just like the previous year,

there is a decrease in value of the equipment by $800.

Since this equipment is

used for production of finished goods,

there is the increase in the value of

finished goods inventory with the same amount.

CEOs annual salary is $2,000,

and the other expenses are $1,000 annually.

So, there is a decrease of cash by $3,000,

and the same amount in shareholders equity.

Just like the last year,

10 percent interest on the loan is paid.

So, that's minus 400 in cash.

Also minus 400 in shareholders equity.

In Action 9, the company will sell a total

of 10,000 pens with the unit price of $1,

and the sales money is collected one-quarter later.

So, during the year,

the company collects $7,000 in cash,

but the sales for the fourth quarter will be

collected in the next year.

So, there is an increase of cash by

$7,000 and an increase of accounts receivable by $3,000.

The company sells 10,000 pens out of 12,000 production.

So, the decrease of value in finished goods inventory

will be five over six of $6,000,

which is minus $5,000.

So, the company has a profit of $5,000,

and that goes to shareholders equity.

If we add all these numbers,

we get the last line

and it is the balance sheet

at the end of the second year.

In summary, we have constructed the balance sheet

of PEN Company at the end of the second year.

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