Create FinancialsStephen Lawrence and Frank Moyes

Graduate School of Business

University of Colorado

Boulder, CO 80309-0419

Course Outline

This Week

Create Financial Statements

Financial Projections– Drivers

– Model

– Assumptions Financial Dynamics Dean Abrams Present Operations Plan

Financial Plan

Income Statement Balance Sheet Cash Flow Summary Assumptions

Operating Expenses

Year 1 Year 2 Year 3Marketing 30 45 65R & DAdministration Total 60 90 140

Cost of Goods

Year 1 Year 2 Year 3Direct 70 130 160Indirect 30 70 90Total 100 200 250

Income Statement

Year 1 Year 2 Year 3Revenue 250 350 500COG’s 100 200 250Oper Expenses 60 90 140

Fixed Assets (Plant)

Year 1 Year 2 Year 3Assets 200 300 400Depreciation 140 210 260 Fixed Assets 60 90 140

Working Capital

Year 1 Year 2 Year 3Receivables 100 200 300Inventory 50 75 125

Balance Sheet

Year 1 Year 2 Year 3Receivables 100 200 300Inventory 50 75 125Fixed Assets 60 90 140

Revenue Drivers

Number of customers, transactions or units Price per customer, transaction or unit Average revenue per customer or

transaction Distribution channel discount Market penetration Response rate Churn rate Growth rate New services or product

Cost of Revenue Drivers

Personnel costs (labor and/or salary) Materials costs Yields Website operating costs Systems costs Warehouse and shipping expenses Returns Outsourcing expenses Lease and/or rental expenses Cost reductions Depreciation large capital expenditures

Operating Expense Drivers

Sales & Marketing– Customer acquisition cost

– Personnel expenses

– Sales commissions

– Exhibitions

– Brand building

– Tech support

– Customer service

Operating Expense Drivers

Research and Development– Personnel expenses– Beta testing– Time to market– Patent and copyright application – Prototyping– Subcontracting

General and Administration– Personnel expenses– Recruiting expenses– MIS expenses– Office rent and utilities

Financial Dynamics

Who does the financial projections?

Investor questions Drivers Optimism vs. Pessimism

Financials Spreadsheet Template