marija nikolic - finance basics for enterprisers

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Day I

Finance basics for enterprisers

In which methods can I finance my future businesses ?

Marija Nikolić, cert. ecc

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Targets

1. Meeting with methods of financing start up business at Serbia and at world

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Working planDay I Day II Day III Day IV Day V

In which methods I can finance my future

businesses ?

What do I need to know about planning finances for my future business ?

Which finance reports I must learn to read?–

Part I

Which finance reports I must learn

to read? – Part II

How can i know if I pay off to invest in

this busieness idea ?

09:00 – 11:0016:00 – 18:00

Finance help,, subventions , funds, credits, tax loads…

Contrast between finance planning and business and why is finance planning important ?

Understanding balance sheet and connecting him with course of cash

Reading of balance sheet and connect him with profits and loss accounts

Counting of adequacy investing in business idea

11:00 – 11:2018:00 – 18:20

Pause Pause Pause Pause Pause

11:20 – 13:0018:20 – 20:00

Guest from bank, credit lime

Practice: Investments plan for business idea which I have

Practice: Analysis of costs ( fixed and variable costs )

Practice: Profit and loss account – prognosis of profit and loss account

Course of cash – internal and external motives for defect of cash, effects, methods of finding cash

Account of necessary circulating tools

Practice: Account of circulating tools

Pratcice: Time of ROI , internal rate of profitability , discounting of ROI and net present value

Budgeting

13:00 – 13:3020:00 – 20:30

Automatically advice

on request Automatically advice on

request Automatically advice on

request Automatically advice

on request Automatically advice

on request

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Finance sources and capital price

• Owners and borrows finance sources

• Long-term and short-term finance sources

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Owners finance sources

• To find owners finance sources• One dinar which is invest now-How

rate in future- net present value• At choice of finance methods is

important to rank profit from owners capital and profit from altogether capital

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Alternative owners sources

• To secure resources for acquirement main target we can go gradually

• Example I – If our target is project for production of movables, but we have weak chances for receiving credits, how to get resources ?

• Example II – Market of white ware and others house articles

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Long-term finance sources

• Expire date longer than year.

• That are: – Obaveznice– Stocks – Credit– Leasing

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Shares• Main form of long-term due• Share is cert.-usually portable• It contains number of borrow sum, time of reimbursement in

future and number agreed interest at agreed time intervals.• Main attributes:

– Conversion ability (exchange for agreed number of usually stocks)

– Cancellation capability (capability of enterpriser: To buy up and before their finally expire date ).

– Warehouse receipts (full power for buying usually stocks of company which has carry obveznice).

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Share marketing• At two methods:

– Directly– Public

• Directly marketing -immediately sale to one buyer or group of buyers.

• Buyers are big finance institutions - insurance companies and pension funds .

• Public marketing - over investment banks.

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STOCKS

• Can be:– Preferential stocks– Usually stocks

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Preferential stocks• Are making external source of long-term capital .• They have abilities of shares and usually stocks.• Preferencijalna dividend is expending from earning after taxation .• Basic abilities are:

– Case law on yield and tools ( at case of bankruptcy )– Nominal value – Cumulative dividend (percent or nominal value). Right on dividend is

not superannuate – Convertibility (conversion right in usually stocks)– vote– Participation (rarely ability )– Payment of dividend can be delayed contrary to shares– Dearly finance source nego share– Interest at share is paying before taxation , dividend is paying later

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Usually stocks

• Oftenest is working across agent.

• Investments bankers:– Deployment sale– Advising clients– Taking risk to self

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3. CREDIT

• Business banks

• Found for deployment

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4. Leasing

• Specific method for getting basic tools Company is renter for tools

• He is paying in advance agreed number of rent (charge)

• Usually there is two leasing types:– Business leasing– Finance leasing

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Business leasing

Arrangement with time line (usually 4 years)

• Time line is shorter than anticipated economic tools.

• Clause about cancellation.• After end of time line of rent, pact can

be renewed and tools buy

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Finance leasing or capital leasing

• He is long-term ability.• It’s not provided cancellation.• .Renter guarantee and paid upkeep

of tools• Company can same tools sale to

leasing company and than take him in rent.

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SHORT-TERM FINANCE SOURCES

• Basic aspects are:– Providers (without interest)– Credits

• others (commercial papers, received advance payment, private advances)

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CAPITAL PRICES

• On offers and requests side of finance tools there are same subjects:

1. People

2. Economic companies

3. State

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Finance agents• They are connecting offer and request

for finance tools.That are:1. Commercial banks2. Savings banks

3. Savings and credits associations4. Credits unions5. Insurance companies 6. Pension funds

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Money marketing

• Is bringing contact offer and request with short-term finance tools.

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Capital marketingCapital marketing is created many institutions which enable

translations. That translations is related on buy and sale long-term negotiable instruments .

Emission of negotiable instruments is doing by:– Big companies– Finance institutions– State

Long-term negotiable instruments are obveznice i stocks.Capital marketing can be organized and unorganized .Organized capital marketing makes change of negotiable

instruments .

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Finance sources

• Business banks

• Republic found for deployment

• Regional guaranty found

• Investment found

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Day II


What do I need to know about finance planning for my future

business?


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Targets

1. Distinction finance plan and business plan

2. How to make investment plan ?

3. How to divide charges on fixed and variable ?

4. How to count repayment ?

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businesses ?



Part I





09:00 – 11:0016:00 – 18:00






11:00 – 11:2018:00 – 18:20


11:20 – 13:0018:20 – 20:00









Budgeting

13:00 – 13:3020:00 – 20:30

Automatically advice on request





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From vision to enterpriser

FINANCE PLANNING With finance planning company we can look answers on next

questions: How much ’ll be profit, cost and yield? How’ll look situation

of property and finance? How to guarantee capability payment of tax ?

To we answer on this questions, on access there are tools of planning.

Transfer of tools plan Balance plan Liquidity plan

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What is finance planning ?1. Defined targets from business plan is

transforming into number.2. He is making us to we occupy about future

business idea.3. He is giving possibility of comparing real –

planning.4. We can see problems at time – We can

instantly taking all countermeasures .

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Instruments of finance planning

1. Transfer of tools plan – budget (profit and loss account )

2. Balance plan (balance sheet)3. Liquidity plan At planning there are principle –How much is

possible to be real and in detail .1. Detail real plan of transfer is working for one

year. Next 2 - 5 are roughly planning.

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Similarity and difference between finance plan and business plan

1. Similarity

2. Difference

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Charges

Yield = Profit – Charges

• How to minimize charges ?

• Charges division on fixed and variable

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Fixed charges Their size is not changing subject to volume of work Charges like that in economy of companies are:Charges for amortisation (machine, equipment and work

space)Charges for bonus for work of unproduction workersCharges for dues in forums, subscription for magazinesCharges warming, illumination and others.Charges kancelarijskog materijalaTariffs , working papers and others.At long-term – all charges are variable.

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Variable charges

Charges for working material Energy charges ( electric, fuel…)Charges for production workersCharges for article transportsCharges for packageTax on productsAnd others.

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Assessing of profitability step

1. Profitability chart :

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Down profitability barrier

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ANALYSIS OF PROFITABILITY STEP

• Target:• Analysis of profitability step is instrument for constate level of production / sale with it

project will cover fixed and variable charges. It ensign to the small number of profit which project must to earn how will he cover altogether charges, so there is no losses…

• altogether charges from market are same as altogether charges• Equivalency point from altogether profit and altogether charges is point zero profit and

zero charges. In assessing industrial projects, analysis profitability step primarily contaste conserving project. That is helpful contaste instrument which is giving answers on next questions:

• At which productions level project can cover altogether charges?• Which is minimal price necessary for product, how will him be tenable on different

productions levels?• What is going on if finance hypothesis of charges or price is changing?• Which is the best, the worst and the most probably project scenario?• Analysis of profitability step is not limited on simple countes at given forms, but

analysis become more imaortant if there is complete interpretacion of calculation result.

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Example Investment plan for business idea

which I have

1. Osnovna sredstva:1.1. Građevinski objekat:1.2. Tehnološka oprema:1.3. Pomoćna oprema:1.4. Ostala ulaganja:2. Obrtna sredstva:UKUPNO

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FINANCE SOURCES• Owners participation :• Credit• Altogether• Market• acquisitions-domestics , outsiders• sales – domestics , outsiders

•

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Investment effects :• 1 Altogether profit• 2 Altogether losses• 3 Yield • 4 Profitability step• 5 Time of backing investments• 6 Number of new workers and structures

• CONCLUISON

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Day III


Which finance reports I must learn to read ? –Part I


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Targets1. How to connect data about my buyers with finance

data2. How to make account of production and charges

volume 3. Understanding three the most important

demonstrators of efficacy : earnings, cash i profits4. How to execute cash wais ?5. What are effects of deficiency cash ?1. Methods of finding cash

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businesses ?



Part I





09:00 – 11:0016:00 – 18:00






11:00 – 11:2018:00 – 18:20


11:20 – 13:0018:20 – 20:00









Budgeting

13:00 – 13:3020:00 – 20:30






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FINANCE REPORTS

1. Balance sheet

2. Profit and loss account

3. Analysis of money wais

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Balance sheet

• Is finance report which show company business success in some time, and realizations earnings, charges and yield and loss which company have.

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profit and loss

account

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profit and loss

account

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Why is profit and loss account important ?

1. Analysis of possibility for charges reduction2. Analysis of possibility for increasing

earnings When we planning earnings i losses we must

compare them with other company data from that region. Calculation different raids and coefficients have no effects without comparing with other data.

Data sources

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How to plan profit and loss account?

• 11. . MarketMarket

PlanningPlanning article dosesarticle doses forfor salesale towardtoward to market sizemarket size and and competitioncompetition

Prospective price riseProspective price rise Changing in assortment Changing in assortment 2. 2. Charges for material, tools and third persons jobsCharges for material, tools and third persons jobs

Proportionally to article numbersProportionally to article numbers DeploymentDeployment of pricesprices at material buyingat material buyingChanging in product assortmentChanging in product assortment

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3. Rashod za osoblje3. Rashod za osoblje

PlanningPlanning receptionsreceptions / / displacementsdisplacements

AdaptationAdaptation earningsearnings

Enterpriser salaryEnterpriser salary atat individualityindividuality companiescompanies

Social donationSocial donation ( (mostlymostly there are proportionatethere are proportionate with salaries) )

ChargesCharges, , education chargeseducation charges, , persons looking posterspersons looking posters

4. Rashod za prostorije4. Rashod za prostorije

Altogether chargesAltogether charges at at rent agreementrent agreement Ukoliko Ukoliko it is firm propertyit is firm property, , citecite rentrent atat actualityactuality pricesprices and considerand consider

asas inflowinflow toolstools atat outsiders inflowoutsiders inflow

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5. 5. UpkeepUpkeep, , fixesfixes, , changes,changes, l leasingeasing Upkeep chargesUpkeep charges, , fixesfixes, , changeschanges, , leasing for leasing for

thingsthings, , machinesmachines, , AOP tools and othersAOP tools and others. . 6. 6. DisbursalsDisbursals forfor carscars andand transport transport SubscriptionSubscription charges charges, , gasgas, , guarantyguaranty, , upkeepupkeep 7. 7. GuarantyGuaranty from damagefrom damage onon thingsthings, , dutiesduties, t, taxax, ,

approvalsapprovals GuarantyGuaranty fromfrom damagedamage on thingson things, , suretysurety, , dutiesduties, ,

taxtax and othersand others. . Can we expectCan we expect new lawsnew laws, , whichwhich cancan affect onaffect on

increaseincrease dutiesduties andand taxestaxes??

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8. 8. DisbursalsDisbursals for for energenergyy andand removingremoving dregsdregs ChargesCharges forfor currentcurrent,, water water, , removing deperditionremoving deperdition, , special special

depertidiondepertidion9. 9. DisbursalsDisbursals za za admisnistrationadmisnistration andand informaticsinformaticsSoftvSoftvaarree, licence, AOP , licence, AOP Office materialOffice material, , printed thingsprinted things, , phonephone, , postagepostage, , net taxesnet taxesBooking adjunctBooking adjunct, , controlcontrol and advices and advices 10. 10. DisbursalsDisbursals for propagandafor propaganda

Propaganda chargesPropaganda charges, , charges for representationcharges for representation ,,gifts for gifts for clients clients

Anniversary showsAnniversary shows , , bringing in new productsbringing in new products

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11. 11. Other businessOther business DisbursalsDisbursals

All business disbursals which haven’t All business disbursals which haven’t mentioned yetmentioned yet

12. 12. DisbursalsDisbursals for interestsfor interests / / earningsearnings from interestsfrom interests

Interest on planning claimInterest on planning claim cretidescretides against balance planagainst balance plan

Prospective interest riseProspective interest rise

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13. 13. Amortisation Amortisation

Decrement ofDecrement of values elementaryvalues elementary resourcesresources

If you in your plan taken in considerationIf you in your plan taken in consideration amorti amortisationsation for for planning planning investmentsinvestments? (? (comparecompare b balancealance plan: " plan: " ElementaryElementary resourcesresources ") ")

14. 14. SuccessSuccess / / outside business profitoutside business profit

Earnings and profitsEarnings and profits whichwhich haven’thaven’t in connectionin connection withwith company performancecompany performance, , example:example: places places ((encumbrance encumbrance ,, profits for placesprofits for places, , profits for rentsprofits for rents), ), negotiable negotiable instrumentsinstruments ((earnings from interestsearnings from interests, , realizedrealized coursetcourset yieldyield) ) or profit for tax.or profit for tax.

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Money wais balance

• Money wais balance shows cash money wais development at company at accounting period .

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Structure of money wais balance

1. Cash flow – cash wais from business activity • Cash inflow at all business activity basics of

company: sale of articles and accommodations , inflows at interest basics, dividends,… He isn’t include demand value: sell but don’t paid articles and accommodations

• Cash outflow from paying providers basics, workers for payments, rents, communal services and others.

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Structure of money wais balance

2. Cash flow – cash wais from capital activity• Cash inflow from basic from sell of

business activity – basic tools, place, or terrain

• Cash outflow from basic of buying fixed activity – basic tools, place, tools, terrain

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STRUCTURS BALANCE MONEY FLOWS

3. Cash flow – Cash flow from finance activity Incomes from sails or emision long-term financial instruments which one company have: ex. emision of stocks, sale stocks from company, emision Obveznice, debit

• Outcomes from buying long-term financial instruments

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• Addition of all three cash flows give us net increasing ( decrasing ) of cash during counting period (mostly one year). When that net increasing ( decrasing ) of cash add at cash balance which company had on the end of the last year, there is balance at cash count at the end of latest counting period.

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• Constantly control and menagment cash is necessary for :

• - liquidity security

• - povećanja rentabilnosti.

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What is the point of assembling reports about cash flows ?

• That gives informations to customers about cash and cash equivalent in past so they can to ability of company to make cash and cash equivalent and needs of companies for cash in future.

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• Which conclusions from reports enterpriser can bring?

• 1. Is it about business activity which gives or request cash outcome

• 2. Is it cash spent in business or no-business activities

• 3. How to finance defect or to use cash equities

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Examle• Wash service : AS• Earnings : 400 din x 3 x 8 = 9.600 dnevno x 30

=288.000• Varlance : • Object rent =24.000 Representation =5.000• Water =10.000 Flat tax=5.000• Electricity,detergent =30.000 Advertisement

=10.000• Worker (gross) =30.000• Taxes =10.000• Credit for equipment =24.000• Amortisation =5.000

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Altogether sale 288.000

Buying price of sold products 0

Material charges 40.000

Charges (gross) 30.000

Rapairs and upkeep, renewal, whiten and others. 10.000

Charges for all marketing types 10.000

Charges connected with drive-park 0

All traveling and representation charges 5.000

Accounting, laws, menagment 0

Rent,; phone, fax and net; electricity, water, gas charges 24.000

Property and workers safeguarding 0

Unmovable property taxes 0

Interest charges 4.000

Basic tools amortisation 5.000

Others charges 0

Altogether charges 128.000

Finance charges 0

PDV 5.000

Net incomes 155.000

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IV dan


Which finance report I must learn to read –Part II?


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Targets

1. Structure balance meeting attention

2. Count of current assets: recourses , costumers demand and cash

3. Operative cycle administer

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businesses ?



Part I





09:00 – 11:0016:00 – 18:00






11:00 – 11:2018:00 – 18:20


11:20 – 13:0018:20 – 20:00









Budgeting

13:00 – 13:3020:00 – 20:30






66

Finance Report

1. Balance sheet

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Balance SheetBalance sheet is finance report which shows us

finance company position in the order moment. It gives us imagination about property and engagements of one company, in fact gives us view at company assets and finance sources of those assets.

• Basic accounting equation about balance sheet is:Altogether assets = Altogether engagements +

Proprietor capital (owners, partners, stockers)

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balance sheet

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balance sheet

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Balance example

ASSET

Balance day

1.1.2005LABILITY

Business place 200.000 Owners capital 150.000

Cash 50.000 Credits 100.000

250.000 250.000

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• Assets – Liabilities ?

• ASSET = LIABILITY

• Assets = Duty + Own Capital

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Balance Sheet Importance

1 Balance sheet analysis

2 Connecting with profit and loss account

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Current assets

1. Necessary current assets count

2. Denpedance rentability and risk

3. Current assets in altogether business assets

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Example

Wash service AS

Takeover data from yesterday example.

Equipment was bought at credit in value of 864.000 din for three years.

For security liqudity enterpriser has pay in 50.000 rent for liqudity.

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ASSETS

1.0 Current assets (1.1.+…+1.7.) 50.000

1.1. Assets and equivalents Counter,drawing accaunt, negotiable

instruments 50.000

1.2. receivables Number which costumer owns by basic sale

1.3. Resources: raw materials Bought materials

1.4. Resources: work in progress Material charges

1.5. Resources: finished products Finished products which are ready for sale

1.6. Prepayments Rent , security

1.7. Others current assets

2. Basic assets ( 2.1.+ 2.2.+2.3) 864.000

2.1. Property Buying property value

2.2. business object Buying object value

2.3. Machines and equipments Buying machines and equipments value

864.000

3. Amortisation Current Assets Amortisation 0

4. Net Value t O.S. (2-3) 864.000

5. Altogether Assets ( 1+4) 914.000

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LIABILITY

6. Short term engagements (6.1.+..+6.5.) 50.000

6.1. Engagements with suppliers Number which owe with suppliers

6.2. Engagements with taxes Taxes on long term payments, Unmovable property, yield

6.3. Engagements by interest Interest which are not paid

6.4. Engagements by short term Capital credit

6.5. Others short term engagements

7. Long term engagements 864.000

7.1. Long term credits Capital credit 864..000

8. Altogether Engagements (6+7)

9. Owners capital (9.1.+9.2.+9.3) 0

9.1. Owners capital/ shareholder Owner capital initial 0

9.2. Investment capital New owners capital

9.3. Reinvestment yield Reinvestment yield from past period

Altogether LIABILITY (8+9) 914.000

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V day

Finance Basic for enterprisers

How can I know should I invest in this business idea ?


78

Targets

1. worthwhile idea counting

2. budgeting

79



businesses ?



Part I





09:00 – 11:0016:00 – 18:00






11:00 – 11:2018:00 – 18:20


11:20 – 13:0018:20 – 20:00









Budgeting

13:00 – 13:3020:00 – 20:30






80

Conclusion I – IV day

Connecting of learned and using of it:

Practice method with making tasks by leading way

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Practice

Time of backing investments, internal rentability step, discouting of time backing investemnts and net now value

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Analysis

Fixed company finance plan

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Budžetiranje

Vežba: Budžetiranja – provera isplativosti moje ideje: dve vežbe, preduzeće i radnja (grupni rad)

marija nikolic - finance basics for enterprisers

Economy & Finance

finance leasing

finance planning

shortterm finance tools

owners finance sources

finance sources longterm

longterm finance sources

finance help

finance agents