Create Financials

Stephen 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 3
Marketing 30 45 65
R&D
Administration
Total 60 90 140
Cost of Goods
Year 1 Year 2 Year 3
Direct 70 130 160
Indirect 30 70 90
Total 100 200 250
Income Statement
Year 1 Year 2 Year 3
Revenue 250 350 500
COG’s 100 200 250
Oper Expenses 60 90 140
 Fixed Assets (Plant)
Year 1 Year 2 Year 3
Assets 200 300 400
Depreciation 140 210 260
Fixed Assets 60 90 140
Working Capital
Year 1 Year 2 Year 3
Receivables 100 200 300
Inventory 50 75 125

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