Money related Statement Analysis: Understand and Interpret Financial Results for Better Management & Credit Decisions Denver – March 30, 2004 Axiomate, Inc.Slide 2
Introduction and Understanding Specific Interests Eric Edwards – Axiomate, Inc. Jeff Holben – E 2 Business Services, Inc. What Participants Hope to Get from Seminar Axiomate, Inc.Slide 3
Purpose of Class Understand the nuts and bolts of money related presentation Understand where the numbers originate from and what they mean. Prologue to the "craft of bookkeeping" or the goal v. subjective Understand the nuts and bolts of monetary instruments Understand the nuts and bolts of arrangement assessment Axiomate, Inc.Slide 4
Our Day Walkthrough the Financial Statements Discuss every real detail: What the number means Source of the number Evidentiary matter behind the number Hard side of number The degree to which the number is OBJECTIVE Soft side of number The degree to which the number is SUBJECTIVE The One Sided Entry For each activity (Dr.) there is an equivalent and inverse response (Cr.) Look at commentaries Walk through the S-1 Turn you lose on the numbers, perhaps Axiomate, Inc.Slide 5
Types of Org. Structures Axiomate, Inc.Slide 6
What Type of Org. Structure Number of Owners/Shareholders Taxes Liability Cost of Operations Financing Axiomate, Inc.Slide 7
Purpose of Financial Statements Used by: Equity Shareholders Banks and Financial Creditors Customers and Suppliers Potential Investors Management and Board Relied upon in picking up solace from danger Axiomate, Inc.Slide 8
Purpose of Financial Statements Equity Shareholders Monitoring Investment & Management Banks and Financial Creditors Analyzing Risk For Credit Decisions Customers and Suppliers Analyzing Risk For Credit Decisions Potential Investors Analyzing Risk for Investment Decision Management and Board Business Management/Oversight Axiomate, Inc.Slide 9
Purpose - Comfort from Risk Credit Risk Investment Risk Management Risk Employment Risk Purchase Risk Axiomate, Inc.Slide 10
Purpose of Financial Statements Offense – Statement preparers Vs Defense – Statement Users (& Auditors) Axiomate, Inc.Slide 11
Example Companies Netflix, Inc. (Less complex) Symbol: NFLX (NASDAQ) Total Revenues of $150 million Rapidly developing, entrepreneurial organization Aspen Technology, Inc. (Complex) Symbol: AZPN (NASDAQ) Total Revenues of $320 million Complex, battling organization Core Financial Statements don\'t recount the entire story Axiomate, Inc.Slide 12
Guest Company - Netflix (Nasdaq: NFLX) is the world\'s biggest online DVD motion picture rental administration offering more than one million individuals access to more than 15,000 titles. Netflix\'s allure and achievement are based on giving the most broad determination of DVDs, a simple approach to pick films and quick, free conveyance. Axiomate, Inc.Slide 13
Elements of A Complete Financial Package Auditors Opinion Balance Sheet Income Statement of Cash Flows Statement of Equity Footnotes Other SEC Disclosures for Public Companies Axiomate, Inc.Slide 14
Types of Statements – Accountant Opinions Audit Statements are a reasonable presentment as per GAAP Review Statements exhibited in GAAP, seem reasonable. Arrangement Statements have been sorted out Axiomate, Inc.Slide 15
Understanding The Auditor\'s Opinion (the Defense?) Only the Opinion Page Belongs to the Auditors (not our business to get ready explanations) Our work is adequate to have REASONABLE affirmation articulations are free of MATERIAL misquote The Statements arranged on steady premise and Present FAIRLY the money related condition Qualified versus.. Inadequate Axiomate, Inc.Slide 16
Auditor\'s Opinion - Unqualified Axiomate, Inc.Slide 17
Auditor\'s Opinion - Qualified Qualification Axiomate, Inc.Slide 18
Auditors – who do they play for? Reviewers were set up as to some degree a private division police power to maintain bookkeeping respectability. Securities Act of 1933/34 Auditors play out the "Bear witness to" capacity They expect obligation regarding decency & trustworthiness Yet, reviewers are contracted by and paid for by the Company Audit board (Mgmt Control versus.. Free) Through 2000, counseling expenses were lucrative Axiomate, Inc.Slide 19
Understanding Company\'s Motivates (the Offense) Financial explanations and references have a place with the organization. Administration utilizes budgetary explanations to recount a story – the way they need to story to be told. Story might be intended for a particular gathering of people. Consider who the gathering of people may be when perusing articulations Financial proclamation presentation is NOT dark & white. Axiomate, Inc.Slide 20
Dissecting The Balance Sheet ASSETS Axiomate, Inc.Slide 21
Fundamentals of Accounting For each charge, there must be an equivalent and relating credit(s) Axiomate, Inc.Slide 22
Liquidity Current Assets Current Liabilities The Balance Sheet Long-Term Liabilities Fixed Assets Equity Section Other Assets Axiomate, Inc.Slide 23
The Balance Sheet – Current Assets Also: A/R & Inv Axiomate, Inc.Slide 24
Dissecting the Balance Sheet – Left Side Thinking – Current Assets Current Assets Axiomate, Inc.Slide 25
Dissecting the Balance Sheet – Left Side Thinking – Current Assets Current Assets Axiomate, Inc.Slide 26
The Balance Sheet – Fixed Assets Axiomate, Inc.Slide 27
Fixed Assets (Aspen Tech) Axiomate, Inc.Slide 28
Dissecting the Balance Sheet – Left Side Thinking – Fixed Assets Axiomate, Inc.Slide 29
Dissecting the Balance Sheet – Left Side Thinking – Fixed Assets Axiomate, Inc.Slide 30
The Balance Sheet – Intangibles/Other Assets Axiomate, Inc.Slide 31
Creating the Intangible (what to do with the charge) Axiomate, Inc.Slide 32
Dissecting the Balance Sheet – Left Side Thinking – Intangibles Axiomate, Inc.Slide 33
Dissecting the Balance Sheet – Left Side Thinking – Intangibles Axiomate, Inc.Slide 34
Dissecting the Balance Sheet – Left Side Thinking – Other Assets Deposits Long-term receivables Deferred Tax advantages Long-term prepaids Axiomate, Inc.Slide 35
Dissecting The Balance Sheet LIABILITIES Axiomate, Inc.Slide 36
Netflix – Current Liabilities Axiomate, Inc.Slide 37
Dissecting the Balance Sheet Right Side Thinking Current Liabilities Axiomate, Inc.Slide 38
Dissecting the Balance Sheet Right Side Thinking Current Liabilities Axiomate, Inc.Slide 39
Netflix – Long Term Liabilities Axiomate, Inc.Slide 40
Dissecting the Balance Sheet – Right Side Thinking Long-Term Liabilities Axiomate, Inc.Slide 41
Dissecting the Balance Sheet – Right Side Thinking Long-Term Liabilities Axiomate, Inc.Slide 42
Dissecting The Balance Sheet EQUITY/NET WORTH Axiomate, Inc.Slide 43
Netflix – Equity Axiomate, Inc.Slide 44
Dissecting the Balance Sheet Right Side Thinking Equity Axiomate, Inc.Slide 45
Dissecting the Balance Sheet Right Side Thinking Equity Watch stock for … .. Axiomate, Inc.Slide 46
Complex Equity (Aspen Tech) Axiomate, Inc.Slide 47
Dissecting the Balance Sheet – Important Metrics Axiomate, Inc.Slide 48
Dissecting the Balance Sheet – Other Good Metrics Inventory Turnover: Cost of Goods/Inventory turnover days: 365/Inventory Turnover A/R Turnover Sales/Accounts Receivable A/R turnover days: 365/AR Turnover Cash Cycle Add Inventory and A/R days Number of days from item to money Axiomate, Inc.Slide 49
Dissecting The Income Statement Axiomate, Inc.Slide 50
Income Statement – Revenue – Growth Axiomate, Inc.Slide 51
Income Statement – Revenue - Transition Growth No Growth Axiomate, Inc.Slide 52
Dissecting the Income Statement - Revenue Types of Revenues Goods Sold (Sales) Fees Subscriptions Rents Software Licenses Maintenance Gross versus.. Net Project Revenues/Progress Billing When to Recognize/Record Axiomate, Inc.Slide 53
Income Statement – Revenue – Growth Axiomate, Inc.Slide 54
Dissecting the Income Statement – Cost of Goods Axiomate, Inc.Slide 55
Dissecting the Income Statement – Cost of Goods Direct Cost of Revenue Cost of Sales versus.. Working Expenses Should Cost of Sales all be variable? Distribution of Fixed Expenses to divisions/classes Axiomate, Inc.Slide 56
Aspen Tech – Operating Expenses Axiomate, Inc.Slide 57
Dissecting the Income Statement – Operating Expenses Types of Expenses – Allocation Discretion Sales and Marketing Advertising, Sales compensations/commissions, T&E Research & Development Salaries General & Administrative Rent, Supplies, Utilities Other Operating Expenses/Non-repeating/Special Cash versus.. Non-Cash Capitalized Expenses/Amortization Axiomate, Inc.Slide 58
Operating cost – another methodology Axiomate, Inc.Slide 59
Dissecting the Income Statement – Below the Line Interest & Investment Income/(Expense) Extraordinary Items Minority Interest New Reconciliations Axiomate, Inc.Slide 60
Dissecting the Income Statement – Important Metrics & Terms Gross Margin/Contribution Margin Operating Margin/Return of Sales Industry Specific Measures Sales & Marketing/Revenues R&D/Revenues G&A/Revenues EBITDA Axiomate, Inc.Slide 61
Aspen Tech Comparative Income Statement Axiomate, Inc.Slide 62
Aspen Tech Income Statement Trend Analysis Axiomate, Inc.Slide 63
Taking a Bath What organizations/CFO\'s will do in terrible years Positioning to oversee income in great years Sometimes, they will "benefit" from the bathwater Many cleaned up in 2001/02 Axiomate, Inc.Slide 64
Dissecting The Statement of Cash Flows Axiomate, Inc.Slide 65
What is Cash? Money is the cash that a man really has, inclu
Money related experts decipher data about organizations and make suggestions to financial specia ...
It obliges a combination of your industry and business hazard investigation and the joining of y ...
Cases of Internal Uses of Statement Analysis. Arrangement - Focus on surveying the current money ...
future money related conditions. also, execution. 3. Purposes behind Analysis. Venture choices . ...
Must take after GAAP (budgetary bookkeeping guidelines) Subject to much judgment by administrati ...
Why perused the notes to the money related proclamations? Utilizing the past to ... Monetary Sta ...
Measure of examination structure is significantly more for DAE. Significance of terminal worth i ...
Name no less than three of the five guideline monetary articulation extortion plans. ... Annihil ...
(C) 2007 Prentice Hall, Inc. . 1-2. Monetary Statements An Overview. . . . . . . . Map. then aga ...
Characterizing Financial Analysis. Money related investigation is the procedure of assessing mon ...
Pay Statement. Income
Axiomate, Inc.. Presentation and Understanding Specific Interests. Eric Edwards
CHAPTER FOURTEEN. FINANCIAL ANALYSIS OF COMMON STOCKS. FINANCIAL ANALYSIS. REASONS FOR FIN ...
2. Interior Users. Outer Users. Monetary explanation investigation offers clients some assistanc ...
The Income Statement and the Statement of Stockholders’ Equity. Chapter 11. Learning Objec ...
2. Money related RATIOS(standardized measures). Utilized by supervisors for arranging and assess ...
Name no less than three of the five standard money related explanation misrepresentation plans.
2. Money related Statement Analysis: Lecture Outline. Survey of Financial StatementsRatiosTypes ...
Learning destinations (contd.). Capital structure and credit hazard: How fleeting liquidity haza ...