WEBVTT 1 00:00:00.500 --> 00:00:04.200 We're in September on starting the business operations. So 2 00:00:03.200 --> 00:00:07.000 sales are 200 puzzles. 3 00:00:06.800 --> 00:00:09.800 It's what we anticipated. This is 4 00:00:09.800 --> 00:00:12.500 the actual good news. It will not be the 5 00:00:12.500 --> 00:00:13.800 same a little bit later on. 6 00:00:14.400 --> 00:00:17.600 This 200 puzzles are delivered by the supplier 7 00:00:17.600 --> 00:00:20.600 and we receive an immediate cash payment on 8 00:00:20.600 --> 00:00:22.200 the e-commerce site. 9 00:00:23.100 --> 00:00:26.300 In order to simplify the calculations. I did 10 00:00:26.300 --> 00:00:29.200 not introduce any value added tax 11 00:00:29.200 --> 00:00:32.200 or sales tax. Of course in a real 12 00:00:32.200 --> 00:00:35.100 world. There should be taken into account, but it does not 13 00:00:35.100 --> 00:00:38.600 bring anything to the pedagogy. So I skip the 14 00:00:38.600 --> 00:00:39.100 issue. 15 00:00:39.700 --> 00:00:42.800 Now the supplier realizes the delivery 16 00:00:42.800 --> 00:00:45.200 and is going to be paid at the 17 00:00:45.200 --> 00:00:48.400 end of the month. The supply is going to send me a global 18 00:00:48.400 --> 00:00:51.500 invoice again, no sales tax for exactly 19 00:00:51.500 --> 00:00:52.700 the same reason. 20 00:00:53.400 --> 00:00:56.800 I decided to spend half of my time working 21 00:00:56.800 --> 00:00:59.600 on this new company and I 22 00:00:59.600 --> 00:01:02.700 pay me a salary which represents my activity 23 00:01:02.700 --> 00:01:05.700 half-time 1,000. This 24 00:01:05.700 --> 00:01:08.800 includes a Social Security expenses to 25 00:01:08.800 --> 00:01:11.600 make it simple now we can calculate the 26 00:01:11.600 --> 00:01:14.300 first profit for this month. 27 00:01:14.900 --> 00:01:18.000 Each and every sale is a transaction. 28 00:01:17.500 --> 00:01:20.200 You have a buyer and you have a 29 00:01:20.200 --> 00:01:23.600 Setter the buyer accepts to buy at my 30 00:01:23.600 --> 00:01:25.400 selling price, which is $30. 31 00:01:26.300 --> 00:01:29.300 But in order to be able to sell a puzzle, I need 32 00:01:29.300 --> 00:01:32.500 to buy dining to purchase it and the purchasing 33 00:01:32.500 --> 00:01:35.400 price is $20. Then you understand that 34 00:01:35.400 --> 00:01:38.900 when I sell something at 30, which I buy for 35 00:01:38.900 --> 00:01:42.300 20. I make a profit margin per 36 00:01:41.300 --> 00:01:44.500 unit which is $10 the difference 37 00:01:44.500 --> 00:01:47.200 between 30 and 20. You understand that 38 00:01:47.200 --> 00:01:50.200 to be an accountant and a finance here. You need to know how to 39 00:01:50.200 --> 00:01:53.800 subtract. You also need to know how to multiply 40 00:01:53.800 --> 00:01:56.800 because if I generate a margin which 41 00:01:56.800 --> 00:01:59.500 is $10 per unit and I sell 42 00:01:59.500 --> 00:02:02.700 200 units. The total margin is 43 00:02:02.700 --> 00:02:06.100 going to be 2000 which is simply 200 times 44 00:02:05.100 --> 00:02:06.600 10. 45 00:02:07.800 --> 00:02:10.600 I have some indirect cost my salary 46 00:02:10.600 --> 00:02:14.100 we name that label related expense including 47 00:02:13.100 --> 00:02:16.200 Social Security expenses, which 48 00:02:16.200 --> 00:02:19.600 is 1,000. Now if you want to calculate the profit, 49 00:02:19.600 --> 00:02:22.500 it is simply revenues minus expenses. 50 00:02:23.200 --> 00:02:27.000 In a calculation of the total margin, I already included 51 00:02:26.100 --> 00:02:29.800 the expense which consists in buying the 52 00:02:29.800 --> 00:02:32.300 puzzles from the supplier. Then I have 53 00:02:32.300 --> 00:02:35.700 to deduct the additional expense which is my cost 54 00:02:35.700 --> 00:02:38.500 1,000. The profit is $1,000. 55 00:02:38.500 --> 00:02:41.700 How do you present this p&l sales 56 00:02:41.700 --> 00:02:45.000 revenues turn over 6000 57 00:02:45.500 --> 00:02:48.700 Minus the purchase cost of 58 00:02:48.700 --> 00:02:51.700 these Goods which I sold now you 59 00:02:51.700 --> 00:02:54.400 understand that any time. There is a transaction on 60 00:02:54.400 --> 00:02:57.400 my site. I account for Revenue which 61 00:02:57.400 --> 00:03:00.300 is 30 and I account for a cost 62 00:03:00.300 --> 00:03:03.900 which is 20 the cost which is associated with 63 00:03:03.900 --> 00:03:06.100 Goods, which I have sold to the 64 00:03:06.100 --> 00:03:06.400 customers. 65 00:03:07.200 --> 00:03:11.600 Six thousand minus 4,000 gives me they grow. Margin 66 00:03:10.600 --> 00:03:13.800 the commercial margin 2000 67 00:03:13.800 --> 00:03:16.300 I deduct in direct calls, which 68 00:03:16.300 --> 00:03:19.700 is very frequently named as GNA which 69 00:03:19.700 --> 00:03:22.600 stands for selling General and administrative cost. 70 00:03:22.600 --> 00:03:24.500 The profit is 1000. 71 00:03:25.500 --> 00:03:28.400 And now this is how it shows on the Sprite 72 00:03:28.400 --> 00:03:31.600 sheet. I will go back to this point a little bit later. But 73 00:03:31.600 --> 00:03:34.700 you also see sales cost of sales gross. 74 00:03:34.700 --> 00:03:37.800 Margin is GNA and the profit of the period which 75 00:03:37.800 --> 00:03:40.300 is 1000. Now what you can observe is 76 00:03:40.300 --> 00:03:43.200 manager 50% What does it 77 00:03:43.200 --> 00:03:47.700 mean in the spreadsheet? There is a tab, which is name parameters 78 00:03:46.700 --> 00:03:49.300 bottom left 79 00:03:49.300 --> 00:03:52.500 of the Sprite sheet in which I describe all 80 00:03:52.500 --> 00:03:55.600 the parameters, which I need for the entire course. 81 00:03:56.700 --> 00:03:59.300 Then it's selling price for b2c or 82 00:03:59.300 --> 00:04:02.700 par value of a share Etc. You have the value of 83 00:04:02.700 --> 00:04:05.800 the parameter, which I am using in the spreadsheet 84 00:04:05.800 --> 00:04:08.200 and you have the name which I give to this 85 00:04:08.200 --> 00:04:11.400 parameter that's easier for the calculations. So 86 00:04:11.400 --> 00:04:14.700 you can see that the cost of a manager is 2000 this 87 00:04:14.700 --> 00:04:17.600 is myself and the name which I give to this 88 00:04:17.600 --> 00:04:18.800 parameter is man. 89 00:04:19.500 --> 00:04:23.900 So in the Sprite sheet, I calculate 50% multiplied 90 00:04:22.900 --> 00:04:25.400 by man man is 91 00:04:25.400 --> 00:04:28.400 a manager. Now. I have calculated to 92 00:04:28.400 --> 00:04:31.200 the profit. I am ready to move to the change in the 93 00:04:31.200 --> 00:04:34.500 cash position the change in the cash position will simply 94 00:04:34.500 --> 00:04:38.100 be how much I introduce in my pocket minus 95 00:04:37.100 --> 00:04:40.400 what leaves my pocket cash in 96 00:04:40.400 --> 00:04:44.100 cash out in flows outflows Outlets. The 97 00:04:43.100 --> 00:04:47.000 cash inflows are the 200 Sales which 98 00:04:46.300 --> 00:04:49.200 I immediately paid $30 99 00:04:49.200 --> 00:04:52.900 per share 6,000 cash outflow. Well 100 00:04:52.900 --> 00:04:55.200 at the end of the month, I pay my supplier. 101 00:04:56.400 --> 00:04:59.500 I generated 200 purchases twenty dollars 102 00:04:59.500 --> 00:05:02.400 4,000. My salary is 103 00:05:02.400 --> 00:05:05.400 paid at the end of the month 1,000 the total 104 00:05:05.400 --> 00:05:09.000 cash Outlet is 5,000. So you understand that cash 105 00:05:08.300 --> 00:05:11.400 in minus Cash Out is 6,000 minus 106 00:05:11.400 --> 00:05:15.400 5,000. It is plus 1,000 on 107 00:05:14.400 --> 00:05:17.700 the spreadsheet. You are going to also observe 108 00:05:17.700 --> 00:05:20.700 the change in cash position cash from sales 109 00:05:20.700 --> 00:05:24.100 6,000 cash Outlets the purchases 110 00:05:23.100 --> 00:05:26.500 which I immediately paid to suppliers 111 00:05:26.500 --> 00:05:29.900 the salary cash outlays minus 112 00:05:29.900 --> 00:05:32.500 5000. Now you understand that if the 113 00:05:32.500 --> 00:05:35.500 nail change in my cash position is 1000. I 114 00:05:35.500 --> 00:05:38.600 can calculate how much cash I have in my back account 115 00:05:38.600 --> 00:05:40.000 at the end of the period. 116 00:05:40.800 --> 00:05:44.000 Beginning of the period my bank account was 10,000. 117 00:05:43.500 --> 00:05:46.800 I add 1000 bank account 118 00:05:46.800 --> 00:05:49.600 at the end of the period cash static is 119 00:05:49.600 --> 00:05:51.200 11,000. 120 00:05:51.800 --> 00:05:54.900 Now once we have calculated the profit and a 121 00:05:54.900 --> 00:05:57.900 cash we have to make an observation and 122 00:05:57.900 --> 00:05:58.700 take a decision. 123 00:05:59.400 --> 00:06:02.800 Observation is simply that the profit and 124 00:06:02.800 --> 00:06:05.700 a change in cash position. Absolutely match. 125 00:06:05.700 --> 00:06:08.300 It's plus 1000 in both 126 00:06:08.300 --> 00:06:11.000 case. This is absolutely exceptional. 127 00:06:12.200 --> 00:06:15.500 And in October, it would be a different situation. I will 128 00:06:15.500 --> 00:06:17.100 explain you why at that time. 129 00:06:18.100 --> 00:06:21.400 The next question is we made a profit but 130 00:06:21.400 --> 00:06:24.500 to whom belong this profit and the cash, 131 00:06:24.500 --> 00:06:26.800 which is associated with this profit. 132 00:06:27.500 --> 00:06:30.300 Well this cash and profit have been generated by the 133 00:06:30.300 --> 00:06:34.700 Company the company belongs to the owners shareholders. 134 00:06:33.700 --> 00:06:36.100 So profit and the 135 00:06:36.100 --> 00:06:39.900 cash belong to the owners and shareholders and they 136 00:06:39.900 --> 00:06:42.600 have to decide what they do. Is this funds. 137 00:06:43.200 --> 00:06:46.700 My decision as an owner of the company I 138 00:06:46.700 --> 00:06:49.100 have 100% of the shares is to leave 139 00:06:49.100 --> 00:06:52.600 the fonts inside the company. Why because I'm 140 00:06:52.600 --> 00:06:55.500 a cautious person and maybe I will need this money 141 00:06:55.500 --> 00:06:55.900 tomorrow. 142 00:06:56.800 --> 00:06:59.600 But you understand that when I live the Farms, 143 00:06:59.600 --> 00:07:03.600 I take a decision about my own involvement and 144 00:07:02.600 --> 00:07:05.400 investment in the company. 145 00:07:06.500 --> 00:07:09.400 When you build a balance sheet, you have to take that into account 146 00:07:09.400 --> 00:07:13.100 first you remember they are the assets. The asset 147 00:07:12.100 --> 00:07:15.200 is a bank account cash at the 148 00:07:15.200 --> 00:07:18.500 end of September is cash at the end of August beginning of 149 00:07:18.500 --> 00:07:21.200 the period plus change in cash in September 150 00:07:21.200 --> 00:07:25.000 you remember it's 11,000. No surprise on 151 00:07:24.100 --> 00:07:27.200 the sources side of the balance sheet you remember 152 00:07:27.200 --> 00:07:30.700 Equity today and liabilities tomorrow. The 153 00:07:30.700 --> 00:07:33.200 initial Capital was 10,000. Now, we 154 00:07:33.200 --> 00:07:36.200 generate to the profit of 1,000 and 155 00:07:36.200 --> 00:07:40.000 we have decided to reinvest this profit to 156 00:07:39.400 --> 00:07:43.600 find on the growth of the company. It's an 157 00:07:43.600 --> 00:07:46.700 accumulated investment, which I make as 158 00:07:46.700 --> 00:07:49.600 a shareholder as an owner of the company. The 159 00:07:49.600 --> 00:07:52.600 10,000 are my first involvement my 160 00:07:52.600 --> 00:07:55.300 first investment. The 1000 is an 161 00:07:55.300 --> 00:07:58.300 additional contribution of me as a 162 00:07:58.300 --> 00:08:02.600 shareholder to the final thing and the prosperity of the company shareholders 163 00:08:01.600 --> 00:08:05.300 Equity is absolutely fundamental. 164 00:08:04.300 --> 00:08:06.400 It is the ACC. 165 00:08:06.400 --> 00:08:09.100 At an investment made by shareholders in the 166 00:08:09.100 --> 00:08:12.500 corporation and they have two ways to find out 167 00:08:12.500 --> 00:08:16.000 the growth Capital shares and profit 168 00:08:15.100 --> 00:08:18.200 reinvested accumulated in 169 00:08:18.200 --> 00:08:22.100 the company. These are the two main contributions of shareholders 170 00:08:21.100 --> 00:08:23.000 to the financing. 171 00:08:23.900 --> 00:08:26.200 I can build my balance it at the 172 00:08:26.200 --> 00:08:31.000 end of September and I have cash 11,000 shareholders 173 00:08:29.400 --> 00:08:32.700 Equity 11,000 which 174 00:08:32.700 --> 00:08:35.900 is made off initial Capital plus a 175 00:08:35.900 --> 00:08:38.700 profit which I decided again to reinvest 176 00:08:38.700 --> 00:08:41.100 from September. You can observe that 177 00:08:41.100 --> 00:08:44.100 again the balance it is balancing, which is 178 00:08:44.100 --> 00:08:45.500 mechanical. 179 00:08:46.400 --> 00:08:49.600 Not in the process of building the three financial 180 00:08:49.600 --> 00:08:52.500 statements. What do you have to do? The first 181 00:08:52.500 --> 00:08:55.800 thing you have to do is to build in parallel the profit 182 00:08:55.800 --> 00:08:58.500 and loss statement and it change in 183 00:08:58.500 --> 00:08:59.100 cash position. 184 00:09:00.400 --> 00:09:03.700 Then at the end you will be able to calculate and 185 00:09:03.700 --> 00:09:06.300 produce a balance sheet. But as the balance sheet 186 00:09:06.300 --> 00:09:09.600 is a picture of where the company stands you need 187 00:09:09.600 --> 00:09:12.900 to know what happened during the period before 188 00:09:12.900 --> 00:09:15.400 you can take the picture at the 189 00:09:15.400 --> 00:09:18.400 end of the period. So again, you start with PNA on 190 00:09:18.400 --> 00:09:21.400 cash. Then you get to the balance sheet. I like 191 00:09:21.400 --> 00:09:24.400 to suggest you as a first application to open the 192 00:09:24.400 --> 00:09:28.400 spreadsheet accounting for business module 1. 193 00:09:29.300 --> 00:09:32.400 You have a tab which is parameters another one, 194 00:09:32.400 --> 00:09:35.600 which is August 1 which is the initial balance 195 00:09:35.600 --> 00:09:38.600 sheet go to the tab September 1 because 196 00:09:38.600 --> 00:09:41.200 there is a first year there will be a 197 00:09:41.200 --> 00:09:44.500 server on your in module two three four and five 198 00:09:44.500 --> 00:09:47.400 now I'm asking you the question what happens if 199 00:09:47.400 --> 00:09:49.800 you buy and sell 300 units. 200 00:09:50.600 --> 00:09:51.900 or 100 units 201 00:09:52.600 --> 00:09:55.900 you simply change the figure in that Sprite 202 00:09:55.900 --> 00:09:58.200 sheet and what are you going to observe? 203 00:09:59.300 --> 00:10:02.700 If you generate 300 sales instead of 200 204 00:10:02.700 --> 00:10:05.800 more sales more profit because 205 00:10:05.800 --> 00:10:08.500 anytime you sell you make a profit and more 206 00:10:08.500 --> 00:10:09.100 cash. 207 00:10:09.800 --> 00:10:12.500 And again, there will be a match between profit and 208 00:10:12.500 --> 00:10:15.200 cash again. It's absolutely exceptional. 209 00:10:16.200 --> 00:10:19.300 But what is interesting is to observe what happens if 210 00:10:19.300 --> 00:10:22.200 you sell only 100 units you understand that there is 211 00:10:22.200 --> 00:10:25.700 a balance in the PNR. It's a zero 212 00:10:25.700 --> 00:10:26.100 profit. 213 00:10:26.700 --> 00:10:30.400 Why because the growth margin the 214 00:10:29.400 --> 00:10:33.800 commercial margin which is variable linked 215 00:10:32.800 --> 00:10:36.700 with sales now exactly pays 216 00:10:35.700 --> 00:10:38.600 for the indirect costs, which 217 00:10:38.600 --> 00:10:41.800 are fixed. My salary does not depend 218 00:10:41.800 --> 00:10:44.300 on how many units I 219 00:10:44.300 --> 00:10:47.300 am selling to the customers, but the growth margin 220 00:10:47.300 --> 00:10:50.300 is exactly directly related with 221 00:10:50.300 --> 00:10:53.300 a number of units. I'm selling you understand that 222 00:10:53.300 --> 00:10:57.500 one is variable. The other one is fixed when the variable income 223 00:10:56.500 --> 00:10:59.600 exactly Pastels in 224 00:10:59.600 --> 00:11:02.300 direct cost. We are at balance. The 225 00:11:02.300 --> 00:11:05.600 p&l is zero. This is named The Break Even point 226 00:11:05.600 --> 00:11:08.500 which I am going to describe in the third 227 00:11:08.500 --> 00:11:11.200 module of this course. What about the knowledge? 228 00:11:11.900 --> 00:11:14.700 We built the profit and loss 229 00:11:14.700 --> 00:11:17.800 statement here. It was a profit because it was positive 230 00:11:17.800 --> 00:11:22.200 but a profit is always made of revenues minus 231 00:11:21.200 --> 00:11:24.200 the cost which are associated with the 232 00:11:24.200 --> 00:11:25.000 revenues. 233 00:11:25.800 --> 00:11:29.200 Changing cash is cashing minus 234 00:11:28.200 --> 00:11:31.800 cash out. Of course, if I immediately 235 00:11:31.800 --> 00:11:34.200 collect the sales sales and 236 00:11:34.200 --> 00:11:37.500 cash inflows are going to be the same and if 237 00:11:37.500 --> 00:11:41.100 I immediately cash out my expenses cash 238 00:11:40.100 --> 00:11:43.200 Outlets will match with expenses and then 239 00:11:43.200 --> 00:11:46.600 profit is exactly the change in cash, but 240 00:11:46.600 --> 00:11:49.800 this is again and again quite exceptional 241 00:11:49.800 --> 00:11:51.200 it will change in October. 242 00:11:52.200 --> 00:11:55.600 Now the last knowledge, which is very important to keep 243 00:11:55.600 --> 00:11:58.300 in mind. Is that shareholders invest in 244 00:11:58.300 --> 00:11:59.100 capital? 245 00:12:00.300 --> 00:12:03.300 Also in the profit with the design to 246 00:12:03.300 --> 00:12:06.400 reinvest in the company September is 247 00:12:06.400 --> 00:12:09.000 completed. We've been successful now we want to 248 00:12:09.400 --> 00:12:12.800 develop the southern distribution Channel, which is B2B and 249 00:12:12.800 --> 00:12:14.500 it will take place in October.