WEBVTT 1 00:00:00.780 --> 00:00:02.800 Welcome to this month of September, 2 00:00:02.850 --> 00:00:06.960 which is going to give us the opportunity to finalize the preparation of this 3 00:00:07.090 --> 00:00:09.520 major step forward for the company. 4 00:00:10.140 --> 00:00:12.640 We replace a machine by a factory. 5 00:00:13.700 --> 00:00:16.560 We have started developing some preparation. 6 00:00:17.140 --> 00:00:20.160 We have invested people to create new product. 7 00:00:20.740 --> 00:00:23.760 We were spending the money capitalizing r and d expenses. 8 00:00:23.900 --> 00:00:28.840 We already spent some money preparing for the production planning 9 00:00:29.280 --> 00:00:30.880 organization and so on, 10 00:00:31.220 --> 00:00:34.800 and we paid in advance for the use of a software. 11 00:00:35.330 --> 00:00:39.360 These preparations are going to be completed in September, 12 00:00:39.800 --> 00:00:42.480 staffing the commercial department for example, 13 00:00:43.020 --> 00:00:46.240 so that we are ready in October to make an equity issue, 14 00:00:46.530 --> 00:00:50.960 raise debt and start the production of a major factory. To do that, 15 00:00:51.020 --> 00:00:55.520 we first have to decide how many units we are going to produce in September. 16 00:00:56.340 --> 00:00:58.960 In September, we're generating sales as expected, 17 00:00:59.190 --> 00:01:02.360 5,300 b2c, b2b, 18 00:01:03.190 --> 00:01:07.400 October forecast, 6,500, which is more than the capacity of the machine. 19 00:01:07.790 --> 00:01:09.760 This is why we build the factory, 20 00:01:10.740 --> 00:01:15.560 but when you start production in a factory is there are some uncertainties, 21 00:01:15.970 --> 00:01:19.000 risks and so on and so forth, so you want to be on a safe side. 22 00:01:19.430 --> 00:01:24.000 This is why you will try to maximize the amount of inventory which is in your 23 00:01:24.000 --> 00:01:26.280 warehouse at the beginning of October, 24 00:01:26.700 --> 00:01:31.640 so at the end of September so that you can go through volatility. 25 00:01:32.000 --> 00:01:35.520 I would say in the production process. In order to do that, 26 00:01:35.740 --> 00:01:38.080 you're going to maximize the production, 27 00:01:38.080 --> 00:01:42.120 which is consistent with the capacity of the machine. Capacity is 5,000. 28 00:01:42.420 --> 00:01:43.880 You produce 5,000, 29 00:01:44.540 --> 00:01:48.480 so you remember that during the previous months what we were doing is 30 00:01:49.110 --> 00:01:53.960 calculating a kind of target for the inventory and deducting from 31 00:01:53.960 --> 00:01:54.793 that production. 32 00:01:55.220 --> 00:02:00.160 Now we produce a maximum we can produce and as a consequence we'll have an 33 00:02:00.160 --> 00:02:04.960 inventory level of 2,420 at the end of September ready 34 00:02:05.180 --> 00:02:09.360 to match with some difficulties when the start production in a new factory 35 00:02:10.390 --> 00:02:12.800 with 5,000, we need six workers. 36 00:02:13.260 --> 00:02:18.200 We hire an additional research engineer so that we can complete 37 00:02:18.220 --> 00:02:20.080 and finalize the product innovation. 38 00:02:20.700 --> 00:02:25.680 We need a new production engineer to prepare the factory and the day you want 39 00:02:25.680 --> 00:02:26.430 to produce. 40 00:02:26.430 --> 00:02:31.200 It's because you want to sell and you have to prepare in advance the 41 00:02:31.200 --> 00:02:32.160 selling staff, 42 00:02:32.420 --> 00:02:37.240 so this is why you hire two salespersons so that you are ready to sell what you 43 00:02:37.240 --> 00:02:40.040 produce. Producing without selling is no good news. 44 00:02:41.020 --> 00:02:45.960 Now the module five is going to explain you how you move from a machine to a 45 00:02:45.960 --> 00:02:50.320 factory with a financial strategy which is related with that point. 46 00:02:50.650 --> 00:02:52.440 We'll see that later. Now, 47 00:02:52.500 --> 00:02:57.320 the organizational chart is changing a little bit because you 48 00:02:57.320 --> 00:02:58.760 increment the number of people 49 00:02:58.760 --> 00:03:01.900 Working in the company, management and administration, 50 00:03:02.000 --> 00:03:06.340 the same two additional people in sales, an additional person in engineering, 51 00:03:06.480 --> 00:03:09.060 an additional person in research and development. 52 00:03:10.170 --> 00:03:13.500 Same number of people in the production staff because so far we are operating 53 00:03:13.500 --> 00:03:15.300 the quotes old machine, 54 00:03:16.080 --> 00:03:20.700 so we are going to produce 5,000. You have the raw materials, 55 00:03:21.220 --> 00:03:25.660 supervision workers and depreciation, which is divided by 5,000. 56 00:03:25.920 --> 00:03:29.620 Now you're generating plenty of economies and scale because you are saturating 57 00:03:29.640 --> 00:03:34.620 the machine and the production cost per unit is down to 17.7 58 00:03:35.030 --> 00:03:38.020 euros. There is absolutely no change in the why. 59 00:03:38.020 --> 00:03:43.020 You calculate your inventories in units and in currency units 60 00:03:43.850 --> 00:03:47.580 with the weighted average cost of good sold, 61 00:03:47.580 --> 00:03:50.260 which is now 18.08. 62 00:03:50.760 --> 00:03:55.740 You deduct from that a total cost of sales and you can start building your p 63 00:03:55.740 --> 00:04:00.260 and l sales revenues based on how many products you've sold, 64 00:04:00.510 --> 00:04:02.900 minus cost of sales, which you already calculated. 65 00:04:03.070 --> 00:04:06.820 Gross margin and administration, no change selling, 66 00:04:07.040 --> 00:04:11.180 how you have two additional people engineering, you are one additional person. 67 00:04:12.420 --> 00:04:14.460 R and d is still capitalized, 68 00:04:15.000 --> 00:04:19.620 but now the license is allocated to the engineering expense. 69 00:04:20.370 --> 00:04:22.540 This is why when you look at the 6,000, 70 00:04:22.690 --> 00:04:26.100 it's not only the additional cost of an additional person, 71 00:04:26.710 --> 00:04:29.620 there is part of the cost of the license which is allocated. 72 00:04:30.630 --> 00:04:32.100 Let's have a look for a minute. 73 00:04:32.160 --> 00:04:36.540 At the evolution of engineering spending now in September we have two engineers, 74 00:04:37.000 --> 00:04:38.700 so it's not 1,500, 75 00:04:38.700 --> 00:04:43.380 3000 and we have to locate the cost of this license 76 00:04:43.680 --> 00:04:47.220 to the six months during which we are going to have the right to use it. 77 00:04:48.160 --> 00:04:52.860 We paid 18,000 for six months. It is 3000 per month, 78 00:04:53.440 --> 00:04:58.380 so the total of engineering spendings for September is 3000 for headcount 79 00:04:58.440 --> 00:05:02.820 and 3000 for the software. Once we have calculated the ebit, 80 00:05:02.920 --> 00:05:07.060 the operating income, we deduct interest tax and we get to the bottom line. 81 00:05:07.680 --> 00:05:11.380 The bottom line is 19,227. 82 00:05:11.690 --> 00:05:15.940 Obviously we reinvest. We retain 100% of this figure, 83 00:05:16.070 --> 00:05:19.260 which is going to increment the shareholders equity. 84 00:05:19.960 --> 00:05:21.540 No change for cash for sales, 85 00:05:22.200 --> 00:05:24.900 we have some accounts receivable at the beginning of the month, 86 00:05:24.900 --> 00:05:26.340 which is B2B sales. 87 00:05:26.690 --> 00:05:30.460 Last month we have a cash receivable end of the month, 88 00:05:30.470 --> 00:05:32.940 which is B2B sales this month, 89 00:05:34.360 --> 00:05:38.540 so as we have sold for 117,500, 90 00:05:38.960 --> 00:05:43.660 the cash inflow was basically the B2B sales in August and the 91 00:05:44.000 --> 00:05:47.260 B2C sales in in September. No change so far, 92 00:05:47.320 --> 00:05:51.900 no increase in financial resources. Cash inflows is cash from sales, 93 00:05:51.900 --> 00:05:56.780 90,000. Now we can move to cash outlay. It starts with 94 00:05:56.780 --> 00:05:59.100 Paying the suppliers. You remember, 95 00:05:59.160 --> 00:06:03.500 we pay the suppliers with a one month delay for 50% of the purchases. 96 00:06:03.940 --> 00:06:08.540 Accounts payable gives us suppliers, cash outlay administration, 97 00:06:08.800 --> 00:06:13.420 the same to additional people in sales. One additional person in engineering, 98 00:06:13.520 --> 00:06:17.860 one additional person in development, no tax payment today, 99 00:06:18.560 --> 00:06:23.020 no dividend payment today, no software license because it was paid in August. 100 00:06:23.720 --> 00:06:28.660 Now cash outlay are 93,000 and you understand that the net change 101 00:06:28.660 --> 00:06:32.020 in cash position is negative by 3,500, 102 00:06:32.190 --> 00:06:36.500 which reinforces the fact that it was not the right moment to pay a dividend and 103 00:06:36.500 --> 00:06:37.780 return cash to the shareholders. 104 00:06:38.000 --> 00:06:41.860 How much cash do we have at the end of the period? Almost 23,000, 105 00:06:42.200 --> 00:06:45.300 so no problem about this negative cash, 106 00:06:45.840 --> 00:06:50.060 but we have to be aware of the fact that now we'll need some financial resources 107 00:06:50.160 --> 00:06:54.540 in order to increase the capacity. Again, this is about module five, 108 00:06:55.740 --> 00:06:59.220 property, plant and equipment, same story and additional months of depreciation. 109 00:06:59.830 --> 00:07:01.060 Intangible asset, 110 00:07:01.130 --> 00:07:04.860 it's still about capitalizing additional research and development expenses. 111 00:07:05.560 --> 00:07:08.020 Now it's about 7,500. 112 00:07:08.680 --> 00:07:12.020 The total accumulated is 18,000. 113 00:07:12.730 --> 00:07:15.020 What about net fixed assets, sum of property, 114 00:07:15.020 --> 00:07:17.540 plant and equipment and intangible. In inventories, 115 00:07:17.560 --> 00:07:21.180 we calculated accounts receivable. We calculated interestingly, 116 00:07:21.180 --> 00:07:22.700 what about the prepared expenses? 117 00:07:24.080 --> 00:07:28.380 You remember we paid 18,000 to have the right to use the software during six 118 00:07:28.380 --> 00:07:32.260 months. Now we have expensed one month, 119 00:07:32.680 --> 00:07:37.500 how much is left? 15,000. Then you can ask yourself the question, 120 00:07:37.790 --> 00:07:42.660 where are the 3000? The 3000 are in the production cost, 121 00:07:43.160 --> 00:07:47.900 so they are either in the cost of sales or in the inventories of 122 00:07:48.260 --> 00:07:50.340 finished goods. In fact, 123 00:07:50.360 --> 00:07:55.260 it is as if the 3000 has been transferred into production. 124 00:07:55.610 --> 00:07:56.820 Cost of goods sold, 125 00:07:57.110 --> 00:08:01.740 production cost of good stored cash has been calculated 126 00:08:02.000 --> 00:08:03.860 by cash in minus cash out. 127 00:08:04.310 --> 00:08:08.980 Total has said 210,194. 128 00:08:09.770 --> 00:08:12.500 Obviously we get the same figure for equity and liabilities, 129 00:08:12.560 --> 00:08:16.780 but now you are used to that. No shares issue. Capital remains the same. 130 00:08:16.780 --> 00:08:20.580 Retained earnings are incremented by the earnings of the mons 131 00:08:21.380 --> 00:08:25.180 retained 100% financial debt, not paid dividends, 132 00:08:25.360 --> 00:08:26.700 no dividend accounts payable, 133 00:08:26.710 --> 00:08:31.580 calculated income tax payable incremented by the tax you accrued during 134 00:08:31.580 --> 00:08:34.980 the month of September. No change. Current operating assets. 135 00:08:34.980 --> 00:08:36.420 Current operating liabilities. 136 00:08:36.480 --> 00:08:39.900 The difference between these two is going to be the working capital requirement. 137 00:08:40.000 --> 00:08:41.980 The balance sheet is absolutely straightforward. 138 00:08:42.480 --> 00:08:46.660 Now what is interesting is to observe the evolution of the working capital 139 00:08:46.660 --> 00:08:48.140 requirement. Now, 140 00:08:48.140 --> 00:08:51.420 it's interesting to observe the evolution of the working capital requirement. 141 00:08:51.880 --> 00:08:54.820 You remember what happened From July to August, 142 00:08:55.880 --> 00:09:00.740 the operating working capital requirement was down by 1,800 and something 143 00:09:01.560 --> 00:09:04.180 and if the working capital requirement was up, 144 00:09:04.450 --> 00:09:08.220 it's because we had to take into account an incremental prepared expense 145 00:09:08.620 --> 00:09:13.500 software license from the zero to 18,000 and so 146 00:09:13.600 --> 00:09:18.380 the working capture requirement extended version of it was up 147 00:09:18.960 --> 00:09:23.260 not because of the quality of execution because the operating working capture 148 00:09:23.260 --> 00:09:27.340 requirement was showing a decrease, but because of this technical consideration, 149 00:09:27.520 --> 00:09:32.060 we pay something in advance. Now from August to September, 150 00:09:32.170 --> 00:09:33.780 it's a little bit a different story. 151 00:09:34.640 --> 00:09:37.820 We want to maximize the inventories to be on the safe side. 152 00:09:37.820 --> 00:09:40.420 When we open the factory in October, 153 00:09:41.240 --> 00:09:45.540 we boost production and then we secure the level of inventories. 154 00:09:46.130 --> 00:09:51.060 This is why the level of inventories by 10,000 as the sales 155 00:09:51.200 --> 00:09:54.060 are mechanically up between August and September, 156 00:09:54.100 --> 00:09:58.380 accounts receivable is dramatically up and if we produce more, 157 00:09:58.520 --> 00:10:02.420 we buy more. The accounts payable is up at the end of the day, 158 00:10:02.600 --> 00:10:06.580 the operating working capital requirement is up by 24,000. 159 00:10:07.520 --> 00:10:11.300 Is it bad quality of execution? The answer is no. 160 00:10:11.890 --> 00:10:15.780 It's because the general management of the company has decided to put the 161 00:10:15.780 --> 00:10:20.300 factory on a safe side when it's time to open a new manufacturing 162 00:10:20.330 --> 00:10:22.980 footprint. This is just management. 163 00:10:23.210 --> 00:10:27.780 It's not quite of execution and if the accounts receivable figure is up, 164 00:10:28.050 --> 00:10:31.700 it's because the commercial success is there. That's not bad news. 165 00:10:32.440 --> 00:10:33.500 Now interestingly, 166 00:10:33.800 --> 00:10:37.700 the operating working capital requirement is very much up when the non-operating 167 00:10:37.700 --> 00:10:40.180 working capital requirement is down. Why? 168 00:10:40.570 --> 00:10:45.220 Because income tax payable is up, dividend is the same, zero, 169 00:10:45.880 --> 00:10:50.620 and we progressively consume the other current operating 170 00:10:50.790 --> 00:10:54.220 asset, which is prepared expenses for the software license. 171 00:10:54.810 --> 00:10:57.620 Then you understand that compared with August, 172 00:10:57.760 --> 00:10:59.460 it is exactly the other way around. 173 00:10:59.930 --> 00:11:02.900 Same story about the working capital requirement. 174 00:11:03.050 --> 00:11:06.740 It's up but not because operating is down on, 175 00:11:06.740 --> 00:11:11.500 technical is up now technical is down and operating is up, 176 00:11:12.040 --> 00:11:15.340 but the interpretation of an increase in the operating working capital 177 00:11:15.340 --> 00:11:18.820 requirement, again, it's a management decision. 178 00:11:18.930 --> 00:11:21.620 It's not bad quality of execution. 179 00:11:21.930 --> 00:11:25.820 Take care about financial analysis and figures interpretation, 180 00:11:27.250 --> 00:11:28.380 cash from operations. 181 00:11:28.880 --> 00:11:32.380 Now we have the right structure to present the operating cashflow, 182 00:11:33.130 --> 00:11:35.140 operating income depreciation, 183 00:11:35.680 --> 00:11:40.140 EBITDA minus interest minus accrued taxes, growth cashflow, 184 00:11:40.390 --> 00:11:43.260 which you remember is the same as earnings plus depreciation. 185 00:11:43.650 --> 00:11:48.220 I'll be back in a minute minus impact of change in the working 186 00:11:48.220 --> 00:11:51.580 capital requirement, but the total working capital requirement. 187 00:11:52.640 --> 00:11:57.220 Now how much cash, net cash is generated by business operations. 188 00:11:57.490 --> 00:11:58.323 4,000. 189 00:11:58.920 --> 00:12:03.340 We keep on investing in September to prepare the building of the factory 190 00:12:04.000 --> 00:12:06.500 and now it's intangibles an additional person. 191 00:12:06.560 --> 00:12:09.420 It cost us as a total 7,500. 192 00:12:09.680 --> 00:12:13.980 We generate only 4,000 because of the increase in the working capital 193 00:12:13.980 --> 00:12:16.100 requirement we already discussed. 194 00:12:16.410 --> 00:12:19.460 Free cashflow is negative by 3,500. 195 00:12:19.690 --> 00:12:23.780 It's going to be really time to discuss about the financial strategy of the 196 00:12:23.780 --> 00:12:27.620 company. You remember the gross cashflow interpretation? 197 00:12:28.490 --> 00:12:31.980 It's a bit uh, minus interest minus taxes, 198 00:12:33.000 --> 00:12:37.740 but EBITDA is EBIT plus that, so when you look at the gross cash flow, 199 00:12:37.740 --> 00:12:42.060 it's EBIT plus that minus interest minus taxes and what about netting income? 200 00:12:42.650 --> 00:12:45.580 Netting income is EBIT minus in interest minus taxes, 201 00:12:46.320 --> 00:12:48.340 so if you add up depreciation, 202 00:12:48.570 --> 00:12:52.820 it's EBIT minus interest minus taxes plus depreciation. Of course, 203 00:12:53.460 --> 00:12:54.293 mechanically, 204 00:12:54.480 --> 00:12:58.620 the two ways to calculate the gross cash flow gives the same figure, 205 00:12:59.080 --> 00:13:03.660 but the one on the left hand side of the slide is definitely much barriers and 206 00:13:03.660 --> 00:13:07.380 the one on the right hand side. Financial analysis, 207 00:13:08.180 --> 00:13:12.660 September back to successful commercial activity and it's going to be even 208 00:13:12.660 --> 00:13:14.420 better in October, et cetera. 209 00:13:15.450 --> 00:13:19.660 Margins generated by business operations, the gross margin is quite stable. 210 00:13:19.660 --> 00:13:22.700 There is combination between the mix, b2b, 211 00:13:23.160 --> 00:13:28.140 B2C and the economies scale on the production cost and if the operating margin 212 00:13:28.400 --> 00:13:29.050 is down, 213 00:13:29.050 --> 00:13:33.460 it's not because the sales are down but it's because there are plenty of 214 00:13:33.460 --> 00:13:37.580 investment which show as an expense In the p and l, 215 00:13:38.520 --> 00:13:41.060 you are going to invest in the manufacturing footprint. 216 00:13:41.160 --> 00:13:45.660 You need an additional engineer for the supervision to 217 00:13:45.730 --> 00:13:49.860 support people in business operations and you need the support of this software. 218 00:13:50.200 --> 00:13:53.980 You are investing even this is about cost. In the p and l, 219 00:13:54.030 --> 00:13:58.300 there are plenty of investments we show as cost in the p and l. 220 00:13:58.960 --> 00:14:03.940 Now, which kind of knowledge did we develop from this months of 221 00:14:04.260 --> 00:14:06.180 September? You remember, 222 00:14:06.400 --> 00:14:11.140 we have a kind of deferred expense deferred charge. Where does it go? 223 00:14:11.590 --> 00:14:16.580 Where do you transfer this 3000 to production cost and then the 224 00:14:16.580 --> 00:14:18.420 3000 are in the production cost. 225 00:14:18.840 --> 00:14:23.180 The production cost will be in the inventory for what is not sold and it'll be 226 00:14:23.180 --> 00:14:25.700 in the cost of sales for what is sold, no problem. 227 00:14:26.610 --> 00:14:28.740 What about the gross cash flow? Again, 228 00:14:28.770 --> 00:14:33.700 it's about EBITDA minus interest minus tax, and it's much, 229 00:14:33.930 --> 00:14:36.900 much, much better than net earnings plus deion, 230 00:14:36.900 --> 00:14:41.580 which is totally confusing and you observe something which is very important. 231 00:14:41.960 --> 00:14:46.940 The top line for people is the top line of the p and l, so it's about sales, 232 00:14:47.320 --> 00:14:48.740 but for us finance people, 233 00:14:49.180 --> 00:14:54.100 cashflow statement is absolutely fundamental and EBITDA is a top line 234 00:14:54.120 --> 00:14:55.340 of the cashflow statement. 235 00:14:55.530 --> 00:15:00.300 This is why in companies business operation managers are 236 00:15:00.450 --> 00:15:04.380 very much asked to look at the EBITDA because it's fundamental, 237 00:15:04.600 --> 00:15:07.060 but EBITDA should be transformed into cash. 238 00:15:07.410 --> 00:15:12.340 This is why the funds from operations is a bit a minus increase 239 00:15:12.340 --> 00:15:16.140 in the working capital requirement. This is also why you have to ask yourself, 240 00:15:16.560 --> 00:15:21.260 do I finance all my capital expenditures with the operating cash flow? 241 00:15:22.320 --> 00:15:26.900 If the answer is yes, I have plenty of cash in excess. If the answer is no, 242 00:15:27.100 --> 00:15:29.380 I need to find financial resources. 243 00:15:30.010 --> 00:15:33.500 Both are about corporate financial strategy. 244 00:15:34.880 --> 00:15:39.340 Now, if I make a quick wrap up about this anti module four, 245 00:15:39.960 --> 00:15:44.740 now we have a comprehensive perspective and understanding of the working 246 00:15:44.890 --> 00:15:46.180 capital requirement, 247 00:15:46.780 --> 00:15:51.620 extended version at large with some additions to current operating assets 248 00:15:51.840 --> 00:15:53.460 and current operating liabilities. 249 00:15:54.330 --> 00:15:58.740 What was fundamental doing that is to make the split between operating working 250 00:15:58.740 --> 00:15:59.740 capital requirement, 251 00:15:59.850 --> 00:16:04.580 it's management of business operations and non operating working capital 252 00:16:04.580 --> 00:16:08.620 requirement about technical aspects such as you pay the rent in advance, 253 00:16:08.760 --> 00:16:10.500 you pay the software license in advance. 254 00:16:10.680 --> 00:16:14.620 It has nothing to do with the ability of people to do a good job in business 255 00:16:14.620 --> 00:16:15.453 operations. 256 00:16:15.730 --> 00:16:19.580 This is absolutely fundamental because financial accounting is not an objective 257 00:16:19.640 --> 00:16:20.473 per se. 258 00:16:20.960 --> 00:16:25.460 It is the accumulation of information thanks to which you can understand 259 00:16:26.080 --> 00:16:29.780 and decide. Management is absolutely fundamental. 260 00:16:29.910 --> 00:16:31.180 There are some objectives. 261 00:16:31.400 --> 00:16:36.380 You control the realization of the objectives and there's another point 262 00:16:36.380 --> 00:16:38.500 which was absolutely fundamental. In this module. 263 00:16:39.160 --> 00:16:43.300 We have some ambitions. We have an industrial ambition, 264 00:16:43.720 --> 00:16:48.420 we have good products and we want to extend the sales figure. We want to grow, 265 00:16:48.520 --> 00:16:51.260 we want to grow the p and l, we want to grow the sales. 266 00:16:52.120 --> 00:16:54.860 Now we'll have to grow the invested capital. 267 00:16:55.040 --> 00:16:59.260 The amount of money we put in business operations growth consumes financial 268 00:16:59.700 --> 00:17:04.500 resources. Why? Because we have to prepare for the manufacturing. 269 00:17:05.000 --> 00:17:09.260 We have to prepare manufacturing with the software, with the engineers, 270 00:17:09.320 --> 00:17:12.900 and we also have to prepare manufacturing with the additional two salespeople. 271 00:17:13.200 --> 00:17:15.860 Why? Because production has to be transformed into sales. 272 00:17:16.720 --> 00:17:19.820 We want to have new product, we have to invest also, 273 00:17:20.200 --> 00:17:24.940 we have to prepare with r and d some innovation. We capitalize r and d, 274 00:17:25.040 --> 00:17:28.340 we invest in research and development, and last but not least, 275 00:17:28.360 --> 00:17:32.820 we are going to invest in tangible capital expenditures the day we are going to 276 00:17:32.820 --> 00:17:34.820 build the factory. Now, 277 00:17:35.000 --> 00:17:39.500 as grows is consuming financial resources which come from 278 00:17:40.010 --> 00:17:43.780 bankers and shareholders. There are two very big questions. 279 00:17:44.400 --> 00:17:48.820 The first one is, are we in a position of attracting shareholders and 280 00:17:48.930 --> 00:17:52.780 Bankers, money, financial creditors? This is about financing. 281 00:17:52.780 --> 00:17:57.260 This is about financial strategy and the other question is 282 00:17:57.530 --> 00:18:00.380 when we take the money from these people's pocket, 283 00:18:00.960 --> 00:18:03.580 are we sure that we invest in the right project? 284 00:18:03.730 --> 00:18:07.900 This is why module five is going to be about investment. 285 00:18:08.490 --> 00:18:10.220 It's going to be about financing, 286 00:18:10.480 --> 00:18:14.060 and we are going to do something which is quite new in this course, 287 00:18:14.390 --> 00:18:18.140 which is an equity issue. Now, bankers, they say, 288 00:18:18.200 --> 00:18:21.260 you got to the limit guys. We have to put money. 289 00:18:21.480 --> 00:18:25.660 We shareholders in the business operations in order to finance growth. 290 00:18:26.240 --> 00:18:29.340 How do we do that? It is module five.