WEBVTT 1 00:00:00.100 --> 00:00:03.500 In order to conclude this course accounting for 2 00:00:03.500 --> 00:00:06.600 business module 1 I would like to propose you 3 00:00:06.600 --> 00:00:09.200 a rapid and add a few compliments. 4 00:00:10.600 --> 00:00:13.500 Further wrap up. What did we learn? We learn 5 00:00:13.500 --> 00:00:16.500 how to calculate the profit revenues Minus 6 00:00:16.500 --> 00:00:16.700 cost. 7 00:00:17.300 --> 00:00:20.200 But we also learn how to measure the change in a 8 00:00:20.200 --> 00:00:23.300 cash position and Bill the balance sheet at the end of each 9 00:00:23.300 --> 00:00:24.100 and every period 10 00:00:25.200 --> 00:00:28.300 we observe that generally speaking profit does 11 00:00:28.300 --> 00:00:31.300 not coincide with cash static or 12 00:00:31.300 --> 00:00:34.200 funds float Dynamic. There are 13 00:00:34.200 --> 00:00:37.600 a few reasons which are introduced in this first module. There 14 00:00:37.600 --> 00:00:40.500 will be other reasons which will be developed during the 15 00:00:40.500 --> 00:00:41.300 next modules. 16 00:00:41.900 --> 00:00:45.300 The first reason is we create some inventories 17 00:00:44.300 --> 00:00:47.600 and the second one is there's a 18 00:00:47.600 --> 00:00:50.600 time lag between on the one hand sales and 19 00:00:50.600 --> 00:00:53.500 collection on the other hand purchases and 20 00:00:53.500 --> 00:00:56.600 disbursements. Now, what is very important is 21 00:00:56.600 --> 00:01:00.600 to start some financial analysis analyze 22 00:00:59.600 --> 00:01:02.600 what happened during these four 23 00:01:02.600 --> 00:01:05.400 months. We need to understand what happened so 24 00:01:05.400 --> 00:01:08.600 that we potentially take some corrective action 25 00:01:08.600 --> 00:01:12.300 if needed there are two perspectives operating 26 00:01:11.300 --> 00:01:14.100 in common cost structure on one hand 27 00:01:14.100 --> 00:01:18.000 cash generation on the other hand. We are going to analyze 28 00:01:17.600 --> 00:01:21.000 these to perspectives. Let's start 29 00:01:20.200 --> 00:01:24.000 first with sales cause profits 30 00:01:23.200 --> 00:01:24.700 and so on. 31 00:01:25.300 --> 00:01:28.700 There is a tab right at the end which 32 00:01:28.700 --> 00:01:31.600 is financial analysis for your 33 00:01:31.600 --> 00:01:34.200 one. What do You observe on top of 34 00:01:34.200 --> 00:01:37.500 the spreadsheet the monthly p&l each and 35 00:01:37.500 --> 00:01:40.900 every month from September to December and the accumulation for 36 00:01:40.900 --> 00:01:43.600 the period and then you recognize the p&l 37 00:01:43.600 --> 00:01:46.600 you're one but you also have all information 38 00:01:46.600 --> 00:01:49.900 from one month to the other including the 39 00:01:49.900 --> 00:01:52.200 corporate income tax which are 40 00:01:52.200 --> 00:01:55.600 introduced at the end of December. I'm going to provide some 41 00:01:55.600 --> 00:01:58.300 comments on the cost of goods sold and also on 42 00:01:58.300 --> 00:02:01.200 the indirect cost but the top line is what 43 00:02:01.200 --> 00:02:04.500 it's about sales and you can observe on 44 00:02:04.500 --> 00:02:07.100 the graph that's a sales are up which is a 45 00:02:07.100 --> 00:02:11.100 result of our successful commercial activity. 46 00:02:12.100 --> 00:02:16.100 What does it mean sales are up? It means that we have selected 47 00:02:15.100 --> 00:02:18.500 the right products at the 48 00:02:18.500 --> 00:02:21.900 right price for the customers and we have created value 49 00:02:21.900 --> 00:02:24.300 for the customers. This is a reason 50 00:02:24.300 --> 00:02:27.400 why the company exists because it 51 00:02:27.400 --> 00:02:30.300 can provide some value to its customers 52 00:02:30.300 --> 00:02:33.500 selling goods and services. That's fine. 53 00:02:33.500 --> 00:02:36.200 But now let's move to the cost and when 54 00:02:36.200 --> 00:02:39.500 you observe first the cost of good souls and the growth. Margin 55 00:02:39.500 --> 00:02:42.200 what do You observe that the gross 56 00:02:42.200 --> 00:02:45.100 margin rate went down from 33 to an average 57 00:02:45.100 --> 00:02:48.200 of 28? What is the interpretation? It does not 58 00:02:48.200 --> 00:02:51.800 mean that the company is not doing. Well. It means that we have complemented 59 00:02:51.800 --> 00:02:54.700 b2c by b2c and B2B. 60 00:02:55.400 --> 00:02:58.600 B2c is we make a profit of 10 61 00:02:58.600 --> 00:03:01.300 when we sell for 30 the gross. Margin is 62 00:03:01.300 --> 00:03:04.400 33% in September. We only sell b2c product. 63 00:03:05.200 --> 00:03:08.100 But in October we introduce B2B when we 64 00:03:08.100 --> 00:03:11.600 sell B2B we make a profit of five out 65 00:03:11.600 --> 00:03:14.400 of a selling price, which is 25. So the gross margin 66 00:03:14.400 --> 00:03:18.300 is 20 then we are going to combine b2c 67 00:03:17.300 --> 00:03:20.400 and B2B and the gross margin rate 68 00:03:20.400 --> 00:03:23.800 is an average between the b2c growth 69 00:03:23.800 --> 00:03:27.400 margin and B2B gross margin understanding Devolution 70 00:03:26.400 --> 00:03:29.900 of the channel of distribution is 71 00:03:29.900 --> 00:03:31.900 something which gives you the explanation. 72 00:03:33.200 --> 00:03:36.400 Now what about the costs administrative and selling 73 00:03:36.400 --> 00:03:39.700 expenses? They are supposed to be fixed cost but they 74 00:03:39.700 --> 00:03:42.400 are not always fixed cost. Sometimes you have an incremental 75 00:03:42.400 --> 00:03:45.300 fixed cost why because the activity is 76 00:03:45.300 --> 00:03:48.800 growing and then you need more support. But 77 00:03:48.800 --> 00:03:51.600 when you look at these figures as a percentage to 78 00:03:51.600 --> 00:03:54.400 revenues what is very interesting is to understand 79 00:03:54.400 --> 00:03:57.600 that there is a combination of numerator in 80 00:03:57.600 --> 00:04:01.000 direct cost and the nominator revenue from 81 00:04:00.400 --> 00:04:04.200 September to October what happens the fixed 82 00:04:03.200 --> 00:04:06.300 cost administrative expense myself is 83 00:04:06.300 --> 00:04:09.600 1,000. It represents 17% of 84 00:04:09.600 --> 00:04:12.100 the September revenues, but as you 85 00:04:12.100 --> 00:04:15.400 know, October the revenues are the same fixed cost 86 00:04:15.400 --> 00:04:19.100 of 1,000 is down from 17 to 9% 87 00:04:18.100 --> 00:04:21.400 of revenues when the 88 00:04:21.400 --> 00:04:24.500 fixed costs are fixed and when the revenues are 89 00:04:24.500 --> 00:04:27.800 up the fixed cost per unit soul is 90 00:04:27.800 --> 00:04:30.200 down and as a consequence, we generate what 91 00:04:30.200 --> 00:04:32.000 we name economies of scale. 92 00:04:32.800 --> 00:04:35.400 In October the fixed costs 93 00:04:35.400 --> 00:04:38.900 are going to go up because I move from halftime to 94 00:04:38.900 --> 00:04:41.300 full-time and because I hire a person 95 00:04:41.300 --> 00:04:44.500 as a consequence the operating expenses are 96 00:04:44.500 --> 00:04:47.300 going to represent 12% to sales because 97 00:04:47.300 --> 00:04:50.800 there is an incremental fixed cost but as this 98 00:04:50.800 --> 00:04:53.500 fixed cost are the same from November to December. So 99 00:04:53.500 --> 00:04:56.400 12 is down to 10. So you understand 100 00:04:56.400 --> 00:04:59.300 that if you want to look at evolution of the operating 101 00:04:59.300 --> 00:05:02.600 profit, you have a combination of gross margin, but 102 00:05:02.600 --> 00:05:05.300 you have a combination of also what happens in the 103 00:05:05.300 --> 00:05:08.200 fixed cost which is incremental fixed cost 104 00:05:08.200 --> 00:05:11.300 and economies of scale this shows 105 00:05:11.300 --> 00:05:14.500 on the graph on the graph. You read the gross margin, 106 00:05:14.500 --> 00:05:17.800 which is 33 at first and then it's going to stabilize. The 107 00:05:17.800 --> 00:05:20.900 interpretation is mix b2c B2B 108 00:05:20.900 --> 00:05:23.700 and when you look at the evolution of the operating margin, 109 00:05:23.700 --> 00:05:26.400 it's a consequence of the growth margin, but 110 00:05:26.400 --> 00:05:29.200 it is also the consequence of the evolution of my fixed cost 111 00:05:29.200 --> 00:05:32.500 and the economies of scale, which I can generate when 112 00:05:32.500 --> 00:05:32.500 I 113 00:05:32.800 --> 00:05:35.500 All my revenues without changing the fixed 114 00:05:35.500 --> 00:05:38.400 cost then you understand that when you want to make a financial 115 00:05:38.400 --> 00:05:42.000 analysis and understand why the figures 116 00:05:41.200 --> 00:05:44.900 move from one to the other the spreadsheet 117 00:05:44.900 --> 00:05:48.300 is extremely useful because it makes a calculations but 118 00:05:47.300 --> 00:05:50.500 the figures are not an 119 00:05:50.500 --> 00:05:53.300 explanation. If you want an explanation if 120 00:05:53.300 --> 00:05:56.200 you want to understand what happens you need something which is 121 00:05:56.200 --> 00:05:59.900 very useful not only for financial analysis, 122 00:05:59.900 --> 00:06:02.600 but for plenty of activities, which is your brain, 123 00:06:03.600 --> 00:06:06.600 But your brain is not going to be mobilized only looking 124 00:06:06.600 --> 00:06:09.500 at the figures but also observing what 125 00:06:09.500 --> 00:06:13.000 happened on the field and this is reconciling 126 00:06:12.400 --> 00:06:15.600 what you see as a figure and what 127 00:06:15.600 --> 00:06:18.000 you observed on the field that you are 128 00:06:18.100 --> 00:06:21.600 going to be able to provide some understanding you need 129 00:06:21.600 --> 00:06:25.200 a brain and a brain which is not calculating a 130 00:06:24.200 --> 00:06:26.400 brain which is observing. 131 00:06:27.100 --> 00:06:29.900 and of Step One observing the prophet 132 00:06:30.500 --> 00:06:34.000 Step 2 operating cash flow and this concept 133 00:06:33.200 --> 00:06:36.300 of working capital requirement. 134 00:06:36.900 --> 00:06:39.800 Very strong statement generally speaking profit 135 00:06:39.800 --> 00:06:43.400 is not immediately and mechanically transformed 136 00:06:42.400 --> 00:06:44.200 into Cash. 137 00:06:44.900 --> 00:06:47.100 And among the reasons the ones which 138 00:06:47.100 --> 00:06:50.100 I developed in this first module the fact that there is an operating 139 00:06:50.100 --> 00:06:53.900 cycle in an operating cycle. What do you do first you 140 00:06:53.900 --> 00:06:56.200 purchase products and you 141 00:06:56.200 --> 00:07:00.000 build up some inventories, then you generate sales 142 00:06:59.400 --> 00:07:02.700 and for some of them there might 143 00:07:02.700 --> 00:07:05.400 be some delayed payments you show an introduce 144 00:07:05.400 --> 00:07:06.800 some accounts receivable. 145 00:07:07.500 --> 00:07:10.500 When you purchase products some suppliers 146 00:07:10.500 --> 00:07:13.500 accept to be paired with the delay and then you create 147 00:07:13.500 --> 00:07:16.300 some accounts payable you remember 148 00:07:16.300 --> 00:07:19.800 that inverter is an accounts receivable are assets and 149 00:07:19.800 --> 00:07:22.300 accounts payable is a liability. 150 00:07:23.400 --> 00:07:26.500 Now the working character requirement is very fundamental 151 00:07:26.500 --> 00:07:29.800 concept first, you want to have a look at the fonts, 152 00:07:29.800 --> 00:07:33.400 which you committed in the operating cycle the 153 00:07:32.400 --> 00:07:35.900 on the asset side. This is inventories and 154 00:07:35.900 --> 00:07:38.500 accounts receivable. They are in the operating 155 00:07:38.500 --> 00:07:41.500 cycle. But you also have to take into account 156 00:07:41.500 --> 00:07:44.800 this purchases which were not yet disburse. This 157 00:07:44.800 --> 00:07:45.800 is accounts payable. 158 00:07:46.500 --> 00:07:49.400 Now this reduces the commitments. This 159 00:07:49.400 --> 00:07:52.700 is why you want to calculate a net Financial commitment 160 00:07:52.700 --> 00:07:56.000 of the company in the operating cycle. And 161 00:07:55.100 --> 00:07:58.700 then naturally it's inventory Plus 162 00:07:58.700 --> 00:08:01.700 accounts receivable minus net of 163 00:08:01.700 --> 00:08:04.500 accounts payable. This is name the operating 164 00:08:04.500 --> 00:08:06.800 working capital requirement. 165 00:08:07.700 --> 00:08:11.100 I will later on elaborate on the difference between the operating 166 00:08:10.100 --> 00:08:13.500 working capital requirement and a 167 00:08:13.500 --> 00:08:16.600 working capital requirement standing alone. That's for 168 00:08:16.600 --> 00:08:19.200 a little bit later. Now first. Let's observe the 169 00:08:19.200 --> 00:08:23.100 monthly changes in the working capital requirement operating. 170 00:08:24.200 --> 00:08:27.300 At the very beginning in September you have no invitaries people are 171 00:08:27.300 --> 00:08:30.300 paying cash and you're paying your suppliers cash. 172 00:08:30.300 --> 00:08:33.000 No working capital requirement of any kind. 173 00:08:33.500 --> 00:08:36.400 In October you introduce accounts receivable 174 00:08:36.400 --> 00:08:39.400 for B2B and accounts payable for the 175 00:08:39.400 --> 00:08:42.600 supplier, but you have no inventory yet as a consequence. 176 00:08:42.600 --> 00:08:45.800 You have a small increase in the operating working capital requirement 177 00:08:45.800 --> 00:08:48.500 by 1000 a major increase 178 00:08:48.500 --> 00:08:51.800 will show in November because we create inventories and 179 00:08:51.800 --> 00:08:54.500 then the operating working capital requirement moves 180 00:08:54.500 --> 00:08:57.600 up to 10 and then 13,000 in 181 00:08:57.600 --> 00:09:00.300 December. But what is fundamental is to understand 182 00:09:00.300 --> 00:09:04.100 the impact of these working capital requirement on 183 00:09:03.100 --> 00:09:04.800 the cash position? 184 00:09:05.700 --> 00:09:08.500 You remember that at the end of December the operating working 185 00:09:08.500 --> 00:09:11.700 capital requirement is inventories and receivables 186 00:09:11.700 --> 00:09:14.500 minus of payables 12 plus 15 minus 187 00:09:14.500 --> 00:09:18.100 14 is 30. Let's try no 188 00:09:17.100 --> 00:09:20.400 or zero working capital requirement 189 00:09:20.400 --> 00:09:21.200 assumption. 190 00:09:21.700 --> 00:09:25.200 So in the spreadsheet December your one you 191 00:09:24.200 --> 00:09:27.500 replace the purchases, which I proposed by 192 00:09:27.500 --> 00:09:30.200 800 the consequence is 193 00:09:30.200 --> 00:09:32.100 there will be no infactory left. 194 00:09:32.700 --> 00:09:35.400 You force the figure of accounts receivable at 195 00:09:35.400 --> 00:09:36.900 the end and you put zero. 196 00:09:37.500 --> 00:09:40.300 As far as accounts people is concerned you want to reduce the 197 00:09:40.300 --> 00:09:43.300 working capital requirement down to 0 so you say hey 198 00:09:43.300 --> 00:09:45.100 is no accounts people 0% 199 00:09:46.200 --> 00:09:50.000 Then the operating working capital requirement is mechanically Zero 200 00:09:49.100 --> 00:09:52.400 by construction. What is a 201 00:09:52.400 --> 00:09:55.700 new cache figure which you can observe now cash 202 00:09:55.700 --> 00:09:59.300 is 23,400. You 203 00:09:58.300 --> 00:10:01.600 understand that it's an increment by 204 00:10:01.600 --> 00:10:03.100 13,000. 205 00:10:03.900 --> 00:10:06.900 So on a one hand, you have the working capital requirement, 206 00:10:06.900 --> 00:10:09.500 which is down by 13,000. And 207 00:10:09.500 --> 00:10:12.600 the immediate impact is that the cash is a 208 00:10:12.600 --> 00:10:15.400 by the exact same amount. You understand that 209 00:10:15.400 --> 00:10:18.400 there's a perfect trade off between cash and 210 00:10:18.400 --> 00:10:21.500 working capital requirement each and every 211 00:10:21.500 --> 00:10:24.600 additional Dollar in the working capital requirement 212 00:10:24.600 --> 00:10:27.800 is a door Less in cash and the opposite is 213 00:10:27.800 --> 00:10:30.900 true. This is why in financial analysis. 214 00:10:30.900 --> 00:10:33.300 We use a very strong indicator, which is 215 00:10:33.300 --> 00:10:37.000 funds from operations to introduce the evolution 216 00:10:36.700 --> 00:10:38.600 working capital requirement. 217 00:10:39.500 --> 00:10:42.300 The definition of funds from operation. Is that 218 00:10:42.300 --> 00:10:45.100 its cash generated by business operations? 219 00:10:45.900 --> 00:10:48.600 And technically it's the profit. We 220 00:10:48.600 --> 00:10:51.600 have generated throughout the periods minus the 221 00:10:51.600 --> 00:10:54.400 change in a working capital requirement. 222 00:10:55.100 --> 00:11:00.300 So you remember that the profit before tax was 13,400 223 00:10:58.300 --> 00:11:01.300 and the 224 00:11:01.300 --> 00:11:05.400 change in working capital requirement was 13,000. So 225 00:11:04.400 --> 00:11:07.700 you understand that the change in working capital 226 00:11:07.700 --> 00:11:10.700 requirement consume most or most 227 00:11:10.700 --> 00:11:13.500 all of the profit we have generated so the 228 00:11:13.500 --> 00:11:16.500 period how much is left is 400? Okay, it's 229 00:11:16.500 --> 00:11:18.100 positive but not that much. 230 00:11:19.300 --> 00:11:22.500 Now you have to confront this figure with the version of the cache 231 00:11:22.500 --> 00:11:25.800 position. If you look at cash in December minus cash 232 00:11:25.800 --> 00:11:29.600 in August before we start the sales 10,400 minus 233 00:11:29.600 --> 00:11:32.400 10,000 and its first 400 the good 234 00:11:32.400 --> 00:11:35.400 news, but it's an illusion is that it's the 235 00:11:35.400 --> 00:11:35.700 same figure. 236 00:11:36.500 --> 00:11:39.200 So of course a fans from operations have an impact 237 00:11:39.200 --> 00:11:42.500 on the cash, but you remember that we have decided to 238 00:11:42.500 --> 00:11:45.300 pair dividend in general of 2000 and we have 239 00:11:45.300 --> 00:11:50.100 to pay the income tax in January of 2,680. So 240 00:11:49.100 --> 00:11:53.000 the fact that we have an additional 400 241 00:11:52.300 --> 00:11:55.800 in cash as a consequence of funds 242 00:11:55.800 --> 00:11:58.200 from operation hides the fact that 243 00:11:58.200 --> 00:12:02.100 there will be some cash outlets in January before 244 00:12:01.100 --> 00:12:04.200 we get to that I have to tell 245 00:12:04.200 --> 00:12:08.100 you that these funds from operation is definitely an extremely 246 00:12:07.100 --> 00:12:11.000 powerful indicator first to 247 00:12:10.100 --> 00:12:13.300 give you the right formula. We have 248 00:12:13.300 --> 00:12:16.800 to elaborate a little bit on which kind of profit between quotes 249 00:12:16.800 --> 00:12:20.100 the main characteristics of this profit. 250 00:12:19.100 --> 00:12:23.000 Oh first, it's operating it 251 00:12:22.400 --> 00:12:25.900 comes from business operation is fun from 252 00:12:25.900 --> 00:12:28.300 operations second. It's cash because 253 00:12:28.300 --> 00:12:32.100 we're looking at the evolution of the cash position last characteristics 254 00:12:31.100 --> 00:12:34.400 is that it's before tax because we 255 00:12:34.400 --> 00:12:36.100 want to make it absolutely 256 00:12:36.500 --> 00:12:38.500 and from the tax payments 257 00:12:39.300 --> 00:12:42.400 this profit is and I will tell you why in the 258 00:12:42.400 --> 00:12:45.900 module 3 name ebita if 259 00:12:45.900 --> 00:12:48.600 it does stands for earnings before interest 260 00:12:48.600 --> 00:12:51.600 before taxes and before the Precision 261 00:12:51.600 --> 00:12:54.200 amortization, so it's an operating 262 00:12:54.200 --> 00:12:57.600 profit before the Precision cash and before 263 00:12:57.600 --> 00:13:00.300 tax the funds from operation is 264 00:13:00.300 --> 00:13:04.000 a bit generated by the period minus the 265 00:13:03.600 --> 00:13:06.300 change in working capital requirement, which 266 00:13:06.300 --> 00:13:09.700 we could observe from the beginning to the end of the period and why 267 00:13:09.700 --> 00:13:12.400 is it so important is indicator imagine that 268 00:13:12.400 --> 00:13:15.800 you have a discussion as a finest person with 269 00:13:15.800 --> 00:13:18.000 somebody in sales and marketing and this person tells you 270 00:13:18.400 --> 00:13:21.400 oh, I increase sales and as a consequence, I 271 00:13:21.400 --> 00:13:22.900 create a bit down. 272 00:13:23.600 --> 00:13:26.400 You're going to say yes, but as you did not 273 00:13:26.400 --> 00:13:29.400 collect the sales we have 274 00:13:29.400 --> 00:13:32.300 paid for the purchases. We have paid for the 275 00:13:32.300 --> 00:13:36.100 salaries you have generated sales you have increased the 276 00:13:35.100 --> 00:13:38.300 but we have not collected the sales 277 00:13:38.300 --> 00:13:41.700 then as a consequence the working capital requirement when 278 00:13:41.700 --> 00:13:44.200 dramatically up and cash is 279 00:13:44.200 --> 00:13:44.400 gone. 280 00:13:45.100 --> 00:13:48.300 So it looks as if you did a good job because if it does 281 00:13:48.300 --> 00:13:51.200 up the fans from operation is a disaster. 282 00:13:52.600 --> 00:13:55.800 Now discussing with people in business operations slash 283 00:13:55.800 --> 00:13:58.800 production. Somebody tells you I increase 284 00:13:58.800 --> 00:14:01.200 production when I increase the production 285 00:14:01.200 --> 00:14:04.500 volume, I generated economies of scales on the 286 00:14:04.500 --> 00:14:07.200 production fixed cost and I reduce the production 287 00:14:07.200 --> 00:14:10.200 cost per unit as a consequent the a bit that 288 00:14:10.200 --> 00:14:10.700 went up. 289 00:14:11.200 --> 00:14:14.600 And then you say okay congratulations because if 290 00:14:14.600 --> 00:14:17.900 you increase production, but you don't sell 291 00:14:17.900 --> 00:14:20.400 what you produce the impact is that 292 00:14:20.400 --> 00:14:23.500 you're going to grow the inventories without selling 293 00:14:23.500 --> 00:14:27.000 the product. Now you have generated higher 294 00:14:26.300 --> 00:14:29.500 repeat that but what about cash? Oh cash 295 00:14:29.500 --> 00:14:32.700 is not in our bank account, but cash is sleeping 296 00:14:32.700 --> 00:14:33.700 in the warehouse. 297 00:14:34.500 --> 00:14:37.800 You understand that when you want to measure the operational 298 00:14:37.800 --> 00:14:40.600 performance of the company, of course a 299 00:14:40.600 --> 00:14:44.100 bit dies. Absolutely great because you have to make a profit but 300 00:14:43.100 --> 00:14:46.900 standing alone. It's not enough of course 301 00:14:46.900 --> 00:14:49.200 profit is absolutely from them at 302 00:14:49.200 --> 00:14:51.100 all, but it's on the potential cash. 303 00:14:51.700 --> 00:14:54.400 You don't find out your growth and your project 304 00:14:54.400 --> 00:14:57.800 by potential cash, but by actual cash 305 00:14:57.800 --> 00:15:00.300 an actual cash is funds from 306 00:15:00.300 --> 00:15:03.100 operations. You understand that the difference between 307 00:15:03.100 --> 00:15:06.800 potential and actual cash is working capital 308 00:15:06.800 --> 00:15:09.500 requirement, which is a kind of time lag 309 00:15:09.500 --> 00:15:12.600 between the mermature account for a profit and the 310 00:15:12.600 --> 00:15:16.100 moment is profit actually shows in your bank account a 311 00:15:15.100 --> 00:15:18.300 few comments before I conclude this session. 312 00:15:19.300 --> 00:15:23.000 You remember that? We have a change in cash position of plus 313 00:15:22.800 --> 00:15:25.400 400 but I already told you 314 00:15:25.400 --> 00:15:28.500 that it hides a downgraded cash 315 00:15:28.500 --> 00:15:31.300 situation. Why because in January you will 316 00:15:31.300 --> 00:15:34.700 have to pay your taxes and to pay a dividends. Then it's 317 00:15:34.700 --> 00:15:37.200 not plus 400 which is your change in 318 00:15:37.200 --> 00:15:41.700 cash position, but it's potential a minus 4,200 319 00:15:40.700 --> 00:15:42.300 and 80. 320 00:15:43.200 --> 00:15:46.400 Now when you look at tax and dividend two different 321 00:15:46.400 --> 00:15:51.100 perspective paying your tax is absolutely mandatory 322 00:15:49.100 --> 00:15:52.400 Distributing a 323 00:15:52.400 --> 00:15:55.100 dividend is optional. It's a decision which is 324 00:15:55.100 --> 00:15:58.400 taken by shareholders. They can decide to distribute a 325 00:15:58.400 --> 00:16:01.300 dividend or not. You don't decide if 326 00:16:01.300 --> 00:16:03.400 you are going to pay your taxes or not. 327 00:16:04.100 --> 00:16:07.600 Now the question is what is the right decision to 328 00:16:07.600 --> 00:16:10.700 distribute a dividend of 2,000 which 329 00:16:10.700 --> 00:16:13.600 is going to be pad in generate. The 330 00:16:13.600 --> 00:16:16.100 answer will be in module 3. 331 00:16:17.400 --> 00:16:20.400 But first we have to go through module 2 332 00:16:20.400 --> 00:16:23.300 in this module. I'm going to add a couple 333 00:16:23.300 --> 00:16:27.100 of Concepts which are not very difficult. But 334 00:16:26.100 --> 00:16:29.600 more than that. I would like in this 335 00:16:29.600 --> 00:16:32.300 module to reinforce your mastering of 336 00:16:32.300 --> 00:16:35.100 the financial statements. So we are going to 337 00:16:35.100 --> 00:16:38.200 get through three months generate February and 338 00:16:38.200 --> 00:16:41.400 March. I will tell you how to build the financial 339 00:16:41.400 --> 00:16:44.800 statements and you are going to do the exercise by yourself. 340 00:16:44.800 --> 00:16:47.600 It's very important that you are introduced to 341 00:16:47.600 --> 00:16:50.500 the beginning of financial planning. 342 00:16:51.600 --> 00:16:52.300 Thank you very much.