Financial management

1. FINANCIAL MANAGEMENT

4. BALANCE SHEET ASSETS 1.Current assets (1.1.+…+1.7. ) 20.000 1.1. Cash and equivalent Counter , account , papers of value 20.000 1.2. Requirement of customers Yield that customers owe according to deal 1.3. Reserve: raw material Bought meterial 1.4. Reserve : production in progress Costs of material and work for goods 1.5. Reserve: final products Final products ready for sale 1.6. Beforehand paid obligations Rent, insurance 1.7. Other current assets 2. Fixed assets ( 2.1.+ 2.2.+2.3 ) 520.000 2.1. Land Purchase cost of land 2.2. Business buildings Purchase cost of objects 2.3. Machines and equipment Purchase cost of machines and equipment 520.000 3. Amortization Amortization of fixed assets 0 4. Net value of fixed assets (2-3 ) 520.000 5. TOTAL ASSETS ( 1+4 ) 540.000

5. BALANCE SHEET LIABILITIES 6. Current liabilities (6.1.+..+6.5.) 0 6.1. Liabilities according to providers Yield which you owe to providers 6.2. Outstanding taxes Taxes of accounted salaries, immoovable property and owing gain 6.3. Outstanding interests Not paid interests 6.4. Short-term credits Principal of credits 6.5. Other short-term liabilities Not implied items previously 7. Long-term liabilities 100.000 7.1. Long-term credits Principal of credits 100.000 8. Total liabilities (6+7 ) 9. Capital (9.1.+9.2.+9.3) 440.000 9.1. Owners equity Initial owners equity 440.000 9.2. Investment capital New owners capital 9.3. Reinvestment gain Previously reinvestment gain TOTAL LIABILITIES (8+9 ) 540.000

6. INCOME STATEMENT Total sales 210.000 Basic and industrial costs 90.000 Salaries + overtime + special bonus and additions 15.000 Taxes and contributions of net salaries (social, health, literacy ) 10.800 Items used in production, but not object of sales 1.800 Repair and preserve, renovation, whitening and other 1.000 Advertising 1.000 Cars expences 0 Traveling and representation expences 3.000 Accounting, juristical, management consalting 1.500 Rent ; phone, fax and internet ; electricity, water, gas, heating 5.700 Property and employees insurance 450 Immoovable property taxes 0 Interests costs 0 Amortization of elementary means 13.000 Previously not implied liabillities 0 Amotrtization of fixed assets 143.250 66.750 Accounted taxes on valid metre of tax on gain 13.350 53.400

7. CASH FLOW ANALYSIS Jan.’07 Feb.’07 Mar.’07 1. Cash on Hand (beginning of period) 20.000 20.000 20.000 2. Cash receipts 2.1. Cash sales 40.000 45.000 50.000 2.2. Initial owners capital 420.000 0 0 2.3. Loan cash 100.000 0 0 2.4. New owners investment capital 0 0 0 2.5. Other cash receipts 0 0 0 TOTAL CASH RECEIPTS 560.000 45.000 50.000

8. CASH FLOW ANALYSIS 3. Cash paid out Jan.’07 Feb.’07 Mar.’07 3.1. Flux according to operative activity (OA) 3.1.1. Material ( basic + auxillary ) 20.000 20.000 20.000 3.1.2. Salaries 5.000 5.000 5.000 3.1.3. Taxes and contributions of salaries 3.600 3.600 3.600 3.1.4. Office material 0 1.800 0 3.1.5. Repairs & maintenance 1.000 0 0 3.1.6. Advertising 500 500 0 3.1.7. Car park 0 0 0 3.1.8. Travel expences and representation 1.000 1.000 1.000 3.1.9. Audit consultancies 500 500 500 3.1.10. Rent 2.100 0 0 3.1.11. Phone, fax and internet 700 700 700 3.1.12. Municipals 500 500 500 3.1.13. Insurance 450 0 0 3.1.14. Taxes 0 0 0 3.1.15. Other liabilities 0 0 0 TOTAL FLUX – OPERATIVE ACTIVITY 35.350 33.600 31.300

9. CASH FLOW ANALYSIS 3.2. Flux according to financial activity ( F A) Jan.’07 Feb.’07 Mar.’07 3.2.1. Principal of credits 0 0 5.000 3.2.2. Interests 0 0 2.500 TOTAL FLUX – FINANCIAL ACTIVITY 0 0 7.500 3.3. Flux according to investment activity (IA) 3.3.1. Purchase of elementary means 520.000 0 0 3.3.2. Start-up expences 21.000 0 0 TOTAL FLUX – INVEST MENT ACTIVITY 541.000 0 0 3.4. Cash withdrawal by owner 0 10.000 0 3. TOTAL CASH PAID OUT (3.1. + ... + 3.4.) 576.350 43.600 38.800 4. Total cash (2-3) -16.350 1.400 11.200 5. Total cash in the end of the period (1+4) 3.650 5.050 16.250

11. RA T IO ANALYSIS BALANCE SHEET ASSETS LIABILITIES Fixed assets 60.000 Own sources ( owner’s equity ) 102.000 Current assets : - reserve - requirement - cash 96.000 46.500 34.500 15.000 Long-term credits 12.000 Short-term credits 42.000 TOTAL 156.000 TOTAL 156.000

27. Break-even point

28. Break-even point can be shown by following formula: TFC BEP = ------------- U – VC/U where is : TFC – total fixed costs, U – unit selling price, VC/U variable costs per unit total profit (TP) = total costs (TC) TP = unit selling price (U) x quantity of product (P) and TC = total fixed costs (TFC) + total variable costs (TVC) U x P = TFC + TVC TVC = VC/U x U U x P = TFC + ( VC/U x U) P ( U - VC/U) = TFC TFC P = -------------- U - VC/U

29. 3. ACCOUNTING CONTROL

30. TARGETS RELEVANT ASPECTS OF COST MANAGEMENT WHAT’S THE TARGET OF:  MANAGEMENT CONTROL MANAGEMENT CONTROL TARGETS WHAT’S MANAGEMENT CONTROL?  IT’S A DEFINED SYSTEM WITH: * PROCEDURES * RESULTS  IT HAS NOT TO BE CONSIDERED A “UNA TANTUM ANALYSIS” OR A SUBPRODUCT OF GENERAL LEDGER PRINCIPAL FEATURES OF MANAGEMENT CONTROL HOW CAN YOU PROJECT A MANAGEMENT CONTROL SYSTEM  IT HAS TO BE DEFINED AS “SPECIFIC” SYSTEM FOR EACH COMPANY  IT HAS TO BE DEFINED ACCORDING TO THE DECISONS COSTS CLASSIFICATION  WE WILL HAVE TO KNOW THE DIFFERENT WAYS TO CLASSIFY COSTS

32. SKILLS TO MANAGE THE DIFFERENT “AREAS” IN THE COMPANY SALES NOT ONLY SALES, BUT MARGINS OPTIMIZE PRODUCTION COSTS : * MAKE OR BUY * MANUFACTURING DEVELOPMENT PRODUCTION ANALYSE GENERAL EXPENSES AND DECIDE WHO WILL BE RESPONSABLE OF THEM GENERAL EXPENSES

33. INFORMATION SYSTEM (IS) THE FAST EVOLUTION OF MARKET ASK FOR INFORMATION SYSTEM WHICH GIVES THE POSSIBILITY OF ANALYSE RESULTS SUPPORT DECISIONS

35. INFORMA TION S Y STEM ECONOMICS RESULTS ANALYSIS CAN BE DONE WITH GENERAL LEDGER MANAGEMENT CONTROL INCOME STATEMENT IN UE FORMAT INCOME STATEMENT IN COST OF SALES FORMAT ECONOMICS REPORTS

36. INCOME STATEMENT SHOWS GENERAL LEDGER ACCOUNTING CONTROL GLOBAL RESULTS PRODUCT LINE RESULTS SHOWS

38. INCOME STATEMENT

39. THE INCOME STATEMENT FOR MANAGEMENT ACCOUNTING THE PRINCIPAL AIMS OF INCOME STATEMENT FOR MANAGEMENT ACCOUNTING ARE TO GIVE A SYNTHETICAL VISION OF ECONOMICAL RESULTS TO SUPPORT DECISIONS 1 TO GIVE EVIDENCE TO : - OPERATING RESULTS - NOT OPERATING RESULTS 2 4 TO ANALYSE MARGING OF DIFFERENT PRODUCT LINES OR BUSINESS AREAS 3 TO DEFINE DIFFERENT LEVELS OF MARGINS TO EVALUATE : - CONTRIBUTION MARGIN - MANUFACTURING MARGIN AND EBIT - CASH FLOW (OPERATING AND FINAL)

40. DIFFERENT MARGINS AND RESULTS CONTRIBUTION MARGIN GROSS MARGIN/PROFIT OPERATING PROFIT (EBIT) GENERAL EXPENCES DEPENDS BY VARIABLE AND FIX COSTS IT DEPENDS BY ALL MANUFACTURING COSTS IT DEPENDS BY ALL THE OPERATING COSTS

41. NOT OPERATING COSTS FINANCIAL EXTRAORDINARY FISCAL TYPE CONTENTS BANK INTEREST AND CHARGES NON RECURRENT INCOMES OR COSTS TAXES ON PROFITS

42. DIFFERENT METHODS FOR “COSTING” COSTING METHOD THE COICE OF IT’ S BASED ON RECEIVERS AND USE MANUFACTURING PROCESS COMPANY ORGANIZATION

43. DIFFERENT METHODS FOR “COSTING” THE DIFFERENT METHODS WE CAN USE FOR CAN BE SINTHETYZED IN FULL COSTING MANUFACTURING COSTING DIRECT COSTING EVALUATE COSTS

45. FULL COSTING FULL COSTING CAN BE DONE ON TWO LEVELS MANUFACTURING COST TOTAL COST

46. MANUFACTURING COSTS MANUFACTURING COST THE METHOD OF IS BASED ON THE PRODUCT EVALUTION WITH ALL COSTS CONCERNED WITH MANUFACTURING PROCESS

47. TOTAL COSTS TOTAL COST THE METHOD OF IS BASED ON THE PRODUCT EVALUTION WITH MANUFACTURING COSTS GENERAL EXPENSES

48. DIRECT COSING VARIABLE COST THE METHOD IS BASED ON THE PRODUCT EVALUATION WITH DEPENDING ON SALES DEPENDING ON PRODUCTION VARIABLE COSTS

51. FULL COSTING ALL THE COMPANY COSTS FULL COSTING THE PRODUCT IS EVALUATED WITH LIMITS: THE ATTRIBUTION OF GENERAL EXPENSES TO THE SINGLE PRODUCTS IS NEVER OBJECTIVE

52. FULL COSTING ALL THE COMPANY COSTS FULL COSTING THE PRODUCT IS EVALUATED WITH ADVANTAGES: THE “THOUGHT” THAT A PRICE THAT WILL COVER ALL COSTS, GIVES YOU SURE EARNINGS

53. COST CENTER AND RESPONSABILITY

54. COST CENTER COMPANY “ENTITY” TO WHICH CAN BE ATTRIBUTED COST CENTER A COSTS IS A

55. COST CENTER AIMS COST CENTER AIMS THE PRICIPAL CAN BE CONSIDERED TO DEFINE COST DESTINATION TO ATTRIBUTE INDIRECT COSTS TO PRODUCT TO LINK RESPONSABILITY AND COSTS

56. COST CENTER CLASSIFICATION COST CENTERS IT CAN BE DEVIDED BASING ON ACTIVITY: PRODUCTION COST CENTER OVERHEAD COST CENTER AUXILIAR COST CENTER 1 2 3

57. PRODUCTION COST CENTER ALL THE WHICH ARE DIRECTLY INVOLVED IN THE PRODUCTION COST CENTER IT’S POSSIBLE TO CLASSIFY AS MANUFACTURING PROCESS COMPANY ENTITIES

58. OVERHEAD COST CENTERS OVERHEAD COST CENTERS IT’S POSSIBE TO CLASSIFY AS WHICH ARE INVOLVED IN GENERAL ACTIVITY MANAGEMENT: COMPANY ENTITIES ALL THE SALES, PURCHASES, PRODUCTION MANAGEMENT, RESEARCH AND DEVELOPMENT, FINANCE

59. PRODUCT COSTS PRODUCT COST RAW MATERIAL EXTERNAL SERVICES/PRODUCTION INTERNAL MANUFACTURING COSTS 1 2 3 HAS TO BE COMPOSED BY

60. PRODUCT COSTS PRODUCT COST RAW MATERIAL EXTERNAL SERVICES/PRODUCTION INTERNAL MANUFACTURING COSTS 1 2 3 HAS TO BE COMPOSED BY

61. PRODUCT COSTS EXTERNAL SERVICES THE NUMBER OF “OPERATIONS” EXTERNALLY MADE PURCHASE PRICE OF EVERY OPERATION EXTERNAL SERVICES COSTS 1 2 DEPENDS ON

62. PRODUCT COSTS MANUFACTURING COSTS THE NUMBER OF “OPERATIONS” INTERNALLY MADE MANUFACTURING COST CENTER RATES INTERNAL MANUFACTURING COSTS 1 2 DEPENDS ON

63. PRODUCT COSTS PRODUCT COSTS DEPENDS ON THE SYSTEM WE HAVE CHOSEN, AND THE IMPACT OF THE DIFFERENT SYSTEM WILL CHANGE ONLY THE MANUFACTURING COST, SO WE WILL HAVE: VARIABLE MANUFACTURING COST AND VARIABLE PRODUCT COST TOTAL MANUFACTURING COST AND FULL PRODUCT COST

64. 4. BUSINESS PLAN Preparing a business plan

93. 5. SOURCES OF FINANCING

95. FINANCIAL MANAGEMENT Second day

96. 2. RATIO ANALYSIS

98. RA T IO ANALYSIS BALANCE SHEET ASSETS LIABILITIES Fixed assets 60.000 Own sources ( owner’s equity ) 102.000 Current assets : - reserve - requirement - cash 96.000 46.500 34.500 15.000 Long-term credits 12.000 Short-term credits 42.000 TOTAL 156.000 TOTAL 156.000

114. Break-even point

115. Break-even point can be shown by following formula: TFC BEP = ------------- U – VC/U where is : TFC – total fixed costs, U – unit selling price, VC/U variable costs per unit total profit (TP) = total costs (TC) TP = unit selling price (U) x quantity of product (P) and TC = total fixed costs (TFC) + total variable costs (TVC) U x P = TFC + TVC TVC = VC/U x U U x P = TFC + ( VC/U x U) P ( U - VC/U) = TFC TFC P = -------------- U - VC/U

116. FINANCIAL MANAGEMENT Third day

117. 3. ACCOUNTING CONTROL

118. TARGETS RELEVANT ASPECTS OF COST MANAGEMENT WHAT’S THE TARGET OF:  MANAGEMENT CONTROL MANAGEMENT CONTROL TARGETS WHAT’S MANAGEMENT CONTROL?  IT’S A DEFINED SYSTEM WITH: * PROCEDURES * RESULTS  IT HAS NOT TO BE CONSIDERED A “UNA TANTUM ANALYSIS” OR A SUBPRODUCT OF GENERAL LEDGER PRINCIPAL FEATURES OF MANAGEMENT CONTROL HOW CAN YOU PROJECT A MANAGEMENT CONTROL SYSTEM  IT HAS TO BE DEFINED AS “SPECIFIC” SYSTEM FOR EACH COMPANY  IT HAS TO BE DEFINED ACCORDING TO THE DECISONS COSTS CLASSIFICATION  WE WILL HAVE TO KNOW THE DIFFERENT WAYS TO CLASSIFY COSTS

120. SKILLS TO MANAGE THE DIFFERENT “AREAS” IN THE COMPANY SALES NOT ONLY SALES, BUT MARGINS OPTIMIZE PRODUCTION COSTS : * MAKE OR BUY * MANUFACTURING DEVELOPMENT PRODUCTION ANALYSE GENERAL EXPENSES AND DECIDE WHO WILL BE RESPONSABLE OF THEM GENERAL EXPENSES

121. INFORMATION SYSTEM (IS) THE FAST EVOLUTION OF MARKET ASK FOR INFORMATION SYSTEM WHICH GIVES THE POSSIBILITY OF ANALYSE RESULTS SUPPORT DECISIONS

123. INFORMA TION S Y STEM ECONOMICS RESULTS ANALYSIS CAN BE DONE WITH GENERAL LEDGER MANAGEMENT CONTROL INCOME STATEMENT IN UE FORMAT INCOME STATEMENT IN COST OF SALES FORMAT ECONOMICS REPORTS

124. INCOME STATEMENT SHOWS GENERAL LEDGER ACCOUNTING CONTROL GLOBAL RESULTS PRODUCT LINE RESULTS SHOWS

126. INCOME STATEMENT

127. THE INCOME STATEMENT FOR MANAGEMENT ACCOUNTING THE PRINCIPAL AIMS OF INCOME STATEMENT FOR MANAGEMENT ACCOUNTING ARE TO GIVE A SYNTHETICAL VISION OF ECONOMICAL RESULTS TO SUPPORT DECISIONS 1 TO GIVE EVIDENCE TO : - OPERATING RESULTS - NOT OPERATING RESULTS 2 4 TO ANALYSE MARGING OF DIFFERENT PRODUCT LINES OR BUSINESS AREAS 3 TO DEFINE DIFFERENT LEVELS OF MARGINS TO EVALUATE : - CONTRIBUTION MARGIN - MANUFACTURING MARGIN AND EBIT - CASH FLOW (OPERATING AND FINAL)

128. DIFFERENT MARGINS AND RESULTS CONTRIBUTION MARGIN GROSS MARGIN/PROFIT OPERATING PROFIT (EBIT) GENERAL EXPENCES DEPENDS BY VARIABLE AND FIX COSTS IT DEPENDS BY ALL MANUFACTURING COSTS IT DEPENDS BY ALL THE OPERATING COSTS

129. NOT OPERATING COSTS FINANCIAL EXTRAORDINARY FISCAL TYPE CONTENTS BANK INTEREST AND CHARGES NON RECURRENT INCOMES OR COSTS TAXES ON PROFITS

130. DIFFERENT METHODS FOR “COSTING” COSTING METHOD THE COICE OF IT’ S BASED ON RECEIVERS AND USE MANUFACTURING PROCESS COMPANY ORGANIZATION

131. DIFFERENT METHODS FOR “COSTING” THE DIFFERENT METHODS WE CAN USE FOR CAN BE SINTHETYZED IN FULL COSTING MANUFACTURING COSTING DIRECT COSTING EVALUATE COSTS

133. FULL COSTING FULL COSTING CAN BE DONE ON TWO LEVELS MANUFACTURING COST TOTAL COST

134. MANUFACTURING COSTS MANUFACTURING COST THE METHOD OF IS BASED ON THE PRODUCT EVALUTION WITH ALL COSTS CONCERNED WITH MANUFACTURING PROCESS

135. TOTAL COSTS TOTAL COST THE METHOD OF IS BASED ON THE PRODUCT EVALUTION WITH MANUFACTURING COSTS GENERAL EXPENSES

136. DIRECT COSING VARIABLE COST THE METHOD IS BASED ON THE PRODUCT EVALUATION WITH DEPENDING ON SALES DEPENDING ON PRODUCTION VARIABLE COSTS

139. FULL COSTING ALL THE COMPANY COSTS FULL COSTING THE PRODUCT IS EVALUATED WITH LIMITS: THE ATTRIBUTION OF GENERAL EXPENSES TO THE SINGLE PRODUCTS IS NEVER OBJECTIVE

140. FULL COSTING ALL THE COMPANY COSTS FULL COSTING THE PRODUCT IS EVALUATED WITH ADVANTAGES: THE “THOUGHT” THAT A PRICE THAT WILL COVER ALL COSTS, GIVES YOU SURE EARNINGS

141. COST CENTER AND RESPONSABILITY

142. COST CENTER COMPANY “ENTITY” TO WHICH CAN BE ATTRIBUTED COST CENTER A COSTS IS A

143. COST CENTER AIMS COST CENTER AIMS THE PRICIPAL CAN BE CONSIDERED TO DEFINE COST DESTINATION TO ATTRIBUTE INDIRECT COSTS TO PRODUCT TO LINK RESPONSABILITY AND COSTS

144. COST CENTER CLASSIFICATION COST CENTERS IT CAN BE DEVIDED BASING ON ACTIVITY: PRODUCTION COST CENTER OVERHEAD COST CENTER AUXILIAR COST CENTER 1 2 3

145. PRODUCTION COST CENTER ALL THE WHICH ARE DIRECTLY INVOLVED IN THE PRODUCTION COST CENTER IT’S POSSIBLE TO CLASSIFY AS MANUFACTURING PROCESS COMPANY ENTITIES

146. OVERHEAD COST CENTERS OVERHEAD COST CENTERS IT’S POSSIBE TO CLASSIFY AS WHICH ARE INVOLVED IN GENERAL ACTIVITY MANAGEMENT: COMPANY ENTITIES ALL THE SALES, PURCHASES, PRODUCTION MANAGEMENT, RESEARCH AND DEVELOPMENT, FINANCE

147. PRODUCT COSTS PRODUCT COST RAW MATERIAL EXTERNAL SERVICES/PRODUCTION INTERNAL MANUFACTURING COSTS 1 2 3 HAS TO BE COMPOSED BY

148. PRODUCT COSTS PRODUCT COST RAW MATERIAL EXTERNAL SERVICES/PRODUCTION INTERNAL MANUFACTURING COSTS 1 2 3 HAS TO BE COMPOSED BY

149. PRODUCT COSTS EXTERNAL SERVICES THE NUMBER OF “OPERATIONS” EXTERNALLY MADE PURCHASE PRICE OF EVERY OPERATION EXTERNAL SERVICES COSTS 1 2 DEPENDS ON

150. PRODUCT COSTS MANUFACTURING COSTS THE NUMBER OF “OPERATIONS” INTERNALLY MADE MANUFACTURING COST CENTER RATES INTERNAL MANUFACTURING COSTS 1 2 DEPENDS ON

151. PRODUCT COSTS PRODUCT COSTS DEPENDS ON THE SYSTEM WE HAVE CHOSEN, AND THE IMPACT OF THE DIFFERENT SYSTEM WILL CHANGE ONLY THE MANUFACTURING COST, SO WE WILL HAVE: VARIABLE MANUFACTURING COST AND VARIABLE PRODUCT COST TOTAL MANUFACTURING COST AND FULL PRODUCT COST

152. FINANCIAL MANAGEMENT Fourth day

153. 4. BUSINESS PLAN Preparing a business plan

182. FINANCIAL MANAGEMENT Fifth day

183. 5. SOURCES OF FINANCING