Financial Statement Analysis & Projections. Presented by: Mr. Ashraf Heleka, GOL Trainer Socialize your Business, Maadi Public Library, Cairo, Egypt. Organized by IRC, US-Embassy in Cairo 26 March, 2013

1. Ashraf Heleka
GOL Trainer
26 March, 2013
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2.  Sales & Profitability
 Asset Efficiency
 Liquidity
 Solvency & Financial Structure

3.  Set targets
 Measure progress
 Compare to peers or industry
 Risk analysis/problem identification

4.  Accounting Knowledge
 Business Life Cycle
 Industry Analysis
 Financial Ratios

5. Start-Up Phase Growth Phase Maturity Phase Decline Phase
Sales
Profits
0
Start-Up Growth Maturity Decline
Focus Survival Build Client Base Sustainability Preservation
Leader Entrepreneur Marketer Controller Asset Stripper

6. Threat of
Potential
Entrants
Bargaining Rivalry Bargaining
Power of Among Power of
Suppliers Competitors Buyers
Threat of
Substitutes

7.  Cyclical
 Seasonal
 High Operational Leverage
 Differentiated
 Commoditized
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8. Ratio Formula What it Measures? If Increases…
Sales Growth Growth in sales from year to Selling more quantity; selling at
year higher or more efficient price;
Gross Profit Profitability in core Higher sales prices, cost
Margin operations before overheads efficiencies (top-line)
Operating Profitability in core Higher sales prices, cost
Profit Margin operations including efficiencies, better operating
overheads performance, changes in product
mix
Net Profit Profitability for shareholders Above + successful management
Margin of the company of the business (bottom- line)
Return on How much profit a company Increased bottom line
Equity (ROE) generates with the money profitability, improved asset
shareholders have invested. efficiency, and/or reduction in
equity

9. Ratio Formula What it Measures? If Increases…
Working The amount of trading Giving longer credit
Investment assets that are not terms; greater inventory
financed by spontaneous levels (stock up, longer
finance production period);
paying suppliers in
advance to get discounts
A/R= 100
INV = 200 Working Investment = 100 + 200 – (50 +100)
A/P = 50 = 150
A/E = 100

10. 2008 2009 2010 2011 2012
Sales 500 600 620 750 700
COGS (100) (100) (110) (130) (130)
SG&A (75) (90) (80) (90) (80)
Other (25) (30) (30) (30) (30)
Operating
Costs
Interest (20) (30) (30) (30) (30)
Expense
Interest 10 10 20 20 10
Income
Taxes (70) (80) (70) (70) (70)

11. 2008 2009 2010 2011 2012
Sales 500 600 620 750 700
COGS (100) (100) (110) (130) (130)
SG&A (75) (90) (80) (90) (80)
Other (25) (30) (30) (30) (30)
Operating
Costs
Interest (20) (30) (30) (30) (30)
Expense
Interest 10 10 20 20 10
Income
Taxes (70) (80) (70) (70) (70)
Net Profit = 700 - 130 - 80 -30 – 30 +10 – 70 = 370

12. 2008 2009 2010 2011 2012
Sales 500 600 620 750 700
COGS (100) (100) (110) (130) (130)
SG&A (75) (90) (80) (90) (80)
Other (25) (30) (30) (30) (30)
Operating
Costs
Interest (20) (30) (30) (30) (30)
Expense
Interest 10 10 20 20 10
Income
Taxes (70) (80) (70) (70) (70)
Gross Profit = 500 – 100 = 400

13.  Assess feasibility of a business or project
 Required by most investors and banks
 Set targets
 Scenario analysis

14.  Understanding of Business Life Cycle
 Industry Analysis
 FSA
 Marketing Research
 Educated Estimations

15.  Who are my customers?
 What are their spending habits?
 How much are they willing to pay for my products/services?
 What quantity of my product/service are they willing and able to
purchase?

16.  Start with Sales
Division Volume Value
 Economic Environment?
A 100 units 10 EGP
 Competition in Market? B 300 units 5 EGP
 Customer Demand? C 500 units 1 EGP
 Past Performance?
 Volume vs. Value? A = 100 * 10 = 500
B = 300 * 5 = 1500
 Capacity? C = 500 * 1 = 500
Total Sales = 2500

17.  Continue with Costs
 COGS/COS
▪ Cost needed in producing product or rendering a service
 Selling & Distribution Costs
 General & Administrative Costs
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18.  Other/Special Factors that May Affect Costs
 Major macro issues that can increase costs
▪ Legal, regulatory, or insurance-related factors
 Commodity prices
▪ If dealing with commodities, fluctuation in price can harm business)
 FX rates
▪ If dealing with customers or companies abroad
 Labor environment
▪ Shortage of qualified labor can increase costs
 R&D
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19. Quarter 1 2010 Quarter 2 2010 Quarter 3 2010 Quarter 4 2010
December 2009 – March - May June-August September –
February 2010 November
Sales 100,000 40,000 30,000 60,000
COGS (20,000) (15,000) (15,000) (15,000)
SGA (15,000) (10,000) (10,000) (25,000)
What quarter in 2011, do you anticipate will
have the greatest sales? Profit?
What are possible explanations?

20. Quarter 1 2011 Quarter 2 2011 Quarter 3 2011 Quarter 4 2011
December 2010 – March - May June-August September –
February 2011 November
Sales 40,000 35,000 25,000 35,000
COGS (20,000) (15,000) (15,000) (15,000)
SGA (15,000) (10,000) (10,000) (15,000)
What trend do you notice when comparing
data for 2010 with 2011?
What explanation can you give for the
difference between the 2 years?

21.  What other information would you gather to project
Shariff Travel Sharm’s 2013 sales?
 What information would you gather to project costs?
Hint: list all potential costs for this business, then
think how you would project each cost.

22.  Manage your Cash
 Monitor inflows and outflows
 Trade Credit Terms (A/P and A/R)
 Focus on Sales and Margins
 Constantly Monitor Progress

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