Questions On Finance

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Balance Sheet – snapshot at certain time
Income Statement – how company performs during a time period: 1st, 2nd quarters, monthly, yearly…
1. Revenue
2. Profit
3. Costs
Pro-Forma – predictions, future, what if statement
Common-Size - % statement vs numbers
Compare year to year and versus competitors
EBITDA – cash flow
Junk Bond – high yield bond (risky)
Depreciation – non cash item

Ratios (LLAPS)
Liquidity = CA/CL
Leverage = TD/TE
Activity = TS/TA (retail industry) (TAT)
Profit = NP/NS, ROA = NP/ASSETS, ROE = NP/EQUITY (investors look at ROE the most)
Shareholder = Div + (Share P end – Share P beg)
PE Ratio = Stock Price/Proj. NI
EBITDA = NI(profit) + Dep. + Taxes
***be able to produce a highly leveraged balance sheet 6—7 ratio (lev) and 1—2 ratio (liq)

Board of Directors
Chairman of the Board
CEO
President
V.P’s of Depts. (functional)
Employees
Corporate Strategy strategy of company as a whole
CEO and Chairman develop strategy and direction
Long range strategy
Functional Area Strategy
Short range strategy – change anytime
i.e.
lower prices, reduce production costs, finance the growth of company
1st step of strategy is planning
Ultimate objective of a strategy is to develop a sustainable competitive advantage!
Activities tailored to your company
Operational Effectiveness – is not strategy
Strategy rests on unique set of activities
SWOT
Strength (internal)
Weaknesses (internal)
Opportunities (external)
Threats (external)
PEST
Political
Economy
Social
Technology

Elasticity – how price of something changes due to demand
Price goes up – Demand goes down
Gas up – start to walk or find other means of transportation
Price goes down – Demand goes up
Inelastic – as price goes up demand might stay the same or go up
Snob appeal
Unique differences
Polo vs Kohl’s brand

Communist – Ultra Liberal – Liberal – + – Conservative – Ultra Conserve. – Reactionist
Environment
Customers
Competition
Value/Supply Chain
Be competitive all the way from supply to demand
Regulators
Taxes and government
Basis of Strategy – Porter’s 5 forces analysis
How to read the cases
1. Read
2. Read add notes
3. Read come up with strategy
Strategic Intent
How do you inspire
Toyota – beat Benz (competitor oriented) / “we try harder”
JFK – “We’re going to the moon”
MLK – “I’ve got a dream”
Leader – Strategic Intent
Don’t just give orders – take action as well

Questions
1. How is company doing?
2. What are the problems
3. How can you improve?

Porter – Professor from Harvard
Porter 5 Forces – Purpose: How profitable division can be
Threats of New Entry
Low its good
High its bad
Bargaining Power of Supplier
Less supplies means high cost
More supplies means less cost
Power of Customers
More power of customers the lower control you have
Less power of customers the higher control you have
Threat of Substitute Products
Higher the threat level the worse it is
Lower the threat level the better it is
Competing Forces
Higher amount of competitor the worse it is
Lower amount of competitor the better it is
Primary Activities
Inbound logistics
Operations
Outbound logistics
Marketing/Sales/Service
Support Activities
Pro-current –paying “?” amount for supplies
Hiring right people
Advance in technology
Infrastructure
*Firm must create a
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