So, here we are. We have spent a number of hours, you have poured over some financials. You have done quite a bit of work. And I want to do a little bit of a recap on what you should know, how we've done it, and how you can actually use it in your work environment. We started this whole process by looking at the financials of an organization. Maybe your organization, maybe a number of other organizations that you think are relevant to your line of work. We looked at the balance sheet. The balance sheet, as you'll recall, has assets, liabilities and equity. And a balance sheet balances. The reason it balances is because Liabilities + Equity = Assets. Recall that your assets are everything that you own or that gives your organization some kind of a value. The liabilities are what your organization owes to somebody else, and then the equity is your ownership, the difference between your assets and your liabilities. Also, recall that your assets are listed from the most liquid to the least liquid, all right? And your liabilities are listed from the most sort of liquid to the least liquid. And that is, what does somebody need from you right now, need form your organization? What kind of bills do you have at the moment? And then your equity is, like I said, the ownership that you have in your organization. We move down to look at the income statement. The profit and loss statement, the P&L. And recall that the income statement walks you through all of the revenue that you bring in and then the expenses that your organization takes on. Now, as you go through the income statement, it reveals different lines that have some kind of a meaning to you organization. All right, one of these big things is the EBITDA. Recall, EBITDA is your earnings before interest, depreciation, taxes, amortization. I mean, this is your income after you account for your operations. And the EBITDA is really the primary number that people use to judge your organization with respect to, how well are you doing in your organization to try to generate profits? Now, the net income, the line at the bottom of your P&L, this tells you at the end of the day, how much money can you sort of take away. And these are really important numbers. And they can be turned into margins. So your EBITDA number, right, as a ratio of your sales, will give your EBITDA margin. Your net income number as a ratio of sales will tell your net income margin. And we can go through and look at a number of other margins. We use those margins to compare, either with our own organization over a period of time to understand how we're developing as an organization. Or we can look at those margins relative to other organizations in our same industry, or sector, to identify where we are selling, where we're falling behind, how does it we rank with other companies that we might be competing with. We also looked at our cash flow statement, right? Remember the cash flow statement is broken down into different sections. A section of operations, a section of investing, a section of activities that you have from financing your organization. And essentially, the cash flow looks at the level of income that you have. And then it subtracts or adds based on where your income is coming from or going to. And this can be a very key statement to look at to identify whether organization is cash poor or cash rich. Whether it has a good flow or money is very tight. So, we took that information and we did some different kind of elements to those. We did a common sizing. A common sizing is where you take the information in your income statement, or you balance sheet. And [INAUDIBLE] from your income statement, you divide everything by your topline sales. And so, it gives you all of these margins. From your balance sheet, you divide everything by your total assets. It tells you how your assets are allocated. It tells you how your liabilities are allocated. And from those common sizing, again, we can compare your own organization over a period of time, or we can compare your organization to other organizations. Remember through one of our exercises, we looked at a number of companies, some big companies and some small companies. And identified how much are they carrying in cash, or what is the size of their debt, okay? And we do this to try to understand, how is the composition of an organization matching, perhaps, its goals, what its stated goals are, where it's trying to move to, what it's trying to achieve. And you can look at successful companies, or companies that you deem to be successful, and identify what the allocation of their assets look like. How does their income statement break down? We moved from there into looking it some more decision models. Identifying, what's the net present value? Identifying, what's the payback period? Identifying different ways to calculate your ROI. And these thing gives you the ability to take the financial information and turn it to some type of number that you can use to promote an idea, or encourage the organization to undertake new capital purchases. And so the idea here is to understand what an investment is, what the return on the investment is. And be able to describe it in any numbers of ways. So that you can convince somebody, or you can have a better understanding as to whether or not your organization should be making a purchase, should be investing in a particular type of technology, and what have you. All right? Lastly, what we did is, we used some of those techniques to identify very specific types of capital purchases, investment strategies. Trying to get a sense for whether or not an organization is best suited to take on a particular type of investment. And we did that by looking at the different hurdle rates, right? We calculated our interest rate using CAPM. We calculated our interest rate using with the WACC, weighted average cost of capital, right? And by using our net present value and discounting by our CAPM or our WACC, what we can do, is we can make decisions that make sense within our organization. Hopefully, what you've taken away can be used in your organization right away, but it may not always be evident how you use it. The next time that you're sitting down with somebody and somebody asks you, what do you think about this project? Ask yourself, what are the questions they're trying to ask? What are the outcomes that they would like to see? How am I measuring those outcomes? Is this something that's going to impact my net sales? Is this something that's going to impact the operating costs? Is this something that's going to have some kind of a savings attached to it. At the end of the day, trying to use any one particular tool may be difficult because there's no roadmap for your organization, per se, that I can give you. Say, you can use this tool in this situation and this tool in this situation. You're going to have to practice, and practice, and practice, but I have confidence that the information that I've given you will become very useful, very quickly. Do not hesitate to shoot me an email if you have questions. If something comes up in your organization and you say, my gosh, I think this is an example of NPV. I think this is an example of where I would need to recalculate my hurdle rate. Shoot me an email. I'm always happy to help.
