[MUSIC] Now, it's time to jump into the numbers, right? It's time to jump into the numbers. But the thing is we have to sets of numbers. The profit and loss statement and the balance sheet statement. Which one of the two should we start looking at? Of course, we're going to look at the two, I agree with you, we're going to look at the two but which one should we look at first? Now I tell you imagine that I go to my mom and I say mom, I started a business. What do you think she's going to ask me? The first questions she's going to ask me? What is your guess? My guess is that my mom, the first thing she would ask me is, son what are you selling? What are you doing? What is your business about? What is it, you started a business, what do you do? And this is what we just did, which is the business analysis, understanding what we do. Now, the second question she may ask is, is this business working? So are you actually making money by doing this business or not? So the answer to that question, whether the business is working, whether you are making money is actually the profit and loss statement, the P&L. And then I agree the third question would be how much money do you want from me? Which is how do I finance my business? Do you need money or not? And this would be the analysis of the balance sheet, right? So, we go through this order, we have a better idea. We can start with the balance sheet as well, but I suggest that we do starting always with the P&L because it helps understand what the business works. Now, as a brief between brackets, I can tell you, there are businesses with good P&Ls that can have bad balance sheets. And then some businesses with bad P&Ls that have good balance sheets. But it is clear that a bad P&L whether you make that better, or in the long run, the business is going to go down because a bad balance sheet cannot sustain itself. A good balance sheet cannot sustain itself with a bad P&L. So let's go to the P&L analysis. Now, and then we open and then we're going to start analyzing the profit and loss statement. This is the P&L of Polypanel. Now, when you see this, it's the first time you see a P&L probably. If you took the course with you understood how to read a P&L. Now with a P&L as you can see, there are different lines. Right? We have 13, 14 lines here in the top line. We have sales and then we start subtracting each of the costs that we have in the business, right? And at the end, in the bottom line,we have the net income, right? So to analyze a P&L, where do we start? Some people say, well, why don't you go directly and look at the bottom line and the bottom line says net income, the profits. What are the profits of my business? Look, the last two years have been positive. This is interesting, profits, positive, good. Making money, yes. They can tell you yes, but we don't know where the profits are coming from so it might be interesting to look at the first line. That's why it is in the first place, the first line sales to analyze the first line. Now as you see from the 13 lines that we have, with very few things, we're going to have a clear idea of what the P&L looks like. The sales, we can look at two different things. The first one, if you look at the first day of the last year, 2007, you can have an idea of how big the company is. In this case, it's 2.9 Million Euros. So what do you think? The company is big or small? It seems like it's a pretty small company, right? How many people are working there? Eight people working and then makes, the revenue is eight million and three million, right? Now, that's the first thing we will have to look at. The second thing is, what is the evolution of sales? Now to look at the evolution of sales, we can look here clearly that it goes from 977 to 2.9 million, but if we look at the growth rates, we can look at the different ratios here. Look at the growth rate of sales. It says the first year is 170 because the first year we started from nothing. But afterwords we went form 54, 47, and 33. So on average its 45%. Now for each of these components for the P&L, I suggest that we look at a concept, the number and we give an opinion about it. The opinion is important because what we are doing is making an analysis, and to analyze something is to give an opinion about a fact. So in this case, the concept is sales, the number is three million euros, and the opinion is well its medium, its pretty small right? And in terms of growth, It turns out that the average growth is 45%. Now would you like to have a startup growing at 45%? I guess you would. I would like to have one, right? So a growth of 45% is pretty huge. It's big, it's great, right? However, is it normal to have such a big growth in a company like this? In other words, I ask you, do you think that company like Apple or Hewlett-Packard or IBM, do they grow at 45% a year? Probably not, and you would say, yeah, it's true because the companies are so huge. When a company's big and mature, normally the growth is very small. But when a company like this one is starting, in the third, fourth year of operations, the company starts growing very sharply right. So it's not that surprising to find 45% of growth. [MUSIC]
