Entrepreneurship

Money in the Organisa/on

Mushtak Al-Atabi

Outline

Balance Sheet
Assets
Liabili/es
Prot and Loss Statement
Return on Equity
Asset Turnover
Financial Leverage

Balance Sheet
Everything that a business owns (Assets), can
be funded by
The owners (shareholders)- Equi/es
Borrowed- Liabili/es

So
Assets = Liabili/es + Shareholders' Equity
The nancial statement that summarises the
Assets, Liabili/es and Sherholders Equity of a
business is called the Balance Sheet

Assets
Any economical resource that a business can use to develop and
deliver value. Normally, it is either cash or can be converted into
cash
Three types of Assets
Current Assets

Cash
Assets that are expected to be converted into cash

Long Term Assets

Real Estate
Plant
Equipment

Intangible Assets

Patents
Trademarks
Copyrights
Goodwill

Deprecia8on and Apprecia8on

Deprecia/on refers to the decrease in the
value of assets over /me
Apprecia/on refers to the increase of value of
some assets

Liabili8es
A liability is any obliga/on arising from past
transac/ons or events, including
Accounts Payable
Wages
Taxes
Debts
Any obliga/on, duty or responsibility to others
due to legal, contractual or ethical considera/ons

XYZ Sdn Bhd. Balance Sheet (RM million)

Assets
Cash
Accounts Receivables
Inventories
Total Assets
Liabili/es
Accounts Payable
Wages Payable
Income Taxes Payable
Debt
Total Liabili8es
Shareholders Equity
Common Stock
Addi/onal Paid Up Capital
Retained Earnings
Total Shareholders Equity

31 Dec 2012
151.2
022.1
009.8
183.1
050.2
020.0
005.0
027.2
102.4
053.0
022.1
005.6
080.7

XYZ Sdn Bhd. Prot & Loss Statement (RM million)

Net Sales (Revenue)

Cost of Sales (Cost of Sold Goods)
Gross Prot
Selling Expenses
General & Administra/ve Expenses
Deprecia/on
Total Opera/ng Expenses
Opera/ng Income
Interest Expenses
Other Expenses
Total Non-Opera/ng Expenses
Prot Before Tax (PBT)
Provision for Income Tax
Net Prot

31 Dec 2012
150.0
050.0
100.0
015.0
005.0
015.0
035.0
065.0
015.0
010.0
025.0
040.0
012.0
028.0

Return on Equity (ROE)

The most popular measure of nancial
performance is ROE
It measures the earning per dollar of
shareholders equity invested (over a period
of /me)
For XYZ Sdn Bhd is ROE=28/80.7= 35%

ROE
ROE has three determinants

Asset Turnover

Measures how well assets are being used to

produce revenue

Financial Leverage

Indica/on to the degree to which a business is

relying on borrowed money
Businesses that are highly leveraged may be at
risk of bankruptcy if they default on their debts
If the business is successful, nancial leverage
can increase the shareholders' return on
investment

ROEs and "Levers" of Performance for 10

Diverse Companies, 1998