An NGFN W An NGFN Webinar binar FINANCIAL FUNDAMENTALS FOR FOOD HUBS, PART 2: THE BALANCE SHEET February 28, 2017
Presentation Outline Welcome Wallace Center at Winrock International The Balance Sheet Questions and Answers Upcoming Sessions
http://ngfn.org/hubfinances contact@ngfn.org
Presentation Outline Welcome The Balance Sheet Gary Matteson, Farm Credit Council Erin Pirro, Farm Credit East Questions and Answers Upcoming Sessions
THE BALANCE SHEET Name: (company or individual) As of: (date)
THE BALANCE SHEET
THE BALANCE SHEET
PARTS OF THE BALANCE SHEET Current Assets Current Liabilities Intermediate Assets Intermediate Liabilities Long-T erm Assets Long-T erm Liabilities T otal Liabilities T otal Assets = + Equity (aka Net Worth)
G & E’s Food Hub Balance Sheets - Fair Market Value As of December 31, 2015 and December 31, 2016 2016 2015 2016 2015 Current Assets Current Liabilities Cash 58,742 31,000 Accounts Payable 8,758 15,000 Accounts Receivable 65,412 8,000 Accrued Expenses 10,000 0 Inventory 190,578 139,000 Operating Loan 100,000 140,000 Supplies 46,000 41,500 Current Portion of IT Loans 8,000 15,000 Prepaid Expenses 6,500 5,000 Current Portion of LT Loans 50,000 50,000 Other Current Assets 3,076 - TOTAL CURRENT ASSETS 370,308 224,500 TOTAL CURRENT LIABILITIES 176,758 220,000 Intermediate Assets Intermediate Liabilities Delivery Trucks 90,000 100,000 Equipment Loan (net of CP) 45,000 60,000 TOTAL INTERMEDIATE ASSETS 90,000 100,000 TOTAL INTERMEDIATE LIABILTIES 45,000 60,000 Fixed Assets Long Term Liabilities Commercial Building 700,000 700,000 Long Term Loan (net of CP) 500,000 550,000 TOTAL FIXED ASSETS 700,000 700,000 TOTAL LONG TERM LIABILITIES 500,000 550,000 TOTAL ASSETS 1,160,308 1,024,500 TOTAL LIABILITIES 721,758 830,000 OWNERS' EQUITY 438,550 194,500 TOTAL LIABILITIES AND OWNER'S EQUITY 1,160,308 1,024,500
WHAT’S A HEALTHY NET WORTH? Net Worth % = Equity x 100 T otal Assets Kohls ’ Traffic Lights Scoring for next move: Red = STOP Net Worth <40% Yellow = CAUTION 40% < Net Worth < 70% Green = GO Net Worth > 70%
BALANCE SHEET: WHAT DOES IT TELL YOU? Liquidity Current Ratio Current Assets ÷ Current Liabilities Working Capital Current Assets – Current Liabilities
G & E’s Food Hub Balance Sheets - Fair Market Value As of December 31, 2015 and December 31, 2016 2016 2015 2016 2015 Current Assets Current Liabilities Cash 58,742 31,000 Accounts Payable 8,758 15,000 Accounts Receivable 65,412 8,000 Accrued Expenses 10,000 0 Inventory 190,578 139,000 Operating Loan 100,000 140,000 Supplies 46,000 41,500 Current Portion of IT Loans 8,000 15,000 Prepaid Expenses 6,500 5,000 Current Portion of LT Loans 50,000 50,000 Other Current Assets 3,076 - TOTAL CURRENT ASSETS 370,308 224,500 TOTAL CURRENT LIABILITIES 176,758 220,000 Current Ratio: Current Assets ÷ Current Liabilities : 1 2015: 1.02:1 2016: 2.09:1 Working Capital: Current Assets – Current Liabilities 2015: 4,500 2016: 193,550
ADEQUATE WORKING CAPITAL DEPENDS ON: Product/services offered How often income is received How often are payments made to vendors Stability of prices and COGS Ability for business to withstand price fluctuations Surprises Guideline: >25% of total expenses
WHO WANTS TO KNOW? YOU Board of Directors/Advisors Strategic Partners Lender
YOUR BUSINESS WORK: Prepare your market-value balance sheet Calculate your net worth net worth % (net worth ÷ total assets) current ratio (current assets ÷ current liabilities) working capital (current assets - current liabilities) What’s your traffic signal? There are PRIZES!
BALANCE SHEET ASSETS LIABILITIES Current Assets Current Liabilities Cash Accounts Payable Accounts Receivable Payroll Taxes Payable Inventory Accrued Expenses Income Taxes Payable Bakery Beverages ST Loans (under 1 year) Dairy Line of Credit Prepared Foods (ready to eat) Credit Cards Value-Added/Grocery Meat and Poultry Produce Supplies Prepaids Other Current Assets Total Current Assets Total Current Liabilities Intermediate Assets Intermediate Loans (under 10 years) Machinery & Equipment Description - Creditor Fixtures Description - Creditor Vehicles if your program doesn't allow intermediate Office Equipment/Furnishings liabilities, call them long term. Other Intermediate Assets Total Intermediate Assets Total Intermediate Liabilities Long-Term (aka Fixed) Assets Long Term Loans (over 10 years) Buildings Description - Creditor Leasehold Improvements Description - Creditor Greenhouses Land Improvements Land Other Fixed Assets Accumulated Depreciation Total Fixed Assets Total Long-Term Liabilities Total Assets Total Liabilities Owners Equity Total Liability and Owners Equity
Questions and Answers Erin Pirro Farm Credit East erin.pirro@farmcrediteast.com Gary Matteson Farm Credit Council matteson@fccouncil.com Jeff Farbman Wallace Center at Winrock International contact@ngfn.org
Financials for Food Hubs All Sessions Start at Noon ET √ Tue 2/21 – Introduction and the Common Chart of Accounts √ Tue 2/28 – The Balance Sheet – How and Why Thu 3/2 – Office Hours : Balance Sheet Tue 3/7 – The Profit and Loss Statement – How and Why Thu 3/9 – Office Hours: Profit and Loss Statement Tue 3/14 – The Cash Flow Statement – How and Why Thu 3/16 – Office Hours: Cash Flow Tue 3/21 – Putting it all together – Managing Your Business Using Finances Wed 3/22 – Office Hours: Putting it all together http://ngfn.org/hubfinances
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