Workshop set up and schedule...Workshop set up and schedule Before the workshop: Determine where...
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Workshop set up and schedule Before the workshop: Determine where each small group will be set up around the room. Distribute a Post-it, self-stick easel poster (suggested 25 x 30.5, Item 559) and markers for each of the groups. Label the top of post-it with Small Company, Large Company or Academia. Write instructions on the board, per the following pictures: Facilitator’s tasks in the small group: 1. Introduce yourself 2. Ask participants for brief introductions 3. Ask participants about their career goals (take this into account as you facilitate discussion). 4. Briefly review the questions for the discussion 5. Pose the questions, one at a time, and ask for their thoughts 6. Sit back and let the group discuss • Refer to the rubric to see if your group is mastering the concepts covered in the lecture • If needed, prompt the discussion with the questions provided below 7. Summarize the conversation and start to make the poster 8. Making the poster – ask for a scribe and a presenter. For the presenter, consider encouraging an individual who wants to work on their presenting or a non-native English speaker. 9. If there is time, pose provocative questions (ex: What if the company doesn’t like the deal you propose, what’s your next step? Would you proceed with the collaboration or find a new company to work with?) SCHEDULE: Notes for Course Moderator – the individual introducing the workshop, wrapping up and keeping time Notes for Course Facilitator – the individuals leading the small group discussions Notes: Step 1 Inform the participants that there are # areas to choose from Step 2 Break into groups of 5 to 7 people; adjust for your group size Step 3 Give approximately 30 minutes for the discussion; adjust according to 60 or 90 min session Step 4 Give each group 5 minutes to report out. We found that this is enough time to present their poster and discuss a few questions from the group.
Transcript of Workshop set up and schedule...Workshop set up and schedule Before the workshop: Determine where...
Workshopsetupandschedule
Beforetheworkshop:Determinewhereeachsmallgroupwillbesetuparoundtheroom.DistributeaPost-it,self-stickeaselposter(suggested25x30.5,Item559)andmarkersforeachofthegroups.Labelthetopofpost-itwithSmallCompany,LargeCompanyorAcademia.Writeinstructionsontheboard,perthefollowingpictures:
Facilitator’stasksinthesmallgroup:
1. Introduceyourself2. Askparticipantsforbriefintroductions3. Askparticipantsabouttheircareergoals(takethisintoaccountasyoufacilitatediscussion).4. Brieflyreviewthequestionsforthediscussion5. Posethequestions,oneatatime,andaskfortheirthoughts6. Sitbackandletthegroupdiscuss
• Refertotherubrictoseeifyourgroupismasteringtheconceptscoveredinthelecture• Ifneeded,promptthediscussionwiththequestionsprovidedbelow
7. Summarizetheconversationandstarttomaketheposter8. Makingtheposter–askforascribeandapresenter.Forthepresenter,considerencouragingan
individualwhowantstoworkontheirpresentingoranon-nativeEnglishspeaker.9. Ifthereistime,poseprovocativequestions(ex:Whatifthecompanydoesn’tlikethedealyou
propose,what’syournextstep?Wouldyouproceedwiththecollaborationorfindanewcompanytoworkwith?)
SCHEDULE:NotesforCourseModerator–theindividualintroducingtheworkshop,wrappingupandkeepingtimeNotesforCourseFacilitator–theindividualsleadingthesmallgroupdiscussions
Notes:Step1Informtheparticipantsthatthereare#areastochoosefromStep2Breakintogroupsof5to7people;adjustforyourgroupsizeStep3Giveapproximately30minutesforthediscussion;adjustaccordingto60or90minsessionStep4Giveeachgroup5minutestoreportout.Wefoundthatthisisenoughtimetopresenttheirposteranddiscussafewquestionsfromthegroup.
Workshopsetupandschedule
**Thisisasuggested60minuteschedule.Fora90minutesession,considerlengtheningthegroupdiscussionoraddinganoptionalfacilitator-led,largegroupdiscussionafterthepresentations.5minutes Getsettled,explanationsbeforegroupsbreakout
Classmoderator-“ThisisachanceforyoutoapplysomeoftheabstractconceptsthatJeShauneandChristineintroducedinthevideos.Fortheindustrycases,youwilllookthroughacompanywebsiteanddeterminethefinancialhealth.Youwilllearntonavigatethefinancialstatementsbycalculatingtheirgrossmargin,operatingloss,andburnrate.Intheacademiccase,youwillenvisionyourselfasanewPIanddiscusshowtodevelopafinancialplanandhowyoucalculateburnrate.Pleasetake5-7minutestoreviewthecaseandstartbrowsingthesites(fortheindustrycases).Pleasecollectyourthoughtsonhowtoanswerthequestions.Thefacilitatorswillbeavailableforquestions.Eachgroupwillmakeapostertosharetheircompany’sstrategyandwewilldiscussit.Remembertochooseascribeandpresenterforeachgroup.”Nowlet’sbreakintogroups.Pleasegototheareaofinterest–IndustryorAcademia
20minutes GroupdiscussionFacilitatorintroduction:“Mynameisx,andIworkatX.Mybackground/PhDisinY.I’mheretofacilitatethediscussion,keepthingsmovingalong.Wewillbeusingaonlinefinancialstatementstodetermineacompany’sfinancialhealth.Feelfreetousetheslides.”Participantslookoverthewebsitesanddiscussamongstthemselves.Facilitatorsmayneedtopromptconversationifthereisalull.Remembertorepeatquestionstothegroupifanindividualraisesaquestion.Iftheysaytheyarealldone,getthemthinkingaboutadimensiontheyhaven’taddressedyet.Classmoderator–givea5minutewarningtowinddowndiscussionandtellthemtostartwritingupthepostersiftheyhaven’talreadybegun.
30minutes
Reportout,grouppresentationsClassmoderator-“Great,nowwewillsharewhatyourgroupsidentifiedasthecompany’sgrossmargin,operatingloss,burnrate,andsolvency.Youwillhaveapproximately5minutestopresent.I’llgiveyoua2minutewarningbyholdinguptwofingers.”
Shareposters,seeexamplesbelow[Optional]Facilitatorsaskfollow-up,nextstepquestionsaboutthepresentationstogettheparticipantstothinkmoredeeplyaboutthesubject.
5minutes WrapupClassmoderator–Thanksforattending.Wewillbesendingoutpost-classsurveys.Pleasetake10minutestogiveusfeedback.Wearedevelopingthisworkshoptobesharednationwideandanycomments,suggestions,orkudosthatyougivewillbehelpful.
Workshopsetupandschedule
SamplepostersfromtheUCSFsessioninJune2016Industryactivity:
1. Reviewthefinancialstatementsfromcompany’swebsite.Youcanalsousedashboardsforexample–GoogleorYahooFinance.Pressreleaseswillprovideinformationaboutpreviousfunding.
2. Inyourgroup,learntonavigatethefinancialstatementsanddeterminethecompany’sfinancialhealthbyansweringthefollowing:• Whatinformationdoeseachtypeofstatementprovide?• Howmanymonthsofcashdotheyhave?• Whatistheircashflow?• Whatistheirgrossmargin?• Whatcanyoutellabouttheiroperatingactivities?
Academicactivity:
1. Imaginestartingupyourlabasanewjuniorfacultymember.2. Considerhowyouwilldevelopafinancialplan.Startby
answeringthesequestions:• Whatdoyouincludeinaforecastofyourbudget?• Howoftendoyouforecast?• Howdoyoucalculatetheburnrateforyourlab?• Whatopportunitycostswillyouconsider?• Howdoesyouroverallstrategyimpactyourfinancial
decisions?
RubricforfinanceconceptsThistableprovidescriteriatoevaluateifthegroupisprogressingonthecase.Facilitatorsmightfindthistableusefulfordeterminingwhetherparticipantsdemonstratemasteryofbasicandadvancedconcepts,providingfocuseddirection,andclarifyingexpectationsforthegroupactivity.Areaofknowledge
BASICmasteryofconcepts ADVANCEDmasteryofconcepts
Identifythedifferentfinancialstatementsandhowcompaniesusethem
Listthe3typesofstatements Listplacestofindthefinancialstatementsonline(e.g.,companywebsites,dashboards,andSEC.govorEdgar)
Describeuseoftheincomestatement(akaP&Lstatement)andtimelineforuse(yearend)
Canfindcurrentrevenueandnetincomeonthestatement
Describeuseofthebalancesheetandtimelineforuse(snapshotintime)
Givecalculationtodetermineassets(assets=liability+equity)
Describeuseofthecashflowstatementandtimelineforuse
Canfindcurrentcashbalanceonthestatement
Explainconceptssuchasopportunitycost,costofcapitalandnetpresentvalue
Defineopportunitycostandwhousesthisconcept(allindividuals)
Giveexamplesofopportunitycostrelatedtothecompany
Definecostofcapital(perceivedriskofinvestment)andwhousesthisconcept(allorganizations)
ExplaintherelationshipbetweenCOCandperceivedrisk(lessriskyinvestments,lowerCOC)
Describethepracticaluseofnetpresentvalueandwhousesthiscalculation(mainlycompaniesinvaluingassetstoacquireorattractivenessofaproject)
ExplainhowNPViscalculated
Describethepracticaluseofinternalrateofreturn(toevaluatetheattractivenessofaproject/investment)
DescribehowNPVisusedtodetermineinternalrateofreturn(IRR)
Describebenefitsofforecasting Describehowtobuilda5yearsimulatedforecastforacompany
Determiningthefinancialhealthofacompany
Givethecalculationforgrossmarginandexplainwhyit’susefulforcomparingcompanies
Determinethegrossmarginforacompany(GrossProfit=revenue–expenses);grossmargin=GP/revenue
Givethesimplecalculationfornetincome=revenue-expenses-taxes
CalculatethenetincomeforacompanyusingtheP&Lstatement
Definecashburn Describewhythiscalculationisonlyusefulforcompaniesthatoperateataloss
Definesolvency(financialhealthofacompany);cashinbank/monthlyexpenses=numberofmonthsleft
Describewhyit’susefulforasmallcompanyorstart-up,butnotforafullyintegratedcompany
Notesforfacilitatingthegroupdiscussion
ThankyouforyourinterestandparticipationintheFinanceworkshop.Thegoalofthegroupdiscussionistogivetheparticipantsachancetoapplytheprinciplestheylearnedfromthelecture.Thetasktheywillperformisdeterminingthefinancialhealthofacompanyfrombrowsingthecompany’sonlinefinancialstatements,andcalculatinggrossmargin,operatingloss,andburnrate(ifapplicable).Questionstoanswer:
• Whatinformationdoeseachtypeofstatementprovide?• Howmanymonthsofcashdotheyhave?• Whatistheircashflow?• Whatistheirgrossmargin?• Whatcanyoutellabouttheiroperatingactivities?
Asareminderofwhattheyarelookingfor,wehavedefinedtheconceptsbelow–
Financialstatementsdiscussed! IncomeStatement–revenueandcosts! BalanceSheet–assets,liabilities,equity! CashFlowStatement–operating,investing,andfinancialactivities
Calculations:! Grossmargin=(revenue–COGS)/revenue! Burnrate=(currentcash/annualoperatingloss)*12! Operatingloss=Revenue–(costofrevenue+R&D+SGA+non-recurringcosts+depreciation
&amortization).Forasimplercalculation,don’tincludedepreciationandamortization! Cashflow=currentcash/operatingloss*12
Reviewoffinancialconcepts! Opportunitycost–thecostofthenextbestalternativethatmustbeforegoneinordertochoose
adesiredplan! Costofcapital–therateofreturn(profits)thatis required to persuade an investor to make a
given investment ! Netpresentvalue–thepresentvalueofaninvestment’sexpectedcashinflowsminusthecosts
oftheinvestment;anindicatorofhowvaluableaprojectcouldbeandwhetheritisworthinvestingin(NPV>0meansitcouldaddvaluetothefirm).Forexample:Costtopurchaseandconstructalemonadestandtodayis$100.Presentvalueofcashflowsfromyourkid’sstandforthenext3monthscouldbe$20,$40,$50.NPV=($20+$40+$50)-$100.NPVequals$10.TheNPVispositivesoyoucouldsayyestotheinvestment.
! Internalrateofreturn–theinterestrateatwhichtheNPVofallthecashflowsfromaprojectequalszero;canbeusedtoevaluatetheattractivenessofaprojectorinvestment
ResourcesSecuritiesExchangeandCommission(SEC)website–companyfilingsYahooandGoogleFinance–dashboardsandsummariesofcompanyinfoCompanywebsite–investorsectionWhatifconversationstalls?Below,youwillfindalistofquestionstoprompttheparticipants.ReviewtheRubricforFinancetohelp
Notesforfacilitatingthegroupdiscussion
guidethediscussion,andtodetermineifparticipantsinyourgrouparethinkingthroughthebasicconcepts.Afteraskingaquestion,steelyourselftowaitthroughthesilence—responseswillcome.Ifyounoticethesame2-3peoplespeaking,andwantbroaderparticipationyoumightsay:“Let’shearfromsomeonewehaven’theardfromyet”or“Howaboutsomeonefromthissideofthegroup?”etc.Movearoundthegroup—youwillboostparticipationbyfacingdifferentdirectionsinthegroup.Questionstopromptconversation:
! What’sfoundontheincomestatement?Revenueandcosts.Canbesummarizedastherevenue(topline)andnetincome(bottomline)
! Whatfinancialstatementdoyouusetocalculategrossmargin?TheincomestatementorP&L(profit&loss).Toplineisrevenuefor2015.Thenfindthecostofgoods.Lilly20Band5B,respectively.GrossmarginforLillyis75%.
! Whydowecalculategrossmargin?Grossmargingivesapercentagetocomparecompaniesmoreeasily.Forexample,asmallcompanymighthaverevenueof25Mwherealargepharmamightstartat20B.Difficulttocomparethis,sogrossmarginisapercentageorratiothatletsyoucompareappleswithapples
! Whatfinancialstatementdoyouusetocalculateoperatingloss?TheincomestatementorP&L(profit&loss).Revenue–(Costofrevenue+R&D+SGA+non-recurringcosts+Depreciation&Amortization).ForLilly,17Bannuallyor1.5Bmonthlyinexpenses.
! What’sonthebalancesheet?Assetsandliabilities–whatyouhaveandyourdebts.It’sasnapshotandchangesnextmonthorevennextbusinessday.Themostimportantpartiscash.Howmuchcashdotheyhaveonhand?Pfizer3.64B
! Howdoyoucalculatethecashburnrateorrunrateforacompany?Thecalculationismonthsofcashdividedbyoperatinglossmultipliedby12.Rememberthiscalculationisusefulonlyifthecompanyissellinglessthantheyareexpensing.Ifthecompanyismakingaprofit,theyarenotburningcash.Pfizer8.6Bisthecash.
Whattypesofquestionsmighttheparticipantsaskmeduringthediscussion?Whenwepreviouslyadministeredthiscourse,werecordedthemostcommonquestions.Belowyouwillfindthislistalongwithpossibleresponsesinthegraytext,followingthequestion.Facilitator’stip–Thefacilitator’sroleistopromptthegroupdiscussion.Whenastudentorpostdocasksaquestion,considergivingabroadanswertogetthemstarted,butthenpointtheminthedirectionofthewebsitewheretheycanfinditthemselves.Youmayalsoaskthequestionbacktothegrouptoseeifanyoneelsehasaresponse.QuestionsparticipantsmayaskFINDINGANDINTERPRETINGTHESTATEMENTS
! WheredoIfindthe10Konthecompanywebsite?Theinvestorsection,lookforthetablewithtealandwhitelines
! What’stheadvantageofusingadashboard(YahooorGoogleFinance)versusthecompanywebsite?Thedashboardshelptointerpretthedatawithoutallthenumbers,canmakemore
Notesforfacilitatingthegroupdiscussion
sensetosome.Keepinmind,someoneispullingthedataforthesedashboardsandtheymaynotbeaccurateorupdated,sotobesure,usethestatementsonthecompanywebsite.
! Whatisa10K?Technically,it’sanannualreportrequiredbytheU.S.SecuritiesandExchangeCommission(SEC),thatgivesacomprehensivesummaryofacompany'sfinancialperformance;publiclytradedcompanies.Note:a10KendsatyearendorDecember31.
! Whatisa10Q?Thequarterlyreports! Wherecanyoureadthefinancialreportsforprivatecompanies?Possibleanswer–youhaveto
knockondoors.! Whatisadeal?adevelopmentdealorcollaborationthatcouldeventuallyleadtorevenue.! Whereisthe10KlistedonYahooFinance?Finance.yahoo.com.Entercompanynameortrading
ticker(forexample:PfizerorPFE)onsearchbarlocatedontopofwebpage.Thenclickon‘Financials’tabtofindsimplefinancialstatements.Forthefullstatements,clickon‘Profile’abovechart
! Whatnumbersinparenthesisorbrackets?Inaccounting,expensesareinparenthesisandanegativesignprecedespurchases.Itindicatesnegativevalueslikeexpensesorlosses.Forexample:Operatingexpenses,NetProfitincaseofLoss.
GROSSMARGIN
! Whatdoesagrossmarginof25%mean?Foreverydollarthecompanygetsasrevenue,theyearn25centsinprofitandtheyuseanother75centstoproducethegoods.Forexample:Tomanufactureacellphone,ifyouspend$75andsellitfor$100,then$25isyourgrossprofit.25%isyourgrossmargin[(revenue-costofgoods)/revenue]
! DowecalculatetheotherexpenseslikeSGAwhendetermininggrossmargin?No,onlyusecostofgoodssold(COGS).RevenueminusCOGSdividedbyrevenue
! Howdowecalculateoperationalprofit?Revenueminuscostofgoodssoldminusexpenses.ExpensesaremainlyR&DandSG&A
! WhatdoesSG&Astandfor?Selling,generalandadministrativeexpenses.Anythingtokeepthelightson.Couldincludemarketingcosts,salariespaidtoemployees,transportation,rentpaidforbuilding,securityandmaintenanceofofficepremises.
BURNRATE&CASHFLOW
! Ifyouwanttolookathowmanymonthsofcashtheyhavewhichstatementdoyouuse?Cashflow.Totalcashisdeterminedfromoperatingactivities
! Whyisthecompany’scashflownegative?[Maybethecaseiftheexampleisastart-up]Well-fundedorwell-establishedcompaniesdoholdsufficientcashtooperateforacertainperiod,unlikesomestart-ups.Start-upsmaybeincurringoperationallosses.Theymaynotbegeneratingprofitsinitially;theymaygetminimumsupportmoneyfromgrants,investorsandothersources.
! Whatdoesanegativecashflowmean?Doesn’tmeanthecompanyisdonefor,butthecompanymaynothavemoneyattheendoftheyear.Negativecashflowmeansthatcompanyisspendingmoremoneythanitisgeneratingincomefromitsbusiness.Forstart-upsitmayindicatethatcompanyisinvestingmoreonR&D,newinfrastructure,marketing&promotionalactivitiesbeforeitcangenerateenoughrevenuetocoverexpenses.Whatcanacompanydo-takeouta
Notesforfacilitatingthegroupdiscussion
loan,drawmorefrominvestorsorshareholderstocoverthecashflowgaptogetoutofthenegative.
! Ifthecompanyhasanegativecashflow,canweworkoutmonthsofcash?Yes,lookatthebalancesheet,gotocurrentassetsandusethechangeincashflowfromtheincomestatementastheburnrate.ForEliLilly–cashequivalentsis3.6Bandaddinshortterminvestmentstoroundoutat4Bincash.Ourchangeincashfromlastyear(annualoperatinglossfromthecashflowsheet)wasnegative200M.Usethecurrentcashwehave4Bdividethatbyannualoperatinglossandmultiplyby12(260months)–soyoucanseewhyit’strivial.It’salongtime.
! Inacademiaareyouoperatinginthenegative?Yes,youconsideritoperatingloss.! Canyoucalculateburnrateifthecompanyisoperatinginthepositive/makingmoney?Youcan,
butbecausethecompanyismakingaprofit,theyaren’tburningcash.Ifacompanyweresellingmorethantheyaremakingorexpensing,thenthatcompanywouldbeburningcash.Profitmakingcompaniespileupcash.Forexample:Apple,asofJune2016hadmorethan$61billionincashandshort-terminvestments.Cashburnmeans,evenifApplestopsearningmoneyfromtoday(notsellingtheiriPhones&iPads),howmanymoremonthsitcansustainwithavailablecash.
! Whatisthedifferencebetweenexpensesandcashburn?Expensesaremoneyspentonkeepingthebusinessoperational.Whereascashburnisutilizingavailablecashtopayforexpenses.
OPERATINGLOSS
! [EliLilly]Theylostalotofmoneywithfinancing.Companiestendtolosemoneywithfinancing.Financingisnegative.Investingisalsonegativeunlessthecompanysellsabigpartofthecompanytomakemoney.Usuallyoperationsisthemakeorbreaksideofcashflow.Ifyou’reoperatingefficientlythenyoucantrytodomoreontheI/Fsideandgeneratemoneyforthecompany.IfLillyisnotoperatingefficiently,itmightbebettertoinvestorspendthatmoneyonoperatingmoreefficiently.It’stypicallyagoodstrategytoinvestinstocksafterthecompanyhasitsownfinancestogether.
! Howcanacompanygeneratemoneythroughinvestingandfinance?Ittakestime.EliLilly–inthisexample,sayLillywantedtotakeanewexperimentaldruginphaseII,theywillinvestinthatdrugataratethattheyknowtheycanmakemoneyback.Thepotentialistosellforbillions,butittakes100Mtoinvesttoday.
! [EliLilly]Thenetincomeisabout10%or2.4B.Ifthecashflowisnegative,whyinvestthe10%ratherthanworktowardsthepositive?Cashflowishowacompanymanagescash,andnegativedoesn’tmeanthecompanyisdoingaterriblejob.Forexample,ifit’spositivethecompanycouldtobemoreefficientwithcash.Forexample:Applehastoomuchcash–they’renotdoinganythingwithit.Theycouldmakemoreunitsorre-investthatnetincome;coulddomoreacquisitionsorinvesting.AlsomostoftheAppleshareholderspreferdividendpayoutsregularlythanreinvesting,whichisasourceofincomeforthem.Whereas,EliLillyshareholderspreferinternalgrowthandexpectmorebenefitsinthefuture.
! Ifacompanyhas10%toinvest,shouldtheyinvestintheirownoperationsorinvestexternally?It’smoneythatgetsmovedaroundwithinthecompany.Thecompanycouldgivedividends,payoffdebt,invest,andsomuchmore.That10%couldgointocostofcapital,anotherratiotocomparetoothercompanies.
! Whatissolvency?Theabilityofacompanytoreachitslong-termgoalsorfinancial
Notesforfacilitatingthegroupdiscussion
commitments.Abilitytomeetshort-termgoalsorpayshort-termobligations,orsellassetstoraisecashisoftenreferredtoasliquidity.Itmostlyreferstototalassetsoncompany’sbalancesheet.
! [EliLilly]Theyarespending1.5Bmonthly.Howdoyoudeterminesolvency?Determinehowmuchcashtheyhaveonhand.ForLilly,theyhave4.5B,sotheyonlyhaveacouplemonths.Soifthiscompanystopsmakingmoneyanddidn’tmakeanotherdime,theycouldcovertheirfinancialcommitments/expensesandtheywouldhave3monthstocomeupwithasolution.
! Whatisthedifferencebetweentheannualoperatinglossandyearoveryearloss?AnnualOperatingLossisforaspecificyear,forexample$100Min2014and$120Min2015.YearoverYearlossisthecomparisonbetweenspecificperiods;inthiscaseit’s$20M(20%)morein2015.Theyearoveryearlosstellsyouaboutthecompany’sgrowthandhowthecompanyismanagingcapital.Howmuchmoneyyoumakeisimportant,butonWallStreetit’simportanthowmuchyou’regrowingsalesandEPS.Howisthecompanytakingthemoneyandre-investingitandgrowingsales?
! Whatisearningspershare(EPS)?Earningsarethebottomline,likenetincome.Pershareisdividingthatnetincomebyhowmanysharesthecompanyhas.Ex:Ifthecompanymade1Mthatyearandhas1Mshares,theEPSis$1.It’sanindicationofhowprofitableacompanyis.Thatgrowth,yearoveryearisusedtoseeifacompanyovertheyearsisgrowingorshrinking.
CASHFLOW
! Wheredoyoufindthecashflowstatement?TheCFstatementislistedafterthebalancesheet.ForPfizer2015:page70.
! WhatarethepartsoftheCFstatement?CFfromoperations,CFfromfinancingandCFfrominvesting.CFfromoperatingactivitiesisbasicallyhowmuchcashisflowingintothecompany.Intheincomestatement,thisisthenetprofit.Howmuchissoldminushowmuchwasexpensed,netincome.ButwithCF,needtoconsiderdepreciation.Intheincomestatementthecompanysold100M,butspent20MinR&Dand40MinSG&A,soit’s40Minprofit,butinthoseexpenses,needtoincludedepreciationandstockbasedcompensationthatwasgiventoemployees.Thisisn’tcashthatwastakenoutofpocket,butit’sacost,andit’stakenoutsothecompanypayslesstaxes.CashwilltakenetprofitfromtheP&Landaddbackthenon-cashitems,toaddbackdepreciationandstockbasedcompensation,becausethatmoneydidn’tflowout.AndCFfromoperationsishowmuchflowsinoroutofthecompany.ForPfizer,2015-14.5B.
POSTERSESSIONS
• Howdoyoucomparegrossmargins?ThehighertheGMthebetterthecompanyperformance.• Grossmarginscanbecomparedindifferentways:
o GrossMarginsforthesamecompany(2015vs2016)isaYoYcomparisono GrossMarginsforCompanyAvsCompanyBinspecificperiod.Forexample:2015GMof
EliLillyvs2015GMofGILD.Thisenablesinvestorstoanalyzewhichcompanyisdoingbetterinthemarket.Usuallycomparisonhappenswithinpeersinthesameindustry.
