Finance for Geeks (Mon Nov 17, lecture 21)

Homework due for today

  • Read Paul Graham on Growth
  • Read and learn how to design good spreadsheets. Even if you think you know how, read both of these: How to use a spreadsheet to create a simple budget and Good Spreadsheet Design. Do all the examples in Google Sheets. Deliverable: Submit the url of the google sheet with your work from the two pages. Don’t forget to make accessible by all
  • Show off your knowledge of two important ideas in spreadsheets. Create a small, but meaninful example of the use of absolute and relative references, as well as a small but meaningful example of the user of the =VLOOKUP function. Deliverable: Submit the url of the google sheet with your work. Don’t forget to make accessible by all

Money

  • Life blood of a business are resources
  • You consume resources and you generate value
  • Remember Gazintas > Gazoutas

Very basic financial modeling

  • Basic terms
    • Costs
    • Revenues
    • Profits
  • Core calculation:
    • Profits = Revenues - Costs
  • Types of costs
    • Fixed
    • Variable
    • Division is not always clear cut
  • Fixed Costs
    • Cost you have to get to the first ‘thing’
    • First release? First sale? First Orange Juice Sold?
    • Rent
    • Communications
  • Variable Costs
    • Marketing expenses
    • Salaries
    • Raw Materials
  • Independent variables
    • Units sold?
    • Units manuctured?
    • Number of employees?
    • Number of customers?
    • Target new customers per month

‘Programming’

  • Learn to be very comfortable with a spreadsheet
  • Google Sheets is fine, excel is fancier

Basic Example Financial Model

  • Lemonade Stand 2.0
    • 1 stand, staffed by 2 kids
    • Three sizes of lemonade, S, M, L
  • What are all the sources of revenue?
  • What are all the costs?
  • Lets lay it out in excel

More complicated example

  • Simlistic Paid Engine of Growth
  • More complicated: Stick Engine of Growth

Discussion about this course

  • Take 5 minutes to think and write down some notes
  • A friend asks if he/she should take this course. Would you recommend it? What would you say students need to do if they want to do well in the course?
  • If you were to take this course again, would you do anything differently? What and why?
  • What’s the relationship between natural ability and hard work? Can you still learn things for which you don’t think you have much natural ability? Can hard work overcome natural ability deficits?