Financial Analysis and advises for startups

1. ACCYBER
Your Business Advisor
By Ghazi Al Mahayni, CMA,CFM.
Financial Analysis and
Advises.
For Startups.

2. Ghazi Al Mahayni
2
Education
Certified Financial Manager-Certificate No # 4839
Institute of Management Accountants. USA New Jersey.
Certified Management Accountant-Certificate No # 28567
Institute of Management Accountants.
Damascus University.
Institute of Management Accountants. USA New Jersey
Finance Manager –HQ
Accounting Manger – Asia & Australia
Financial Controller – Sub-Saharan Africa
Cost Controller
Chief Accountant
Malaysia. SLB
Malaysia. SLB
Saudi Arabia. SLB
Qatar. SLB
Syria. Space Toon TV
Syria. Dublin International
Petroleum
+17 years of Experience
Training & Courses
Financial Training Level 1 Abu Dhabi
Financial Training Level 2 Dubai
Unleash the lead in You Kuala Lumpur
Effective Communication Skills Kuala Lumpur
Segment Financial Training Houston
CFM
CMA
Bachelor
Of Economics
A Member of
ICMA
A Member
CFA
Institute of Chartered Financial Analyst
Financial Controller – Sub-Saharan Africa
Senior Chief Accountant
Chief Accountant
Angola. SLB

3. Agenda
• “Financial Statements” Understanding .
• “Financial Statements” Analysis. Vs
• Stock Analysis for investment Decisions making.
• General Accounting Advises for Startups-business.
• Q&A
3

4. Financial Statements (Understanding):
Each listed Company must reports its financial statements annually.
(Within the 1st quarter of the subsequent year).
These statement are prepared by the corporate management and audited by
an independent accounting firm ( Mostly one of the big four firms).
4
Balance
Sheet
Notes.
Income
Statement
Cash Flow
Statement
Change of
Equity
Statement

5. Financial Statements (Understanding):
• The annual report is publicly published and available for any one on
the official website of the corporate itself or the listing stock market.
5
Owners
Management
Employees
Investors
Suppliers
Customers
Government
Financial
Statements
stakeholders

6. Financial Statements (Understanding):
Accountant must follow the basic accounting principles while performing the bookkeeping
1. Economic Entity Assumption
2. Monetary Unit Assumption
3. Time Period Assumption
4. Cost Principle
5. Full Disclosure Principle
6. Going Concern Principle
7. Matching Principle
8. Revenue Recognition Principle
9. Materiality
10. Conservatism
6

7. Financial Statements (Understanding):
The financial statements are prepared based on certain accounting
principles:
7
GAAP
(Generally Accepted Accounting Principles)
US Companies
IFRS
(International Financial Reporting Standard)
International Companies

8. Financial Statements (Understanding):
8
• Top differences between GAAP and IFRS:
GAAP IFRS
• Globally accepted standard for accounting, and is
used in more than 110 countries.
• Exclusively used within the United States and has a
different set of rules for accounting than most of the
world.
• GAAP focuses on research and is rule-based. • IFRS looks at the overall patterns and is based on
principle.
• Under GAAP, a company is allowed to use the Last In,
First Out (LIFO) method for inventory estimates.
• Under IFRS, the LIFO method for inventory is not
allowed.
• Development costs must be expenses under GAAP. • Development costs can be capitalized under IFRS
• Intangible assets under GAAP are recognized at the
fair market value and nothing more.
• It takes into account whether an asset will have a
future economic benefit as a way of assessing the
value.

9. Financial Statements (Understanding):
• Balance Sheet Notes:
Is a financial statement that reports a company’s ASSETS,LIABILITIES,
and SHAREHOLDERS equity at a Specific Point in Time.
9
Assets Liabilities
Resources owned the company Obligations of a company
They have future economic value They have future economic sacrifices.
Measured or expressed in Monetary basis

10. Financial Statements (Understanding):
• Example:
By 31/12/2018 reported their Balance Sheet Notes ( Listed on
NASDAQ Stock Market, Numbers in millions).
10
Cash and Cash Equivalents
Short-Term Investments
Net Receivables
Inventory
Other Current Assets
Total Current Assets
Long Term investments
Fixed Assets
Good Will
Intangible Assets
Other Assets
Total Assets
Assets
31,750$ 20%
9,500$ 6%
16,677$ 10%
17,174$ 11%
-$ 0%
75,101$ 46%
-$ 0%
61,797$ 38%
14,548$ 9%
-$ 0%
11,202$ 7%
162,648$ 100%
Amazon
2018
%
Accounts payable
Short-term debit
Other Current liabilities
Total Current Liabilities
Long Term Debit
Other Liabilities
Defered liabilities charges
Misc Stocks
Minority interest
Total Liabilities
Total Equity
Total Liabilities
Liabilities
61,855$ 38%
-$ 0%
6,536$ 4%
68,391$ 42%
23,495$ 14%
27,213$ 17%
-$ 0%
-$ 0%
-$ 0%
119,099$ 73%
43,549$ 27%
162,648$ 100%
Amazon
2018
%

11. Financial Statements (Understanding):
• Income Statement (Profit or Loss statement):
Is a financial statement that reports the company’s Revenue and
expenses During a particular period.
11
Revenue
Expenses
Income Before Taxes
Taxes
Net Income

12. Financial Statements (Understanding):
• Example:
Amazon reported their income Statement for the year of 2018
Numbers in thousands :
12
Total Revenue $232,877
Cost Of Revenue $139,156
Gross Profit $93,731
Sales, General and Admin. $81,310
Operating Income $12,421
Interest Expenses $1,417
Income Tax $1,197
Net Income $10,073

13. Financial Statements (Understanding):
• Cash Flow Statement:
Is a financial statement reports the sources and uses of cash by
operating activities, investing activities, financing activities, During a
particular period.
13
Net Income ***
Cash generated by operating activities +/-
Cash generated by Investing activities +/-
Cash generated by Financing activities +/-
Ending Cash Balance ***

14. Financial Statements (Understanding):
• Example:
Amazon reported their cash flow Statement for the year of 2018
Numbers in thousands :
14
Net Income $10,073
Cash generated by operating activities +$30,723
Cash generated by Investing activities -$12,369
Cash generated by Financing activities -$7,686
Ending Cash Balance $21,317

15. Financial Statements (Understanding):
• Change of Equity Statement:
Amazon insider number of trades during the last 3/12 months trading
15

16. Financial Statements (Analysis):
To perform a quality financial Analysis for any targeted company we
need the following:
• The financial statements of the targeted company .
• The financial statements of a main competitor.
• Some information about the sector itself.
• Perform common size conversion.
16

17. 20%
6%
10%
11%
0%
46%
0%
38%
9%
0%
7%
100%
%
31,750$
9,500$
16,677$
17,174$
-$
75,101$
-$
61,797$
14,548$
-$
11,202$
162,648$
Amazon
2018
Stock Analysis:
Balance Sheet Note analysis:
17
Cash and Cash Equivalents
Short-Term Investments
Net Receivables
Inventory
Other Current Assets
Total Current Assets
Long Term investments
Fixed Assets
Good Will
Intangible Assets
Other Assets
Total Assets
Assets
20,522$
10,464$
13,164$
16,047$
-$
60,197$
-$
48,866$
13,350$
-$
8,897$
131,310$
Amazon
2017
16%
8%
10%
12%
0%
46%
0%
37%
10%
0%
7%
100%
%
32,221$
1,733$
-$
-$
6,871$
40,824$
28,274$
10,568$
25,772$
5,856$
2,686$
113,979$
AliBaba
2018
28%
2%
0%
0%
6%
36%
25%
9%
23%
5%
2%
100%
%
4% YOY cash increase, but
still 8% lower than a main
competitor
Absence of long term
investments in other
companies, while Alibaba
massively did.
Amazon is increasing
investments in fixed assets
compared to Alibaba
Amazon estimated Good
will value prior to public
issuance is much lower
than Alibaba
Slight increase on
inventory
However, competitor has
relief of these items and
absence of risk

18. Liabilities Amazon 2017 % Amazon 2018 % AliBaba 2018 %
Accounts payable $ 52,786 40% $ 61,855 38% $ 15,076 13%
Short-term debit $ - 0% $ - 0% $ 1,443.00 1%
Other Current liabilities $ 5,097 4% $ 6,536 4% $ 5,066 4%
Total Current Liabilities $ 57,883 44% $ 68,391 42% $ 21,586 19%
Long Term Debit $ 24,743 19% $ 23,495 14% $ 18,997 17%
Other Liabilities $ 20,975 16% $ 27,213 17% $ 325 0%
Defered liabilities charges $ - 0% $ - 0% $ 3,227 3%
Misc Stocks $ - 0% $ - 0% $ 477 0%
Minority interest $ - 0% $ - 0% $ 11,224 10%
Total Liabilities $ 103,601 79% $ 119,099 73% $ 55,836 49%
Total Equity $ 27,709 21% $ 43,549 27% $ 58,144 51%
Total Liabilities $ 131,310 100% $ 162,648 100% $ 113,979 100%
Stock Analysis:
Balance Sheet Note analysis:
18
Amazon increased other
liabilities by 1%, but
competitor has a relief of
such obligations.
Amazon equity increased
by 6% however Alibaba
still has higher value of
equity and better
coverage.
Amazon has no minority
interest while Alibaba has
10%
2% YOY payable decrease,
but still 25% higher than a
main competitor

19. Period Ending: 2016 % 2017 % 2018 % AliBaba % Sector
Total Revenue $135,987 100% $177,866 100% $232,887 100% $39,777 100% 18%
Cost of Revenue $88,265 65% $111,934 63% $139,156 60% $17,014 43%
Gross Profit $47,722 35% $65,932 37% $93,731 40% $22,764 57%
Operating Expenses 0% 0% 0% 0%
Research and Development $0 0% $0 0% $0 0% $3,617 9%
Sales, General and Admin. $43,536 32% $61,826 35% $81,310 35% $6,920 17%
Non-Recurring Items $0 0% $0 0% $0 0% $79 0%
Other Operating Items $0 0% $0 0% $0 0% $1,132 3%
Operating Income $4,186 3% $4,106 2% $12,421 5% $11,017 28%
Add'l income/expense items $190 0% $548 0% $257 0% $5,508 14%
Earnings Before Interest and Tax $4,376 3% $4,654 3% $12,678 5% 16525 42%
Interest Expense $484 0% $848 0% $1,417 1% $567 1%
Earnings Before Tax $3,892 3% $3,806 2% $11,261 5% $15,985 40%
Income Tax $1,425 1% $769 0% $1,197 1% $2,893 7%
Minority Interest $0 0% $0 0% $0 0% $426 1%
Equity Earnings/Loss Unconsolidated
Subsidiary
($96) 0% ($4) 0% $9 0% ($3,305) -8%
Net Income $2,371 2% $3,033 2% $10,073 4% $10,187 26%
3% Gross profit increase.
However still 17% lower
than the competitor.
30% YOY Revenue Growth,
12% higher than the sector
and 6 times the
competitor revenue.Stock Analysis:
Income Statement analysis:
19
Sales and operating
spending is 18% higher
than a competitor
Low gross profit and high
sales and operating costs
heavily reflected on EBIT
and NET income is
22% lower than a
competitor

20. 55% reduction on
investment spending.
Still in line with Alibaba
Stock Analysis:
Cash Flow Statement analysis:
20
Reversal direction in
finance activities Vs last
year.
Period Ending: 12/31/2016 12/31/2017 12/31/2018 3/31/2018
Net Cash Flow-Operating $ 17,203 $ 18,365 $ 30,723 $ 19,895
Net Cash Flows-Investing $ (9,516) $ (27,084) $ (12,369) $ (13,333)
Net Cash Flows-Financing $ (3,716) $ 9,928 $ (8,037) $ 2,272
Net Cash Flow $ 3,759 $ 1,922 $ 10,317 $ 8,833
67% YOY Operating cash
flow increase, 54% higher
than the competitor.

21. Stock Analysis:
21
Item Amazon
Cash + Steady positive Growth.
Receivables And Inventory -/+ Steady Growth Vs a competitor with relief of such burden.
Which means more risk on collection and management.
Long Term investments - Absence of such items Vs a competitor heavily doing so, which reflects
higher risk during any financial crisis.
Fixed Assets - Heavily investing in Fixed Assets compared to a competitor which make it
difficult to liquidate the assets if required.
Good Will +Less than a competitor which means possible increase during a potential
acquisition.
Accounts Payable & other liabilities - Higher than a competitor, though it is slightly decreasing.
Total Equity - Lower than a competitor which means less coverage and owners
protection

22. Stock Analysis:
22
Item Amazon
Revenue + Steady positive Growth and higher than the sector itself.
Gross Profit + Steady Growth 2% YOY.
- Still 17% lower than a competitor.
Sales and operating expenses - Increase in the sales cost and 18% higher than a competitor.
Net Profit - Very low net income at 4% Vs 26% for a competitor.

23. Stock Analysis:
23
Conclusion
Amazon Alibaba
Stock Market Price $1,844 $185
EPS $20.14 %0.11 $4.33 %2.3
Book Value per share $88.65 $42.53
Market value 20.8 times the book value 4.34 times the book value
• Amazon stock is overpriced and at high risk on the long run.
• Alibaba is currently providing higher EPS, but showing better business strategy and long term vision.
• That’s why Amazon is showing insider sales while Alibaba showing no sale or buy during the last 12
months.

24. General Advises:
24
• Build your Financial plan on Monthly &Yearly basis.
• Update the Actual results.
• Compare and make decisions
• Hire a qualified accountant to perform the accounting as early as possible.
• Hire a qualified Tax advisor “Mali Meşaver” to avoid surprises.
• Select the right Accounting software which fits your current and future needs. Ask
experts.
• Focus on the cash flow: Where it came from and where is the best to go for.
• Make priority on spending. The added back value 1st.
• Keep a reserve of cash for surprises or investment chances.
• When it is about planning : Be pessimistic with Sales forecast. And conservatism with
expenses.

25. Q&A
Your Business
Advisor