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Questions & Answers
Q: My question is on the inputs page. The space for owner labor in my case is $35,000. The outside earnings box seems to ask for total outside earnings being given up without regard to the owner labor amount I plan on paying myself once cash flow allows (the 35k entered in cells C19 and C28). My outside earnings would only total about $60,000. When I enter 60k into cell c64, the valuation is a negative number. When I enter 25k in cell c64 (60k-35k) I get a positive value of the business. The cash flow projection allows me to pay myself partial salary the first year and full salary the second. So it seems to me that the 25k--which is all I'm giving up of outside pay is the number to enter as owner's external earning power (cell c64). Am I understanding it correctly? Thank you for your help. I'm helping a friend on his purchased model, but as a financial adviser, intend to purchase the commercial license on my very next business client.
A: The Owners External Earning Power (C54) is the amount of earnings given up when the owner commits to the business. If you could earn 60k outside the business then before the business can start providing a return on investment it must give you a return of 60k. Anything above will be a return on investment. The contribution you (the owner) make to the business in labor is included as the Owner Labor in the Variable and Fixed Costs. This is the cost of basically paying someone else to do what you do in the business. The actual amount you pay yourself does not really matter as any profit is the owners. So when we look at the Results page we see the Operating Surplus (which is the surplus available from the business without the contribution of the owner), and the Owner Cash Flow which is the Operating Surplus plus the value of labor provided by the owner. To determine the return on investment we then deduct the amount the owner gave up to wok in the business and deduct an allowance for depreciation leaving the Business Return. Which is the amount the business investment really provided for the owner. I hope this makes sense, if not let me know.
Question and Answer Item 43 - Browse All Question and Answer Items
Q: I am trying to use this tool for a retail business that has inventory. My questions concern accounting for inventory value as an asset (not to be depreciated) and 'cost of goods' an an adjustment to sales.
A: For non-depreciating items you can handle them as a component of the Other Investment (operating capital). This value is actually adjusted by the Valuation (depending on the return you set). Considering the Inventory when you generate a valuation the Other Investment value should cover the the cost of inventory (stock on hand). If there was no other investment component to consider then the Other Investment would consist of Inventory plus Goodwill. If the Other Investment is less than the inventory then the required return is not achieved.
Question and Answer Item 44 - Browse All Question and Answer Items
Q: What are the requirements to use software?
A: Browser based software including Form1 Builder and Investment Analysis Software apply the Document Object Model (DOM) and to function correctly your system should include a 5th Generation browser with JavaScript enabled. Mozilla FireFox or Microsoft Internet Explorer 5.5 (Windows 98) or later is recommended, Netscape Navigator 7.0 or later is also supported. If required you can download a current version browser free of charge from:
* Mozilla FireFox - http://www.mozilla.org/
* Microsoft Internet Explorer - http://www.microsoft.com/windows/ie/default.mspx
* Netscape Navigator - http://browser.netscape.com/ns8/
For Form1 and MailMailer the php scripting language and mail function must be available on your web server to run these php base software titles. Most commercial web servers support php. For more detail on the php language please refer to What is php? ( https://bizpep.com/phptest.html ). The only additional requirement is a web browser.
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Q: What about software security?
A: Form1 Builder and Investment Analysis Software always save information to your computer. If the software is installed on your computer this information is as secure as all other data on your system. When the software is run from a server saved information can be accessed as a cookie by the hosting site. It is recommended that you install and run software directly on your computer when maximum data security is required.
If you set the Form1 delivery email address in the configuration variables Form1 can only send to that email address. This cannot be altered unless access is provided to modify files on your server.
MailMailer emails can be sent by anyone who can access your MailMailer web page. To protect from misuse only provide your MailMailer address (url) to authorized personnel. If desired you can change the name of your MailMailer file and/or locate it in a password protected directory to provide additional security.
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