Welcome back to the Capstone course. Now we are working on module three. Now you will see how module two information actually flows into the balance sheet. We are going to be looking at the items that do appear on the balance sheet. The assets and how you have paid for those assets or your source of funds. So these are things that you learned when you took Kevin's first class. When you looked at the position of the company. Again, you have to spend money to make money, there's no way that you will be able to create a product, provide a service, or have a charitable organization if you don't have some assets, if you don't have some economic resources to keep that business flowing. So, what assets do you actually need? When you look at the balance sheet template, you will see a list of, just as you saw in your first course. You will see your current assets. You will see long-term assets. You will see other assets. Once again, much of this will flow from the estimations you made in expenses. For example, equipment. If you determine for your manufacturing entity that you are going to pursue a manufacturing entity, you certainly need equipment to do that. If you are going to provide services, maybe your equipment will be your computer system. Or you will have furniture or other items. If you have a entity like a small retail store, you are going to have fixtures of some kind where you will be able to hang the products that you are actually selling. Now, once again there are many things on this template that you certainly won't have if this is a brand new entity for you. You won't have any sort of investments in securities as part of your asset section. You may or may not have any notes payable in your liability section. You won't have an extremely complex stockholder's equity section. So when you look at overall what assets do you need, you will see how they fall into the template for the balance sheet. Now, once again, you have a challenge ahead of you. Where you going to find this information? Some of this might actually be a little it easier to find than your cost of goods sold or your operating expenses. And the reason for that is, when you have to buy equipment or you have to buy furniture, you are going to pay for it at a selling price just as if you were any regular customer. Maybe you can negotiate a deal on a business to business basis. However, more than likely you can do some internet research, look at the assets that you need to run your business and get a good estimate of what they will cost. You can also determine cost of assets from your experience, whether you have that business already, whether it's just related to life experience. If you're creating a business based on a hobby that you have all ready pursued then that will provide experience and the cost of assets that you will need as an economic resource moving forward to make sure that you actually have a sustainable organization. While this project is in a short term time frame where we complete the project. The goal is that these are skills that are going to help you in the long term. So we do want to get a good idea of the cost of assets and get used to doing some research on how you would find the cost of assets. Now, as I said, you have to spend money to make money. So you have to spend money to pay for these assets. And you have to determine where are you going to get the money to pay for these assets. You may have some savings that you can use, your own funds that you can use to buy the assets. You may have investors, whether they be family members or possibly other people that you've encouraged to be a part of the business. You may be able to get bank loans. Very offer, banks will offer loans specifically to small businesses, possibly at a better interest rate, and now crowdfunding is the big explosion on how an entity can actually raise funds. So again, for the overall project, you want to be creative. Don't hold anything out, think of all the different ways you could pay for the asset, because again at the starting point of this entity, you're going to have the estimate of the cost of the assets. And you're going to need how you're going to pay for them. And at this point they will nearly be equal. We'll have a little bit of difference for a stock holder's equity or a capital account. But at this point assets and the source of funds are almost the same number when you add them all together. So you have a very good idea of what and type of resources you need from whatever is available to you to capitalize your business. So that you spend that money so that your business continues to be sustainable. So that is our goal in module three. We want to get a sense of for a new enterprise or even if you're working on an enterprise that you already have, how does that balance out? Have you fully thought about it is well, I need a piece of equipment. How am I going to pay for it? Here are my options. As opposed to saying, I need a piece of equipment, I need it now or I can't produce my product, okay? You want to have a plan as to how you're going to pay for assets. So we've looked at possible assets through the templates. Here are some examples that you have for how you could pay for these assets. Again, I encourage you to be creative. So in the instructions on the course site, you will have the requirements that you need of how to present this information. Now once you have submitted your assignment, then it is time for peer review. As I said, it is really important that as a peer reviewer, you read the business description that's posted. You might be reviewing the same student, but they could have revised their business description. And it's important that you have that in mind. Because throughout the project I really encourage you to revise based on the additional information you receive on each step along the way. So specifically, what is the peer review we're going to look at? When I say, is the list of assets complete? I'm thinking about, that you obviously need to have cash to pay day-to-day expenses, and to have some savings contingency funds. You are a manufacturing entity. You obviously have to include some expenses. Almost any entity will have computer equipment that is going to be part of their assets. Maybe you already own the building and the land from which you're going to operate. That will be one of your assets. So things that are just absolutely essential to running the business that was described to you. Now additional assets may also be provided and that's great, but you want to make sure that things that are really necessary are actually being included. Now, are they included? How are they getting those cost estimates? And that's part of what you will provide in your assignment. So the peer reviewer is going to look at your explanation of the cost estimate to see if they are reasonable. Once again, I do not expect the reviewer to do in depth research to check the amounts that have been presented to you. Use what you have learned in the courses, use your own experiences, your own life experiences, and use your common sense to evaluate are the assets reasonable? Okay, now as I said, have to spend money to make money. Is there a reasonable plan to pay for those assets? If you don't have a plan then the business is going to have a really tough start. It's going to have a very steep climb to be successful. So you want to have a plan to purchase all of the assets that you feel are necessary. So, in this module, you are looking specifically at the assets and liability section of the balance sheet, or the position of the entity as of a point in time. The point in time we're looking at is the very start of the entity or if you have a current business, you can use at the beginning of your year, if you like. As always, provide constructive feedback. You may have thought of things based on your experience. Based on things that you are working on for your own project, that weren't thought of in the module three assignment that you reviewed. Providing constructive feedback to each other will improve everyone's final product. As I said, when working on these types of things, we really learn as much from each other as we might from the actual research that we are doing. To sum up module three, we are looking at balance sheet items. You have the template of a balance sheet, although you may not have every single account. And, you are going to focus on the assets that are absolutely essential, and developing a reasonable plan on how are you going to pay for those assets. Essentially, day one when you start your business. So this relates back, once again, to the first course that you had with Kevin. And that's how this fits into the overall specialization. Good luck in your assignment.
