 Namaskar. I'm Professor Devdeep Purkayastha from the Indian Institute of Technology, Bombay. Welcome to my course, Business Fundamental for Entrepreneurs Part 1, Internal Operations. As part of the course, I'm very pleased to welcome Professor Umakan Jayaram, who is a very illustrious finance industry veteran to share a few modules. Professor Umakanth is an alum of IIT Bombay, and he went on to do his MBA, post which he has 30 years plus of industry experience in various aspects of finance. He has worked extensively in the banking industry, he has founded his own company, he has sold his own company, and he serves now as a public interest board member at the Bombay Stock Exchange. So it is my pleasure to hand over to Professor Umakanth for his module. Thank you. Yeah, welcome back. We are moving on to the next topic as to how we move, learn about the basics of accounting. Having understood the reason why accounting and finance plays a role, which is very significant in business, and having understood the problems and issues that are typical to a finance and accounting view of a business. We are now sitting about a journey of at least familiarizing ourselves with the basics of accounting. Let's suppose that you are a tech founder and you have been focusing on your product development and client sales function in order to get your business off the ground, and you've done a wonderful job, your startup is successful, and you made your first sales. In all the 9 to 10 months of your journey so far, assuming that it took you 10 months to do this, you left all money matters to an accountant. He started looking at all the things that needs to be done in terms of maintaining the books of accounts and giving you reports. He comes to you at the time in which you are actually doing reasonably well, and he shows you a periodic statement, such as the one in the right. He says that it's a trial balance worksheet, and he wants you to learn and to understand what this trial balance really is. Let's now start from ground zero and look at this report. What does it say? At the top it says the general ledger account balances, by which you have two statements here. You have a general ledger, what is a general ledger, and what are account balances? The account balances seem to be of two types. One is what is known as debits, and one is what is known as credits. And then you have different kinds of descriptions, some of which you may even be familiar with, such as investments, or taxes, or credit card payables, that's the kind of amount that you need to pay the credit card company, or common stock, that being the investment in the company, or revenues, or the business earns, or salaries. So some of this you are familiar with, some of them you are not familiar with. But the good thing is you see them a good, a tally, you know, you see the whole list of debits, the whole list of credits, and when you add them up, they seem to be totaling up to the same level. So here's how we break this down. Let's go one by one to understand what these elements mean in the statement. When is the statement prepared? What is the statement trying to tell you? And why is it prepared? In order to understand it, we'll have to go back to the basics again, and let me just bear with me to give you what are the 101 of accounts. We'll start off with what is known as the ledger. A ledger is a book of record. It is where you actually record all transactions happening in the business. The records are kept in t-account form, where each of t-account has got two different headings, one being debit and one being credit. In actuality, debit means nothing but the left side, and credit means nothing but the right side, although they have the Latin histories as to what they really stood for. They go together to court as known as the double entry accounting system. Every transaction that is worthwhile of putting into the accounting books will hit at least two accounts. And what is an account? It is nothing but a storage unit used to classify and summarize money measurements of business activity which fall in the similar nature. All measurable business activity is recorded as transactions. Let us give an example. If the company affects a sale of its product, sales to a customer is an activity. This is recorded as a transaction. In this transaction, two things happen. Products move from the company, which is the producer to the customer, and the customer pays cash for that. The movement of the product of a certain value to the customer is recorded in the value term, which is the measure. And the movement of cash, which has its own value, of course, goes to the company. This exchange of value is noted as an income transaction. This account type for income is where we have listed here as the period earnings. Accounts come in various forms, but they all are classified as assets, liabilities, equity, retained earnings, income, expenses. And you can look at a special type of expense called dividends. These are all the forms in which accounts take place. What is an asset? An asset is what a firm owns. It is a resource that is in a position to generate cash flow. A typical form of an asset is a property if the business owns property. Another form of an asset is a equipment. Liability is what a firm owes to others. This arises from obligations that the firm has to the people it takes resources from. Owners' equity is nothing but the contribution of cash capital into the business. Income and expenses are intuitive. They mean just what they say. It is what the company owns from sales. And expenses are what the company spends. And finally, dividends is a particular form of distribution of profits, which is a difference between income and expenses to the stockholders. These are the various forms of account types. Remember, revenues, expenses and dividends are all having a particular characteristic. They are flow accounts. In that, they are temporary in nature. Their balances are accumulated for a period. Usually for three months or for a month or for any period you want to set up. And after that period, they are actually closed out. They move in as retained earnings into a stock account. The difference between revenues and expenses is income and we will see how that happens. Everything in the balance sheet are stock accounts. They are actually the measure of stockpile of assets you have or the total amount of obligations you own. Assets and liabilities or the total amount of net asset value or the net ownership value of the business. The principle and only equation that is to be known and which follows logic is this accounting equation where assets will always be equal to the liabilities plus equity. This comes from the intuitive logic that assets being all that the company owns will have to be accounted for, all that the company has raised as resources from others, which is what they owe, plus all the obligations that has come in form of ownership, the claimants of the profits. It's restated as assets is equal to liabilities plus equities. For every transaction, this particular equation is held true. And a transaction is one which moves any one of these primary accounts. When you add to record a transaction for something that you do in business, usually the recording process is called a journal entry and a subsequent posting to a pre-identified T account, a ledger account. Let's take an example. If a company has purchased some raw materials in order to process them and make finished goods, this purchase is made from a vendor. So the purchase order has been made to the vendor. The vendor ships those goods and as the goods have been shipped and reaches the customer premises, his customer premises, which is the firm's premises, the purchase order has to be affected by its contract into a payment obligation, which is a liability or an actual payment, which is a cash transfer. When you record this transaction, you actually affect the liabilities accounts because the firm is recognizing a new liability and you also affect an asset account because the firm is getting into its possession raw material assets. Because the raw material assets have increased and the mood the asset levels high, such an increase is recorded as a debit by this recording convention. All increases to assets are recorded as debits. So we debit raw material assets and all liabilities which increase are recorded as credits and we credit accounts payable, the same value. So the value is say 100 rupees of assets, raw materials, then this is the transaction which is posted and so on and so forth. Many, many such transactions, they go through the rules and conventions of increase in assets as a debit, increase in liabilities as a credit, increase in equity as a credit, decreases obviously the other way around. These are all the postings that happen through evidences which are in voices or in form of vouchers. After these postings are done and they are posted into predesignated accounts, all of the A, L, O, R, I, E, D, I, E type of accounts. And this listing is exactly what you saw as a trial balance. So we'll go back to our previous, this is what you saw as a trial balance. This is what you saw as a trial balance. Here you can see that all these assets are stock accounts or balance sheet accounts in the form of assets. All these liabilities are against stock liabilities, balance sheet items, right up to equity which is also a balance sheet item. The balance sheet equation is assets is equal to liabilities plus equity. You can see that over here. Usually in a trial balance, you may find that this equation, although it will be equal in debits in credits, there will have to be some adjustments made. There are several types of adjustments that one has to do after the trial balance is drawn up. And these addresses certain accounting concepts. These of course are the income statement. The accounting concepts which are primarily most important, there are about eight to nine of them. They are the conventions by which all statements are made. The most important concept, especially governing the income statement, is when we recognize revenue, revenue recognition. There are two key principles here. The first one is when the earnings process is substantially completed and the cash collection is reasonably assured, then we can recognize revenue. This is a very important concept for in the context of Indian startups because there's been a lot of controversy in the recent past as to how the book of accounts has been kept by many of these venture capital funded startups. They bring in a concept of what is known as adjusted revenue, which is not really something that accountants are familiar with. Nobody who's a classical accountant who's trained himself under the general accepted accounting principles followed the world over will actually understand the term adjusted revenue. But this is specifically an economic concept that startups companies normally use to build a narrative that they are actually moving towards a path and progressing towards profitability. The second concept in income statement preparation is the matching concept. All the income that is generated in a particular period has to have only the matched expenses for that period to actually come out with what is known as the revenue for that period. An example would be if you had actually made an expenditure in the last month of the financial year for an insurance contract that is going to be valid for the business for 12 months, then the matching principle would say that you should only take that portion of that expense which is matching towards that period in which the income statement is prepared for the year as an expense level. If it is the last month, then it means that only one-twelfth of that expense should be taken as an expense and not the whole expense. This is how the matching principle works. Why does it work that way? Because we want to give a true and fair picture of how the period performance of the business has been. That's the basic objective of the income statement. There are many more such conventions which are generally going, they go together to compile what are known as gap principles. These are the principles that are agreed by accountants and are actually placed in the law of the land by way of the accounting convention passed through an act in the parliament. The job of an auditor was actually a statutory person run by a statute to actually oversee all of these transactions, whether it has been diligent and whether it has been maintained in a diligent manner and is accurate and is complete, is done by an independent audit firm which is also called as a public accountant firm. The differences that the public accountant will have with the individual accountants of the firm will have to be sorted out. Lest such gaps will have to be notified to the shareholders in a report which is called auditor's report in the form of qualifications or emphasis of matters. The other statement which is the balance sheet is nothing but a restatement of this principle statement of assets is called a liabilities per sequity. It gives you that picture of what a company is ending up as a statement of position in terms of the resources owned by the firm, the form of assets put to use or investments. And the financing of those assets and investments through obligations such as liabilities and the remaining through equity. These are the only three major, two major statements that are prepared by accountants. But there is one other statement which is very, very useful again to shareholders as well as to managers and that is the statement of cash flows. Let's look at all these three statements one by one. The income statement is a very familiar term. Most people actually are intuitively aware what it does. It starts off with what is known as the firm earnings has been or the firm sales has been revenues in terms of sales of products and services. The matching amount of expenses, matched expenses which are directly contributed towards the manufacturing of the products which are sold or the services that is sold goes into cost of sales. If it is a physical good, we normally use a term called cost of goods sold. These are direct inputs, direct cost, directly attributed into the manufacturing system. Plus inventory changes. Inventory is nothing but the stock of raw materials, work in process and finished goods. And how these inventories changed over the year, is the end of the year minus. And this inventory changes, they go towards cost of goods sold. The difference between the firm sales and the direct cost plus the inventory changes or what is known as cost of goods sold is what we call gross profit. After this gross profit, we are actually capturing all the expenses directly attributable to the production of the goods or the delivery of this service. After that comes all of the expenses which are known as overheads. These cannot be specifically attributed towards the product being manufactured. A typical example would be management expenses, expenses of salaries of general managers, CEOs. Their salaries are directly not attributable to the production of goods. But they get apportioned or allocated down in the form of indirects. In this case, the indirects captured were selling, general administration expenses. When you look at the profit after taking into account these indirect operating costs, you end up with what is known as operating profit. This is the profit from operations of the business. The term operating here refers to the fact that this is in strategy, in line with the strategy of the business. The question then would be, are there non-operating profits? Yes, there are. You can make profits by selling off some of the equipment that you don't no longer require. But you can't keep selling the equipment all the time. That's not the purpose for which your company was made. You may have had some extra cash which you invested in say bonds or any other mutual funds or some investments. The income that you derive from those investments are considered non-operational in nature. They don't come into your operating profit lines, neither here nor here. They come below the line. So operating profit is profit from the direct operations of the business and is defined here as earnings before interest and taxes. What is interest expense? Interest expense is the expense incurred for financing your business. If you had actually taken financing lines either from the trade or from a bank and you incurred income, interest charges. It goes here. Some would argue that it actually is an operational item and it can go here. But how you finance the business and how you run the business is actually separated. And finally, what is considered here at this line is called taxable income. And they are actually shown to the tax authorities and you pay tax. After paying taxes, what is left is the only profits which is attributable to shareholders. And this term that is attributable to shareholders is called net profits. This statement right from revenues to net profits is what is known as the income statement. When we use the term dividends in the last slide, dividends is a charge on profits, net profits, below the line. It is the amount of net profits that the business has desired to use to distribute to the shareholders. So if their business have made 100 rupees of net profits and has decided to actually distribute out 80 rupees in form of dividends, then profit attributable to the shareholders is 100. Dividend distributed is 80 and what is left is only 20 rupees which is taken down as retained profits or retained earnings. This goes back to the balance sheet in the form of reserves and surplus, such as the closure. But suffice it to know that the income statement which is otherwise called the statement of operations of the business is nothing but the statement of profit and loss. It answers the question how much profit source made by the business in a period. The next statement is what we said was the balance sheet. A simple balance sheet will actually be balancing out the total ownership assets. There are two terms in ownership assets. One term is called as current assets. The other term is known as non-current assets. The difference between the two is the current assets are those assets which the business owns which can be reasonably converted into cash within a short period of time. Such a period of time is usually one year. So they have cash and marketable securities, cash anyway is cash. And you can also have marketable securities here which you can sell off the market and convert it very quickly. This is liquid. So in the order of liquidity it starts with cash. The second item, line item is accounts receivable. Accounts receivable is nothing but what the company owns from its customers but has not been paid for. So it's a kind of ownership technically because the customer is given a contract that or at least is verbally agreed or contractually agreed that he will pay a related aid. And such an obligation is as good as an ownership for him. The old term that was used, the old term that was used for the same line item was called central debtors. It's also called accounts receivable. Prepaid expenses are also a form of an asset. These are expenses made by the business even before the value of that which is expended has been enjoyed by the business. So since the value is yet to come, that yet to come value is ownership item as an asset in the business. And finally inventory as we know are raw materials purchased or raw materials purchased which is actually being converted to work in process inventory. This is further being processed to finish goods and the levels of that at a particular date. As you can see the degree of liquidity is the highest to the top and the lowest below. But they are all assets which can be converted into cash reasonably within a year. Therefore they are called total current assets. It's quite a different story with the other assets which are property and equipment and what another one which is called goodwill. Property and equipment is a tangible asset in the sense that it's physical. Property could be say at least a factory or an office space. An equipment is all the kind of equipment that goes into manufacturing your product. These assets are not expected to be sold and even if sold they are not expected to be converted into cash cycle of the business. Therefore they are called non-current assets or fixed assets. The final one goodwill is not even a tangible asset. It's what is known as intangible assets. It is only arising because this company probably acquired another business and tried a price which is more than the value of the business, intrinsic value of the business. That difference is what is recorded there as goodwill to balance the books. So such is the asset side of the balance sheet. Moving over to the liability side, this is the obligations of what the business owes to others. Again the same concept. What is owed within one year is listed as current liabilities. Accounts payable is the one that has got the biggest currency. Here again you can have buckets of that which is payable in 90 days and that which is not payable in 90 days, up to 360 days. But accounts payable is accounts payable. Then you have something known as accrued expenses. These are basically the obligations that the business has to recognize but didn't have to pay for. A typical example would be borrowings for which there is a contract for paying interest only after 90 days. But every day there is an obligation that such a period amount of interest needs to be accrued. And this is what is known as an accrued expense. There are other examples to that. And then another form of liability is unearned revenue. These are value deposits that the customer makes to you for which he has received no or he has under-received. The benefit of all your services or your products. So you have earned some revenue on the books but you have actually not accomplished the transfer of benefits. To that extent it's a non-revenue and therefore it's a liability. There is an obligation in your part to actually fulfill your contract to deliver the fiscal transfers or the product transfers or the service transfers to your customer. You need to recognize that as revenue. Companies in the utility businesses, they experience a lot of accrued expenses because they take deposits. They also have unearned revenues and so on. On the other hand, you also have liabilities which are beyond a year. Beyond long-term debt, debt in which they take five-year debt or three-year debt, this is going beyond a year. And there are other long-term liabilities such as guarantees that can be for more than five years and so on. Which are converted into loans. The one has hit it on these guarantees and the guarantee has now converted to a loan. And there are other long-term liabilities which are more than one year. What is left is now only equities. The share of crack capital is contributed capital of the shareholders that is paid in capital subsequently. And the other portion is retained earnings that's a part of earnings which has been plowed back in the company in the form of profits. Over a period of time this accumulates and together they form what is known as shareholder's equity. The whole balance sheet balances because assets is equal to liabilities plus equities. And what is it telling you is how does this company generate its ownership assets? How much is it level of assets which are reasonably productive in nature which can convert itself into cash generation sources? And where does it get the money to actually fund these assets? This tells a story by itself because certain metrics such as the level of current assets in a business as a proportion of its current liabilities tells a story of the liquidity of this business. The current assets are much lesser than the current liabilities. That means what is going to convert into cash is not adequate enough in one year to actually pay off all the obligations of the business. This business is in trouble. So we can actually interpret these financial statements for different purposes and that is what an analyst does. But more on that a bit later. The purpose of this module is only to tell you what a balance sheet is and what it looks like. Let's move on to the next statement of accounts and that is the cash flow statement. So far we have been dealing with only accounts. Accounts are not the same thing as cash. As we have seen accrued expenses is not the same as the amount of payments which have been made and unearned revenues is not the same as the amount of cash that's coming into the business. The cash flow statement focuses only on the amount of cash that the business is generating and the amount of cash that the business is spending. And it ends up with a total change in cash which is shown in the cash balance sheets or the bank statements of the business. This is a very important statement from a owner's perspective because it is cash which actually makes the change in the business. Everything else is only interpretative in value. So going back to the sources of cash, the type of cash we have operating cash. Those that come out of operations. This is a cycle of orders to cash, the pays to procure and so on. And the net of all that generates cash. The second is the cash flow from investing activities. And cash flow from investing activities is nothing but the cash that the business is either generating or losing because of its investments. And the last is the cash flow which is actually raised or it is actually repaid back for financing. Investments is like capital expenditures, like purchase of other businesses, M&A or investing in marketable securities. All of these three options go into either generation or the dilution of cash. Operating cash flow is nothing but net income which is revenues minus expenses, minus tax and minus depreciation. Depreciation is a concept which is to be explained here a little bit. It is nothing but a notional charge that the business occurs every year. It's not a real charge but a notional charge. In such a way that the assets which have a finite lifetime value, finite life value will be able to get replenished at the end of that finite life. For an example, if the business buys computers which have a life value of four years and if those value of the computer spot is say 1,000 rupees. Since these computers are considered to be core to the business, it makes sense for us to generate enough reserves from our profits so that when the life value is over, the company has got enough money to raise 1,000 rupees again and replenish those assets. Instead of waiting for the fourth year and then saying that the 1,000 rupees need to be actually written down and a new 1,000 rupees need to be raised. Every year there is a charge of 1,000 divided by 4 or any other metric for you to expense out as if the useful life has been spent. So every year 250 rupees is taken off in what we call depreciation. In the end of four years, 1,000 rupees would have been depreciated accumulatively and that is adequate enough of a reserve to buy the next equipment. Deplication works like that. It's a non-cash expense but it impacts the operating cash flow. The cash balances are higher than what the net income value will show because net income carries depreciation. And finally, the important concept here is working capital which is nothing but the current assets minus the current liabilities. Some portion of that which is not funded by long-term equity is actually a charge on the operating cash. It basically changes the entire picture of how much of the cash of the business remains because increasing amount of current assets is tantamount to usage of cash and increasing amount of current liabilities is tantamount to the generation of cash. So cash flow from operations, you have to make adjustments from the reported earnings, take back depreciation, write back the tax benefit of a borrowing shield, write back all non-cash expenses other than depreciation like amortizations and recognize the changes in working capital and you will get what is known as operating cash flow. The sum of operating cash flow, the investing cash flow and the financing cash flow, the last part is financing cash flow. The business can actually generate cash by borrowing money from the banks by issuing debt or by issuing equity for the equity. It can use money or service these equity holders and debt holders by paying them dividends. The net sum of these two activities is either a cash positive or drains cash but the level of the nature of the activities is all financing. As you can see the cash flow statement puts together the cash impact of these three activities, operating activities, investment activities and financing activities. It's a very important tool for planning, for forecasting because people can economically forecast what is going to happen to the operations of the business. You can make a decision forecast on how much investments are going to be made and what the surplus is going to be utilized for. And you can make a financing choice as to if there is a gap in the requirement of cash, where will it be from. This tool is a very important tool for management and the way the company was managed is cash will actually be shown by the accountants when they drop the accounts to the firm of the recent period which they ended in the form of a cash flow statement. So analysts who actually look at backward information will see a cash flow statement in the pack of accountant reports. We'll also see a balance sheet and we'll also see an account income statement. This is the total income set, the accounting set for the business to review the operations of the past. We can actually revise any one of this using an example and we would recommend that we will do that. We'll see it tomorrow when we actually see a real company and when we have reported financials for that company. I like to spend some time on the remaining topic which is to do with managing cash flow. We talked at the beginning of the module that finance is needed at various levels in managing the business. We've seen the operating level where owners need to know the result of their operations in a period. They see it through an income statement and a cash flow statement. They also need to know what is the position of business, finance wise and what is the statement of position and they see it in the balance sheet. The balance sheet gives them a solvency where they have enough equity which is positive value and the income statement shows them whether they pay profits or losses. The cash flow statement tells them as to how much cash is generated by the operations, how much of cash is actually either spent or generated in investments and what is the balance of needs of the business form of cash coming from financing sources. But at a tactical level what the owner needs to know is we don't have to wait for the final year's reports to actually be asked to take a call on what to do with cash that is either there in the balance bank statement or is needed for funding the next week or the next month's operating activities. One of the biggest concerns for startup promoters is would they have enough cash to sustain the next period or the next sprint of value building in their entire curve, the hockey stick curve we saw. It's very obvious that the biggest challenge for startup founders is to survive the value of death and in surviving that it is cash which is actually called for. Cash is king, nothing else. So in order to give the right metrics for the startup promoter usually these are the ones that matter the most. You have a concept called the net burn rate. The burn rate is nothing but the usage of the businesses in cash. Suppose you want to calculate what is the burn rate over the month of May 2023 in a particular startup all you have to look at is what is the starting balance in May, what is the closing balance of May and since there's only one month then the difference will be the starting balance means closing balance. So the starting balance was say 600 rupees, the closing balance was say 200 rupees then the business is burned to 400 rupees in the month and that's the net burn rate when you actually look at why is it called net it also the balances also affect not just expenditures but some revenues you probably got some revenues in between. When you see that the month to month changes in the burn rates is say 400, 200 and 150 you can come up with a metric known as average burn rate. This tells you what is the average that the business needs in form of cash. If your balance is at the beginning of the year was 1000 and if the burn rate is 400 then you know that you have two and a half months of operations that you can reasonably fund without asking for further funds from outside or further cash from outside and this metric is called days cash on hand. I have actually calculated months cash on hand but it is the same concept. If there are some expenses that you can incur without paying cash then you get an advantage but otherwise this metric will gives you a feeling as to how much of runway you have. How many months can you survive which is actually shown here cash on hand and there is another concept called the burn multiple. In general if you want to make the transition between just burning money and then making the turn towards going up the slope changes. The net burn has to slowly become less and less significant relative to the revenue. New revenue that is coming in should be more and more thick and the net burn as a proportion of that should become smaller and smaller. If this happens then you are in a better position to turn around. These are the three metrics that really matter for you to track but that doesn't give you any clue as to how to actually manage your business. These metrics usually come in the form of dashboards and there are sophisticated systems that can generate these dashboards for you. People tend to see it almost every day or every week when your startup is young. For instance you can have a blow down of the revenue recurring revenue that's happening. What kind of this revenue comes from the same for some total type of customers. New customers. What kind of revenue comes from the same customers but is expanded because of pricing or because of more usage or because of more frequency. What kind of customer accounts are contracting or they are really switching out from you, churning out from you. So you can have some better color and granular understanding of how your revenue profile is changing and that's the purpose of doing this exercise. To connect what is coming out as your cash metrics to what is really happening in the field. That's the purpose and this kind of MIS is critical for businesses in the early days. Also conceptually it's important to know that growing is a great thing but when growth happens too fast that's also a little bit of a problem because faster you grow the deeper is going to be your need for cash. We explained in the last slide that changes in working capital are also a usage of cash and if this working capital changes steeply then you need more cash and if you do not have the ability to raise that level of cash or no banker is willing to fund you then you have a big business problem. You're operationally you're doing well as a good acceptance for your products but financially you have to slow down. You may have to probably look at any one of these methods. You may have to accurately forecast what is going to be your expenses and your revenues. If your revenues are going to be booked with a lot of credit sales you may have to actually try to give discounts and encash your contracts as soon as possible. You may have to actually maintain some kind of control on your expenses. Only fund what is very critical for a direct line of business. You may have to look at the order to cash and procure to pay cycles very closely change the kind of discounts that you offer to customers and the discounts that you can enjoy from your purchases. You may want to even look at you know what are known as forfeiters or factors who can actually take your accounts receivables and finance it for a particular interest. This injects cash into your system. We already talked about discounts and cash purchases. You may have to look at backup liquidity options like to accelerate your next finance call from your investors or a subordinated debt investors or crazy investors. Usually businesses should be set up in the early stage to have runways of at least 12 months or 18 months. Which means your cash runway the cash on hand should be adequate enough to actually allow the business to burn its operational budgets to the extent of at least 12 to 18 months. And as this actually reduces your product development features must be complete and you must be able to win enough customers and generate MRRs and create a burn multiple which will actually take care of the deficit. This is how a normal good situation in cash gets translated. Usually whereas there is a pitfall you must be in a position to convince investors to come in and support you. In the startup world the real rate for failure you know we all know that more than four in five startups fail. And the biggest reason for failure is often running out of cash. Therefore this is a very important issue for promoters to track to make sure that they make course corrections in any one of these six ways and to make sure that they have enough cash runway they are on the right path towards the right burn multiple for their business and they manage their burn rate with expense control. I shall end my module for literacy and financial statements over here. When we come back we shall see very closely how MIS and accounting can play a role in building a business model for your business. Thank you very much for being with us and see you soon.