 Well, hello everyone and welcome back to Sailor Academy's MBA 601 financial management. This is our overview or review, however we would like to say, of Unit 7. If you haven't watched any of the previous videos in this series, feel free to check the playlist below. And of course, as we just said, this is an overview of the course. So definitely go in and check out the course on Sailor Academy that is also linked below. If you have any questions as we're going along, you can leave them in the chat on the side. And if you have any questions watching later, you can leave them in the comment section and we'll get to them. So before we get going, I'll just queue you up here, Niagara Pearsall, and I'll just say we had a question from Unit 5 that I don't think we got to yet. And someone wanted to know what the difference between a capital plan and the capital structure was, and if there was a difference. Good question. And frankly, they're very similar. And I think about it this way. The capital plan is where the executives actually sit down as we talk and make a determination on how much debt and how much equity the firm is going to use for their capital plan. All right. And the result of that, after they've made that decision, that is the capital plan for the firm. All right. So I mean, it's relatively, it's the same term. We plan for it and we enact it. And that then becomes a capital structure. Awesome. Well, thank you very much. While we just hop in to Unit 7 here, I'll get out of your way. And of course, if anyone has any questions, leave it now. We'll get you those answers. Great. Thanks, Michael. So again, we're here to talk about Unit 7, Financial Planning and Forecasting. And this is the last of the units that make up our course in financial management. Again, this is a master's level course, and it's available through Sailor Academy. As always, I wanted to quickly just point out the specific course learning objectives that are addressed in this unit. Some of these are familiar. They've applied to other units. These are basic financial calculations, but they're the objectives that we want to make sure that you gain from going through the material that we provide. So the ability to demonstrate a degree of accounting and financial literacy, the ability to talk about, understand, and present what we're doing when we talk about financial management. Being able to apply those results in a decision-making process, we've talked a lot about how executives go about making decisions. Many of them, of course, are based on financial implications. What are the costs? What are the expected returns? We want to be able to recognize free cash flow. We talked about that a lot in the last session. And free cash flow is that cash generated after the firm's expenses and taxes have been paid. So again, it's a measure of successfully operating the firm and generating additional wealth. And last, the ability to calculate the cost of the firm's debt and equity, which is the cost of capital. And as the question we open with, that is the capital plan. That's the capital structure of the firm. How much debt and how much equity is going to be used to finance these programs? The specific learning objectives for our unit, for unit seven today, is reviewing this concept of evaluating decisions that the firm makes. As a former CEO, you make lots of decisions. You make decisions daily, weekly, monthly. There's a reason and there's an importance to carefully considering what it is you're doing in spending the firm's money to presumably make the firm better. I want to talk a little bit about the idea of forecast. Forecasting is essential part of financial management for any business. I want to talk about a concept called additional funds needed. We're not going to go into a great deal of depth on it, but just point out that there is a way for a firm to determine if, in fact, they're going to need some additional funds to support the capital plan that they have for the business. And I'll wrap up with just a couple of comments on this idea of corporate governance and what it means. Last week, you remember, we introduced the idea of fiduciary responsibility. Well, part of that falls under the purview of corporate governance. Some of the topics we'll touch base on today is going to be the idea of strategic planning, big picture. One of the models I use is the five Ps of strategy. We'll talk about that briefly. Financial and operating budgets, the two major budgets in the master budget that a firm has additional funds needed. Securities and exchange commission was important. Any business in the U.S., any publicly traded company, and corporate governance, and these last two, by the way, are growing and increasing importance in countries around the world. So while the SEC applies to the U.S., there's lots of interest in organizations by countries looking at making sure that there is real governance over businesses that are involved in financial activities and that have investors. Having said that, before I get started, I'll just ask Michael to check and see if there's any questions posted yet. We don't have any questions posted yet, but again, everyone, if you have any questions, feel free to leave them in the chat or in the comments section later and we'll get to them. I'm not seeing anything right now, so let's keep going and I'll let you know if we hear anything. Great. Okay, so let's go in and just quickly review this idea of the role of management. I mean, management has a role, thank goodness, in organizations. The larger the organization, the more important that role becomes, the more demands are placed in that role. And we referred earlier on in the program about key responsibilities that managers have. And we typically define those as three basic roles that they play. One is as the planner, one is as a director, and one is as a controller. The planner, in fact, is all about planning, what kinds of plans and thinking ahead. The director is the role of making decisions on the allocation of resources, both financial and human resources. And last, the controller, one of my personal favorites, which is actually keeping track of what's going on and making sure that this train stays on the track. That's the role of the controller. What we're going to talk about today is that role of the planner because that's the idea, that's the basis of an important function that has to take place, which is the generation of the plan. Businesses or at least successful businesses need to have a plan. The purpose of that plan is to think ahead, right? We know what we did last year. That's a history lesson. I know what I'm doing today because I can look at the numbers, I can look at the books. The real question is what are we going to do tomorrow? Where are we going to be? What's going to be entailed? What do I have to do today to position myself for tomorrow? And that's this idea of planning for the future. And that planning requires a concept in the business plan, which is a written document summarizing all of these forecasts. The strategy that's going to be implied, how are we going to achieve certain goals that we have, and actually establishing the goals and objectives for the business. Now as a former CEO, annually, the executive staff and myself developed the strategic plan for the business that covered typically a three-year period. So we were planning three years into the future. Now did they change? Sure, because the world is dynamic. And so we talk about dynamic plans or those that you're able to go in and make adjustments based on what's happening. But at least it implies that you're thinking ahead and you're working towards that one important question that I've hammered on a lot in these presentations, which is how can I add value to this business? I'm creating value for owners, for investors, for shareholders. That's my role. That's one of the important and other responsibility I have. And that's part of that fiduciary responsibility we talked about last week. So the strategic plan. What is it? Well, if we think about things as basic as we're focused on profit, we want to generate new profit. Well, profit is a result of how much revenue came in, less expenses, generates profit. So simply put, how do I increase profit? I can keep sales the same and I can reduce expenses. We call that cost management. I can look at keeping expenses the same and increasing revenue, new products, new markets, new product lines. So when we think about strategy, we want to think about looking forward. What are the things that we can do that are going to have a direct impact on the profitability of the business? And obviously this is a myriad number of tasks that we could engage in. Things like new product offerings. And by the way, new products can be a strategy of the firm. We see this in a lot of firms that have spent a goodly amount of money on research and development. A strategic plan might be to continually introduce new products and services going forward. And to do that, of course, requires some planning. How much will you spend on research and development? Do you have the appropriate skill sets available to do that? Have you created a culture of innovation that supports that kind of activity? It can be introducing new technologies or cost savings programs. Not everything we do is outward facing and having to do with the revenue side. The larger the firm, the more money we're spending to operate. And so what kinds of programs can we initiate to reduce our costs? For example, we talked about just-in-time inventory by identifying strategic suppliers and working close with them, building a strong relationship. It's possible that you could reduce the amount of inventory that you have to carry to support your production. Well, reductions in inventory result in reduced expense. With technology, for example, I think back to my days as an executive at IBM, I ran part of the consulting operation for IBM. I had 100 consultants around the country. With technology, we had virtual meetings, meetings like we're having right now with these folks, which meant that we reduced tens of thousands of square feet of office space that we paid for. We actually improved efficiencies, we're more responsive to customers, and we reduced our expenses and investment opportunities. So when you think about it, there's lots of things that you can do to have an impact on creating value for the firm. This is the whole idea of a strategic plan because it's not enough to kick the ideas around. As much fun as that can be, you're going to have to really go through and identify the ones that will have potentially the largest impact, the ones that you can reasonably accomplish, the ones that you can afford to invest in, and then, if you once you've decided and created that to-do list, then it's required to sit down and figure out exactly who, what, when, where, and how that's all going to be done. And that's really why we spend the time we do in creating a strategic plan. Now, there's lots of models out there to think about in terms of generating a plan. One that I've used in the past that I think is fairly simple is called the five P's of strategy. This is explained, by the way, in more detail in our course. Let me just quickly touch base on what we're talking about. It's kind of a think about it as a template for starting to consider a strategy. We talk about plan, ploy, pattern, position, and perspective. Now, the plan simply means that you're going to actually create a document. You're going to take the time and the effort and the resources to document all the things that you're planning to do. A key part here is, of course, not only knowing what's going to be done, but when it will be done, how much it's going to cost, who's responsible. I mean, every major initiative in my experience was assigned to an executive owner. Somebody must be responsible to be able to ensure that the activity is taking place and that it's achieving the results that we want. And that's that verification. We're going to launch a major advertising campaign. It's going to increase our market share by 3%. Was a former CEO on Monday morning after that campaign, I was calling a meeting saying, so did our market share increase? Are we seeing an impact from the time and the resources that we spent? We have ploy, ploy simply represents actions that the firm can take that address issues with competition in the marketplace. So we talk about things like how do you continue to try and maintain a competitive advantage? Think about Apple and iPhones. It's no surprise that Apple comes out with a new iPhone on a regular basis. This can give them a competitive advantage as people who like the iPhone are waiting for to see what the next new one is, what are the new features and benefits. Now, there's a potential risk there as well as there isn't any strategic initiative. Will, whatever it is the new iPhone has, whatever those features and benefits are, do our consumers look at that and say, oh yes, this is definitely, this was worth the wait and yes, I want to upgrade. We think about patterns. Patterns are the fact that we can demonstrate that the firm is actually following the plans. It's part of the business. That plan becomes part of the day-to-day operations. We are working towards completing the things that we've included in our business plan. And the strategies that we've identified. We talk about position, which is constantly evaluating and looking at where are we in relation to our competitors? Every business has a competitor. There are very few businesses that are an absolute true monopoly. So there's typically lots of options out there. And today's global economy, your competition can come from anywhere. So we need to be thinking about that. I spent time as an executive at Carrier Air Conditioning Corporation. Carrier is the largest manufacturer of air conditioning and heating systems in the world. Not only the largest, they've been around for almost a hundred years. And it was Dr. Willis Carrier that invented air conditioning. Now having said that, because you've been around a long time and because you have a successful product and you have size, does that ensure that you'll always be successful? No. And so here's a simple task that I'd ask you to do. Go and look at last year's edition of the Fortune 100. Who are the, from Fortune Magazine, who are the 100 tap companies? Take a look at the Fortune 101 or two years later. Compare that list. You're going to note something interesting. Not all those companies are still there or they're not still in the same position. And yet when you think about it, being part of the 100 largest corporations in the world, how do you not maintain that position? You have resources, brand equity, products, experience. That's why planning and keeping track of what we're doing is so important. You can't build tomorrow and hope that everything you did yesterday will still apply. And last is perspective. Perspective is just that. It's that ability of the executives, the business team to sit there and look out at the marketplace, look out at what's taking place in the industry, and do that evaluation and trends. Trends has always been a fascinating thing to look at and probably one of the most difficult things to really plan for and address. For example, way back when, if I want to go back some decades when I was substantially younger, I spent a lot of time, I remember making weekly trips to the bookstore. Barnes & Noble to buy books as an avid reader. Who would have thought that all of those stores would be taken over by a company called Amazon where you're ordering online? You could still order a book online, but now it's digital. For years, I had a library of books. Now everything fits on my on my pit. All the books that I keep and all the books I want to read. So that perspective of what's taking place is critical. Strategy is dynamic. And what does that mean? It means that the market's constantly changing. Technology is changing faster than ever before. Every time I think we've reached a new plateau, I see that that plateau has blown up another few months and there's a new level of technology. Consider this. We talk about in marketing, we talk about product adoption. And what that says is, you know, how long does it take the marketplace of consumers to actually accept a new to the market product? And so if you go back in time and you think about the introduction of the television, the and we consider a product being adapted in the U.S. when 50% of the marketplace has adapted the product, 50%. For the television, that that adoption period was measured in a number of years. I grew up in a household where my father grew up in a household where there was no television. The family listened to the radio. In my generation, there was a television. It was black and white. Then we go to color televisions. And the other day, my daughter was telling me on cable, there's nothing to watch because we only have like 450 cable channels. So what took years for product to be adapted decades ago. Now the cell phone was adapted in a matter of months. And so think about this. If you're if you're a business, what the implications are on that for your products, your product development, the depth and breadth of your product offering. So these are strategies. And a key here is that you recognize that change is inevitable. Their change must happen. And so you have to have an organization that accepts change. Although in my world, I stressed the fact I was looking for people that welcomed change. All right, because to me, it represents opportunity. But only if you're in a position to be able to respond and adapt your organization to that dynamic business environment. Now, before I go much further, let me just pause here and see if in fact there's any questions or comments. Well, we don't have any questions yet. But if anyone has put has a question right now, why don't you put it in the chat? Well, I talk about bookstores first. No, I couldn't help but think when you were like a bookstores like, oh man, people like, yeah, people probably don't like no books. Like bookstores are probably not a very like relevant thing. And I was like, actually, as a compound word bookstore might be on its way out too. Like both the concept of books and the concept of stores might in a hundred years not be quite what anyone thought of beforehand. Well, I was around when Amazon launched their business. So think about this thing. Company came out and said, we're going to offer books and we're going to do it all online. We're going to have no physical stores, no physical footprint. And the consensus at that time was, well, that makes no sense. Nobody's going to go online and buy a book. Well, and now they're rolling out retail stores. So who knows? Like it's crazy. But but I think we can keep going. I think I've wasted enough of everyone's time. It doesn't look like we have any questions. But of course, if you have questions, watch it now. Again, leave them in the chat. If you're watching later, you can put them in the comments. We'll get to them, but we'll just let you keep going here. And I'll be back if we have any questions. Great. So let's let's talk about the idea of forecasting. When you're preparing this plan, again, everything in this plan isn't back the forecast, right? And what is the forecast that's looking into the future? We have to be able to sit back and consider the potentials. We want to consider opportunities that the business has, potential issues, concerns, problems. The key here is we want to plan for them. One way to operate a business is to go about your day to day activity. And when something happens, sit down and figure out what you'll do to address it. That's one approach. Preferable approach is that you actually try to consider things that could happen and actually spend some time now before the panic sets in trying to determine how you might address problems or how you're going to pursue opportunities. So that's the purpose of forecasting. We forecast, we take the business plan, we take those ideas, we take all those potential strategic initiatives we have, and we convert them into financial plans. Businesses operate on numbers. And I believe that if we go all the way back to Unit 1, at some point in there, I mentioned that the language of business is finance. Whether you're in IT, advertising, sales, operations, the language of business is finance. We talk about numbers, the costs of investments, the potential returns, the risk on profitability. So that's what a forecast is. And what we forecast these financials, what we're doing is we're preparing pro forma statements. And so when I mentioned that my strategic plan for my business was typically a three-year plan, was updated during the year and constantly evaluated, we would reintroduce every year a new three-year plan. They contained our pro forma financial statements. We actually took the financial package that we've gone through in some detail, income statements, balance sheet, statement of retained earnings, cash flow statements, and we forecasted those statements out for two or three years. Now, we typically start with a review of history. So we'll go back and we'll look at the history of the business, how we've gone over the last couple of years. Now, we can learn some information that's important in going forward from that. We can see where we have been improving. So let's do more of that. We can see where we underperform. Well, let's spend some time and address those issues. And so the purpose of looking at history is to let us focus on some key initiatives and to perhaps be able to start establishing some trends. For example, how has our revenue been trending over the last three years? And let's hope that it's been trending up. How has our profitability been doing over the last few years? What's the trend in that? However, once you've done all of that analysis, and we've certainly covered enough financial analysis and financial ratios and evaluations, so you really understand where you've been. Now, the real work starts. Where are you going to go? And so I can't look at the past to see where I'm going to go in the future because the past is not necessarily a predictor of future performance. So we're going to have to spend some considerable time and resources analyzing what's going on in the current economy. What is consumer spending like? What's taking place among competition? Are we looking at or are we experiencing any new regulations? Where do we think consumer demand is going to go? So we now start to sit and this really is a function of research, evaluating lots of data, and including a good dose of what your gut tells you you should be doing. Now, I'm a firm believer in gut feelings because it's not just a guess. If you're an executive and you've been in business for 20 years, you have learned a lot of things. You have a sense about what's taking place. And so all of those things help us in the forecasting process. And what are we going to forecast? We're going to start by forecasting our budgets. We need to take a look at the financials of where we're going to go. What are our goals in financial terms? So as a former executive, my goals might include I want to see an increase of overall cost by 2%, an increase in market share. Whatever those goals and objectives are, we state those. Sorry to cut you off, but I lost you just there for a second. Now I can't remember the exact line, but you were talking about your goals. It was the goals part, I think. So if we could move back, move back just like a minute, I think, and we're good. You know, Zoom has got us again, stuttering up. Technology is our friend. Okay, so we're talking about the fact that we identified goals and objectives in our business plan, and we're going to take those goals and objectives and put those in terms of finance. For example, if I want to, one of my goals is to introduce new products. Great. Financially, that represents an increase in expenses. There's an investment upfront. Could be materials. It could be an equipment. It's an advertising campaigns. And the expectation is we're going to generate how much new revenue. Why do I invest this money? The other thing that budgets do is it actually provides a way to communicate these goals to the rest of the organization. So as a former director of materials and one of the organizations I worked for, I had, I was given an annual budget to work with that laid out. The expectations on how much I could spend on operations on a week-to-week, month-to-month, and year-to-date plan. And we monitored that and reported on our results. So it helps communicate what's important to the organization. It can help make improvements to what we're doing. Because we're looking, a lot of these are called, we call, stretch goals. I know that typically our cost of operations has run about six percent. I really want to budget it at five percent. I want to push to see if we can't be a little bit more effective, a little bit more efficient. So it can help us identify areas and help move improvements forward. And last, it's an evaluation. It's an evaluation. How do I do a report card on the company, on the executives? I can use this to evaluate the performance of the business. Have we reached our overall sales goals? I can use it to evaluate the performance of the department as marketing meeting the goals that we established for them at the beginning of the year. Write down to employees and employees' individual contributions to reaching those goals. Now, having said that, budgets, I can say, we typically talk about the master budget. And the master budget has two parts to it. One is the operating budget. The operating budget covers all those day-to-day operating expenses that we'll forecast. We're going to have a sales budget. What are the sales going to be month-to-month and for the year? Our production budget. You know, in production, we're going to schedule units to be built, equipment that has to be purchased or maintained, manpower to use in the operation. There's this cost associated with it. So there's a budget prepared. We have direct materials and direct labor. Now, remember, we distinguish between direct and non-direct. Direct materials and labor are any expense that's directly associated to the product. So if I'm buying parts to assemble a product, that's direct materials. People working on building the product is direct labor. I also have variable and fixed costs in the manufacturing budget. Variable budgets could be some expenses will increase or decrease with the volumes of production. I'll have certain fixed costs. The facility is fixed. I'm going to pay rent on this space, whether I use it or not. So that's a fixed cost. Variable might be the amount of energy being consumed. Depending on how much production you're doing. And we'll also include the SG&A budget or sales general and administrative expenses. Now, when you think about it, these categories should start to sound a tad familiar in there because these are the basic components of the income statement. And so that income statement, a record of revenue that comes in minus all of these expenses and the bottom line is earnings or net income. So I'm hoping to demonstrate as you think about this, there's a substantial amount of budgeting. So it's not enough to say, well, we're going to continue making stuff next year. How many units, how often, how much, how much labor, how much material. We're going to forecast all that and turn that into our operating budget. The second major component of the master budget is the financial budget. And that's where we're going to talk about the capital expenditures. Remember, go back to that planning. One of the roles of management is to plan for future investments. Things we're going to need to grow, expand and support the business we're doing. So we're going to have that capital expenditures budget. We're going to have a cash budget. We want to budget cash flows. I need to know, as we sit here today, if there's going to be some period in the next 12 months where, whether it's seasonality of product or some forecasted issue, where we might have an issue with having a sufficient amount of cash to maintain the operations of the business. And that of course, will means we're also going to budget the balance sheet. So yeah, we're going to sit down and plan for how much cash we're going to have. The inventory levels we're going to maintain. The amount of debt we're going to carry. And so we're going to forecast shareholders equity. Now, bear in mind, just a note here that when we're talking about the capital expenditures budget, planning says, what are we going to do? And what are some of the ideas? And what might we be investing in? The directing role of management comes in. And that's where you actually make decisions on which things you will fund. All right, so that's directing. So this all ties back in. Now, having said that, part of that financial budget and the capital expenditures and the capital plan that you're going to need, the question is, are there going to be additional funds needed? And good news, there isn't a way to determine if additional funds are going to be needed. Again, based on forecast. So let's talk about AFN for a minute. AFN basically says, look, we make an investment in a project. Why? Because you're going to increase sales, I hope. How much sales will go up? It is going to cost you some expense to maintain those increased sales. How much is that expense going to be? And am I going to generate positive cash flow? What will that look like? So additional funds needed simply says, if you evaluate projects, what you're going to spend, how much new revenue will be generated? Let's take out any of those liabilities that you're going to have, and let's eliminate any of the retained earnings that you were going to keep, profit that you did not give back to shareholders. And then the difference between those will give us if there are additional funds needed from outside sources. So what this really says is, can I fund a particular project internally? The money we have, the retained earnings we have, the profits we're generating at a regular basis, or am I going to be required to seek some funds from outside? And that's additional funds needed. Now, hold your breath on this one, because this is the formula for additional funds needed. It looks terribly confusing. It's not. All we're saying here is there are three components, as I mentioned. One, the first component we'll call the capital intensity ratio. And that says, as you're making investments to grow the business, you're increasing assets, right? Assets have a value. And if we're creating value, then those assets should be generating sales. So if you look at the bottom here, and I'm not going to go through any tremendous calculations here. It's something you can work through. But it basically says, what do I need to know to identify capital intensity? Remember those liabilities they said. We want to be able to identify and take out any spontaneous liabilities. We're also going to take out any retained earnings that we're going to generate. We're going to say, yes, I've got those. And so what's left? And so if you see the only terms here we're looking at, these aren't terribly complicated. We're looking at knowing the assets they're going to be directly tied to the sales you're talking about. That's, for example, new equipment you're purchasing, a new building. We're going to look at the increase that's going to occur if sales increase, which is presumably why you're making the investment. So we need to know the current or last year sales and what that projected sales increase is going to be. Makes sense. Where were you and where are you going to go? The liabilities, we're going to look at things like accounts payable, accruals, not financing charges. Excuse me because we're not looking at a financing formula here. What the profit margin is, of course that profit margin is a result of sales minus expenses. What the projected or new sales level will be. And what's the retention ratio that the firm operates under? Remember retention simply says at the end of the day, if you look at the bottom line of your income statement, you have net income. That's money that belongs to shareholders. Some of that we're going to return to them as they return on their investment. We call that a dividend. Some we are going to keep, retain in the business so that we can continue operating. So what is the retention? The result of this calculation simply gives you a positive or negative value. If it's positive, it says you have enough internally generated funds to proceed with the investment. No outside funding necessary. If it's negative, that's how much money you need to source externally from lenders. All right, so we can actually take a look at it. This is a component of that capital planning that we've talked about because it's an indication of how much debt are we going to need for the capital plan. Now, to wrap up our discussion, to wrap up Unit 7 and to kind of wrap up the course, I want to touch on just a couple of additional things that I think are worth noting when we talk about the responsibility of management, especially that fiduciary responsibility. We've talked about all the things required in making good decisions. So we'll talk about corporate governance. This quote was actually taken out of a material that was prepared by Sailor Academy. It's called corporate governance. This was done back in 2012 and it still applies. And I think this is a nice simple summary of what corporate governance is. It's a system that's a set of fiduciary and managerial responsibilities. And you know that we've been talking about those quite a bit over the last number of presentations. It binds the company's management and shareholders and the board. Okay, we work together. We're supposed to be in this together within a larger societal context. What is that? It's a context that's defined by laws, by regulations, by competition, the economy, political issues, ethics, and other forces that we can think about the environment and social responsibility. It's a set of guidelines that corporations must work under or should be aware of. So let me give you an example. As a former president CEO of a firm, I was hired by a board of directors. Now the board of directors are people that are elected by the shareholders. Remember when we talked about common stock. One of the benefits of common stock is that you are an owner and you have voting rights. So that means that a slate of potential officers is put before shareholders. They cast votes for who they want on the board of directors. Now if you're a shareholder in the company, what might you be thinking about when you are looking to support a member for the board of directors? I'm guessing you're thinking about people that have experience in the industry, demonstrated track record of successfully working with businesses. Folks that have a history of creating value that are ethically sound, have good business reputations. That's who you want on the board. Why? Because the board represents you, represents the owners. The board responsibility now is fiduciary and to provide a degree of corporate governance. So the board of directors provides the governance for the firm. They're responsible to ensure that the management team and the business does the right things, makes the right decisions, is working in the best interest of the shareholders and the owners, and working to expand the value of the corporation and create wealth for owners. So as a president and CEO, I reported to our board of directors that board was my boss. My responsibility was to bring in an appropriate executive team. A CFO, chief financial officer, a chief person in charge of systems, a marketing executive, a sales vice president. So the executive team that would manage and operate the business on a day-to-day basis, I selected, I hired, they reported to me. The governance covers the idea of how do you ensure that everybody's working in the best interest. And so I reported to the board, I had a monthly board meeting where I would went in, what will go in and make a state of the business review to the board, summarize what we were doing, where we were going, investments that we were making, expectations on returns, potential issues. And the board would be keenly interested and could ask questions and dig deeper, say we want more information on. That's the idea of corporate governance, it's management of what the business executives are doing. Now here in the United States, we have a securities and exchange commission, the SEC. That was actually formed by an act of Congress back in 1933 was the act, and the exchange was commissioned in 1934. What are its responsibilities? It was the government now looking at what's taking place in the business marketplace, recognizing shareholders out there, putting a lot of trust and faith in businesses. We're hoping that they're going to work in our best interest. And the government said, well, we need to add some additional pressure to make sure that companies are working in these best interests. So the securities and exchange responsibility regulates the securities markets when stocks can be put on the exchange, watching the trading of stocks. You've heard of things like no insider trading. It's illegal in the US, for example, for myself as a former president to take advantage of information that I know that has not been available to the overall marketplace so that I can get an advantage on the stock market. It's illegal protecting investors. How do you protect investors? We want to make sure that companies are transparent, that they're providing real information to investors, that it's true and accurate, and it facilitates in this idea of capital formation. So for example, how do you provide, make sure that we're having transparent information? Well, publicly traded firms are responsible for issuing regular, audited financial statements. So every quarter and every year, my company had to prepare financial statements. We use the services of outside independent auditing companies that would come in and review and audit our books, and then make a statement on their findings that we were acting in accordance with the approved standards for financial reporting. Now, interestingly enough, the SEC is the United States, but this kind of activity and oversight can be found in many countries around the world throughout Europe, the Far East, the Middle East. There is an interest in governments in helping provide some stability to financial activity and using the resources of the government to help ensure that investors are being treated fairly and honestly. That's really all we're looking for here is a fair, honest level playing field. All right, so that wraps up my comments on Unit 7 and all the material that we've covered for our course in financial management. Next week, for the next two weeks, I'm going to do, they'll be shorter, I promise, and they will be kind of a review of some test exams that you'll have. With our program, you can either enroll in our master's program and take final exams for credit, or you could take this course and look to get a certificate of achievement in financial management. And so, I'll review those over the next two weeks. And having said that, Michael, I'm done. I'll turn it back to you. All right, well, again, as always, and of course, for this time, thank you for taking us through the course. I think you've done a great job. I think people have enjoyed watching it. Everyone who has been watching, thank you so much. Whether you're watching live or watching later, thank you. Thank you for the questions. Thank you for the comments. But yeah, so the next two weeks, we'll be at the same time. We'll be doing the, I'll make sure I look, I just wrote down the exact title. We're going to do the practice exam reviews is what we're going to call them for the next two weeks. So everyone, I'm not seeing any questions in the chat, so I guess I vamp long enough. And I'll just say, again, thank you, Dr. Pierce, all for taking us through this. Thank everyone for joining us. Again, this is an overview of the Sailor Academy course, which is linked below. And of course, this is video eight of unit seven. So if you haven't seen any of the other videos, go back and maybe some of your questions will be answered there. But we will see everyone next week. Thank you so much, everyone for joining us again. Thank you, Dr. Pierce, all for taking us through all this. And we will see everyone at the same time next week. Thank you. Thank Michael