Putting It Together — slides
Financial Literacy Club
Understanding Businesses · Lesson 11
Putting It Together
Use the six-question framework to analyze a business from start to finish.
20-minute lesson · learnwithflc.org
Putting It Together · 1 / 17
Financial Literacy Club
Understanding Businesses · Lesson 11
Putting It Together
Use the six-question framework to analyze a business from start to finish.
20-minute lesson · learnwithflc.org
Today's goals
By the end of class, you'll be able to…
- Apply the six-question framework to a business
- Support every conclusion with a number
- Write an honest one-paragraph business summary
Warm-up
If you could invest in one business you visit every week, which would it be — and what would you want to know first?
Think, then write your answer.
The big idea
Putting It Together
Use the six-question framework to analyze a business from start to finish.
Understanding Businesses · Lesson 11
You now have the tools to analyze any business. The six questions from the start of this course tie everything together:
- 1
How does it make money?
Business model and revenue.
- 2
Does it keep any of it?
Gross, operating, and net margins.
- 3
What does it own and owe?
Balance sheet, current ratio, debt.
- 4
Does cash actually come in?
Cash flow vs. profit.
- 5
Why can't competitors copy it?
Moats and how long they'll last.
- 6
What could go wrong?
Risks, inside and out.
Understanding Businesses · Lesson 11
No single number tells the story. A company with great margins and heavy debt can be riskier than one with modest margins and lots of cash. The skill is putting the pieces together — and being honest about what you don't know.
See it
A hypothetical campus coffee chain: it sells drinks and a monthly subscription; has a 60% gross margin and 8% net margin; has a current ratio of 1.8 with modest debt; collects cash immediately; benefits from prime campus locations and a loyal brand; and faces risks from summer slowdowns, one landlord owning most locations, and competition from chains.
| What we found | Signal | |
|---|---|---|
| Makes money | Drinks, plus a $20/month drink subscription | Recurring revenue helps |
| Keeps it | 60% gross margin, 8% net margin | Healthy for a café |
| Owns and owes | Current ratio 1.8, modest debt | Sturdy |
| Cash | Customers pay immediately | Strong cash flow |
| Moat | Prime campus spots, loyal brand | Moderate |
| Risks | Summer slump; one landlord owns most locations | Watch concentration |
Real example
Writing the one-paragraph summary
An analyst's job ends with a clear, honest summary. For Campus Coffee Co.:
Summary. Campus Coffee Co. is a profitable, cash-generating café chain with healthy margins, a solid balance sheet, and some recurring revenue from subscriptions. Its prime locations and loyal customers give it a moderate moat. The biggest risks are seasonal sales and heavy dependence on one landlord; a lease dispute could close many stores at once.
Notice what the summary does: it states strengths and weaknesses, backs them with numbers, and names the single biggest risk.
Try it together
Try it: check the margins
Campus Coffee earned $1,500,000 in revenue. Try COGS of $600,000 and operating expenses of $720,000, with $60,000 in interest and taxes.
Your numbers
Direct costs of what was sold: ingredients, inventory, materials.
Running the business: wages, rent, marketing, software.
Results
Gross margin
60%
Operating margin
12%
Net margin
8%
$120,000 net profit
| Revenue | $1,500,000 |
|---|---|
| − Cost of goods sold | −$600,000 |
| Gross profit60% margin | $900,000 |
| − Operating expenses | −$720,000 |
| Operating income12% margin | $180,000 |
| − Interest and taxes | −$60,000 |
| Net profit8% margin | $120,000 |
Educational calculator, not financial advice. Results are hypothetical estimates based on the numbers you enter.
Activity · small groups · 15 min
Analyst Team
- Groups use the Campus Coffee Co. facts from the lesson.
- Each group member takes one or two of the six questions: model, margins, owns/owes, cash, moat, risks.
- The group combines answers and writes a one-paragraph summary with at least three numbers.
- Two groups read their summaries aloud; the class asks one follow-up question each.
Check for understanding · 1 of 3
Company X has a 40% net margin but $5 million in debt due next year and only $500,000 in cash. Company Y has a 10% net margin, no debt, and plenty of cash.
Which statement is most reasonable?
- ACompany X is obviously safer because of its margins.
- BCompany X may face near-term risk despite high margins, because of its debt and low cash.
- CCompany Y is failing because its margins are lower.
- DMargins are the only thing that matters.
B. Company X may face near-term risk despite high margins, because of its debt and low cash.
Great margins don't pay a $5 million bill due next year. Analysis combines the pieces.
Check for understanding · 2 of 3
Which question does the balance sheet help you answer?
- AWhat does the business own and owe?
- BWhat's the company's logo?
- CHow many followers does it have?
- DWhat will next year's stock price be?
A. What does the business own and owe?
The balance sheet shows assets, liabilities, and equity on a given date.
Check for understanding · 3 of 3
A strong business analysis names the biggest risks, not just the strengths.
- True
- False
True
Honest analysis weighs both. Ignoring risks is how investors and owners get surprised.
Remember
Key takeaways
- Six questions: model, margins, owns/owes, cash, moat, risks.
- No single number tells the whole story.
- Back every claim with a number.
- End with an honest one-paragraph summary.
Discuss
Talk it over
- Pick a real company you know. Answer the six questions as best you can.
- What's the hardest of the six questions to answer from the outside? Why?
Exit ticket
Why shouldn't you judge a business by a single number?
Answer on your exit ticket before you leave.
Nice work today.
Review this lesson anytime — free, no account needed:
learnwithflc.org/courses/understanding-businesses/analyze-a-business
Next up: finish your worksheet.