Finance, Accounting & Cap Tables

Kaern Schools — Founder Track

Tutor: Fin — your in-class finance guide

Running case: cycleWASH (a real venture) + Kaern's own equity model

Welcome to the room

Pull up a chair. I'm Fin, and for the next seven modules I'm going to be the person standing at the whiteboard while you, the founders of your Kaern startups, do the actual work. This is not a lecture you watch — it's a workshop you sweat through. I'll talk for two or three minutes, then I hand you the marker.

We're going to learn finance the only way it ever really sticks: on live numbers. Our running case is cycleWASH, a bicycle-washing systems company with two products — the Mini Platinum (compact) and the Pro Platinum (fully automatic). cycleWASH has a real financial model: three linked statements, a DCF, a WACC, an EV/EBITDA multiple. We'll dissect all of it.

And because you're sitting inside Kaern, we'll also use Kaern's own equity model as a case: founders hold 60%, investors 30%, and the school 10%. Enrolment is €1,990 per founder, and Kaern provides €20,000 of consulting into each startup. You'll learn cap tables by reading the one you're literally on.

Who this is for

Founders who can read a spreadsheet but freeze when an investor says "walk me through your unit economics" or "what's your post-money?" You don't need an accounting degree. You need to own your numbers — in a board meeting, a term-sheet negotiation, and at 2 a.m. when you're staring at your bank balance.

What you'll walk out able to do

• Build and link the three financial statements so a single assumption flows correctly through all of them.
• Keep clean books with a sensible chart of accounts.
• Compute contribution margin and know which products and customers actually pay you.
• Build a driver-based forecast and stress-test it.
• Value a company three ways (DCF, comparables, EV/EBITDA) and defend the number.
• Read and edit a cap table, model SAFE conversions and dilution, and not get diluted by accident.
• Manage cash and runway, and know exactly when you are fundraising-ready.

How I grade you

Every module ends with a Check for understanding. The course ends with a Capstone where you build a complete model + cap table for your Kaern startup. The rubric is at the very bottom — read it now so you know where we're going.

A word before we start: finance is not maths, it's storytelling with constraints. Every number is a claim about the future or a record of the past. Your job is to make the claims honest and the records clean. Ready? Let's open the books.

Module 1 — The three financial statements & how they link

Learning objectives

1. Explain what the income statement (P&L), balance sheet, and cash flow statement each measure.
2. Describe the links between them (net income → equity & cash; depreciation; working capital).
3. Distinguish profit from cash and explain why a profitable company can run out of money.
4. Trace a single transaction through all three statements.
5. Read cycleWASH's three statements and explain what they tell an investor.

Lessons

Lesson 1.1 — Three cameras, one company

Teaching script. Imagine cycleWASH is a moving car and we have three cameras filming it. The income statement is the speedometer: over a period, how fast did we go — revenue in, costs out, profit at the bottom? The balance sheet is a single photograph taken at one instant: everything the company owns (assets) and owes (liabilities), with what's left over belonging to you (equity). The cash flow statement is the fuel gauge: it ignores accounting cleverness and asks one blunt question — did money actually move in or out? Here's why founders get hurt: the speedometer can read "profit" while the fuel gauge reads "empty." You sold ten Pro Platinum units on 60-day terms — the P&L cheers, but no cash has arrived, and payroll is Friday. The three statements only make sense together; any one alone will lie to you by omission. The art of the next hour is learning to glance at all three at once, the way a pilot scans an instrument panel rather than staring at one dial. So when I show you cycleWASH made €180k profit last year, what's the very first follow-up question you should ask me?

Lesson 1.2 — The wiring diagram

Teaching script. Now the part nobody explains clearly: how the three actually connect, because that wiring is what makes a model trustworthy. Three wires matter. Wire one: net income from the bottom of the P&L flows into retained earnings on the balance sheet — profit you keep grows your equity. Wire two: net income is also the starting line of the cash flow statement, where we then add back depreciation (an expense that took no cash) and adjust for working-capital swings — money trapped in unpaid invoices or inventory. Wire three: the cash figure that the cash flow statement calculates becomes the cash line at the top of the balance sheet. Close the loop and your balance sheet balances — assets equal liabilities plus equity — automatically. If it doesn't balance, you have a wiring fault, not a rounding error; never plug it. A model where you change one revenue assumption and watch it ripple correctly through all three statements is a model an investor will trust. One that needs manual "fixes" to balance is one they'll distrust on sight. So: if cycleWASH buys a €50k washing rig with cash, which statements move, and in which directions?

Worked example — one rig, three statements. cycleWASH buys a Pro Platinum production rig for €50,000 cash, depreciated straight-line over 5 years (€10,000/yr).

• Balance sheet (purchase day): Cash −€50,000; Equipment (asset) +€50,000. Net change to total assets: €0 — it balances; we swapped one asset for another.
• Income statement (year 1): Depreciation expense −€10,000 → pre-tax profit falls €10,000.
• Cash flow (year 1): Start from net income (which already absorbed the €10k), then add back €10,000 depreciation (no cash left this year). The actual €50k cash outflow appeared in investing activities on purchase day, not spread over five years.
• Balance sheet (end year 1): Equipment now €40,000 (€50k − €10k); retained earnings lower by the after-tax effect of the €10k expense.

The lesson: the €50k cash hit once; the €10k expense recurs five times. Cash timing ≠ expense timing.

Hands-on exercise. Take cycleWASH's simplified annual figures: Revenue €600,000; COGS €330,000; Operating expenses €150,000; Depreciation €10,000; Tax rate 25%.

1. Build the income statement down to net income.
2. The company also collected €40,000 of last year's receivables and bought €25,000 of inventory this year. Build the operating section of the cash flow statement starting from net income.
3. State, in one sentence, whether cash grew faster or slower than profit, and why.

Common mistakes.

1. Treating profit as cash. Net income includes non-cash items and ignores invoice timing. Always reconcile to the cash statement.
2. Plugging the balance sheet. If it doesn't balance, find the broken link — never hard-code a "balancing figure."
3. Double-counting capex. Recording the full €50k as an expense and depreciating it. It's one or the other: capitalise, then depreciate.

Check for understanding.

1. A company shows €180k net income but cash fell €20k. Give two plausible reasons.
2. Where does net income appear on the balance sheet, and where on the cash flow statement?
3. cycleWASH writes off a €10k depreciation charge. Why is it added back in the cash flow statement?