Financial planning

1. Financial planning ….Telling your story in numbers

2. Financial plan– a mathematical way of the opportunity and the way you will execute

3. Why do we need financial plans? Help entrepreneurs effectively manage their business Aids potential lenders and investors in decision-making

4. Basic financial statements The statement of cash flows The income statement • Is a snapshot of the firm’s profitability. • Shows the firm’s net profit or loss by comparing expenses against revenue over a period of time. The balance sheet • Shows assets owned and the claims creditors and owners have against those assets. • Estimates a firm’s worth at a point in time. • Presents the changes in working capital since the beginning of the year.

5. Indicating the changes in a period of time

6. Revenues • All sales of products and services for the company Returns and allowances • The refunded cash or discount provided Net sales= Gross sales - Returns and allowances

8. Cost of Goods Sold (COGS) • The amount it costs us to obtain the items that we sell • Includes the costs of materials, direct labor and overhead allocated specifically to the product Gross profit = Net sales - COGS

10. Operating expenses • Usually are the fixed costs of a business. Operating Income= Gross profit – Operating expenses Net Income • Usually are the income before taxes

11. Considering the taxes and share outstanding

12. Indicating the status at a point in time Total Assets = Total Liabilities + Owner’s Equity

13. An asset is any item that is used or owned by the company. Assets are usually listed in the order of their liquidity Current assets are normally able to be converted into cash during the accounting year. Fixed assets are normally not used up during the accounting year

14. Accounts receivable: the credit sales for which money has not been collected. Inventory: Those the business has in stock but has not yet sold. • Depreciation: the wearing out of the business asset during its useful life. Businesses are obligated to depreciate assets according to methods or systems provided by the government. • Straight-line • Accelerated cost recovery

15. Liabilities: What is owed by the firm to the creditors. Current Liabilities are expected to be paid off during the current accounting year. Long-term Liabilities are not expected to be paid off during the current accounting year. Owner’s Equity: the net worth of a company.

16. Accountspayable: the debts that are owed to vendors. Any present goods or services that were delivered to the firm but that were not paid for as of the date of the balance sheet is presented. Notes payable: the debts that are promises to pay a creditor or lender the amount owed plus interest for a specified period of time. Taxes payable: the accrued taxes that are owed but not actually paid as of the date of the balance sheet.

17. The difference between all of the cash received by the business and all of the cash paid out by the business in conducting day-to-day operations. The net difference between the acquisition of plant and equipment (fixed assets) on the two balance sheets. The net difference between the increase in owner’s equity due to the issuance of stock to raise cash and the increase in debt due to the issuance of bonds or other long-term debt instruments.