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Chapter

10. Chapter. The Financial Plan. Sequence of Financial Statements. Budgets Operating- Short-Term Capital- Long-Term Pro Forma Statements. Pro Forma Statements. Pro Forma Income Sales Budget By Month Expenses Are Function Of Sales Level Pro Forma Cash Flow Cash Receipts Cash Payments

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  1. 10 Chapter The Financial Plan

  2. Sequence ofFinancial Statements • Budgets • Operating- Short-Term • Capital- Long-Term • Pro Forma Statements

  3. Pro Forma Statements • Pro Forma Income • Sales Budget By Month • Expenses Are Function Of Sales Level • Pro Forma Cash Flow • Cash Receipts • Cash Payments • Pro Forma Balance Sheet • Pro Forma Sources & Applications of Funds

  4. Daily KnowledgeOn Financial Position • Cash Balance On Hand • Bank Balance • Daily Summaries Of Sales/Cash Receipts • Problems In Credit Collections • Record Of Money Paid Out

  5. Weekly KnowledgeOn Financial Position • Slow-Paying Accounts Receivable • Discounts Offered On Accounts Payable • Payroll- Hours Worked & Payroll Owed • Taxes- When Taxes Due & Reports Required

  6. Provide Records Receipts Disbursements Bank Accounts Journals Review Income Statement Balance Sheet Reconcile Checking Account Balance Petty Cash Account Review Tax Requirements & Make Deposits Review/Age Accounts Receivable Monthly KnowledgeOn Financial Position

  7. Sales Budget • Calculate Sales Expectations In Units • Utilize • Marketing Research • Industry Sales • Experience • Forecasting Techniques • Survey of Buyers • Sales Force Opinions • Expert Opinions • Time Series Analysis

  8. Cash Flow:(Cash Flow From Operating Activities) Net Income XXX Adjustments to NI Noncash/Nonoperating Items +Depreciation XXX Cash Changes in Current Assets/Liabilities +/- Accounts Receivable XXX +/- Inventory XXX +/- Prepaid Expenses XXX +/- Accounts Payable XXX Net Cash From Operations XX,XXX

  9. Cash Flow:(Cash Flow From Other Activities) Capital Expenditures (-) (XXX) Payments of Debt (-) (XXX) Dividends Paid (-) (XXX) Sale of Stock XXX Net Cash From Other Activities (XXX) Net Cash From Operations XXX Net Cash From Other Activities (XXX) Increase/(Decrease) in Cash XXX

  10. Pro Forma Balance Sheet Assets Current Assets Cash $50,400 Accounts Receivable 46,000 Merchandise Inventory 10,450 Supplies 1,200 Total Current Assets $108,050

  11. Pro FormaBalance Sheet (cont’d) Fixed Assets Equipment $240,000 Less Depreciation 39,600 Total Fixed Assets $200,400 Total Assets $308,450 =======

  12. Pro FormaBalance Sheet (cont’d) Total Liabilities & Owners’ Equity Current Liabilities Accounts Payable $23,700 Current Portion of L.T. Debt 16,800 Total Current Liabilities $40,500 Long-Term Liabilities Notes Payable $209,200 Total Liabilities $249,700

  13. Pro FormaBalance Sheet (cont’d) Owners’ Equity C. Peters, Capital $25,000 K. Peters, Capital 25,000 Retained Earnings 8,700 Total Owners’ Equity $58,750 Total Liabilities & Owners’ Equity $308,450 =======

  14. Break-Even Analysis Total Fixed Cost B/E(Q) = SP per Unit – VC per Unit

  15. Break-Even Graph Break-Even TR = TC

  16. Pro Forma Sources & Applications of Funds Sources of Funds Mortgage Loan $150,000 Term Loan 75,000 Personal Funds 50,000 Net Income From Operations 8,750 Add Depreciation 39,600 Total Funds Provided $323,350

  17. Pro Forma Sources & Applications of Funds(cont’d) Applications of Funds Purchase of Equipment $240,000 Inventory 10,450 Loan Repayment 16,800 Total Funds Expended $267,250 Total Funds Provided $323,350 Total Funds Expended 267,250 Net Increase in Working Capital $56,100 ======

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