ENPI MODULE 6

2. ENPI MODULE 6 CREATING A FINANCIAL PLAN FOR YOUR BUSINESS

3. INCOME STATEMENT • Summarizes a business’s income and expenses over a given time period • Shows whether the business made a profit or took a loss • Also called a profit and loss statement • Prepared monthly, quarterly, annually • Two formats: Traditional and Contribution Margin • Shows the Break Even Point (How much does a business need to sell to pay all its expenses)

4. PARTS OF AN INCOME STATEMENT • RevenueIncludes gross sales, return sales, and net sales • Cost of Goods Sold • Gross ProfitSubtracting COGS from net sales • Operating ExpensesAll expenses needed to run business • Pre-Tax ProfitSubtracting operating expenses from gross profit • Net Profit (Loss)Subtracting taxes from pre-tax profit.Thisis your $$!

5. CASH FLOW • Records inflows and outflows of cash when they actually occur. • Should be created monthly with an income statement. FIVE WAYS TO HAVE CASH • Collect Cash as Soon as Possible • Pay Bills Close to the Due Date • Keep Track of Your Cash • Lease Equipment • Keep Inventory to a Minimum

6. PARTS OF A CASH FLOW STATEMENT • Beginning Cash BalanceWhat you start the month with in cash • Cash InflowCash received in • Total Available CashAdd Beginning cash balance and cash inflow together • Cash OutflowIncludes payments for inventory and/or operating expenses • Net CashShows the net change in cash flow.

7. BALANCE SHEET • Summarizes the assets and liabilities of a business • Fundamental Accounting Equation:Assets-Liabilities=Owner’s Equity • How much is your business worth on a specific date. • Answers the Questions: • What does the company own? • To whom does it owe money? • How much is the business worth?

8. PARTS OF A BALANCE SHEET • AssetsEverything owned by the business that has a monetary valueExample: Cash, inventory, equipment, supplies. • LiabilitiesAny outstanding bill or loan that has to be repaid. • Owner’s EquityValue of the business if all the assets were sold and all the liabilities were paid.