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Chapter 10 The Financial Plan
Sequence of Financial Statements <ul><li>Budgets </li></ul><ul><ul><li>Operating- Short-Term </li></ul></ul><ul><ul><li>Ca...
Pro Forma Statements <ul><li>Pro Forma Income </li></ul><ul><ul><li>Sales Budget By Month </li></ul></ul><ul><ul><li>Expen...
Daily Knowledge   On Financial Position <ul><li>Cash Balance On Hand </li></ul><ul><li>Bank Balance </li></ul><ul><li>Dail...
<ul><li>Slow-Paying Accounts Receivable </li></ul><ul><li>Discounts Offered On Accounts Payable </li></ul><ul><li>Payroll-...
Monthly Knowledge   On Financial Position <ul><li>Provide Records </li></ul><ul><ul><li>Receipts </li></ul></ul><ul><ul><l...
Sales Budget <ul><li>Calculate Sales Expectations In Units </li></ul><ul><li>Utilize </li></ul><ul><ul><li>Marketing Resea...
Cash Flow:   (Cash Flow From Operating Activities) <ul><li>Net Income XXX </li></ul><ul><li>Adjustments to NI </li></ul><u...
Cash Flow:   (Cash Flow From Other Activities) <ul><li>Capital Expenditures (-) (XXX) </li></ul><ul><li>Payments of Debt (...
Pro Forma Balance Sheet <ul><li>Assets </li></ul><ul><li>Current Assets </li></ul><ul><li>Cash $50,400 </li></ul><ul><li>A...
<ul><li>Fixed Assets </li></ul><ul><li>Equipment $240,000 </li></ul><ul><li>Less Depreciation   39,600 </li></ul><ul><li>T...
<ul><li>Total Liabilities & Owners’ Equity </li></ul><ul><li>Current Liabilities </li></ul><ul><li>Accounts Payable $23,70...
<ul><li>Owners’ Equity </li></ul><ul><li>C. Peters, Capital $25,000 </li></ul><ul><li>K. Peters, Capital   25,000 </li></u...
Break-Even Analysis B/E(Q)  = Total Fixed Cost SP per Unit – VC per Unit
Break-Even Graph Break-Even TR = TC
Pro Forma Sources &  Applications of Funds <ul><li>Sources of Funds </li></ul><ul><li>Mortgage Loan $150,000 </li></ul><ul...
<ul><li>Applications of Funds </li></ul><ul><li>Purchase of Equipment $240,000 </li></ul><ul><li>Inventory   10,450 </li><...
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Chapter 10

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Chapter 10

  1. 2. Chapter 10 The Financial Plan
  2. 3. Sequence of Financial Statements <ul><li>Budgets </li></ul><ul><ul><li>Operating- Short-Term </li></ul></ul><ul><ul><li>Capital- Long-Term </li></ul></ul><ul><li>Pro Forma Statements </li></ul>
  3. 4. Pro Forma Statements <ul><li>Pro Forma Income </li></ul><ul><ul><li>Sales Budget By Month </li></ul></ul><ul><ul><li>Expenses Are Function Of Sales Level </li></ul></ul><ul><li>Pro Forma Cash Flow </li></ul><ul><ul><li>Cash Receipts </li></ul></ul><ul><ul><li>Cash Payments </li></ul></ul><ul><li>Pro Forma Balance Sheet </li></ul><ul><li>Pro Forma Sources & Applications of Funds </li></ul>
  4. 5. Daily Knowledge On Financial Position <ul><li>Cash Balance On Hand </li></ul><ul><li>Bank Balance </li></ul><ul><li>Daily Summaries Of Sales/Cash Receipts </li></ul><ul><li>Problems In Credit Collections </li></ul><ul><li>Record Of Money Paid Out </li></ul>
  5. 6. <ul><li>Slow-Paying Accounts Receivable </li></ul><ul><li>Discounts Offered On Accounts Payable </li></ul><ul><li>Payroll- Hours Worked & Payroll Owed </li></ul><ul><li>Taxes- When Taxes Due & Reports Required </li></ul>Weekly Knowledge On Financial Position
  6. 7. Monthly Knowledge On Financial Position <ul><li>Provide Records </li></ul><ul><ul><li>Receipts </li></ul></ul><ul><ul><li>Disbursements </li></ul></ul><ul><ul><li>Bank Accounts </li></ul></ul><ul><ul><li>Journals </li></ul></ul><ul><li>Review </li></ul><ul><ul><li>Income Statement </li></ul></ul><ul><ul><li>Balance Sheet </li></ul></ul><ul><li>Reconcile Checking Account </li></ul><ul><li>Balance Petty Cash Account </li></ul><ul><li>Review Tax Requirements & Make Deposits </li></ul><ul><li>Review/Age Accounts Receivable </li></ul>
  7. 8. Sales Budget <ul><li>Calculate Sales Expectations In Units </li></ul><ul><li>Utilize </li></ul><ul><ul><li>Marketing Research </li></ul></ul><ul><ul><li>Industry Sales </li></ul></ul><ul><ul><li>Experience </li></ul></ul><ul><li>Forecasting Techniques </li></ul><ul><ul><li>Survey of Buyers </li></ul></ul><ul><ul><li>Sales Force Opinions </li></ul></ul><ul><ul><li>Expert Opinions </li></ul></ul><ul><ul><li>Time Series Analysis </li></ul></ul>
  8. 9. Cash Flow: (Cash Flow From Operating Activities) <ul><li>Net Income XXX </li></ul><ul><li>Adjustments to NI </li></ul><ul><li>Noncash/Nonoperating Items </li></ul><ul><li>+Depreciation XXX </li></ul><ul><li>Cash Changes in Current Assets/Liabilities </li></ul><ul><li>+/- Accounts Receivable XXX </li></ul><ul><li>+/- Inventory XXX </li></ul><ul><li>+/- Prepaid Expenses XXX </li></ul><ul><li>+/- Accounts Payable XXX </li></ul><ul><li>Net Cash From Operations XX,XXX </li></ul>
  9. 10. Cash Flow: (Cash Flow From Other Activities) <ul><li>Capital Expenditures (-) (XXX) </li></ul><ul><li>Payments of Debt (-) (XXX) </li></ul><ul><li>Dividends Paid (-) (XXX) </li></ul><ul><li>Sale of Stock XXX </li></ul><ul><li>Net Cash From Other Activities (XXX) </li></ul><ul><li>Net Cash From Operations XXX </li></ul><ul><li>Net Cash From Other Activities (XXX) </li></ul><ul><li>Increase/(Decrease) in Cash XXX </li></ul>
  10. 11. Pro Forma Balance Sheet <ul><li>Assets </li></ul><ul><li>Current Assets </li></ul><ul><li>Cash $50,400 </li></ul><ul><li>Accounts Receivable 46,000 </li></ul><ul><li>Merchandise Inventory 10,450 </li></ul><ul><li>Supplies 1,200 </li></ul><ul><li>Total Current Assets $108,050 </li></ul>
  11. 12. <ul><li>Fixed Assets </li></ul><ul><li>Equipment $240,000 </li></ul><ul><li>Less Depreciation 39,600 </li></ul><ul><li>Total Fixed Assets $200,400 </li></ul><ul><li>Total Assets $308,450 </li></ul><ul><li> ======= </li></ul>Pro Forma Balance Sheet (cont’d)
  12. 13. <ul><li>Total Liabilities & Owners’ Equity </li></ul><ul><li>Current Liabilities </li></ul><ul><li>Accounts Payable $23,700 </li></ul><ul><li>Current Portion of L.T. Debt 16,800 </li></ul><ul><li>Total Current Liabilities $40,500 </li></ul><ul><li>Long-Term Liabilities </li></ul><ul><li>Notes Payable $209,200 </li></ul><ul><li>Total Liabilities $249,700 </li></ul>Pro Forma Balance Sheet (cont’d)
  13. 14. <ul><li>Owners’ Equity </li></ul><ul><li>C. Peters, Capital $25,000 </li></ul><ul><li>K. Peters, Capital 25,000 </li></ul><ul><li>Retained Earnings 8,700 </li></ul><ul><li>Total Owners’ Equity $58,750 </li></ul><ul><li>Total Liabilities & Owners’ Equity $308,450 </li></ul><ul><li> ======= </li></ul>Pro Forma Balance Sheet (cont’d)
  14. 15. Break-Even Analysis B/E(Q) = Total Fixed Cost SP per Unit – VC per Unit
  15. 16. Break-Even Graph Break-Even TR = TC
  16. 17. Pro Forma Sources & Applications of Funds <ul><li>Sources of Funds </li></ul><ul><li>Mortgage Loan $150,000 </li></ul><ul><li>Term Loan 75,000 </li></ul><ul><li>Personal Funds 50,000 </li></ul><ul><li>Net Income From Operations 8,750 </li></ul><ul><li>Add Depreciation 39,600 </li></ul><ul><li>Total Funds Provided $323,350 </li></ul>
  17. 18. <ul><li>Applications of Funds </li></ul><ul><li>Purchase of Equipment $240,000 </li></ul><ul><li>Inventory 10,450 </li></ul><ul><li>Loan Repayment 16,800 </li></ul><ul><li>Total Funds Expended $267,250 </li></ul><ul><li>Total Funds Provided $323,350 </li></ul><ul><li>Total Funds Expended 267,250 </li></ul><ul><li>Net Increase in Working Capital $56,100 </li></ul><ul><li> ====== </li></ul>Pro Forma Sources & Applications of Funds(cont’d)

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