Slide 1

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WELCOME TO

Planning the Entrepreneurial Venture

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14

Financial Statements

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14_A

Financial Statements

 Income Statement

 Balance Sheet

 Cash Flow Statement

MARKET PLANNING: Financial Statements

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14_B

Income Statement

 Shows profits or loss for a given period.

 Shows revenue (sales) earned by company.

 Shows expenses incurred to generate the revenue.

 Serves as tax document.

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Cash Flow Statement

 Projects cash flow in and out on a monthly basis.

 Shows the cash cycle.

 Helps with day-to-day budgeting.

 Ignores non-cash accounting entries such as depreciation, amortization, asset transfers.

14_C

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14_D

Balance Sheet

 Shows the value of the company at a point in time.

 Shows assets, liabilities, and owner’s equity.

 Uses the accounting equation.

Assets = Liabilities + Equity

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14_E

Financial Ratios

 Profitability ratios

 Liquidity ratios

 Risk ratios

 Efficiency ratios

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14_F

Financial Plan

 Start-Up Costs

 Sales Projections

 Income Projections

 Break-Even Analysis

 Cash Requirements

 Sources of Financing

 Exit Strategy

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14_G

Exit Strategy

 Sell the business.

 Take the business public.

 Pass the business to a family member.

 Liquidate the assets and close the doors.

 Retain ownership and hire a manager.

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14_H

Budget Monitoring

 Provides a basis to financially manage your business.

 Controls costs.

 Reduces spending.

 Predicts sales.

 Estimates production costs.

 Sets goals for payroll costs.