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Financial Plan

The document outlines the key components of a financial plan, including: 1. Developing operating and capital budgets to project expenses and cash flow on a monthly basis for the first year. This includes sales, cost of goods sold, and operating expenses. 2. Creating pro forma income statements by projecting monthly and yearly revenue, expenses, and profits. Pro forma cash flow and balance sheet statements are also important to project. 3. Conducting break-even analysis to determine the sales volume needed to cover total costs. Financial ratios and cash flow projections are also covered. The goals are to provide a complete financial picture and plan to meet obligations and maintain business liquidity.

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Hassan Julkipli
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190 views23 pages

Financial Plan

The document outlines the key components of a financial plan, including: 1. Developing operating and capital budgets to project expenses and cash flow on a monthly basis for the first year. This includes sales, cost of goods sold, and operating expenses. 2. Creating pro forma income statements by projecting monthly and yearly revenue, expenses, and profits. Pro forma cash flow and balance sheet statements are also important to project. 3. Conducting break-even analysis to determine the sales volume needed to cover total costs. Financial ratios and cash flow projections are also covered. The goals are to provide a complete financial picture and plan to meet obligations and maintain business liquidity.

Uploaded by

Hassan Julkipli
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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FINANCIAL

PLAN
BERNARDO,DARAUG,DUNGCA,JULKIPLI,
MANIBOG
OBJECTIVES:
At the end of the learning experience, the learner will
be able to:
1. Understand the importance of preparing a financial
plan.
2. Describe how to prepare financial statements and
use them to manage a small business.
3. Create projected financial statements.
4. Understand basic financial statements through ratio
analysis.
5. Explain how to interpret financial ratios.
6. Conduct a break-even analysis for a small company.
THE FINANCIAL PLAN
It provides the entrepreneur with a complete picture of:
the amount funds and when they are coming into the
organization
where funds are going and how much cash is available.
the projected financial position of the firm
the plan explains how the entrepreneur intends to
meet financial obligations and maintian the venture's
liquidity.
THE IMPORTANCE OF
A FINANCIAL PLAN

Common Many Financial


mistake among entrepreneurs planning is
business run their essential to
owners: failing companies running a
to collect and without any successful
analyze basic kind of business and is
financial data financial plan not that difficult
OPERATING & CAPITAL BUDGETS
These are developed before developing the pro forma income
statement.
Sales budget
An estimate of the expected volume of sales by month.
Cost of sales can be determined from the sales forecasts.
Regression Analysis
Time Series Analysis
Exponentail Smoothing
Qualitative approaches
Example Manufacturing
Budget
OPERATING & CAPITAL BUDGETS
Operating costs:
Includes fixed expenses incurred regardless of sales volume.
Variable expenses must be linked to strategy in the business
plan.
Estimated costs can be ascertained from personal experience or
industry bench marks
Capital budgets
provide a basis for evaluating expenditures that will impact the
business for more than one year.
A Sample Operating Budget for
First Three Months
Pro Forma Income Statements
Pro Forma Income - Projected net profit calculated from projected
revenue minus projected costs and expenses.
Sales by month is calculated first.
Basis of the figures - Marketing research, industry sales, trial
experience, forecasting, and financial data on similar start-ups.
Projecting of all operating expenses for each of the months during the
first year should be made.
Pro Forma Income Statements
increasing selling expenses as sales increase should be taken
into account
changes in expenses during the first year can necessitate
month-by-month illustration.
increase in individual expenses need to be reflected in the first
year's pro forma income statement.
projections should be made for 2 years and 3 as well consider
expenses that are likely to reamain stable over time.
Pro Forma cash flow
projected cash available calculated from projected cash
accumulations minus projected cash disbursements
it is not the same as profit
sales may not be regarded as cash
use of profit as a measure of success may be deceiving if there
is significant negative cash flow
cash flow can be projected using the indirect or direct method.
Pro forma cash flow
Entrepreneurs must make monthly projections of cash.
if disbursements are greater than receipts-entrepreneur must either
borrow funds or have cash in a bank
large positive cash flows need to be invested or deposited in a bank
for periods when disbursements are greater than receipts.
determining the exact monthly receipts and disbursements is
difficult
Pro forma cash flow is based on best estimates
Sample Pro Forma Cash Flow, First Year by Month
Pro Forma Balance Sheet
Summarizes the projected assets, liabilities, and net worth of the new
venture.
It is a picture of the business at a certain moment in time and does not
cover a period of time.
Consists of:
Assets - Items that are owned or available to be used in the venture
operations; can be current or fixed.
Liabilities - Money that is owned to creditors; can be current or long
term debt.
Owner's equity - Amount owners have invested and/or retained from the
venture operations.
Break-even Analysis
breakeven- volume of sales where the venture neither makes a profit nor incurs a loss
the break-even formula:

major weakness in calculating the breakeven lies in determining if a cost is a fixed or


variable
Software packages
A spreadsheet program (microsoft excel) is most suitable
for completing pro forma statements.
- helps present different scenarios and assess their impact on
the pro forma statements
A Simple and easy to use software is useful in the start-up
stage.
Software packages vary in price and complexity.
The team

Manibog Kaye Honeylee Daraug, Kris Angel Beranardo, Mikaella Julkipli, Hassan
Any questions?
THANK YOU!

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