How to develop the financial plan for your Business

How to develop the financial plan for your Business Business Plan Basics Income Statement Net Sales - RO 40,000Cost of Sales- RO 22, 000Gross Margin- RO 18,000Operating Expenses-Depreciation- RO 2,000 Administrative + Sales - RO 2,000Operating Income- RO 14,000Dividend and interest income -RO 5,000Interest Expense -RO 2,000Taxes -RO 1,000Net Income -RO 16,000Net Sales: amount of money made from the goods or the services that you sold. Cost of Goods Sold or Cost of Sales: amount of money it took you to be able to have the goods or services ready. Includes things such as materials and labor costs incurred to make the product or labor that supplied the service. Overhead is also included in here.

A) Direct Materials: goes into and becomes part of the product that is sold. B) Direct Labor: is used specifically in the production of the product or performance of the service. C) Overhead: a category of various general things that are indirectly used to make a product such as oil for machine parts to keep the factory working. It is usually a small part of each products cost

Gross Margin: This shows how much money you receive compared to what it cost to made the good or service. The gross margin shows you how much money you have available to pay your expenses and still make a profit. Depreciation: subtraction from the value of asset because of wear over time. These are figured out based on the life of an asset or how much it is used Dividend and Interest Income: additional money that you receive from ownership and investments externally. Dividends are your portion of another companys earnings. Interest income is money that you make as a result of allowing someone else to borrow money from you. Income taxes: the amount you will have to pay in taxes as a result of your income applied to the appropriate tax amount Interest expense: money you need to pay others because of your borrowing. You get to subtract this out of the money that your company has before calculating the amount of taxes that you have to pay. Net Income: may be a positive or negative value. At the end of all things this is what most people look at. This includes all sources of income and all costs.

Reference: Merrill Lynch. (2003). How to Read a Financial Report. Net Income RO 16,000 P/A Total Investment in the Business RO 48,000Break Even- 3 yearsCash Flow Statement When we begin to build a cash flow statement, we want to keep the following in mind:We have a starting balance of cash at the beginning of our fiscal year. We might have increased cash via operations. We made money on the products or services we sell. We used cash throughout the year to pay for things: new assets and expenses. We might have raised cash throughout the year.

Cash and Cash Equivalents (Beginning)+ Cash from Operations- Cash Flows from Investing Activities+ Cash Flows from Financing Activities= Cash and Cash Equivalents (Ending)

Net Income $8,000,000 Depreciation Expense $4,000,000 Net Change to Accounts Receivables ($2,000,000) Net Change to Accounts Payable $1,000,000 Total Adjustments to Operating Income $3,000,000 Net Cash Flow Provided by Operating Activities $11,000,000 Cash Flows from Investing Activities Purchase of New Computer ($1,500,000) Purchase of Assembly Line Machine ($2,000,000) Decommissioning Fund Contributions ($500,000) Net Cash Used in Investing Activities ($4,000,000)Net Cash Flows from Financing Activities Increase in Short Term Debt $500,000 Redemption of Long Term Debt ($3,000,000) Issuance of Common Stock $250,000 Cash Dividends on Common Stock ($2,000,000) Net Cash Provided by (Used in) Financing Activities ($4,250,000)Cash and Cash Equivalents at the Beginning of the Period $6,000,000 Net Increase / Decrease in Cash and Cash Equivalents $2,750,000 Cash and Cash Equivalents at the End of the Period $8,750,000