ENTREP | Financial Plan

Financial Plan

• describes the business’ activities in terms of money or finances.

• also includes resources, equipment and materials that are needed to operate the business.

Financial Requirements

1. Fixed Capital (CAPEX)

2. Working Capital (OPEX + COGS)

3. Pre-Operating Capital

Fixed Capital

• one-time expenses

• generally last the lifetime of the business

• includes the cost of land, building and its renovation, furniture, furnishings and fixtures, machinery and equipment

Working Capital

• the reserve money you need to run the business until it
  becomes self-supporting, which may take from one to six months or
  even longer.

• includes to purchase raw materials, to compensate workers, to pay
  for transportation, telephone, electricity and water bills

Pre-Operating Capital

• money that you spend before your business begins to operate.

• includes capital to register the business, to acquire licenses for franchises, and to pay a consultant or lawyer.

Kinds of Financial Statements

1. Income Statement

2. Statement of Cash Flow

3. Balance Sheet

Income Statement

• illustrates the profitability of a company under accrual accounting rules.

• indicates how the sales is transformed into the net income. (Profit or Loss Statement)

Statement of Cash Flow

• shows cash movements from operating, investing, and financing activities

Balance Sheet

• shows a company’s assets, liabilities, and shareholders’ equity at a particular point in time

Projected Income Statement

helps forecast your estimated sales for a period of time (e.g. month, semi-annual, annual).

Parts of an Income Statement

1. Sales/Revenue

2. Cost of Goods Sold

3. Groos Profit

4. Operating Expenses

5. Net Income

Revenue

• money from the sale of products and services

• Formula: REVENUE = sales price x #

Net Income

• profit after all expenses are deducted

• Formula: NET INCOME = Gross Profit - Total OPEX

Gross Profit

• difference between revenue or income (net revenue) and the cost of making a product or providing a service (cost of goods sold)

• Formula: GROSS PROFIT = Sales - COGS

Cost of Goods Sold (COGS)

• attributable to the production of goods
  which includes material cost and direct labor cost. (Direct costs/Variable
  Costs)

• Formula: COGS = Beginning Inventory + Purchases - Ending Inventory

Operating Expenses (OPEX)

• an ongoing cost for creating a product and running a business. It is usually the monthly expenses. It is your fixed costs.

• sum of all OPEX

Capital Expenditures (CAPEX)

• the cost of developing or providing non-consumable parts for the product or service.

• not included in the income statement.