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Financial Management
deals with two things: raising money and managing a company's finances in a way that achieves the highest rate of return.
Historical Financial Statements
Reflect past performance and are usually prepared on a quarterly and annual basis.
Pro Forma Financial Statements
Are projections for future periods based on forecasts and are typically completed for two to three years in the future.
Income Statement
Reflects the results of the operations of a firm over a specified period of time. It records all the revenues and expenses for the given period and shows whether the firm is making a profit or is experiencing a loss.
Balance Sheet
Is a snapshot of a company's assets
Statement of Cash Flows
Summarizes the changes in a firm's cash position for a specified period of time and details why the changes occurred.
Profits
Total Sales (Revenues) - Total expenses.
Net Sales
Total sales minus allowances for returned goods and discounts.
Cost of Sales
All direct costs associated with the production.
Operating Expenses
Include marketing; administration; and other expenses not directly related to the production of a product/service.
Current Assets
Include all assets that are relatively liquid (cash) such as accounts receivable and inventories.
Current Liabilities
Money you need to pay within 12 months; which includes accounts payable; accrued expenses; short-term notes.
Long-term Liabilities
Loans that are repayable beyond 12 months; which includes mortgages and loans associated with equipment.
Owner's Equity
The money that the owners invest in the business.
Forecasts
Predictions of a firm's future sales; expenses; income; and capital expenditures.
Percentage-of-Sales Method
A method for expressing each expense item as a percentage of sales.
Constant Ratio Method of Forecasting
All expense items on your pro forma income statement will grow at the same rate of sales.
Pro Forma Income Statement
A firm's pro forma financial statements are similar to its historical financial statements except that they look forward rather than track the past.
Pro Forma Balance Sheet
A firm's pro forma financial statements that provide a forward-looking snapshot of assets
Pro Forma Cash Flow Statement
A firm's pro forma financial statements that project future cash inflows and outflows.
New Venture Fitness Drinks
A fictitious sports drink company used to illustrate how financial statements are prepared.
Growth Rate
The company is profitable and is growing at a rate of 25% per year.
Assumption Sheet
A document created to outline the assumptions on which forecasts are based.
Financial Statements Templates
Templates available on Score.org for various financial statements.
Projected Balance Sheet
A template for creating a future balance sheet.
12 Month Cash Flow Statement
A template for projecting cash flows over a 12-month period.
12 Months Sales Forecast
A template for forecasting sales over a 12-month period.
Start-Up Expenses
Expenses incurred during the start-up phase of a business.
Business Plan
A 25-35 page narrative outlining business goals.
Dual-Use Document
Serves internal strategy and external investment purposes.
Road Map
Guides execution of strategies and plans internally.
Investor Introduction
/ Presents business opportunity to potential investors.
Perfect Business Plan Fallacy
/ Ideal plans often fail in real-world application.
Adaptation in Start-ups
Successful start-ups continuously learn and iterate.
Seed Money
Initial funding required to start a venture.
Executive Summary
Brief overview of the business plan's key points.
Industry/Market Analysis
Examines competition, barriers, and market dynamics.
Company Description
Details history, mission, and legal status of the firm.
Market Analysis
Analyzes customer segmentation and buyer behaviors.
Economics of Business
Includes break-even point and revenue streams.
Marketing Plan
Outlines product, price, promotion, and distribution strategies.
Design and Development Plan
Addresses intellectual properties and development challenges.
Operations Plan
Covers logistics, quality control, and inventory management.
Management Team Structure
Describes organizational hierarchy and board of directors.
Overall Schedule
Timeline for business milestones and deliverables.
Financial Projections
Forecasts income statements, balance sheets, and cash flows.
Appendices
Supplementary materials supporting the business plan.
Barringer and Ireland Template
Structured format for creating a business plan.
Score.org Template
Business plan template for start-ups and established firms.
SBA Online Template
Government resource for business plan creation.
Cover Page Requirements
Includes company name, founder, and contact information.
Table of Contents
Lists sections and page numbers for navigation.
Business Concept
Explanation of the business's unique idea.
Target Market
Specific audience the business aims to serve.
Industry Analysis
Description of industry size and growth trends.
Market Segmentation
Breaking down the market into specific segments.
Buyer Behavior
Analysis of customer purchasing habits.
Mission Statement
Company's guiding principles in 30 words or fewer.
Legal Status
Type of business structure (e.g., corporation).
Break-even Point
Total fixed costs divided by profit per unit.
Sales Forecast
Projected sales based on various factors.
Value Chain Analysis
Framework for analyzing business activities and efficiencies.
Management Team
Key personnel leading the business venture.
Milestones
Critical events necessary for business success.
Fixed Costs
Expenses that do not change with production volume.
Variable Costs
Expenses that vary directly with production volume.
Start-up Expenses
Initial costs incurred before business launch.
Intellectual Property
Legal rights to inventions and creative works.
Key Partnerships
Collaborations that support business operations.
Sales Channels
Methods used to sell products/services to customers.
Pro Forma Statements
Projected financial statements for future periods.
Ethical Organizational Culture
A strong ethical culture established by founders through leading by example.
Code of Conduct
A formal statement of an organization's values on certain ethical and social issues.
Ethics Training Program
Programs that teach business ethics to help employees deal with ethical dilemmas.
Ethical Dilemma
A situation that involves doing something beneficial to oneself or the organization
Founders' Agreement
A written document that addresses equity splits
Nondisclosure Agreement
An agreement that binds an employee or party to not disclose a company's trade secrets.
Noncompete Agreement
An agreement that prevents an individual from competing against a former employer for a specific period.
Business Licenses and Permits
Local; state; and/or federal licenses and permits required for a business to operate.
Federal Licenses and Permits
Licenses required for certain businesses; such as those selling alcohol or firearms.
State Licenses and Permits
Categories of licenses required by states
Local Licenses and Permits
Licenses required to operate certain types of businesses or engage in specific activities at the local level.
Fictitious Business Name Permit
A permit allowing a business to operate under a fictitious name.
Federal Employee Identification Number (EIN)
A number required for all businesses
Sole Proprietorship
The simplest form of business entity involving one person; where the individual and business are the same.
Advantages of Sole Proprietorship
Easy and inexpensive to create
Disadvantages of Sole Proprietorship
Unlimited liability for the owner and reliance on the skills of a single owner for success.
General Partnership
A partnership where all partners share responsibilities and liabilities.
Limited Partnership
A partnership consisting of one or more general partners and one or more limited partners.
C Corporation
A legal entity that is separate from its owners; providing limited liability to its shareholders.
Subchapter S Corporation
A special type of corporation that meets specific Internal Revenue Code requirements.
Limited Liability Company (LLC)
A flexible form of enterprise that blends elements of partnership and corporate structures.
Unlimited Liability
Owner is personally responsible for all business debts.
Raising Capital
Process of obtaining funds for business operations.
Partnership
Business owned by two or more individuals.
General Partner
Partner with unlimited liability and management authority.
Limited Partner
Partner with liability limited to their investment amount.
Shareholders
Individuals who own shares in a corporation.
Board of Directors
Group elected by shareholders to govern a corporation.
Double Taxation
Income taxed at both corporate and shareholder levels.
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