Business Startup Check List

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1. ____Choose & Register a Business Name 2. ____Decide on the Legal Form for the Business 3. ____Write a Business Plan 4. ____Set Up a Relationship with a Banker 5. ____Set Up Other Professional Relationships 6. ____Set Up a Relationship with an Attorney, if Needed 7. ____Meet Legal Requirements for Operating a Business 8. ____Get Licenses and Permits 9. ____Set the Price for Your Product or Service 10. ____Determine the Financing You Will Need and How You Will Get It 11. ____Obtain Office Space, Equipment and Suppliers 12. ____Plan for Risk & Insurance 13. ____Set up Record keeping Systems 14. ____Set up a Financial Management System 15. ____Develop a Marketing Plan 16. ____Hire Employees 17. ____Develop a Day-to-Day Managerial Plan

7 Tips for Creating a Great Business Proposal
Q: I was wondering if you had any tips on what constitutes a good proposal. Much of my business comes from making proposals, and I think they could probably be stronger, though I am not sure they are weak, if that makes sense. Thanks in advance. — Kirk A: In his excellent book, Writing Winning Business Proposals, author Richard C. Freed says this about business proposals:

Although a few are outstanding, most aren't. Many offend with 'cut-and-paste' boilerplate, miss important opportunities to provide value, suffer from poor logic and organization, and focus more on you than on me and my organization. Although some do a few things well, some don't do much well at all.

I think he is on to something. I read quite a few business proposals, and have written many. Most often, and most successfully, my proposals have been to publishers. Each time I have written a book, the process begins with a proposal that explains what the book would be, who its intended audience is, why it would be better than competitive books, and why the publisher would be nuts not to publish it. Similarly, not a few business proposals come across my desk. Some are excellent and some are not. So here then are my 7 Tips for Creating a Great Business Proposal:

1. Write Clearly and Succinctly: There is a tendency in business writing generally, and in business proposals specifically, to try and show how smart you are by using excess verbiage, jargon, and run-on sentences. Don't do it. Be succinct. Make your point and move on. Remember: When people begin reading the proposal, they have little or no idea what you are proposing, so you have to walk them through the process. You do so by starting at the beginning and clearly, simply, and logically moving forward by making your points one at a time. Start with the big picture and drill down as you go along. 2. Make a Good Argument and Counter Possible Obstacles: A great proposal is, essentially, a sales brochure, disguised. In it, you put your best foot forward, put your company in the best light, and make yourself irresistible to the reader. How do you do that? The best way is to marshal the top facts and arguments in your favor. Have a theme and reinforce it again and again. Take the reader down a path that leads but to one conclusion — that hiring you makes the most sense for them. You also have to put yourself in the readers' position, think of what counter arguments they may be considering, and deal with those potential obstacles honestly. That makes you trustworthy. 3. Show your Personality: Far too often, business proposals are devoid of life, as if the person writing it is some Employeetron 3000, programmed to say nothing, be boring, and not offend. I say, let your personality come through. Of course this is business and you have to follow some business conventions, but as you do, also let the reader see who you are. Share your enthusiasm for your business, their business, the idea, something. 4. Use Graphics Intelligently: Don't make the mistake of bogging down a perfectly fine proposal with excess graphics. Yes, of course you need graphics; they can clarify an idea, and liven up a proposal and allow readers to focus on something other than words. That's smart. Just don't get carried away. Whether you use a program like Publisher or PowerPoint,

just be sure that the graphics reinforce the sale rather than distracting from the point. 5. Don't Oversell: Avoid hyperbole. As soon as you cross the line from understandable pride to obnoxious overstatement, you lose credibility. Once readers think you're not shooting straight with them, they may question the truthfulness of everything in your proposal—all that they read so far, and all that is still to come. You avoid this unenviable fate by staying on the safe side of overstatement. 6. Avoid Boilerplate Language and Catch Typos: Another sure way to lose readers is to have them think that your proposal is a cut-and-paste job, consisting of boilerplate data and text. Certainly you can reuse persuasive information from elsewhere, but try to keep it to a minimum and don't make it obvious. Your proposal should read as if it were created especially for this particular client or customer. And while you're personalizing the proposal, triple-check for typos. If it is clear that you didn't give the proposal your best effort, why would your readers think you would give their project your best effort? 7. Always Keep the Reader in Mind: A proposal is a marketing tool, and as such, remember Marketing 101: Stress benefits, benefits, benefits. Finally, while price is important and must be discussed, do so only after you have wowed readers with your crisp writing, powerful arguments, supporting graphics, and a plethora of potential benefits. Then you can go in for the sale.

Business Plan The Cafe Deluthe & Gourmet Bakery

Financial Analysis The Cafe Deluthe & Gourmet Bakery is basing their projected baking, baked goods, coffee and espresso sales on the financial snapshot information provided to them by All Bros. Coffee Company. Internet sales were estimated by calculating the total number of hours each terminal will be active each day and then generating a conservative estimate as to how many hours will be purchased by consumers. Cost of Goods Sold: Total cost of goods sold for coffee and baked goods-related products was determined by the "retail profit analysis" we obtained from All Bros. Coffee Company. The cost of bakery items is 20% of the selling price. The cost of Internet access is $250 per month, paid to _________________ for networking fees. The cost of e-mail accounts is 25% of the selling price.

Fixture Costs: Fixture costs associated with starting The Cafe Deluthe & Gourmet Bakery are the following: 2 computers and wireless hubs $3,000, two printers $1,000, one scanner $400, one espresso machine $10,700, one automatic espresso grinder $895, two coffee/food preparation counters $1,200, one information display counter $1,400, one drinking/eating counter $900, sixteen stools $1,600, six computer desks w/chairs $3,400, stationery goods $500, two telephones $200, decoration expense $14,110 for a total fixture cost of $39,305. Baking Kitchen: (See the complete business plan in Fimark's Business Plan Writing Tool Kit) Salaries Expense: The founder of The Cafe Deluthe & Gourmet Bakery, ________________, will receive a salary of $24,000 in year one, $36,400 in year two, and $49,040 in year three. Payroll Expense: The Cafe Deluthe & Gourmet Bakery intends to hire six part-time employees at $5.75/hour and a full-time technician at $10.00/hour. The total cost of employing seven people at these rates for the first year is $7,240/month. Rent Expense: The Cafe Deluthe & Gourmet Bakery is leasing a 1700 square foot facility at $.85/sq. foot. The lease agreement The Cafe Deluthe & Gourmet Bakery signed specifies that we pay $2,000/month for a total of 36 months. At the end of the third year, the lease is open for negotiations and The Cafe Deluthe & Gourmet Bakery may or may not re-sign the lease depending on the demands of the lessor. Utilities Expense: As stated in the contract, the lessee is responsible for the payment of utilities including gas, garbage disposal, and real estate taxes. The only utilities expense that The Cafe Deluthe & Gourmet Bakery must pay is the phone bill and dedicated Phone line for Internet access The basic monthly service charge for each wireless hub provided by Verizon is $17.29. The 13 wireless hubs used to connect the modem will make local calls to the network provided by Verizon resulting in a monthly charge of $224.77. The two additional lines used for business communication will cost $34.58/month plus long distance fees. The Cafe Deluthe & Gourmet Bakery assumes that it will not make more than $40.00/month in long distance calls. Therefore, the total cost associated with the two business lines is estimated at $74.58/month and the total phone expense at $599.35/month. Marketing Expense: The Cafe Deluthe & Gourmet Bakery will allocate $5,000 for promotional expenses at the time of start-up. These dollars will be used for advertising in local newspapers, magazines and online in order to build consumer awareness. Insurance Expense: The Cafe Deluthe & Gourmet Bakery has allocated $1,440 for insurance for the first year. As revenue increases in the second and third year of business, The Cafe Deluthe & Gourmet Bakery intends to invest more money for additional insurance coverage. Legal and Consulting Fees: The cost of obtaining legal consultation in order to draw up the paper work necessary for an LLC is $1,000. Depreciation: In depreciating our capital equipment, The Cafe Deluthe & Gourmet Bakery used the Modified Accelerated Cost Recovery Method. We depreciated our computers over a five-year time period and our fixtures over seven years. Taxes: The Cafe Deluthe & Gourmet Bakery is an LLC and, as an entity, it is not taxed. However, there is a 15% payroll burden.

Accounts Payable: The Cafe Deluthe & Gourmet Bakery acquired a $24,000 loan from a bank at a 10% interest rate. The loan will be paid back at $750/month over the next three years. The $9,290 short term loan will be paid back at a rate of 8%.

Get the complete Business Plan along with an easy to use step by step Business Plan Writing Form complete with Business Plan Tutorial, Research interface access, Assumptions and Financial Summary Creator and Business Startup Timeline Checklist in Fimark's Business Plan Writing and Startup Tool Kit

Business Plan Definitions
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Enter Term Here Suggestion: when entering the word to be defined use sentence case i.e. Accounts Receivable instead of all lower case words.

Business Plan Terms Define Accounts Receivable Loan (debt) A loan that revolves around a business' accounts receivable balance. Define Annuity A form of contract sold by life insurance companies that guarantees a fixed or variable payment to the buyer at some future time, usually at retirement. Annuity is the annual payment of an allowance or income. The right to receive this payment or the obligation to make this payment. Define Asset Anything owned that is convertible into cash. Usually divided into two broad classes: 1) Real assets/property; computer, equipment, inventory, etc., 2) Financial assets/money; cash, bank account, mutual funds, etc. Define Bankers Acceptance Short terms financing that are a cost effective vehicle for domestic and international commerce. One advantage of a banker's acceptance is that it does not need to be held until maturity, and can be sold off in the secondary markets. Define Banks, Savings & Loans and other Financial Institutions Commercial banks savings and loans and similar institutions do the majority of business financing. Banks use their depositors’ money to make loans and must repay their depositors. Define Bond (debt security) A negotiable, long-term debt instrument. The bond or debt security carries certain obligations (including the payment of interest and repayment of principal) on the part of the issuer. Define Bond, Discounted

Also called Zero-Coupon bonds, having no periodic interest payments as the discounted bond is sold at some price below (discounted) its face value and returns full face value at maturity. discounted bond. Define Bottom Line The last line of a company's profit and loss ledger sheet. The bottom line usually refers to the net profit or loss of a company at any given time. The right marketing solutions can make a difference to your bottom line. Define Bridge Loan (debt and/or equity) Bridge financing is needed at times when a company plans to go public. Often bridge financing is structured so that it can be repaid from the proceeds of the public underwriting. Companies are able to expand using a bridge loan program. Define Budget An estimate of income and expenses for a specified period. Your business plan should include a monthly, quarterly and annual budget plan. Define Business Plan A blueprint of your business mission, goals, projections and how these will be attained. A written instrument to help the owner to operate the business. A road map to tell others how you expect to reach projected goals. You may require a business plan to get a loan or attract investors. Define Capital Wealth, net worth in money and/or property. Any form of wealth employed or capable of being employed in the production of more wealth. A subset of Assets. Thus business capital. Define Capital Structure The post investment financial structure must fit the particular capital requirements of the company that will provide sufficient long-term capital growth. Define Capital Venture (venture capital) Funds made available for startup firms and small businesses with exceptional growth potential. Define Cash Flow- After Debt Service The sum remaining after subtracting debt service (principal and interest) from net operating income. Define Cash Flow- Net Operating Net operating cash is the amount of money remaining after all direct expenses are deducted, such as maintenance, property taxes, utilities, management, etc. but not including debt service, depreciation, income taxes and capital improvements. Define Commercial Lines of Credit

Working capital lines of credit are provided on a revolving basis and are annually renewable. These lines of credit are extended on a formula basis with advances made against selected inventory. Define Commercial loan A bank loan to a company to meet business operating expenses or to finance the purchase of inventory. Define Corporate Tax The tax owned by the company according to the tax regulations and its net profit before tax. Define Corporate Tax Rate A way to measure the amount of charge or levy placed on the profit of a firm. Different rates are used for different levels of profits. Define Currency The metal or paper medium of exchange that is presently used. Define Debt Debt consists of long or short-term loans that may be secured, unsecured, or partially secured, fixed or variable rate, etc. There are many variations of debt, and a whole list of terms and conditions that may be applicable. Define Dividend Distribution of earnings to shareholders, the amount is decided by the company's board of directors and is usually paid quarterly. Dividends must be declared as income in the year they are received. Define Dollar Cost Averaging A method of purchasing assets by investing a fixed amount of dollars at set intervals (such as $100 per month). This method automatically buys more of the asset when the prices are down. Define Early Stage Financing (debt and/or equity) Provided to companies that have expended their initial capital and require funds to initiate full-scale manufacturing and sales. May be debt or equity. Define Earnings Corporate profit remaining after paying taxes and bondholder interest. Define Earnings Projection Quantitative estimate of future earnings based on economic or financial performance Define Employee Stock Ownership Plan Loans Financing to assist in the transfer of ownership to the employees. Define Equipment Financing Capital to be used for acquisition of equipment, operation or manufacturing. Define Equity

Equity is not a loan, but an investment made by an individual, group, or an organization. Define Equity Creation The completed value of a project should ordinarily exceed its total cost, since risk and other uncertainties are either clear, or eliminated. Define Executive Summary It provides a concise overview of the entire plan along with a history of your company. Define Expansion Capital Capital used for (a) the expansion of an existing business, or (b) enlargement of an existing structure or project. Define Exit Strategy A business plan should include a time frame and a mechanism for realization of shareholder value. Define Factoring of Accounts Receivable - Consumer Receivables Consumer Receivable factoring is the sale of accounts receivables (where services were delivered or goods were sold to consumers) for cash at a discount, without credit insurance. Define Factoring of Accounts Receivable - Full Recourse Full-Recourse factoring is the sale of accounts receivables for cash at a discount, without credit insurance. Define Factoring of Accounts Receivable - Maturity Maturity factoring allows companies to establish predictable cash flow levels at a relatively low cost by offering what amounts to a slow payment insurance policy. Define Factoring of Accounts Receivable - Non Recourse Non-Recourse factoring is the sale of accounts receivables for cash at a discount, where the factor insures the credit risk associated with your customer's ability to pay, but does not insure the performance risk in your ability to deliver a satisfactory service or product. Define Financial Lease A long-term lease that extends over most of the useful life of the asset. Define Financial Leverage The use of debt financing to complement equity financing. Define Financial Structure Ratio Invested capital (or net assets) divided by owners' equity. A measure of financial leverage based on balance sheet data. Define Financial Summary

Condensed statement of a companies financial activities Define Financial Analysis The techniques used to determine money needs in a business. Techniques include balance sheet, financial ratio analysis, calculation of return on investment and breakeven analysis to determine ultimate success. Define Financing The manner in which a proposed purchaser intends to make up the difference between cash on hand and the purchase price. A method of financing in which a company issues shares of its stock and receives money in return. Define Firms Cost of Capital The return expected by investors for the capital they supply to fund all the assets acquired and managed by the firm. Define First Stage Funding (debt and/or equity) Provided to companies that have expended their initial capital and require funds to initiate full-scale manufacturing and sales. May be debt or equity. Define Fixed Assets Tangible, relatively long-lived resources. The business has acquired these assets ordinarily in order to use them in the production of other goods and services. Define Fixed Asset Turnover or Turns Sales divided by fixed assets. A measure of the efficiency of fixed assets management. Define 401(k) Plan An employer sponsored, tax deferred, retirement plan which uses pre-tax contributions from an employees regular compensation to invest for that employee's in a number of possible financial instruments. Define 403(b) Plan A tax deferred retirement plan very much like the 401(k) [above], with the main difference being that the employer is a non-profit organization (school, church, etc.). Define Franchising Companies transferring the right to conduct business under its trademark. Define Goodwill The difference between the (higher) price at which a firm has been acquired and either its reported net book value or its estimated fair value. Define Gross Profit The difference between the firm's net sales and its cost of goods sold. Define Hard Money Loans Mortgage loans that are made to borrowers who have significantly adverse credit. These loans are usually made by private investors or funding companies. Hard money

lenders are commercial real estate lending companies offering a specialized type of real-estate backed loan. Define Historical Multiples Multiples calculated using past financial data. Same as trailing multiples. Used to value a firm. Define Horizontal Merger Two firms in the same sector pooling their resources. Define Hurdle Rate An investment's cost of capital when used in comparison with the investment's internal rate of return. Same as minimum required rate of return. Define Inflation A sustained rise in the prices of goods and/or services. Two common measures of the Inflation Rate are the Consumer Price Index and the Producer Price Index. Define Income Statement Financial statement reporting information about the firm's activities that result in changes in the value of owner' equity during a period of time, obtained by deducting from revenues the corresponding expenses incurred during that period of time. Define Incremental Cash Flow The difference between the firm's expected cash flow if the investment is made and its expected cash flows if the investments not undertaken. Define Initial Public Offering (IPO) When a firm sells equity to the public for the first time. Define Intangible Assets Assets such as goodwill, patents, trademarks, and copyrights. Define Interest - Rate Risk Risk arising from unexpected changes in the level of interest rates that affect the firm's future cost of debt financing. Define Internal Rate of Return (IRR) Discount rate at which the present value of the future cash flows of an investment equal the cost of the investment. Define International Lines of Credit Through letters of credit you can place the strength of the lender behind your company providing the international trading partners with additional confidence. Define Inventories Raw materials, work in process, and finished goods not yet sold, reported in the balance sheet as current assets. Define Inventory Turn or Turnover

Cost of goods sold divided by ending inventories. Define Invested Capital The sum of cash and marketable securities, working capital requirement, and net assets. Equal to capital employed. Define Investment The use of capital to create more money. Usually includes the idea that safety of principal is important. Define L.L.C. Limited Liability Corporation Define Land Loan Financing the making, installing, or constructing of the improvements necessary to convert raw land into construction-ready building sites. Define Last In, First-Out Inventory valuation method that assigns to all units in inventory the cost of the unit purchased last. Define Late Stage Financing Capital used to finance an existing established business. Late Stage Financing may be used to gain market share, reduce debt or virtually any other need a company is looking to address. Define Letters of Intent A written indication of serious interest by a prospective tenant, but not a binding obligation. Define Leveraged Buyout Takeover of a company, using borrowed funds. Most often, the target company's assets serve as security for the loans taken out by the acquiring firm, which repays the loans out of cash flow of the acquired company. Define Leveraged Lease A financial lease in which the leasing company finances the purchase of the asset with a substantial level of debt, using the lease contract as collateral. Define Liabilities What a firm's shareholders collectively owe on the date of the balance sheet. Define Licensing Companies can license their product to distributors with established sales, thus avoiding the cost of building its own sales infrastructure. Define Line of Credit Lines of credit cover short-term operating expenses. A non binding arrangement in which a bank lends a firm a stated maximum amount of money over a fixed but renewable period of time, usually one year.

Define Liquidation Value Amount of cash that can be raised if various items that make up firm's assets are sold separately. Usually the minimum value of assets. Define Liquidity (of a Firm) The ability of a firm to meet short-term recurrent cash obligations. Define Loan or Investment to Value Ratio The amount of funding compared to the value of the project (50%, for example). Define London Interbank Offering Rate (LIBOR) The interest rate at which international banks lend U.S. dollars to one another. Define Long-Term Financing Equity plus long-term debt. Define Management Buyout Takeover of a company by its own management, using borrowed funds. Most often, the company's assets serve as security for the loans taken out by its management, which repays the loans out of cash flow of the company. Define Market The world of commercial activity where goods and services are bought and sold. Define Market Analysis Research used to assist in predicting the direction of the markets. Define Marketing Plan The entire strategy for selling a product or service including its publicity, promotion, sales and advertising. Define Margin It is an important measurement of management’s efficiency, and also the profitability and performance of a company. Define Market Capitalization Market value of a firms equity. Equal to its quoted price per share multiplied by the total number of shares the company has issued. Also referred to as market cap. Define Master Lease (Debt) A continuing lease arrangement whereby additional equipment can be added from time to time merely by describing that equipment in a new lease schedule executed by the parties. Define Maturity Date The date on which the face value of a bond must be repaid. The date on which an option contract must be settled. For an option contract, the maturity date is the same as the expiration date.

Define Mezzanine Loan (combination debt/equity) Is a hybrid between debt and equity. Secured by existing or to be acquired borrower assets it ranks below senior bank financing. Define Mission Statement Inspiring motivational written statement that defines the central function of the organization. Define Money Market Fund A type of Mutual Fund that invests in commercial paper, bankers acceptances, repurchase agreements, government securities, certificates of deposit, and other liquid and safe securities that pays money market rates of interest. Define Mortgage Mortgages are available for new construction, acquisition, and refinancing purposes. Term of loans is usually fully amortized over fifteen to thirty years. Define Mortgage Bond/Loan A medium- to long-term bond/loan backed by real estate. Define Multiplies Ratios used to value firms. Define Net Assets Cash plus working capital requirement plus net fixed assets. Also, total assets less operating liabilities. Same as invested capital. Not to be confused with net asset value. Define Net Asset Value The difference, at a particular date, between what a firms shareholders collectively own, called assets, and what they owe, called liabilities. Same as net worth owners' equity, shareholders' funds. Not to be confused with net assets. Define Net Book Value The value at which a fixed asset is reported in the balance sheet. Define Net Capital Expenditures Cash Capital expenditures less cash raised from the sales of existing assets. Define Net Fixed Assets Long-term assets, such as equipment, machinery, and buildings, from which accumulated depreciation expenses have been deducted. Net fixed assets can be liquidated in order to create cash assets for other ventures. Define Net Operating Cash Flow The net cash flow originating from the firm's operating activities during the period under consideration (cash inflows from operations minus cash outflows from operations). Define Net Present Value (NPV)

The discounted value (at the weighted average cost of capital) of an investments future stream of cash flows (net operating cash flows less net capital expenditures) less the initial cash outlay required to launch the investment. When comparing the value of money now with the value of money in the future one presents the net present value. Define Net Present Value (NPV) Rule If a business proposal has a positive net present value (NVP), it should be carried out because it will increase the firm's value by an amount equal to the proposal's NVP If a proposals NPV is negative, it should be rejected. Define Net Profit Margin Net profit margin divided by sales. A measure of profitability. Define Nominal Cash Flows Nominal cash flows measured in nominal terms, that is, including inflation. Define Noncurrent Assets Long-lived assets that are not expected to be turned into cash within a year. Same as long-term assets, fixed assets, or capital assets. It can be tangible or intangible assets as well as financial assets. Define Noncurrent Liabilities Obligations of a firm that are payable after more than one year. Define Note A debt security acknowledging a creditor relationship with the issuing firm and stipulating the conditions and terms under which the money was borrowed. Same as promissory notes. Define Operating Cash-Earnings Multiple Share price divided by earnings before interest, tax, depreciation, and amortization (EBITDA) per share; used to value a firm. Define Operating Cycle The sequence of operating activities that begins with the acquisition of raw materials and ends with the collection of cash for the sale of final goods. Define Operating Expenses Expenses related to operating activities, that is, cost of goods sold, selling, general and administrative expenses, and depreciation expenses. Define Operating Lease A short-term lease for which the length of the contract is shorter than the useful life of the asset leased. Define Operating Profit Net sales less operating expenses. Define Operating Profit Margin

Earnings before interest and tax (EBIT) divided by sales. A measure of profitability. Define Optimal Capital Structure The debt-to-equity ratio that maximizes the market value of the firm's assets. Define Overhead Expenses The expenses required for the production, management and execution of services of a company. Define Owners' Equity The difference, at a particular date, between what a firm's shareholders collectively own, called assets, and what they owe, called liabilities. Same as net asset value, net worth, shareholders' equity, and shareholders' funds. Define Paid-In Capital in Excess of Par The difference between the cumulative amount of cash that the firm received from shares issued up to the date of the balance sheet and the cash it would have received if those shares had been issued at par value. Define Par Value For a share of stock, an arbitrary fixed value set when shares are issued. For a bond, the fixed amount (face value) that has to be paid back to bondholders at the maturity date of the bond. Define Payback Period The number of periods (usually years) required for the sum of the project's expected cash flows to equal its initial cash outlay. Define Preferred Stocks A security that has a priority over common stock in the payment of dividends and a prior claim on the firm's assets in the event of liquidation, but has no voting rights. Define Prepaid Expenses Payments made by a firm for goods or services it will receive after the date of the balance sheet. Define Present Value (PV) The value of an expected future cash-flow stream discounted at a rate that reflects its risk. Same as discounted value. Define Price-to-Earnings Ratio (PER or P/E Ratio) Share price divided by the firm's earnings per share. Same as earnings multiple. Used to value a firm. Define Private Placement The issuance and sale of a firm's securities directly to financial institutions and qualified investors, thus bypassing the financial markets. Define Profitably Index (PI)

The present value of an investment's expected cash-flow stream divided by the investment's initial cash outlay. Define Projection A prediction made by extrapolating from past observations Define Property Plant and Equipment Tangible assets such as land, buildings, machines, and furniture reported in the firm's balance sheet as fixed assets. Define Provisions (for bad debt) Provisions for possible uncollectiblity of accounts receivable. Same as allowance for bad debts. Define Public Offering The issuance and sale of a firm's securities to the public at large, not only to its existing shareholders. Same as general cash offering. Define Purchases Cost of goods sold plus change in inventories minus production costs. Define Principal Face amount of a debt security (Bond or Mortgage) on which interest is owed or earned. Investment Principal: basic amount invested, exclusive of earnings. Define Quick Ratio Cash plus accounts receivable divided by current liabilities. Same as acid test. A measure of liquidity. Define Raw Materials Inventory The cost assigned to materials that have not yet entered the production process at the date of the balance sheet. Define Real Estate Loans Loans used to purchase or refinance owner-occupied property and buildings. Define Recapitalization Alteration of a corporation's Capital Structure, such as an exchange of bonds for stock, or of preferred stock for common stock, or of one type of bond for another. Define Research and Development (debt and/or equity) Scientific and marketing evolution of a new product or service. Define R & D Funding (Equity) This is a tax advantaged partnership setup up to finance product development for startup as well as more mature companies. Define Return on Investment The most common calculation used is Internal Rate of Return (IRR). A less sophisticated "snapshot" method is return on cost, calculated by dividing total cost by net operating income.

Define Reserves The accumulation of retained earnings since the creation of the firm. Define Residual Value (of an asset) The resale, or scrap, value of an asset. Same as salvage value. Define Residual Value (of a Firm) The estimated value that the firm will have at the end of a forecasting period, which is determined by the expected cash flows beyond the forecasting period. Define Retained Earnings The part of a firms profit that owners decide to invest back into their company. Define Return on Assets (ROA) The Earnings after tax (EAT) divided by total assets. A measure of profitability. Define Return on Business Assets (ROBA) Earnings before interest and tax (EBIT) divided by business assets (working capital requirement plus net fixed assets). A measure of operating profitability. Define Return on Capital Employed (ROCE) The net operating profit after tax (NOPAT or EBIT x (1-Tax rate)) divided by capital employed (equity plus debt capital) Same as return on net assets (RONA). Define Return on Equity (ROE) Earnings after tax (EAT) divided by owners equity. A measure of the firms profitability to shareholders. Define Return on Invested Capital Net operating profit after tax (NOPAT or EBIT x (1-Tax rate)) divided by invested capital (cash plus working capital requirement plus net fixed assets). Define Return on Sales (ROS) Earnings after tax (EAT) divided by sales. Same as net profit margin. A measure of profitability. Define Return on Total Assets (ROTA) The Earnings before interest and tax divided by total assets. A measure of profitability. Define Resolving Credit Agreement A legal agreement that a bank will lend a stated maximum amount of money over a fixed but renewable period of time. Define Risk Premium The difference between the expected return on a security and the risk-free rate. Define Sale/Leasebacks

A transaction that involves the sale of an asset (such as Real Estate or Equipment) to a leasing or finance company and a subsequent lease of the same asset back to the original owner, who continues to use the asset. Define s-Corporation A form of corporation, allowed by the IRS for most companies with 75 or fewer shareholders, which enables shareholders to enjoy limited liability status. Define Second Stage Funding (debt and/or equity) Second stage funding is working capital for the initial expansion of a company that is producing and shipping, and has growing accounts receivable and inventories. Although the company has made progress, it may not yet be showing a profit. Define Sector A set of businesses that are buying and selling such similar goods and services that they are in direct competition with each other. Define Security Certificate (or a book entry in the security holders account) issued by a firm that specifies the conditions under which the firm has received the money. Define Security Offered Types of security include a mortgage on the property, personal guarantees, other property collateral, letter of credit and third party guarantee. Define Seed Capital Funds Private venture capital firms specifically targeted to small business start-ups. Define Seed Funding (debt and/or equity) Seed funding is a relatively small amount of capital provided to an inventor or entrepreneur to prove a concept and to qualify for start-up capital. Define Self-Liquidating Loans Short-term bank loans to firms that need to finance the seasonal buildup in their working capital investment and that bankers expect the firm to repay with the cash that will be released by the subsequent reduction in working capital. Define Shares A stock, also referred to as a share, is commonly a share of ownership in a corporation. Define Short-Term Borrowing/Debt/Financing Short-term, interest-bearing debt that includes bank overdrafts, drawing on lines of credit, short-term promissory notes, and the portion of any long-term debt due within a year. Define Small Business Administration (SBA) A government backed loan program for small businesses whereby the US Small Business Administration guarantees some portion of a loan administered by a private business lender such as a bank.

Define Small Business Investment Companies (SBIC) Privately organized and privately managed investment firms licensed by the Small Business Administration. Define Speculation Signifies a much higher degree of risk than investment, though often having better odds than gambling. Define Statement of Cash Flow Financial statement, such as FASB Standard 95, that provides information about the firm and the outside world by separating transactions into cash flows related to operating, investing, and financing activities. Define Straight-Line Depreciation Method Depreciation method according to which the firms tangible fixed assets are depreciated by an equal amount each year. Define Start-up Capital A new business venture. Start-up is the earliest stage at which a venture capital investor or investment pool will provide funds to an enterprise. Define Standby Letters of Credit Back up financial facilities that provide assurances the contractual obligations will be met. Define Stock (Equity) Shares of stock represent a fraction of ownership in a corporation. As a partial owner, the stockholder is entitled to a partial share of earnings and dividends after taxes. Define Structured Financing Structured finance describes any non-standard way of raising money. Companies resort to structured finance techniques for a variety of reasons. For example, conventional loans, debentures or equity may be either unavailable or too expensive. As such, structured solutions tend to be tailor-made to suit a borrowers needs. Define Subordinated Debt Junior in claim on assets to other debt, that is, repayable only after other debts with a higher claim have been satisfied. Define Subordinated Bond/Debt/Loan Bond/debt/loan that has a claim on the firm's assets (in the event of liquidation) that follows the claim of senior debt holders. Same as junior bond/debt/loan. Define Tangible Assets Assets such as land, buildings, machines, and furniture (collectively called property, plant, and equipment) and long-term financial assets. Define Time Value of Money

Time has value because a dollar received earlier is worth more than a dollar received later. Define Times-Interest-Earned Ratio The ratio of earnings before interest and tax (EBIT) divided by interest expenses. Same as interest coverage ratio. A measure of financial advantage based on income statement data. Define Term Financing Loans are available for a variety of purposes. Amortization is over five to seven years. Define Unlevered Cost of Equity The cost of equity of an all-equity financed firm. Can be estimated with the capital asset pricing model using the firm's asset beta. Define Variables Difference between direct And indirect costs. Define Venture Capitalists Venture Capitalists provide equity financing and hybrids financing structures (i.e. bonds and equity). Venture Capitalists look for a high return on their investment. Define Venture Capital Firm An investment firm specializing in the financing of small and new ventures. Define Vision Statement A statement giving a broad, inspirational image of the future that an organization is aiming to achieve. Define Weighted Average Cost of Capital (WACC) The weighted average of the after tax cost of debt and cost of equity. The minimum rate of return a project must generate in order to meet the return expectations of its suppliers of capital (lenders and shareholders). Define Wire Transfer Cash advance or a wire transfer usually occurs in a long-term relationship where the two parties know and trust each other. Define Work-In-Process Inventory The cost of the raw materials that were used in the production of unfinished units plus labor costs and other costs allocated to these units. Define Working Capital Funds required for overhead and operations of a business. Yield The annual rate of return on an investment, expressed as a percentage Define Yield To Maturity The rate that makes the bond price equal to the present value of the bond's future cash-flow stream.

Define Zero-Coupon Bond A bond with no coupon payments that is sold at an original discount from face value. Use the more detailed Business Planning Organizer in the Business Plan Writing Tool Kit when preparing your PowerPoint Business Plan Presentation

Business Plan Definition

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