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How to develop the

financial plan for your
Business Plan Basics

Income Statement • • • • • • • • • • • Net Sales 40.000 Taxes .000 Operating IncomeDividend and interest income .RO Interest Expense RO 2. RO 18.000 Cost of Sales000 Gross MarginOperating ExpensesDepreciation2.RO 16.000 RO RO RO 14.000 Administrative + Sales 2.000 5.000 RO RO 22.000 .RO 1.000 Net Income .

• 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.• Net Sales: amount of money made from the goods or the services that you sold. Overhead is also included in here. .

• 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 .• 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.

These are figured out based on the life of an asset or how much it is used . • Depreciation: subtraction from the value of asset because of wear over time.• 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.

• Income taxes: the amount you will have to pay in taxes as a result of your income applied to the appropriate tax amount . Dividends are your portion of another company’s earnings. Interest income is money that you make as a result of allowing someone else to borrow money from you.• Dividend and Interest Income: additional money that you receive from ownership and investments externally.

You get to subtract this out of the money that your company has before calculating the amount of taxes that you have to pay.• Interest expense: money you need to pay others because of your borrowing. .

• Net Income: may be a positive or negative value. . (2003). • Reference: Merrill Lynch. This includes all sources of income and all costs. At the end of all things this is what most people look at. How to Read a Financial Report.

000 P/A • Total Investment in the Business RO 48.000 • Break Even.• Net Income – RO 16.3 years .

• We might have increased cash via operations. • We used cash throughout the year to pay for things:  new assets and expenses. 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 raised cash throughout the year.  We made money on the products or services we sell. .Cash Flow Statement • When we begin to build a cash flow statement.

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

000 • Total Adjustments to Operating Income $3.000) • Net Change to Accounts Payable $   • Net Cash Flow Provided by Operating Activities $11.• Net Income $8.000 .000.000 • Net Change to Accounts Receivables ($2.000.000   • Depreciation Expense $4.

• Cash Flows from Investing Activities   • Purchase of New Computer ($1.000.000) .000) • Purchase of Assembly Line Machine ($2.000)     • Net Cash Used in Investing Activities ($4.500.000.000) Decommissioning Fund Contributions ($500.

000) .000 • Redemption of Long Term Debt ($3.250.000) • Issuance of Common Stock $250.000 • Cash Dividends on Common Stock ($2.000.000)     • Net Cash Provided by (Used in) Financing Activities ($4.• Net Cash Flows from Financing Activities •   Increase in Short Term Debt $500.000.

000 • Cash and Cash Equivalents at the End of the Period $8.• Cash and Cash Equivalents at the Beginning of the Period $6.000 • Net Increase / Decrease in Cash and Cash Equivalents $2.750.000.000 .750.