CHAPTER VII

PREPAIRING, ANALYZING
AND FORECASTING
FINANCIAL STATEMENTS:
QUANTIFYING THE BUSINESS
PLAN
 CASH FLOW
SUPPLIERS
CREDIT
RAW MATERIALS
AND SUPPLIERS

BANK
LOANS
CASH

LAND, BUILDING,
STOCKHOLDERS MACHINERY,
EQUITTY EQUIPMENT,
FIXTURES VEHICLES
 LIABILITIES ASSETS
- Suppliers credit ( all suppliers - Cash ( cash inflows minus cash
credit availed of less what has been outflows)
paid for) - Accounts recievables (sales not yet
- Debt (all dept incurred less all collected )
principal payments paid) - Inventories( all merchandise sold)
- Equity ( capital put in plus all net - Fixed assets
profits generated ( or net losses Land
incurred) Minus all dividends paid Buildings
out) Machinery and equipment
Vehicles, etc.
 
Less: accumulated depreciation
 

Total liabilities Total assets

Analyzing Financial Statements
Financial statements are nothing but absractions of all he business
transactions going on in an enterprise. Analysing or interpreting financial
statements can give very powerful insights into how an enterprise is
conducting itself. One of the most easily understood financial statements is
the income statement, also called the profit and loss statement.
Income Statement Analysis
The top line of the income statement is sales. One can compare the sales
figures of an enterprise over the years to see whether is growing or not.
 
Balance Sheets Analysis
The balance sheet items are logically arranged by the accountant for
convenient analysis.
ASSETS
 CURRENT ASSETS – those convertible to cash within a relatively short
of period of time.
 FIXED ASSETS- led by land, which is the most saleable among them
 OTHER ASSETS- usually intangible, such as organizational development
expenses are enterprise creation expenses
 TOTAL ASSETS
FORECASTING FINANCIAL STATEMENTS
 The art of financial forecasting is popular among entrepreneurs who know their businesses
inside out. It enables them to ask the following questions, among many, prior to a financial
forecasting exercise:
 What will happen to the market conditions tomorrow?
 What will competition do?
 What products and services will come out?
 What technology is in store for us?
 What will interest rates be like?
 How will the economy grow?
 What regulaions might he government impose?
 What changes are happening in the environment?
 How is our organization responding to these changes?
 What are we capable of doing or not doing tomorrow?

INCOME STATEMENT FORECASTING

BALANCE SHEET FORECASTING
What the balance sheet of an enterprise will look like in the future depends a lot on the future
sales.
FUNDS FLOW FORECASTING
Compute for the increase or decrease in the different items found in he asses and liabilities.

CASH FLOW FORECASTING

The entrepreneur or finance manager is concerned about enterprises survival on a day to day
basis as well as its long term sustainability.