• Click to edit Master text styles

– Second level
• Third level
Session 21
– Fourth level
» Fifth level
Analysis of Financial
Projections (Part 1)

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 Chapter Learning Objectives
1. Discuss Source and Use of Funds Statement
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2. Design–Assumptions
Second level Sheet
• Third level
3. Develop Pro –Forma Financial Statements
Fourth level
» Fifth level
4. Utilize Ratio Analysis

Copyright © 2015 Pearson Education, Ltd. 10-2

 Introduction
• Tips for Success:
1. • Provide
ClickLenders
to edit
and Master text
Investors What Theystyles
Want to Know
2. Show You Can Get Up and Running Successfully
– Second level
3. Get Accountant’s Help
• Third level
– Fourth level
• Six Parts: » Fifth level
– Sources and Uses of Funds Statement
– Assumptions Sheet
– Income Statements
– Balance Sheets
– Cash Flows
– Ratio Analysis

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 Section 1: Sources and Uses of Funds
Statement
1. How Much Money Firm Needs
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2. Where Money
– Second Will Come From:
level
– Founders, Initial
• Third levelManagement Team
– Early Investor(s)
– Fourth level
» FifthNeeded
– Remaining Funds level

3. What the Money Will be Used For

• Example: Figure 10-1

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 Section 2: Assumptions Sheet

• Explanation of Most Critical Assumptions that

• Click Statements
Financial to edit Master text styles
are Based on
– Second
– General level
Assumptions
• Third
• Reflect level View of Common Knowledge
a Consensus
– Fourth level
» Fifth level
– Financial Statements Assumptions
• Information in Earlier Sections of the Plan
• Gumshoe Inquisitiveness

• Example: Figure 1-2

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 Section 3: Financial Statements
• Pro Forma = Projected Future Estimates
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• Pro Forma Financial
– Second Statements:
level
1. Income Statement
• Third level
2. Balance Sheet
– Fourth level
3. Cash Flow Statement
» Fifth level

• Years to be Projected:
– Complete Income and Cash Flow Statements on Monthly Basis for
First Two Years
– All Statements Annually for Three to Five Years

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 Pro Forma Income Statement
• Projected Sales – Expenses = Profit (or Loss)
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– Second
• Numbers Receiving level
Most Attention:
– Net Sales
• =Third
Total level
Sales – Returns & Discounts
– Fourth level
– Cost of Goods Sold = Direct
» Fifth levelCosts Associated with Producing or
Delivering Product/Service

– Operating Expenses = Marketing, Utilities, Indirect Administrative Costs

• Example: Figure 10-3

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 Pro Forma Balance Sheet
• Projection of Firm’s Assets,
• Clickand
Liabilities, to Owner’s
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Equity at
– Second
Specific level
Point in Time
• Third level
• Assets:
–Fourth level
– Current Assets
» Fifth level
– Fixed Assets

• Liabilities:
– Current Liabilities
– Long-Term Liabilities
– Owner’s Equity

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 Balance Sheet Categories and
Questions to Answer
• Categories:
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Assets
Master text styles
Liabilities
–Current
Second level Current
• Third level
Fixed Long-Term
– Fourth level Owners’ Equity
» Fifth level

• Questions to Answer:
1. Does Firm Have Sufficient Short-Term or Current Assets to Cover
Short-Term Debts?

2. Is Firm Financially Sound Overall?

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