Third Year BBM

Business and Economic Department

NMDC

BUSINESS PLANNING

Daw Htay Htay(AP)

Oct 2021
WEEK 1
CHAPTER 1 THE SUCCESSFUL BUSINESS
1.Factors of a successful Business
In the past success was often put down to good luck, but as a society we
have largely moved on from such ideas.
Researchers have studied businesses in detail looking for the common
elements of success.
Out of this has come a handful of common factors that successful
businesses exhibit which enables them to see off the competition and
bring great ideas to a wide market. Among factors, a plan is one factor of
the common elements of success.
 A Plan

Having a plan is the first necessity for success. Not all businesses have
this at the outset and often it changes along the way but once a direction is
settled upon it is important to develop clarity about where the business is
going in order to communicate it to staff, investors and the wider world.
PERSONAL SATISFACTION: THE FOUR C'S
 For start-up businesses, smaller enterprises, or businesses that are heavily
influenced by one or two key members of management, issues of personal
satisfaction can be a central element in influencing long-term success.
 Thus, you must evaluate and consider your personal goals when deciding upon
the course of your business development. For most entrepreneurs, the Four C’s
can sum up these goals:

1. Control,
2. Challenge,
3. Creativity and
4. Cash.
CONT.’S
1). control:
 How much control you need *to exercise on a day-to-day basis
helps determine how large your company can be. If you are
unwilling to delegate or share authority, your business should be
designed to stay small. Likewise, if you need a great deal of
control over your time (because of family or personal demands),
a smaller business without rapid expansion is more appropriate.
 If your company is large, put mechanisms in place and structure
management reporting systems to ensure that as the company
grows, you continue to have sufficient direction over
development to give you personal satisfaction. Understand the
nature of control your funders will have and *be certain you are
comfortable with these arrangements.
CONT.’S

2). Challenge
 If you are starting or expanding a business, *you are likely to be a
problem-solver and risk-taker, enjoying the task of figuring out
solutions to problems or devising new projects.
 It is important to recognize the extent of your need for new
challenges and develop positive means to meet this need;
otherwise, you may find yourself continually starting new projects
that *divert attention from your company’s overall goals.
 As you plan your company, establish personal goals that not only
provide you with sufficient stimulation but advance the growth of
your business.
CONT.’S
3). Creativity
 Entrepreneurs want to leave their mark. Their companies are not only a means of
making a living, but also a way of creating something that* bears their stamp.
That’s why many businesses carry the founder’s name. As you develop your
company, make certain it reflects your larger values.
 You’ll want to shape your business so it is not just an instrument for earning an
'income but a mechanism for maintaining creative stimulation and making a larger
contribution to society .But don’t over personalize your company, especially if it
is large. *Allow room for others, particularly partners and key personnel, to share
in the creative process.
4). Cash
 Understand how your personal financial goals have an impact on your business
plan.
 For instance, if you need substantial current income, you may need investors so
that you have sufficient cash to carry you through the lean start-up time. You will
most likely have to share equity, and the business must be devised for substantial
profit potential to reward those investors appropriately.
WEEK 1
CHAPTER 2
GETTING YOUR PLAN STARTED

The business planning process is designed to answer two questions:

1) Where are we now?
2) Where do we want to go?
 The result of this process is a business plan that serves as a guide
for management to run the company.
 Describing the most critical tasks that must be completed and the
time frame for completion, a business plan allows companies to
allocate resources to accomplish goals.
WHAT IS A BUSINESS PLAN?

Business plans may be prepared for a variety of reasons. Most

typically, business plans will be developed to facilitate financing,
operational, or strategic goals.
• A business plan is a written document describing a company's
core business activities, objectives, and how it plans to achieve its
goals.
• Startup companies use business plans to get off the ground and
attract outside investors.
• Businesses may come up with a lengthier traditional business
plan or a shorter lean startup business plan.
• Good business plans should include an executive summary,
products and services, marketing strategy and analysis, financial
planning, and a budget.
REASONS FOR WRITING A BUSINESS PLAN

1. To serve as the guide you will follow throughout the life

of your business
2. All lenders and investors require a business plan
3. A business plan is the key to conducting business in the
international marketplace
WEEK 1
CHAPTER 3
MAKING YOUR PLAN COMPELLING
Business plan
 Business plans written primarily for financing purposes
tend to be the most common.
 These plans have as their primary goal obtaining capital
from lenders or investors.
 These plans will tend to be quite formal and will stress
financial issues.
 Moreover, as these business plans are written primarily
for outsiders, the plan must assume the reader has little
or no knowledge of the business.
OPERATIONAL BUSINESS PLANS
 Operational business plans tend to be written for an
internal audience, and help define the functional
aspects of the business.
 These plans will be more focused on internal

operations to give direction to team members a clear

picture as to the functional dynamics of the business.
 As the plan is geared toward insiders of the business,
it will tend to assume basic knowledge of the
business itself.
STRATEGIC BUSINESS PLANS
 Strategic business plans are often written for
entrepreneur, him/herself, and allows the
entrepreneur a vehicle by which he/she may
organize thoughts and
 ideas so as to develop a strategic plan for the
business.
STRUCTURE OF A BUSINESS PLAN
1. Executive Summary.
2. Assumptions.
3. Core Competencies
4. Mission Statement.
5. Products & Services
6. Organizational Chart
7 Start-up Costs.
8. Estimating Capital Needs.
9. Competitive Advantage.
10. Market Analysis
CONT’S
11.Structure of Business
12.Operations
13. Sales Forecast
14.Employees
15.Competitive Analysis
16.Target Market
17.Marketing Plan
18.SWOT Analysis
19.Insurance
20.Industry Analysis
21Preparing the Financial Statements.
ANOTHER FORMART
1- Cover Page and Table of Contents
2- Executive Summary
3- Mission and Vision Statement
4- Business Description
5- SWOT analysis
6- Competitor Analysis
7- Market Analysis
8- Marketing Plan or Go-To-Market Plan
9- Operations Plan
10- Financial Plan
WEEK 2
CHAPTER 4
EXECUTIVE SUMMARY

1. The Executive Summary

is perhaps the most important section of the business plan.
 The summary should be concise and specific.

 It will summarize the highlights of the business plan, and

should include sales, spending, and profit summary figures.
 The summary should emphasize all factors which make the

business successful.
 The summary should include precise numbers for the size of
your market as well as its trends, your company’s goals, income
and spending information, ROI, and required funding.
2. ASSUMPTIONS

Assumptions –
 The validity of the business plan will rest on the assumptions owner/
its executives make.
 The business plan is based on a variety of assumptions.

Some of the broadest types of assumptions

1.The General business climate.
These will include issues such as in terestrates, demographics,
and other factors commonly faced by businesses.
2. Business specific assumptions.
These will be tailored to your business and will include
specific capabilities that your business must develop or maintain.
3. Alternate assumptions.
These will explain your contingency plans in response to events
outside your control.
3. CORE COMPETENCIES

Core competencies of the business

refer to those qualities or skills a business have
which it do well.
 These are not defined relative to competitors. Indeed, its
core competencies might not be superior
to those of competitors, when compared.
 These core competencies will be used to help you develop
your SWOT Analysis, and will be used in your strategic
planning.
 The goal is to take your core competencies and

use them to develop a competitive advantage.

FOR A NEW BUSINESS
 A new business
- should first attempt to identify its core
competencies.
 Once identified, the business can use these as a focus

for its reputation and brand recognition.

 Ultimately, these core competencies should allow a
company to differentiate itself from its competitors.
 When identifying core competencies, one must ask why
customers choose one product as opposed to another.
WEEK 2
CHAPTER 5
COMPANY DESCRIPTION
Structure of Business
The business may be structured in a variety
of ways. Your choice of business structure must be
thoroughly researched and explained. Common
structures of business are as follows:
1.Corporation
(a) C Corporation
A C corporation can have one or more owner.
(b) S Corporation
The S Corporation is often favored by small businesses.
STRUCTURE OF BUSINESS (CONT.’S)
2. Limited Liability Company (LLC)
 An LLC may be formed by one or more members. LLCs
with at least two members can choose to be taxed either as a
corporation or as a partnership.
 Not all businesses are permitted to form LLCs. For example,
businesses requiring a professional license will typically be
barred from forming an LLC.
3. Partnership
Partnerships may be formed by two or more partners. The two
major types of partnerships are:
a. Limited Partnership
b. General Partnership
4. Sole Proprietorship
CONT.’S

1. The Mission Statement

- should explain the company’s nature, its
values, and its work and will include these qualities:
1. It is based on your competitive advantage and core
competencies.
2. It must be realistic – not too broad, and not too
narrow.
3. It should be specific, short, and focused
MISSION STATEMENT (CONT.'S)

To develop a mission statement, ask yourself these questions:

1.What need do we exist to address?

2. How are we going to achieve those needs?
3. What are our principles?

Eg (1). CVS – Retail: Our company’s vision is to help people live

longer, healthier and happier lives. An integral part of this vision is
our investment in the communities we serve. The primary focus of
our programs is health and education, two natural extensions of our
company’s goals.
Eg (2). A mission statement for a discount retail store in the US:
“We deliver value through low prices to middle Americans.”
2. PRODUCTS & SERVICES

 The businesses should be specifically define what they

are selling. Be sure to articulate and emphasize customer
benefits.
 This section should include details about their suppliers
and corresponding costs.
 Further, they should define the net revenue they expect
from the sale of these products or services.
 This section should include:

1. A detailed description of your products or services with

emphasis on their benefits.
PRODUCT & SERVICES (CONT.'S)
2. Explain your product’s or service’s place in the
market, with an explanation as to its advantages over the
competition.
This will include:
a. What is the product or service’s life cycle?
b. Are there intellectual property rights, such as
copyright, patent or trade secrets?
c. What R&D is the company undertaking which may
lead to new products or services, or which will maintain
your product’s or service’s position in the forefront of
the market?
4. START-UP COSTS
 Start-up costs are one-time costs which are required to get
the business going. Start-up costs
 should be estimated on a separate worksheet. They should
not be included in the first year’s profit & loss
 statement because these are not recurring costs.

 The first step is to identify start-up cost categories.

These categories may include:

1. LEGAL
Eg. Copy rights, trademarks, incorporation fees,
business license
2. RESEARCH & DEVELOPMENT
Eg. patents, product testing, test marketing, salaries, materials,
marketing research
START-UP COSTS (CONT’S)

3. Furniture, fixtures & equipment

4. Land & building
5. Remodeling & improvements
Eg. parking lots, alarm system, sprinkler systems, fire doors
6. Prepaid & deposits
Eg. Rent, taxes, insurance, credit with suppliers
7. Inventory
Eg. investment in inventory, delivery, storage, insurance
special packing
8. Personnel (HR)
START-UP COSTS (CONT’S)

9. Cash
Eg. cash flow reserve - 1-3 months operating expenses,
cash register drawers, petty cash fund, minimum balance in
checking
10. Living expenses
estimate # of months without income
11. Contingency funds
Eg. 1-3 months operating expenses, emergency fund
12. Others
Eg. pre-opening advertising, security, office supplies
 WEEK 2
CHAPTER 6
INDUSTRY ANALYSIS & TRENDS
Do research
1) You will have to conduct research on your industry to
determine what costs there will be.
2) You can conduct interviews with people already in the
industry.
3) You can research through trade associations.

4) You can research franchise information.

INDUSTRY ANALYSIS
 Industry analysis is a study of the characteristics that
influence the primary and secondary
businesses that supply a related product.
 The industry analysis should provide the following four
types of information:
1. The characteristics that define the industry
2. Description of the economic, competitive, social, legal
and political factors
3. Historical trends of sales and profits in the industry
4. Description of the strategic opportunities that exist for
firms in this industry
SWOT ANALYSIS (CONT.’S)
SWOT ANALYSIS

 SWOT is an acronym used to describe the particular

Strengths, Weaknesses, Opportunities, and Threats that
are strategic factors for a specific company.
 A SWOT analysis should identify the firm’s core

competencies.
 A comprehensive SWOT analysis should include an
honest
assessment of your market.
 It will include internal factors, such as strengths and
weaknesses, and external factors, such as opportunities
and threats.
SWOT ANALYSIS (CONT.’S)

To assess your market, ask yourself the following:

1. What is happening externally and internally that
will affect our company?
2. Who are our customers?
3. What are the strengths and weaknesses of each
competitor?
4. What are the driving forces behind sales trends?
5. What are important and potentially important markets?
6. What is happening in the world that might affect our
company?
7. What does it take to be successful in this market?
ESTIMATING CAPITAL NEEDS
 When calculating your start-up costs, you must also
consider how much capital will be invested in the
business.
 How does one determine

 what is an appropriate capital investment?

 There are multiple methods by which one

may calculate appropriate financing.

 There are multiple methods by which one

may calculate appropriate financing.

ESTIMATING CAPITAL NEEDS (CONT’S)

1. Percent of Sales Method

2. Cash Budget Method
3. Cash Turnover Method
1. PERCENT OF SALES METHOD

 This method assumes that changes in sales affect the amount of

assets to be maintained in a company.
 An asset that changes as a result of increases or decreases in
sales is called a spontaneous asset.
 If sales are expected to rise, the company needs more cash and
inventory and should expect more accounts receivable to
accumulate. If sales are predicted to decline, inventory levels
should be reduced.
 To accommodate growth in sales and concomitant increase in
the need of spontaneous assets, external financing may be
required.
2. CASH BUDGET METHOD
 The purpose of liquidity management is to ensure that
the company will never run out of cash.
 The cash budget technique may be used to achieve this
objective.
 Compare future cash receipts with future cash payments
on a monthly basis and determine the financing surplus
or deficit for each month.
 Net monthly cash flow is determined by subtracting
estimated payments from estimated receipts.
 Then add the cash at the beginning of the period to the
net cash flow to get the end cash.
CASH BUDGET METHOD (CONT.’S)
 Figure the minimum amount of cash
that a company should maintain to avoid running out
of cash.
 Adding the minimum reserve to the end cash

gives the estimated cash surplus or deficit.

 The company must plan in advance how to cover the
deficit.
 Despite substantial earnings, a company may run
into cash deficit problems if a/r are not properly
collected.
3. CASH TURNOVER METHOD
 The minimum amount of cash needed by a company
to run its operation is determined by the use of the
following equation: Minimum cash required =
(annual operating expenditures) ÷ (cash turnover)
 This assumes that there are no significant changes in

operating expenditures from one period to another.

 Cash turnover is the number of times that a firm’s
cash is collected, or turned over, in a year.
 Cash turnover is calculated as follows: Cash
turnover = 360 days ÷ days between purchase of
materials and collection of sales proceeds.
CASH TURNOVER METHOD (CONT.’S)
MARKET ANALYSIS (CONT.’S)

To identify your market clearly, you should identify

 the size of the total market

 the size of the market that is interested in your

products
 the size of the market to whom you can distribute

 the size of the market that already buys

competitive products
 the size of the market that your company can serve

 the size of the market that your company can reach

with advertising and distribution
MARKET ANALYSIS (CONT.’S)
 Your market analysis should include
 the existence and type of competitors,

 a description of your target customers,

 the market size, distribution costs, and

 trends in both your industry and the market.

 The purpose of the market analysis is to lay the

groundwork for your marketing strategy.
MARKET ANALYSIS (CONT.’S)

 Your market analysis should contain specifics.

 Identify the size of your market. Is it large
enough to sustain both your business and the
competition?
 What is the growth trend for the next five years?

 Identify specifically the market segment to whom

you will be selling. Your actual market segment
may be only a small fraction of the total market.
MARKET ANALYSIS (CONT.’S)

 The market analysis presents your conclusions regarding

external market factors that will affect your business.
 It examines the totality of the business environment in
which you will compete.
 Your market analysis should include the existence
and type of competitors, a description of your target
 customers, the market size, distribution costs, and trends
in both your industry and the market.
 The purpose of the market analysis is to lay the
groundwork for your marketing strategy.
WEEK 3
CHAPTER 7
TARGET MARKET
 What type of customers you’re aiming at.
For example,
- consumers, businesses or organizations.
 When you’re aiming for consumers,
include their age and gender.
 When aiming for businesses or organisations, mention
the size of their business.
 What about their location?
For example, where they live or work.
 Describe the key characteristics of your customers.
TARGET MARKET (CONT.’S)

1.Geographic Segmentation
2. Distribution Segmentation
3. Media Segmentation
4. Price Segmentation,
5. Demographic Segmentation
6. Time Segmentation
7. Psychographic or Lifestyle Segmentation
TARGET MARKET
 It is necessary to define your target market in
terms as specific as possible.
 Market segmentation subdivides a market along
some commonality.
 The purpose of segmentation is to enable a

seller to concentrate its marketing dollars and

develop a successful strategic plan.
COMPETITIVE ANALYSIS

 Who are your main competitors?

 What are their products and prices?

 You should gather up-to-date information on at

least
 three competitors.

 That may take some time, if you haven’t

 already done so.

 For this purpose, you can study competitor

 websites. You can also buy and try out their

products.
COMPETITIVE ANALYSIS (CONT.’S)

 You might wish to categorize your competitors in

different levels, starting with your most direct
competitors and moving on to indirect competitors.
 Level One Competitors: the specific brands which are
direct competitors to your product or service, in your
geographic locality.
 Level Two Competitors: competitors who offer similar
products in a different business category or who are
more geographically remote.
 Level Three Competitors: competitors who provide
goods or services which are an alternative to what you
are providing.
COMPETITIVE ANALYSIS (CONT.’S)

 A company must narrow its choices and decide

which industry, product or service categories,
brands, geographic areas, channels of distribution,
etc., to compete in.
 Without this knowledge and analysis, your
marketing programs will not be effective and
efficient, particularly if you have a very limited
budget.
COMPETITIVE ANALYSIS (CONT.’S)

Basic information every company should know about their competitors

includes:

1. each competitor's market share, as compared to your own

2. how target buyers perceive or judge your competitors' products and

services

3. your competitors' financial strength, which affects their ability to

spend money on

advertising and promotions, among other things

4. each competitor's ability and speed of innovation for new products

and services
COMPETITIVE ANALYSIS (CONT.’S)
AN EXAMPLE OF COMPETITIVE ANALYSIS USING SWOT:
NEXT

You should assess your company:

1. What do we do best?

2. What are our company resources – assets, intellectual

property, and people?

3. What are our company capabilities (functions)?

FINALLY,
Assess your competition:

1. How are we different from the competition?

2. What are the general market conditions of our business?

3. What needs are there for our products and services?

4. What are the customer-market-technology opportunities?

5. What are the customer’s problems and complaints with the

current products and

services in the industry?

6. What do customers find lacking?

WEEK 3
CHAPTER 8
COMPETITIVE ADVANTAGE
 As part of the business plan, you must identify what your
competitive advantage is.
 To help clarify your competitive advantage, you may
want to ask yourself the following:
 Passion

What is your organization deeply

passionate about?
 Purpose

What is the purpose of your

business? Why does your business exist?
COMPETITIVE ADVANTAGE (CONT.’S)
 Resource
 What unique skills (not a person), resources, capabilities,
and assets set our company apart in the marketplace?
 Can these skills and resources be used to create value in
the marketplace?
 If yes, how are these skills and resources used now to
create value?
 If no, what can we do?
 What is our company best at relative to our competitors?
What can we be best at in the market?
COMPETITIVE ADVANTAGE (CONT.’S)

 Profit Engine
 What is our primary revenue driver? How do we make
money? (i.e. profit per customers, profit per customer
visits, profit per employee, profit per order)
 How sustainable is your Competitive Advantage?
 In other words, is it difficult for competitors to match
your competitive advantage?
 Can you improve your competitive advantage?
 Competitive Advantage can be achieved through a
variety of means.
ELEMENTS OF COMPETITIVE ADVANTAGE

Elements of Competitive Advantage

1. Consistent Difference: Customers must see a
consistent difference between your product/service and
those of your competitors. This difference needs to be
obvious to your customers and it must influence their
purchasing decision.
2. Difficult to Duplicate: Your competitive advantage
must be difficult to duplicate. This may be derived
from proprietary knowledge or processes.
WEEK 3
CHAPTER 9
STRATEGIC & RISK ASSESSMENT

Barriers to entry are

 the costs and/or requirements needed to enter a market.
 They protect companies already in business by making it
more difficult for others to enter.
 Not every business will have barriers to entry.
 When few barriers to entry exist, if your business plan
shows substantial profit, you must be prepared to explain
why others are not jumping into the market to compete
against you
 and command some of your market share.
BARRIERS TO ENTRY (CONT.’S)
BARRIERS TO ENTRY (CONT.’S)
Indeed, the threats of new entrants to the market is greatest,
and, consequently, the barriers to entry
 are lowest, when:

 processes are not protected by regulations or patents

 customers have little brand loyalty

 start-up costs are low

 products provided are not unique

 switching costs (incurred by the consumer) are low

 production process is easily learned

 access to inputs is easy

 access to customers is easy

WEEK 4
CHAPTER 10
MARKETING PLAN & SALES FORCAST
 The business plan must contain a marketing plan.
 The marketing plan should be imaginative,
 specifically targeted to your target market, realistic in its
approach, and include a budget.
 You can begin by researching the marketing
 strategy of your competitors.
 If their strategy is working, you may want to copy it. If
not, then you know what not to do in developing your
own strategy.
 Once you develop a strategy, you must then develop a
system to measure its effectiveness.
IN PREPARING YOUR MARKETING PLAN,
you may want to consider the following:
Step 1. Determine who the target buyer is.
Step 2. Determine what is meaningfully unique about your product.
Step 3. Construct a business positioning strategy statement.
Step 4. Determine the best message to communicate your
product positioning to target buyers.
Step 5. Determine promotion and advertising options and costs in
terms of available budget
 SALES FORECAST

 Your sales forecast should be demonstrated monthly

for the first year, and then annually for the ensuing
three years.
 You should state your underlying assumptions in
detail.
 For any company, resources must be forecast in order
to ensure that the products or services make it to the
selling stage.
 Depending upon the type of business, there are a
number of potential forecasting methods which
should provide at least a ballpark estimate.
SALES FORECAST (CONT.’T)
Both types of forecasts can be undertaken based on
 an entrepreneur 'sense of the market and its wants, market
surveys of customer preferences and buying patterns,
 time-series analyses, which examine the past relationship
between sales and time to determine patterns on which to base
a forecast, and econometric models, which take into account
the factors affecting sales and production including price,
competing products, complementary products, availability of
credit, consumer tastes and other key components.
WEEK4
CHAPTER 11
OPERATIONS
The business should describe how the business will be run. This
section will include the following
information:
1. Will you be undertaking research and
development?
2. What products or services do you need to
acquire in order to produce, supply or develop your
product or service?
a. Which vendors will you need?
b. Do you have current vendor
relationships?
c. If not, who will you choose and why?
OPERATIONS (CONT.’S)

3. What staffing requirements will be needed for

daily operations?

4. What equipment will you require?

5. Identify and describe your facilities requirements

WEEK 5
CHAPTER 13
MANAGEMENT & ORGANIZATION
 The organization chart is the graph of your company's
organizational structure.
 It should identify the company owners, management team and
board of directors.
 In a small to medium firm, it will probably include all the
employees.
 In a large firm, it will typically show management structure.
 The organizational chart should show the relationship among
the individuals.
 Vertical lines connecting members of the organization show the
hierarchical relationship, and horizontal lines demonstrate that
the individuals are of equal hierarchical standing.
ORGANIZATIONAL CHART (CONT.’S)

 In addition to the organizational chart as a graphic, the written

business plan should include specific information about
management and employees.
 This information should include:
1) Descriptions of departments and key employees (if a large
company) and all employees if small to medium.
2) Information about owners, including their names, percentage of
ownership, extent of involvement within the company and a
biography listing their background and skills
3) Description of the management team, including names and
positions.
4) Description of board members.
5) Personnel( HR)
EMPLOYEES (HR)
Remember that if your firm hires employees it must follow
pertinent federal wage and hour laws
as well as state regulations, which will vary by state.
You could get information from
 comparative wage surveys including company and trade
associations, professional associations, and chambers of
commerce.
 The government also has information about benefits and
other statistical information related to employment.
 Internet
EMPLOYEES (HR)
 should state how many employees you have
or need.
 Say whether they have or need any

special skills.
 Are there minimum national standards/ employment
regulations which you need to bear in mind?
WEEK 5
CHAPTER 14 TAXES

If you are going to be in business, you'll want to know

what types of business taxes may apply,
 including:
 City, State and Federal Income Tax
 Self-Employment Tax
 State and Federal Payroll
 Sales and Use Tax
 Real Property Tax
 Unsecured Property Tax
WEEK 5
CHAPTER 15
INSURANCE
1) Property insurance
2) Business interruption insurance
3) Liability insurance
4) Key man insurance
5) Workers' compensation insurance
6) Health insurance
7) Life and disability insurance
8) Auto Insurance
WEEK 6
CHAPTER 16
PREPARING THE FINANCIAL STATEMENTS

1. Depreciation
2. Cost of Goods Sold
3. Income Statement
4. Statement of Owner’s Equity
5. Cash Flow Statement
6. Balance Sheet
7. Loan Amortization
BREAK-EVEN ANALYSIS
 A company breaks even when its total sales equals
its total expenses. To calculate the break-even
point, one must know not only a firm’s total
expenses, but of those expenses, how much are
fixed and how much are variable.
 The formula to calculate the break-even point in
units for a
 single product is:

 Fixed Costs ÷ (unit selling price - unit variable

cost)
RATIO ANALYSIS
 An important part of your business plan is your
ratio analysis.
 This analysis assists you in determining the

health and viability of your business.

 Your ratios shouldbe compared over time.

 Therefore, you should conduct your ratio

analysis for each of the years your business plan
covers, and then explain what these numbers
mean.
RATIO ANALYSIS (CONT.’S)
1.Liquidity Ratios 3. Efficiency Ratios
a. Current Ratio a. Average Collection Period
b. Quick Ratio (Acid Test) Ratio
c. Turnover of Cash Ratio b. Inventory Turnover Ratio
d. Debt to Equity Ratio c. Fixed Asset Turnover Ratio
2. Profitability Ratios 4. Other Profitability Measures
a. Average Rate of Return
a. Rate of Return on Sales
(ARR)
b. Rate of Return on
b. Payback Period
Assets
c. Net Present Value (NPV)
c. Rate of Return on
Investments d. Profitability Index (PI)
Week 7
Revision
All chapter

Thank you for your Attention