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10-1
10-2
ChapterChapter1010
The Financial PlanThe Financial Plan
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Sequence ofSequence ofFinancial StatementsFinancial Statements
BudgetsBudgetsOperating- Short-TermOperating- Short-TermCapital- Long-TermCapital- Long-Term
Pro Forma StatementsPro Forma Statements
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Pro Forma StatementsPro Forma Statements
Pro Forma IncomePro Forma Income Sales Budget By MonthSales Budget By Month Expenses Are Function Of Sales LevelExpenses Are Function Of Sales Level
Pro Forma Cash FlowPro Forma Cash Flow Cash ReceiptsCash Receipts Cash PaymentsCash Payments
Pro Forma Balance SheetPro Forma Balance SheetPro Forma Sources & Applications of Pro Forma Sources & Applications of
FundsFunds
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Daily KnowledgeDaily Knowledge On Financial PositionOn Financial Position
Cash Balance On HandCash Balance On Hand
Bank BalanceBank Balance
Daily Summaries Of Daily Summaries Of Sales/Cash ReceiptsSales/Cash Receipts
Problems In Credit Problems In Credit CollectionsCollections
Record Of Money Paid OutRecord Of Money Paid Out
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Slow-Paying Accounts Slow-Paying Accounts ReceivableReceivable
Discounts Offered On Accounts Discounts Offered On Accounts PayablePayable
Payroll- Hours Worked & Payroll Payroll- Hours Worked & Payroll OwedOwed
Taxes- When Taxes Due & Taxes- When Taxes Due & Reports RequiredReports Required
Weekly KnowledgeWeekly Knowledge On Financial PositionOn Financial Position
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Monthly KnowledgeMonthly Knowledge On Financial PositionOn Financial Position
Provide RecordsProvide Records ReceiptsReceipts DisbursementsDisbursements Bank AccountsBank Accounts JournalsJournals
ReviewReview Income StatementIncome Statement Balance SheetBalance Sheet
Reconcile Checking Reconcile Checking AccountAccount
Balance Petty Cash Balance Petty Cash AccountAccount
Review Tax Review Tax Requirements & Make Requirements & Make DepositsDeposits
Review/Age Accounts Review/Age Accounts ReceivableReceivable
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Sales BudgetSales BudgetCalculate Sales Expectations In UnitsCalculate Sales Expectations In UnitsUtilizeUtilize
Marketing ResearchMarketing Research Industry SalesIndustry Sales ExperienceExperience
Forecasting TechniquesForecasting Techniques Survey of BuyersSurvey of Buyers Sales Force OpinionsSales Force Opinions Expert OpinionsExpert Opinions Time Series AnalysisTime Series Analysis
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Cash Flow:Cash Flow: (Cash Flow From Operating Activities)(Cash Flow From Operating Activities)
Net IncomeNet Income XXXXXX
Adjustments to NIAdjustments to NI
Noncash/Nonoperating ItemsNoncash/Nonoperating Items
+Depreciation+Depreciation XXXXXX
Cash Changes in Current Assets/LiabilitiesCash Changes in Current Assets/Liabilities
+/- Accounts Receivable+/- Accounts Receivable XXXXXX
+/- Inventory+/- Inventory XXXXXX
+/- Prepaid Expenses+/- Prepaid Expenses XXXXXX
+/- Accounts Payable+/- Accounts Payable XXXXXX
Net Cash From OperationsNet Cash From Operations XX,XXX XX,XXX
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Cash Flow:Cash Flow: (Cash Flow From Other Activities)(Cash Flow From Other Activities)
Capital Expenditures (-)Capital Expenditures (-) (XXX)(XXX)
Payments of Debt (-)Payments of Debt (-) (XXX)(XXX)
Dividends Paid (-)Dividends Paid (-) (XXX)(XXX)
Sale of StockSale of Stock XXX XXX
Net Cash From Other ActivitiesNet Cash From Other Activities (XXX)(XXX)
Net Cash From OperationsNet Cash From Operations XXX XXX
Net Cash From Other ActivitiesNet Cash From Other Activities (XXX)(XXX)
Increase/(Decrease) in CashIncrease/(Decrease) in Cash XXX XXX
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Pro Forma Balance SheetPro Forma Balance Sheet
AssetsAssets Current AssetsCurrent Assets
CashCash $50,400$50,400
Accounts ReceivableAccounts Receivable 46,000 46,000
Merchandise InventoryMerchandise Inventory 10,450 10,450
SuppliesSupplies 1,200 1,200
Total Current AssetsTotal Current Assets $108,050 $108,050
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Fixed AssetsFixed Assets
EquipmentEquipment $240,000$240,000
Less DepreciationLess Depreciation 39,600 39,600
Total Fixed AssetsTotal Fixed Assets $200,400$200,400
Total AssetsTotal Assets $308,450 $308,450 ==============
Pro FormaPro Forma Balance Sheet (cont’d)Balance Sheet (cont’d)
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Total Liabilities & Owners’ EquityTotal Liabilities & Owners’ Equity Current LiabilitiesCurrent Liabilities
Accounts PayableAccounts Payable $23,700$23,700Current Portion of L.T. DebtCurrent Portion of L.T. Debt 16,800 16,800
Total Current LiabilitiesTotal Current Liabilities $40,500$40,500
Long-Term LiabilitiesLong-Term LiabilitiesNotes PayableNotes Payable $209,200 $209,200
Total LiabilitiesTotal Liabilities $249,700 $249,700
Pro FormaPro Forma Balance Sheet (cont’d)Balance Sheet (cont’d)
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Owners’ EquityOwners’ EquityC. Peters, CapitalC. Peters, Capital $25,000$25,000
K. Peters, CapitalK. Peters, Capital 25,000 25,000
Retained EarningsRetained Earnings 8,700 8,700
Total Owners’ EquityTotal Owners’ Equity $58,750 $58,750
Total Liabilities & Owners’ Equity $308,450Total Liabilities & Owners’ Equity $308,450 ==============
Pro FormaPro Forma Balance Sheet (cont’d)Balance Sheet (cont’d)
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Break-Even AnalysisBreak-Even Analysis
B/E(Q) =B/E(Q) =Total Fixed CostTotal Fixed Cost
SP per Unit – VC per UnitSP per Unit – VC per Unit
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Break-Even GraphBreak-Even Graph
0
200
400
600
800
1000
1200
0 20 40 60 80 100
Fixed Cost
Total Cost
Total Revenue
Break-EvenBreak-Even
TR = TCTR = TC
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Pro Forma Sources &Pro Forma Sources & Applications of FundsApplications of Funds
Sources of FundsSources of FundsMortgage LoanMortgage Loan $150,000$150,000
Term LoanTerm Loan 75,000 75,000
Personal FundsPersonal Funds 50,000 50,000
Net Income From OperationsNet Income From Operations 8,750 8,750
Add DepreciationAdd Depreciation 39,600 39,600
Total Funds ProvidedTotal Funds Provided $323,350 $323,350
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Applications of FundsApplications of FundsPurchase of EquipmentPurchase of Equipment $240,000$240,000
InventoryInventory 10,450 10,450 Loan RepaymentLoan Repayment 16,800 16,800
Total Funds ExpendedTotal Funds Expended $267,250 $267,250
Total Funds ProvidedTotal Funds Provided $323,350$323,350Total Funds ExpendedTotal Funds Expended 267,250 267,250Net Increase in Working Capital $56,100Net Increase in Working Capital $56,100
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Pro Forma Sources &Pro Forma Sources & Applications of Funds(cont’d)Applications of Funds(cont’d)
