Question

In this assignment you will be creating a financial business plan for the business of your choice. This may be a business that you are looking to create, a business that you are working for, a business that interests you, or a hypothetical business. You will provide a written summary (Word) of the business, it’s activities and it’s financial activities. The financial data will be prepared in Excel. Financial statements will include:  An operating budget  Breakeven analysis  A capital budget  A cash flow budget  Optional Proforma income statement and balance sheet Since this is a beginning finance course, your analysis and presentations may remain simple. Just be sure that you discuss and present the basics items of your chosen business. For example, if you are starting a retail business, you are welcome to present your analysis on one product line or to simplify your cost of goods sold expenses as a percentage of sales or gross profit (mark-up). Written Summary: In your written summary provide basic information about the business. State the character of the business; is it a business you are starting, working for, of interest to you or a hypothetical example. Discuss the product, service, sales methods, production methods, location, size and any other information necessary to understand the financial analysis you present. Also, within the written summary, discuss the outcomes of your financial analysis including funding needed, overall income estimates, asset acquisitions, and results of your breakeven analysis. Financial Presentations: Prepare your financial projections for at least a one-year period or for the first year of operations for a new business. If you have experience in financial preparations or want to perform a more extensive plan, you are welcome to prepare projections for multiple years. You should consider preparing all your financial presentations on one Excel workbook, with various statements and budgets on separate tabs. Operating budget: Review the information in your Week 7 folder for more information about preparing your operating budget. Also, consider using any templates you have available. Remember, depending on the character of your business, your operating budget will be very different. A service company will not include inventory purchasing projections where a retail company will. Remember the operations budget is a presentation of sales and expenses; it ties to the income statement. You should consider preparing a monthly operating budget with a year-end summary. Also, I would advise not considering customer account receivables and consider all sales or service revenue as cash. Capital Budget: The capital budget discusses long term asset purchases and funding through long term liabilities and equity expansions. For a new business, the start-up budget may be considered the capital budget as start up costs include initial purchases of long-term assets and funding considerations. Remember to include a timeline for long term asset purchases and dates of funding receipts. Cash Flow Budget: Once you have prepared the operating and capital budget, you will have the information necessary to prepare your cash flow budget. The previously prepared budgets will give you the information to construct your cash flow budget. You have the information to consider cash receipts from operations (sales), cash expenditures from operations (expenses) and sources and uses of capital funding considerations. You should consider preparing a monthly cash flow budget for the first year of operations. Remember to include a minimum balance of cash required and inputs of cash if needed.

Answer 1

A financial business plan encompasses a variety of documents that project the financial health of a business, including an operating budget, breakeven analysis, capital budget, and cash flow budget. Understanding the basics of these components in a finance course is crucial when projecting potential business profitability and managing finances.

Step-by-step explanation:

Creating a financial business plan involves several key components that lay out the expected financial activities and projections for a business. A clear and concise written summary of the business should include basic information about the products, services, sales, and operational methods.

This sets the stage to understand and relate to the financial documents that follow. These documents consist of an operating budget, a breakeven analysis, a capital budget, and a cash flow budget. Additionally, you may choose to create a proforma income statement and balance sheet.

The operating budget is a detailed projection of all anticipated revenues and expenses. Meanwhile, the breakeven analysis helps understand at what point the business will start to generate profits rather than losses. The capital budget addresses long-term investments in assets and how those investments will be financed. The cash flow budget presents the timing of cash inflows from sales and outflows from expenses, providing a detailed view of the company's liquidity over time.

Funding options for a business can include early-stage investors, reinvesting profits, loans, or issuing stock. In a finance course, these financial statements and analyses may remain simple, focusing on the core financial data pertinent to your chosen business model. The aim is to demonstrate an understanding of how a business forecasts and plans for financial activity.