Chapter_07 - Chapter 7 Preparing and Understanding...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Copyright Atomic Dog Publishing, 2006 Chapter 7 Preparing and Understanding Financial Statements
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Copyright Atomic Dog Publishing, 2006 7-1 Introduction Entrepreneurs and business owners must develop financial forecasts so they can allocate resources according to a rational plan. Through financial planning, companies of all sizes, are able to control their growth and spending patterns while comparing their actual financial performance against their estimated performance. The entrepreneurial venture is unlikely to have cash to invest in anything other than the venture itself. In the early stages of a venture, entrepreneurs are more concerned with developing reliable estimates and building a realistic financial plan, also known as business model.
Background image of page 2
Copyright Atomic Dog Publishing, 2006 7-2 Financial Planning A well-designed financial plan helps entrepreneurs stay focused and on track despite the lack of profits. The most important goals is to determine the funds needed to launch and sustain the venture as it grows. The financing needed to launch depends on factors such as: - The industry - Experience of the entrepreneur - Location of the venture - Inventory requirements Every new venture needs funds to cover start-up expenses—the entrepreneur must obtain sufficient seed capital.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Copyright Atomic Dog Publishing, 2006 7-2 Financial Planning (cont.) In the start-up stage, for entry into an accounting system, the entrepreneur estimate the financials. It is achieved through pro forma financial statements. The three primary financial statements that businesses use to forecast and record operating results: - The profit and loss statement - The cash flow statement - The balance sheet Such financial statements are forward looking and are based on estimates of business activity. In a business plan, entrepreneurs are required to provide pro forma statements that estimate operating activity for at least three years and sometimes as much as five years.
Background image of page 4
Copyright Atomic Dog Publishing, 2006 7-2 Financial Planning (cont.) - They estimate the profitability and overall financial condition of the company over the three-year period. -
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 17

Chapter_07 - Chapter 7 Preparing and Understanding...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online