Financial Statements

Financial Statements - Copyright Atomic Dog Publishing,...

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Unformatted text preview: Copyright Atomic Dog Publishing, 2006 Preparing and Understanding Financial Statements Copyright Atomic Dog Publishing, 2006 Entrepreneurs and business owners must develop financial forecasts to allocate resources according to a rational plan. Through financial planning, companies 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. Copyright Atomic Dog Publishing, 2006 Financial Planning A well-designed financial plan helps entrepreneurs stay focused and on track despite the lack of profits. The most important goals -determine the funds needed to launch-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 The entrepreneur must obtain sufficient seed capital to cover start-up expenses. Copyright Atomic Dog Publishing, 2006 Financial Planning (cont.) In the start-up stage, the entrepreneur estimates the financials. Pro forma financial statements is an estimation of operating activity. 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 Pro forma financials- Forward looking and based on estimates of business activity. In a business plan, entrepreneurs are required to provide pro forma statements -for at least three years and sometimes as much as five years. Copyright Atomic Dog Publishing, 2006 Financial Planning (cont.)-estimate the profitability and overall financial condition of the company over...
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This note was uploaded on 02/28/2011 for the course ENTR 3310 taught by Professor Ortega during the Spring '08 term at University of Houston.

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Financial Statements - Copyright Atomic Dog Publishing,...

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