Business ratios are often misunderstood they arent

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Unformatted text preview: s and Chapter 16: Cash is King. You’ve seen then that the Balance Sheet table shows the financial position of the business, its assets and liabilities, at a specified time. A standard business plan includes a projected Balance Sheet table for each of the first 12 months in the plan, and for each of the three years. The ironclad rule of Western double-entry bookkeeping and accounting is that assets are equal to capital and liabilities. This is what balance means. If you think about it, you’ll notice we also used that rule in the Start-up costs section of Chapter 6: Describe Your Company. It comes up again with the Balance Sheet table as we use this rule to calculate retained earnings, which makes the balance correct. BALANCE SHEET TABLE The illustration shows the Balance Sheet table, or pro forma Balance Sheet table. The Balance Sheet table should naturally start with either your start-up costs or your ending balance from the previous year, depending on whether you are a start-up company or an ongoing company. Then, for the first 12 months of your plan, it should give detailed projections of your assets, liabilities, and capital as your business progresses. The calculations for this come mainly from your income statement and cash flow. Between This illustration shows the Balance Sheet table for AMT, Inc., those two statements, plus the beginning the sample company first introduced in Chapter 14: About balances, your Balance Sheet should be Business Numbers (numbers displayed in thousands). virtually done before you start. HURDLE: THE BOOK 17.2 ON BUSINESS PLANNING Standard Industry Profiles Whenever possible, a business plan should compare projected numbers to standard industry numbers of the type we discussed earlier in Chapter 9: The Business You’re In. We show an example here, in which the sample case’s main business numbers for Year 1 through Year 3 are compared to a standard industry profile, shown in the column named “Industry Profile.” STANDARD INDUSTRY COMPARISON This samp...
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This note was uploaded on 01/26/2014 for the course BUINESS 102 taught by Professor Unknown during the Winter '09 term at University of Phoenix.

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