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Unformatted text preview: e formula starts with a negative sign (“-”) because the cash ﬂow row uses positive numbers
for spending amounts, while many spreadsheet functions assume cash ﬂow calculations use
negatives for spending. • The ﬁrst element of that formula (=PPMT) is a standard function call, used in Business Plan
Pro® as well as in Microsoft Excel and compatible spreadsheet software. • The “long_term_interest_rate/12” is the annual interest rate from a general assumptions table,
divided by 12 (because this is monthly interest). The range is named “long_term_interest_rate”
using standard spreadsheet range naming. • The “column()+44” portion represents the 47th payment.“Column()” is a built-in number that
equals 3 in the third column. • The 120 in the formula is the total number of payments (120 for a 10-year loan). • The 400000 at the end of the formula represents the original loan amount, $400,000. You can use this special payment function to calculate your own principal payments, if you wish. Or
you can get the number from loan papers or from your banker. HURDLE: THE BOOK 16.14 ON BUSINESS PLANNING Summary
Your cash plan is the most critical element of your business projections. If it is going to be useful at all,
a business plan helps you develop a realistic cash estimate, based on the underlying relationships we
explored in the previous chapter. Whenever you change an assumption in sales forecast, personnel
plan, proﬁt and loss, or balance sheet, it affects your cash ﬂow.
The examples in this and the previous chapters pointed the way toward cash ﬂow, and the way cash
works. Proﬁts are very important to cash, of course, and they work in obvious ways — the more
proﬁts, the better the cash, because proﬁts are sales (that generate cash) minus costs and expenses
(that cost cash). What is less obvious, however, is the impact of balance sheet items:
• An increase in assets decreases your cash. A decrease in assets increases cash. • An increas...
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- Winter '09