IX. Financial Plan
The financial plan accumulates and describes all the data expressed in monetary units from the other sections of the business plan. For example, the amount of salaries that appears in the projected statement of comprehensive income comes from the organization plan, and the cost of machineries and equipment that appears in the noncurrent asset section of the projected statement of financial position comes from the production plan.
The financial plan simply collates and describes the various sets of information derived from the other sections of the business plan. It is composed of the following important areas:
1. Major assumptions
2. Projected statement of comprehensive income
3. Projected statement of cash flows
4. Projected statement of changes in equity
5. Projected statement of financial position
6. Financial statement analysis
Major Assumptions
The financial statements in the business plan are not actual but rather projected, thus requiring some major assumptions based on reliable data or information. Suppose the the entrepreneur projects an increase of 10 percent in the salaries of employees in the projected statement of comprehensive income. This projection may be based on a related pending bill in Congress or on the policy of the business to gradually increase the salaries of workers in comparison to those of competitors.
Financial Statements
The financial plan features the following different projected financial statements of the proposed business:
1. Statement of comprehensive income
2. Statement of cash flows
3. Statement of changes in equity
4. Statement of financial position
These financial statements are projected for at least three years and are considered the final product of the whole accounting process.
Financial Statement Analysis
The last section of the financial plan is the analysis of financial statements. The financial statements do not provide any useful and relevant information to the users unless they are evaluated and analyzed. The analysis is done through several approaches and is usually dependent upon the objective of the users of the financial statements.
Basically, a financial statement analysis is conducted to determine the financial operation of the business in terms of liquidity level, profitability of operations, and solvency status. It must be noted that the mathematical computations in the financial analysis are not the most important part of the analysis but rather the interpretation and implication of the results to the business. In other words, mere mathematical computations do not provide value to the analysis.
The financial plan simply collates and describes the various sets of information derived from the other sections of the business plan. It is composed of the following important areas:
1. Major assumptions
2. Projected statement of comprehensive income
3. Projected statement of cash flows
4. Projected statement of changes in equity
5. Projected statement of financial position
6. Financial statement analysis
Major Assumptions
The financial statements in the business plan are not actual but rather projected, thus requiring some major assumptions based on reliable data or information. Suppose the the entrepreneur projects an increase of 10 percent in the salaries of employees in the projected statement of comprehensive income. This projection may be based on a related pending bill in Congress or on the policy of the business to gradually increase the salaries of workers in comparison to those of competitors.
Financial Statements
The financial plan features the following different projected financial statements of the proposed business:
1. Statement of comprehensive income
2. Statement of cash flows
3. Statement of changes in equity
4. Statement of financial position
These financial statements are projected for at least three years and are considered the final product of the whole accounting process.
Financial Statement Analysis
The last section of the financial plan is the analysis of financial statements. The financial statements do not provide any useful and relevant information to the users unless they are evaluated and analyzed. The analysis is done through several approaches and is usually dependent upon the objective of the users of the financial statements.
Basically, a financial statement analysis is conducted to determine the financial operation of the business in terms of liquidity level, profitability of operations, and solvency status. It must be noted that the mathematical computations in the financial analysis are not the most important part of the analysis but rather the interpretation and implication of the results to the business. In other words, mere mathematical computations do not provide value to the analysis.
FINANCIAL PLAN Projected Statement of Comprehensive Income Financial Statement Analysis |