Chapter 36 Financing the Business 1 Marketing Essentials Chapter 36 Financing the Business Section...

Chapter 36 Financing the Business 1

Marketing EssentialsMarketing Essentials

Chapter 36 Financing the Business

Section 36.1 Preparing Financial Documents


SECTION 36.1SECTION 36.1

What You'll LearnWhat You'll Learn

Preparing Financial DocumentsPreparing Financial Documents

The purpose of preparing financial documents

How to develop a personal financial statement

How to determine start-up costs for a business


SECTION 36.1SECTION 36.1 Preparing Financial DocumentsPreparing Financial Documents

Why It's ImportantWhy It's Important

The most common reason for writing a business plan is to obtain financing for a business. In order to get the money you will need to start your business, you will need to prepare financial statements.



Key TermsKey Terms

personal financial statement

debt asset

liability

start-up costs



A major purpose of the business plan is to put together financial information relating to your business. Five important financial documents are:

the personal financial statement the start-up cost estimate the income statement the balance sheet the cash flow statement

The Financial Part of a Business Plan



The personal financial statement is a summary of your current personal financial condition. It compares your assets to your liabilities at a particular point in time.

An asset is anything of monetary value that you own.

A liability is a debt you owe.

The Personal Financial Statement



Start-up costs are a projection of how much money you will need for your first year of operation. You also need an estimate of operating costs after the first year.

Estimating Start-Up Costs

Slide 1 of 3



Start-up costs vary for each type of business, but are based on factors:

The nature of your proposed business. The size of your business. The amount and kind of inventory needed. The estimated time between starting the

business and earning income from sales. The operating expenses that must be paid

before income is received.


Slide 2 of 3



Business start-up costs may be one-time costs or continuing costs.

One-time costs are expenses that will not be repeated after you begin operating the business, such as installation and deposits for telephone service.

Continuing costs are operating expenses you will pay throughout the life of the business, such as rent and payroll.


Slide 3 of 3



Your personal costs are those expenses that are necessary for you to live during the start-up phase. You will need to project your monthly living expenses and household cash needs for at least the first year of business. You should have enough money available to pay for up to six months of living expenses.

Personal Costs



There are several funding sources used to start-up a business. Why are the sources divided into primary and secondary sources?

Financing Sources


36.1 ASSESSMENTASSESSMENT

Reviewing Key Terms and Concepts

1. Why is financial information included as part of a business plan?

2. What items should be identified on a personal financial statement?

3. What is the difference between an asset and a liability?

4. What are start-up costs?5. What is the difference between one-time costs

and continuing costs?


36.1 ASSESSMENTASSESSMENT

Thinking Critically

Why are friends and family usually consulted first when looking for loans?


36.1 Graphic OrganizerGraphic Organizer

InventoryInventory

Working Capital

Working Capital

AdvertisingAdvertising ProfessionalFees

ProfessionalFees

BuildingImprovements

BuildingImprovements

Deposits(Rent, Utilities,

Phone)

Deposits(Rent, Utilities,

Phone)

Furniture and

Equipment

Furniture and

Equipment

TransportationEquipment

TransportationEquipment

Start-Up Costs

Start-UpStart-Up Costs Costs

Start-UpStart-Up Costs Costs

Machineryand

Equipment

Machineryand

Equipment


Marketing EssentialsMarketing Essentials

End of Section 36.1

Chapter 36 Financing the Business 1 Marketing Essentials Chapter 36 Financing the Business Section...

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