BAEB501 : ENTREPRENEURSHIPCHAPTER 9:Financial Plan

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Chapter 9: Financial Plan

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Topic Outlines

9.1 Financial Plan9.2 Relationship Operating Budget and Financial Budget9.3 Good Financial Plan9.4 The importance of a financial plan9.5 Process of developing Financial Plan9.6 Components of Project Implementation Cost9.7 Cash flow statement9.8 Elements in Cash Flow9.9 Elements in the Cash Outflow

© 2010 Cosmopoint

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Chapter 9: Financial Plan

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Learning Outcomes

After completing this chapter, student should be able to: Explain the basic information of Financial Plan Understand the Financial in Entrepreneurship Apply the concepts learnt

Topics© 2010 Cosmopoint

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Chapter 9: Financial Plan

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9.1 Financial Plan

Topics

What is financial plan?

A financial plan incorporates all financial data derived from operating budgets such as the marketing, production (or operation) and administrative budgets.

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Chapter 9: Financial Plan

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9.2 Relationship Operating Budget and Financial Budget

Topics

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Chapter 9: Financial Plan

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9.3 Good Financial Plan

Topics

Good financial plan may contain the following:

Total project implementation costs Total amount of financing required and the

proposed sources of finance. Capital structure of the new firm Amount of depreciation on fixed assets Amount of loan and hire purchase repayments Cash inflow and outflow for the planned period Profit and loss at the end of the planned period Financial position at the end of the planned

period Financial viability of the proposed project

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Chapter 9: Financial Plan

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9.4 The importance of a financial plan

Topics

The importance is summarized as follows:

To determine the size of investment example the project implementation cost.

To identify and proposed the relevant sources of finance

To ensure that the initial capital is sufficient

To appraise the viability of the project before actual investment is committed

To be used as guideline for implementation

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Chapter 9: Financial Plan

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9.5 Process of developing Financial Plan

Topics

There are 7 steps involve:

1. Gather all financial input2. Prepare the project implementation cost

schedule3. Prepare the source of finance schedule4. Prepare the cash flow statement5. Prepare the income statements6. Prepare the balance sheet7. Perform financial analysis based on above

statements.

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Chapter 9: Financial Plan

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9.6 Components of Project Implementation Cost

Topics

There are four component involve:

1. Capital Expenditure

2. Working capital requirements

3. Other expenditure

4. Contingency cost.

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Chapter 9: Financial Plan

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9.7 Cash flow statement

Topics

The cash flow statement must be able to show the following information:

1. Cash inflows – the projected amount of cash flowing into the company

2. Cash outflows – the projected amount of cash flowing out of the company

3. Cash deficit or surplus – the difference between cash flows and cash outflows.

4. Cash position – the beginning and ending cash balances for a particular period.

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Chapter 9: Financial Plan

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9.8 Elements in Cash Flow

Topics

The cash inflow is generally made up of the following:

1. Equity contribution in cash

2. Term loan

3. Cash sales

4. Collection of receivables

5. Sales of assets

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Chapter 9: Financial Plan

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9.9 Elements in the Cash Outflow

Topics

The cash outflow is generally made up of the following elements:

1. Operations expenditure2. Marketing expenditure3. Administrative expenditure4. Term loan repayment5. Hire purchase repayment6. Purchase of fixed assets7. Pre-operating expenditure8. Payments for deposits9. Miscellaneous expenditure