Module 4: Financial Analysis & Forecast

Module Questions

Using accurate data based on factual information provided in previous research paper projects, prepare the following financial documents. Keep in mind that the revenue in the financial data in your current business plan will not suffice as it does not reflect the Asheville market/economy. All financial statements should be completed in a relevant format (Excel, etc.) and submitted as a separate document in Moodle. You do not need to import the spreadsheets into your paper; you may simply refer to the proper worksheet where appropriate.

Essay Question 1: Calculate and explain the following:

Start-up cost analysis

Break even analysis

Income Statement

One-year cash flow statement including start-up costs and monthly cash flows (see example posted in Moodle under the Module 4 Project section)This piece requires you to make a monthly sales prediction. Your prediction cannot be guessed you must justify your prediction which means you need the following information from the M1 & M2 projects:

Determine (if you havent already) your target market customer profile

Then, determine how many of your customers (based on that profile) are located in the area to your business (from the demographic info you researched from M1 if you didnt do that, you need to do it now)

Of your target market, what percentage of the market share do you expect to grab (typically its 1-3% the first year)

From that information, determine your daily average number of customers and their average sales receipt. This will help you find the break even point as well as expected monthly sales.

Essay Question 2: Explain the importance of the four main accounting statements for your business success.

Essay Question 3: Perform the following accounting ratios and explain their significance in detail

Gross profit percentage (also called the gross margin percentage)

After tax profit margin ratio

Essay Question 4: Based on the ratios from EQ3 above, draw conclusions to provide a financial analysis summary depicting your assumptions of your companys future and address any issues with solutions to remain solvent and successful. Such conclusions include but are not limited to the following:

Key expense components as a percentage of sales (COGS, SG&A, OE, etc.) (for example, rising SG&A as a percent of sales could indicate lavish spending this is an area of concern and one that can be controlled to increase profit)