The financial plan is basic to the evaluation of an investment opportunity and needs to represent your best estimates of financial requirements. The purpose of the financial plan is to indicate the venture's potential and to present a timetable for financial viability. It also can serve as an operating plan for financial management using financial benchmarks.

In preparing the financial plan, you need to look creatively at your venture and consider alternative ways of launching or financing it.

As part of the financial plan, financial exhibits need to be prepared. To estimate cash flow needs, use cash based, rather than accrual-based, accounting (i.e., use a real-time cash flow analysis of expected receipts and disbursements).

This analysis needs to cover 3 years, including current- and prior-year income statements and balance sheets, if applicable; profit and loss forecasts for 3 years; pro forma income statements and balance sheets; and a breakeven chart.

On the appropriate exhibits, or in an attachment, specify assumptions behind such items as sales levels and growth, collections and payables periods, inventory requirements, cash balances, and cost of goods.

Your analysis of the operating and cash conversion cycle in the business will enable you to identify these critical assumptions.

Pro forma income statements are the plan-for-profitpart of financial management and can indicate thepotential financial feasibility of a new venture. Becauseusually the level of profits, particularly during the startup years of a venture, will not be sufficient to finance operating asset needs, and because actual cash inflows do not always match the actual cash outflows on a short-term basis, a cash flow forecast indicating these conditions and enabling management to plan cash needs is recommended.

Further, pro forma balance sheets are used to detail the assets required to support the projected level of operations and, through liabilities, to show how these assets are to be financed.

The projected balance sheets can indicate if debt-to equity ratios, working capital, current ratios, inventory turnover, and the like are within the acceptable limits required to justify future financings that are projected for the venture.

Finally, a breakeven chart showing the level of sales and production that will cover all costs, including those costs that vary with production level and those that do not, is very useful.

A. Actual income statements and balance sheets.

For an existing business, prepare income statements and balance sheets for the current year and for the prior 2 years.

B. Pro forma income statements.

Using sales forecasts and the accompanying productionor operations costs, prepare pro formaincome statements for at least the first 3 years.

C. Pro forma balance sheets.

Prepare pro forma balancesheets semiannually in the first year and atthe end of each of the first 3 years of operation.

D. Pro forma cash flow analysis.

Project cash flows monthly for the first year ofoperation and quarterly for at least the next2 years. Detail the amount and timing ofexpected cash inflows and outflows. Determinethe need for and timing of additional financingand indicate peak requirements for workingcapital.

Indicate how necessary additionalfinancing is to be obtained, such as throughequity financing, bank loans, or short-termlines of credit from banks, on what terms,and how it is to be repaid. Remember thatthese numbers are based on cash, notaccrual, accounting.

E. Breakeven chart.

Calculate breakeven and prepare a chartthat shows when breakeven will be reachedand any stepwise changes in breakeven thatmay occur.

Discuss the breakeven shown for your ventureand whether it will be easy or difficult toattain, including a discussion of the size ofbreakeven sales volume relative to projectedtotal sales, the size of gross margins and pricesensitivity, and how the breakeven point mightbe lowered in case the venture falls short ofsales projections.

please prepare this subject for a cow farm