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10-3 BZUPAGES.COM  Presented To: Sir Ghulam Abbas sb  Presented By: M.Sheraz Anjum Bukhtyar Ali Khurram Shahzad Muhammad Arqum BS(IT)7 th

10-4 BZUPAGES.COM Is a person a born Entrepreneur? THINK!!!

10-5 BZUPAGES.COM Case Study What’s the BIG IDEA Businesses Started by Young Entrepreneurs The idea: From the minds of: The business: Online shoe sales Tony Hsieh Nick Swinmurn Zappos.com, 1999

10-6 BZUPAGES.COM Mind Your Own Business Start it... Grow it... Own it!

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10-8 BZUPAGES.COM Khurram Shahzad

10-9 BZUPAGES.COM Financial Plan Provides with complete picture of how much & when funds are coming into the Organization- Where funds are going- How much cash is available & projected financial position of the firm

10-10 BZUPAGES.COM  Helps new venture with most common problem- lack of cash  Explain to potential investor  Plans to meet financial obligations  How would he pay off debt or provide good ROI  3 Years of projected financial data to satisfy any outside investors  First year should reflect Monthly data

10-11 BZUPAGES.COM Operating and Capital Budgets (1 of 2)  Developed before the pro forma income statement.  Sales budget: estimate of the expected volume of sales by month.  Cost of sales can be determined from the sales forecasts.  In manufacturing ventures:  costs of internal production or subcontracting are compared.  Budgets reflects seasonal demand or Marketing programs than can increase demand & inventory  Ventures in which high level of inventory are necessary or where demand fluctuates significantly because of seasonality ----This Budget is valuable tool to asses cash needs

10-12 BZUPAGES.COM Example of a Manufacturing Budget  >

10-13 BZUPAGES.COM Operating and Capital Budgets (2 of 2)  Operating costs:  List of fixed expenses gained regardless of sales volume.  Variable expenses which may change from month to month depending on sales volume, seasonality or opportunities for new businesses  Capital budgets provide a basis for evaluating expenditures that will impact the business for more than one year. Rent, Utilities, Salaries, Interest, depreciation, insurance Advertising & selling expense CB may project expenditure for new Equipment, vehicles, computers etc

10-14 BZUPAGES.COM Example of an Operating Budget  >

10-15 BZUPAGES.COM Bukhtyar Ali

10-16 BZUPAGES.COM Pro Forma Income Statements (1 of 2)  Pro forma income: projected net profit calculated from projected revenue minus projected costs and expenses.  Sales by month is calculated first.  Basis of the figures: marketing research, industry sales, and some trial experience.  Forecasting techniques may be used.  New ventures take time to build up sales.  Projections of all operating expenses for each of the months during the first year should be made.

10-17 BZUPAGES.COM Pro Forma Income Statements (2 of 2)  Increasing selling expenses as sales increase should be taken into account.  Changes in expenses during the first year can require month-by-month illustration.  Projections should be made for years 2 and 3 as well.

10-18 BZUPAGES.COM Example of a Pro Forma Income Statement  >

10-19 BZUPAGES.COM Pro Forma Cash Flow (1 of 2)  Projected cash available calculated from projected cash accumulations minus projected cash disbursements.  Cash & profit are not the same (Difference between a Company’s total revenue & its total expense)  Cash is the money that is free & readily available to use in a business  Sales may not be regarded as cash.  Use of profit as a measure of success for a new venture may be deceiving.

10-20 BZUPAGES.COM Pro Forma Cash Flow  If disbursements are greater than receipts in any time period the entrepreneur must either borrow funds or have cash in bank account to cover the higher disbursements  Cash flow statement is based on best estimates.

10-21 BZUPAGES.COM Example of a Pro Forma Cash Flow  >

10-22 BZUPAGES.COM Muhammad Sheraz Anjum

10-23 BZUPAGES.COM Pro Forma Balance Sheet  Pro forma balance sheet: summarizes the projected assets, liabilities, and net worth of the new venture.  A picture of the business at a certain moment in time.  Does not cover a period of time.  Consists of:  Assets: items that are owned or available to be used in the venture operations.  Liabilities: money that is owed to creditors.  Owner’s equity: amount owners have invested and/or retained from the venture operations.

10-24 BZUPAGES.COM Example of a Balance Sheet  >

10-25 BZUPAGES.COM Break-Even Analysis  Break-even: volume of sales where the venture neither makes a profit nor incurs a loss.  Break-even sales point indicates the volume of sales needed to cover total variable and fixed expenses.  The break-even formula: TFC B/E(Q) = SP – VC/Unit (Marginal Contribution)  Major weakness in calculating the breakeven lies in determining if a cost is a fixed or variable.

10-26 BZUPAGES.COM Graphic Illustration of Breakeven  >

10-27 BZUPAGES.COM Questions Please…..

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