1. C. Financing a Small Business 5.00 Explain the financial statements maintained in a small business. 5.02 Explain the use of sales projections.

2. Identify factors associated with making sales projections. Sales Ratio Sales Forecast Break-even point Economic outlook Sales quota Product positioning Market share

3. Sales Ratio: An expression of any component of the income statement as a percentage of total sales. The value of the component is divided by the value of sales. Component/Gross Sales X 100 = % of Sales

4. Sales Ratio Example Sales 1,000,000 Expenses Rent 13800013.8%=Rent/Sales Phone 47000 4.7%=Phone/Sales Total 18500018.5%=Total/Sales

5. Guided Practice Using the Sole Source worksheet, determine the Ratio to Gross Sales for 12/31/2009.

6. Independent Practice Using the Sole Source worksheet, determine the Ratio to Gross Sales for 12/31/2010.

7. Current Ratio: A comparison of current assets with current liabilities. This is one indicator of the ability of the business to pay its debts. Assets/Liabilities=Current Ratio

8. Sales forecast: An estimate of sales for a specified period. Current Sales + (% increase x the current sales) OR Current Sales x (100% + % increase)

9. Calculating Sales Forecast Region2011 SalesQuota Increase FormulaResult? North211,0007.5% = 2011 Sales *1.075 South198,45011% = 2011 Sales *1.11 East179,25013.5% = 2011 Sales *1.135 West225,35012% = 2011 Sales *1.12

10. Break-even point: The point at which the money from product sales equals the costs of making and distributing the product. BEP=Total fixed expenses divided by (unit sales price minus unit variable expense)

11. Economic outlook: Trends associated with the economy that can impact your business’ sales.

12. Sales quota: A goal assigned to a sales person for a specified period.

13. Product positioning: Placing a product in a certain market to get a desired customer response.

14. Market share: The percentage of a product/service that is sold in the total market for that product/service.

15. Identify financial tools that utilize sales projections. Cash flow statement Repayment Plan Inventory

16. Cash flow statement: Shows the flow of cash in and out of the business.

17. Repayment plan: A plan for repaying the debt of a business.

18. Inventory: Ensuring that adequate inventory is on hand to meet sales demand.