1. ©2001 Kauffman Center for Entrepreneurial LeadershipPLANNING AND GROWING A BUSINESS VENTURE™ ™ Income Statement Sales Percentage – Cost of goods sold ______ % = Gross profit ______ % – Expenses (depreciation) ______ % = Net profit ______ % – Income taxes ______ % = Net income (profit or loss) ______ % Doesn’t describe how business operates. Doesn’t show actual cash available. 22.1 © 2004 Ewing Marion Kauffman Foundation

2. ©2001 Kauffman Center for Entrepreneurial LeadershipPLANNING AND GROWING A BUSINESS VENTURE™ ™ Sample Income Statement Fast Growth Manufacturing Co. 22.2 Revenues$250,000 $600,000 Cost of sales 150,00060% of sales 360,00060% of sales Gross profit 100,000 240,000 Expenses: Salaries 60,000 100,000 Rent 15,000 15,000 Telephone12,000 22,000 Depreciation 1,000 3,000 Other7,000 25,000 Total expenses 95,000 165,000 Operating income 5,000 75,000 Income taxes 2,00040% of income 30,00040% of income Net income 3,000 45,000 Income statement shows the results of the operation for the period or the full fiscal year. 20002001 © 2004 Ewing Marion Kauffman Foundation

3. ©2001 Kauffman Center for Entrepreneurial LeadershipPLANNING AND GROWING A BUSINESS VENTURE™ ™ Sample Balance Sheet 22.3 Fast Growth Manufacturing Co. 20002001 © 2004 Ewing Marion Kauffman Foundation

4. ©2001 Kauffman Center for Entrepreneurial LeadershipPLANNING AND GROWING A BUSINESS VENTURE™ ™ Levers of Cash Flow Accrue employee salaries String inventory payments Pay accountants, attorneys quarterly Pay suppliers quarterly Lease equipment/fixtures Hire contract labor Freeze with suppliers 22.4 © 2004 Ewing Marion Kauffman Foundation

5. ©2001 Kauffman Center for Entrepreneurial LeadershipPLANNING AND GROWING A BUSINESS VENTURE™ ™ Levers of Cash Flow Negotiate rent Consignment Factor accounts receivable Negotiate prepayment on new orders Request C.O.D. Give discounts for cash Use credit cards Monitor collections 22.5 © 2004 Ewing Marion Kauffman Foundation