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FIFTH STEP BUSINESS PLAN CONTENT

FINANCIAL DOCUMENTS

1.-ACCOUNTING SYSTEM

• CONCEPT: Is a tool that facilitates decision-making and maintains a constant monitoring of operations and financial health of the company.
• OBJECTIVE: To facilitate decision making process and keep in order the registration  of each operation a certain period.
• ORDEN: Must be establish before performing the first economic activity.

2.-CASH FLOW STATEMENT

• COSTS AND EXPENSES: Cost, is any amount of money used to pay what is required in the operation of the company, is not intended to gain; while expenses are used with the purpose of obtaining profits.
• VARIABLE COSTS: Vary directly with the level of production.
• FIXED COSTS: Are costs that remain constant and do not vary with production or sales revenue.
• CAPITAL STOCK: Total amount invested by business owners (partners) for forming it and serves as the basis  for the start of its operations.
• LOANS: Economic contribution granted to the company in order to face commitments or investment needs which can not be faced with the capital stock.
• CASH RECEIPTS: Are all incomes that company receives.
• CASH PAYMENTS: Are all disbursement that the company makes. Expenses or costs in which incurs.
• CASH FLOW PROJECTION: Financial statement that shows the total cash that entered or left out the company for a specified period. Cash flow let to project in a concrete a reliable way , the situation of the company in future times.

3.- FINANCIAL STATEMENTS PROYECTED

Financial statements are summaries of the different economic operations  of a company in an specific period.

OBJECTIVE: Visualize from the beginning to where leads all the efforts made in the business for good decision making.

Cash flow provides basic information to develop the two main financial statement:

• INCOME STATEMENT.
• BALANCE SHEET.

4a.-CONCEPTS

INCOME STATEMENT: Financial statement that shows profits or loss of a business in a specific time period.

• Can be calculated for any kind of company.
• Accounts change, according with the line of business of the company.
• BALANCE SHEET:  Financial statement that shows the business situation in a particular moment. It is a device that shows in a specific time period,what are the assets, liabilities and equity. Displays its financial situation, what it has, what it owes and what it has been paid.

4b.-BALANCE SHEETS

The Balance Sheet is a financial statement that shows the financial position of the business as of a fixed date.

-It is usually done at the close of an accounting period.

BALANCE SHEET CATEGORIES

ASSETS :Anything your business owns that has monetary value.

LIABILITIES:  Debts owed by the business to any of its creditors.

NET WORTH: Amount equal to the owner´s equity.

ASSETS

Balance sheet accounts are clasified according to their  liquidity (speed for becoming in money).

ASSETS: Everything owned by or owed to your business that has cash value.It has three types:

a)CURRENT ASSETS:  Assets that can be converted into cash within one year of the date on the Balance Sheet.

• Cash: Money you have on hand.
• Petty cash: Money deposited to  Petty Cash and not yet expended.
• Accounts Receivable (clients): Money owed to you for sale of goods.
• Inventory: Raw material, work in process and goods manufactured.
• Short –term investments: Expected to be converted to cash within one year-stocks

Prepaid expenses: Goods or services purchased or rented prior to use

b) FIXED ASSETS

• Resources a business owns and does not intend for resale: Land, buildings, equipment , furniture, vehicles…

C} LONG TERM INVESTMENTS:  Stocks, bonds, and special savings accounts to be kept for at least one year.

LIABILITIES

What your business owes; claims by creditors on your assets :

• CURRENT LIABILITIES

• Accounts payable: Obligations payable within  one operating cycling.
• Notes payable:Short-term notes.
• Interest payable: Interest accrued on loans and credit.

LONG TERM LIABILITIES: Outstanding balance less the current portion due (business loans, mortgages, etc).

NET WORTH

• Also called Owner Equity. The claims of the owner or owners on the assets of the business.

5.- FINANCIAL RATIOS

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