Practical no 13

Title of Practical : Prepare the Financial Feasibility Report of Chosen

Product/Service
Name of the Student : Satvik Kale Roll no : 40
Business Idea : Content Creation

Introduction :
A financial plan consists of five budgets that detail the minimum
requirements for starting your business, the investments you will need to make
and how you plan to finance them. This allows you to determine whether your
business idea is viable. What turnover do you expect to generate? And will your
business be profitable, or not? It also forces you to examine cash flow and whether
you will have enough money each month. Answering all these questions in your
business plan is the key to your success.

Financial Planning :
1. Profit and loss statement
This is a financial statement that goes by a few different names—profit and loss
statement, income statement, pro forma income statement, P&L (short for “profit
and loss”)— and is essentially an explanation of how your business made a profit
(or incur a loss) over a certain period of time.

It’s a table that lists all of your revenue streams and all of your expenses—
typically over a three-month period—and lists at the very bottom the total amount
of net profit or loss.
There are different formats for profit and loss statements, depending on the type
of business you’re in and the structure of your business (non profit, LLC, C-Corp,
etc.).
What to include in your profit and loss statement
• Your revenue (also called sales)
 • Your “cost of sale” or “cost of goods sold” (COGS)—keep in mind, some
types of companies, such as a services firm, may not have COGS
• Your gross margin, which is your revenue less your COGS
These three components (revenue, COGS, and gross margin) are the backbone of
your business model — i.e., how you make money.
You’ll also list your operating expenses, which are the expenses associated with
running your business that isn’t directly associated with making a sale. They’re
the fixed expenses that don’t fluctuate depending on the strength or weakness of
your revenue in a given month—think rent, utilities, and insurance.

2. Cash flow statement

Your cash flow statement is just as important as your profit and loss statement.
Businesses run on cash—there are no two ways around it. A cash flow statement
is an explanation of how much cash your business brought in, how much cash it
paid out, and what its ending cash balance was, typically per-month.
Without a thorough understanding of how much cash you have, where your cash
is coming from, where it’s going, and on what schedule, you’re going to have a
hard time running a healthy business. And without the cash flow statement, which
lays that information out neatly for lenders and investors, you’re not going to be
able to raise funds.
The cash flow statement helps you understand the difference between what your
profit and loss statement reports as income—your profit—and what your actual
cash position is.
It is possible to be extremely profitable and still not have enough cash to pay your
expenses and keep your business afloat. It is also possible to be unprofitable but
still have enough cash on hand to keep the doors open for several months and buy
yourself time to turn things around—that’s why this financial statement is so
important to understand.
Cash versus accrual accounting
There are two methods of accounting—the cash method and the accrual method.
The accrual method means that you account for your sales and expenses at the
same time—if you got a big pre-order for a new product, for example, you’d wait
to account for all of your pre-order sales revenue until you’d actually started
manufacturing and delivering the product. Matching revenue with the related
expenses is what’s referred to as “the matching principle,” and is the basis of
accrual accounting.
The cash method means that you just account for your sales and expenses as they
happen, without worrying about matching up the expenses that are related to a
particular sale or vice versa.
If you use the cash method, your cash flow statement isn’t going to be very
different from what you see in your profit and loss statement. That might seem
like it makes things simpler, but I actually advise against it.
I think that the accrual method of accounting gives you the best sense of how your
business operates and that you should consider switching to it if you aren’t using
it already.

3. Balance sheet

Your balance sheet is a snapshot of your business’s financial position—at a

particular moment in time, how are you doing? How much cash do you have in
the bank, how much do your customers owe you, and how much do you owe your
vendors?
What to include in your balance sheet
• Assets: Your accounts receivable, money in the bank, inventory, etc.
• Liabilities: Your accounts payable, credit card balances, loan repayments,
etc.
• Equity: For most small businesses, this is just the owner’s equity, but it
could include investors’ shares, retained earnings, stock proceeds, etc.

It’s called a balance sheet because it’s an equation that needs to balance out:
Assets = Liabilities + Equity
The total of your liabilities plus your total equity always equals the total of your
assets.
At the end of the accounting year, your total profit or loss adds to or subtracts
from your retained earnings (a component of your equity). That makes your
retained earnings your business’s cumulative profit and loss since the business’s
inception.
4. Sales forecast
The sales forecast is exactly what it sounds like: your projections, or forecast, of
what you think you will sell in a given period. Your sales forecast is an incredibly
important part of your business plan, especially when lenders or investors are
involved, and should be an ongoing part of your business planning process.
Your sales forecast should be an ongoing part of your business planning process.
You should create a forecast that is consistent with the sales number you use in
your profit and loss statement. In fact, in our business planning software, Live
plan, the sales forecast auto-fills the profit and loss statement.
There isn’t a one-size-fits-all kind of sales forecast-every business will have
different needs. How you segment and organize your forecast depends on what
kind of business you have and how thoroughly you want to track your sales.
Generally, you’ll want to break down your sales forecast into segments that are
helpful to you for planning and marketing purposes.
If you own a restaurant, for example, you’ll want to separate your forecasts for
dinner and lunch sales. But a gym owner may find it helpful to differentiate
between the membership types. If you want to get really specific, you might even
break your forecast down by product, with a separate line for every product you
sell.

5. Personnel plan
Think of the personnel plan as a justification of each team member’s necessity to
the business.
The overall importance of the personnel plan depends largely on the type of
business you have. If you are a sole proprietor with no employees, this might not
be that important and could be summarized in a sentence of two. But if you are a
larger business with high labour costs, you should spend the time necessary to
figure out how your personnel affects your business.
If you opt to create a full personnel plan, it should include a description of each
member of your management team, and what they bring to the table in terms of
training, expertise, and product or market knowledge. Think of this as a
justification of each team member’s necessity to the business, and a justification
of their salary (and/or equity share, if applicable). This would fall in the company
overview section of your business plan.
6. Business ratios and break-even analysis
Business ratios explained
If you have your profit and loss statement, your cash flow statement, and your
balance sheet, you have all the numbers you need to calculate the standard
business ratios. These ratios aren’t necessary to include in a business plan—
especially for an internal plan—but knowing some key ratios is always a good
idea.
Common profitability ratios include:
• Gross margin
• Return on sales
• Return on assets
• Return on investment
Common liquidity ratios include:
• Debt-to-equity
• Current ratio
• Working capital
Of these, the most common ratios used by business owners and requested by
bankers are probably gross margin, return on investment (ROI), and debt-to
equity.

Requirement Planning :

Sr no Tool Price

1 Smart Phone 15000

2 Recording Mike 3000

3 Marketing ads 500

4 Purchase Application /Software 2500

 Overall Expenditure :
This is overall expenditure of our company which is we spend in initial stage of
our building enterprise. We expense our budget as follows:

Requirement

Start-up Expenses 20000

15000
Expensed equipment
Other 5000
Total Start-up Expenses 20000

Start-up Assets 5000

Cash Required 25000

Other Current Assets 3000

Long-term Assets 0
25000
Total Assets

Total expense 25000/-

Name of student : _______________________________________

Marks Obtained Dated signature of

Teacher

Process Product Total

Related (10) Related (15)
(25)