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THE FINANCIAL PLAN

LEARNING OBJECTIV ES

1. To understand why positive profits can still result in a negative cash flow.
2. To understand the role of budgets in preparing pro forma statements.
3. To learn how to prepare monthly pro forma cash flow, income, balance sheet, and sources and uses of funds statements for the first year of operation.
4. To explain the application and calculation of the break-even point for the new venture.
5. To illustrate the alternative software packages that can be used for preparing financial statements.

THE FINANCIAL PLAN

A. The financial plan provides a complete picture of:

1. How much and when the funds are coming into the organization.
2. Where the funds are going.
3. How much cash is available?
4. The projected financial position of the firm.

B. The financial plan provides the short-term basis for budgeting and helps prevent a common problem-lack of cash.

C. The financial plan must explain how the entrepreneur will meet all financial obligations and maintain its liquidity.

D. In general, the financial plan will need three years of projected financial data for outside investors.

Read more: MGT602 - Entrepreneurship - Lecture Handout 30

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MEASURING ORGANIZATIONAL PERFORMANCE

Learning Objectives

This topic concern with various is for measuring the performance of an organization.

Measuring organizational performance

To determine that which objectives are most important in the evaluation of strategies can be difficult. Strategy evaluation is based on both quantitative and qualitative criteria. Selecting the exact set of criteria for evaluating strategies depends on a particular organization's size, industry, strategies, and management philosophy. An organization pursuing a retrenchment strategy, for example, could have an entirely different set of evaluative criteria from an organization pursuing a market-development strategy. Quantitative criteria commonly used to evaluate strategies are financial ratios, which strategists use to make three critical comparisons: (1) comparing the firm's performance over different time periods, (2) comparing the firm's performance to competitors', and (3) comparing the firm's performance to industry averages. Some key financial ratios that are particularly useful as criteria for strategy evaluation are as follows:

1. Return on investment
2. Return on equity
3. Profit margin
4. Market share
5. Debt to equity
6. Earnings per share
7. Sales growth
8. Asset growth



Read more: MGT603 - Strategic Management - Lecture Handout 44