Relationship between Components of the Financial Plan
Option #1: Financial Plan
Consider your chosen entrepreneurial opportunity. Write a financial plan for the opportunity. Actual amounts are not required; rather, realistic estimates can be used. The plan should include the following:
Three-year pro forma income statement
Three-year pro forma cash flow
End of first-year balance sheet
Break-even analysis
(Further description of these sections can be found in Chapter 10 of the text.)
Then, answer the following questions:
How do the components of the financial plan relate to each other?
What can an entrepreneur determine by analyzing the financial plan?
Your paper should meet the following requirements:
2-3 pages in length
Formatted according to CSU-Global Guide to Writing and APA Requirements
Include at least 2-3 outside sources
Financial Plan
Name
Institution
Introduction
Financial plan is defined as a comprehensive process for evaluating an investor’s today and future financial state through the use of recognized variables to predict future cash flows, value of assets, and plans for withdrawal. There are various Kinds of financial plan that relate to each other (Barsch, 2016).
This paper examines how these financial plan Components relate to each other and how analysis of financial plan can be of beneficial to an entrepreneur.
Relationship between Components of the Financial Plan
Financial Plan has got three main components which include; financial statements, balance sheet, and cash flow statement. It is important to note that all these three components of financial plan relate to one another in one way or the other. For instance, the information that is contained in the financial statements of a company is the foundation of corporate accounting. The information is reviewed by the necessary stakeholders like investors and lenders to enable them understand the company’s financial position or stability. The information that is in the balance sheet, income statement and the cash flow statement can be used by the financial analyst or planner to calculate some of the most important financial ratios that provide insightful details on how the finances are being managed and some fundamental issues that ought to be addressed. It is important to note that these three components of financial plan that is; the income statement, the balance sheet, and the cash flow statement do contain different information but they rely on one another are interconnected in many ways. For example, the net profit or the loss that is contained in the income statement will be used in the balance sheet. These three components of f...