A business can fund it’s operations from both internal (retained earnings) and external (debt and injected capital) sources. The retained earnings to total assets ratio is the ratio of the accumulated retained profits of the business compared to its total assets, and is an indication of the percentage of assets funded by internal resources.
Leverage is the extent to which a business uses liabilities relative to equity to finance it’s assets. The debt ratio is the ratio of liabilities to assets and is used in the financial projections template as one indicator of financial leverage.
The operating return on assets ratio measures the ability of a business operation to use its assets to generate earnings. It is calculated by dividing the operating income by the assets of the business.
Last modified September 20th, 2019 by Michael Brown
An understanding of the cash flow statement allows the startup entrepreneur to manage the cash flow of a business effectively. In doing so they will avoid many of the cash flow problems which can damage or even destroy what would have been a successful startup operation.
A service based business can use break even point analysis to calculate the number of units it is required to sell in order to reach break even. As a service business does not normally have a physical product to sell it must first define the unit (clients numbers, labor hours, projects, jobs etc.) to be used in the analysis.
A manufacturing business needs to review its draft financial projections to ensure that they include sufficient capital investment to provide the production capacity needed to meet the sales demand forecast and the required inventory levels.
Last modified September 24th, 2019 by Michael Brown
The target costing model is a method used by a business to determine the required manufacturing product cost necessary to achieve a given gross margin percentage based on a market driven selling price.
Capital expenditure is a necessary part of operating a business and is included in the cash flow statement of the financial projections template. This capex model allows those costs to be estimated in detail and summarized.
General & administrative costs are a necessary part of operating a business. Expenses associated with general and administration such customer acquisition costs and the costs to service customers throughout the customer life-cycle, need to be included in the income statement of the financial projections template, and this model allows those cost to be estimated in detail and summarized.