When early payment discounts are offered by suppliers, the cost of trade credit needs careful consideration as the effective interest rate can be very high compared to other forms of finance.
Last modified November 9th, 2022
Tag: Cash flow
Cost of Offering Early Payment Discount
Free Cash Flow
Inventory Purchases Budget
16 Things To Know About Creating Financial Projections
Financial projections are made up from three financial statements, the balance sheet, the income statement, and the cash flow statement. Here are sixteen things to know about creating financial projections which should give you a better understanding of what’s included in the three financial statements, and how they relate to each other.
Last modified September 6th, 2023
Cash vs Accrual Accounting in Financial Projections
It is important to consider both the cash basis and accrual basis of accounting when preparing financial projections.
Cash basis accounting records revenue and expenses when cash enters and leaves the business, and the accrual basis of accounting records revenue when earned and expenses when the benefit of them is received.
Last modified October 15th, 2019
Budget vs Forecast vs Projection vs Pro Forma
The terms financial budget, financial forecast, financial projection and pro forma financial statement are often used to refer to the same thing. However, while they have a very similar format, normally comprising a balance sheet, income statement, and cash flow statement shown over a period of months or years, they are each based on a very different set of assumptions.
Last modified October 14th, 2022
Pro Forma Financial Statements
The terms pro forma financial statements, financial projections, financial forecasts, and financial budgets are often used interchangeably, but they are not the same thing.
Pro forma financials simply refers to a set of financial statements in the usual format (balance sheet, income statement, and cash flow statement), which have been prepared in order to show the effects of a transaction on the historical financial statements prior to the transaction actually taking place.
Last modified June 7th, 2022
Product Lifecycle
All businesses develop products which have a limited economic life and defined product life cycle. Each year a business will develop new models of a product and introduce them to the market to replace older models which are starting to become obsolete.
It is important that the financial projections and the business plan make allowance for these product life cycles, as any errors in the timing of product development can lead to revenue, net income, and cash flow shortages, ultimately resulting in the failure of the business.
Last modified July 16th, 2019
Working Capital
Startup Financial Projections Checklist
The financial projections checklist can be used at any stage, but is particularly useful for startup businesses preparing financial projections for first time. The checklist provides a listing of some of the most common items to check for when reviewing financial projections.
Last modified July 16th, 2019
