The shape of the cumulative cash flow graph is referred to as the j curve or death valley curve, as it identifies the level of funding a business needs to have available to survive the startup years.
Last modified July 19th, 2019
Tag: Cash flow
Cash Flow Forecast for Start Up Business
Sensitivity Analysis vs Scenario Analysis
Sensitivity analysis is used when preparing a business plan financial projection to assess the impact on the financial projection of changes in each input variable. Scenario analysis involves changing all input variables at the same time to show the base, best, and worse case scenarios. By doing this the business can show how vulnerable its business plan is to changes in major assumptions and inputs. Scenario and sensitivity analysis is carried out in order to assess risk.
Last modified October 8th, 2019
Cash Flow From Operations
Cash flow is important to any business, a business will not fail through lack of profit, but it will fail for lack of cash. In order to survive without external funding, a business needs to be able to generate sufficient cash flow from its trading activities.
Looking at the net income of a business from the income statement tells you about profit not cash, to find cash you need to look at the cash flow statement and in particular the cash flow from operations.
Last modified January 24th, 2023
Enter New Debt Payment Term
Debt finance is normally evidenced by a note or document which specifies the amount, interest rate, and date of repayment. The date of repayment will dictate the payment term for the debt, for example a debt might be payable in five years time.
In the previous step the new debt was entered, and in order to allow for this debt to be repaid, a new debt payment term needs to be entered.
Last modified August 22nd, 2019
New Debt Estimation
For a business, debt can take many forms including loans, mortgages, borrowings, overdrafts, credit cards, and generally any form of finance on which interest is paid.
New debt is included in the cash flow statement of the projection as a positive figure as it represents cash flowing into the business from lenders. For example, if in year two the plan is to borrow 46,000 to finance the purchase of new equipment, the figure of 46,000 should be included in the cash flow statement on the new debt line.
Last modified December 14th, 2022
Estimate Capital Expenditure
Capital expenditure is amounts spent of long term assets during the accounting period.
Long term assets are assets which have a long life and are for use within the business and not held for resale, they include for example land, buildings, equipment, and plant and machinery, needed to get the new business up and running, ready to start producing and selling goods and services.
Capital expenditures are included in the financial projection as a negative amount in the cash flow statement, as money flows out of the business to pay for them.
Last modified September 27th, 2019
Enter Cash Opening Balance
The opening day cash balance forms part of the opening balance sheet of the business, and includes amounts which are held by a business in the form of notes and coins (e.g. petty cash) or which are held at a bank in the form of on demand deposits such as current accounts and savings accounts.
The cash opening balance comes under the heading of current assets in the balance sheet of the business.
Last modified February 15th, 2023
Business Plan Assumptions
All financial projections are based on business plan assumptions. Listed below is a selection of the important assumptions which need to be considered and decided upon when using the Financial Projections Template to produce the financials section of your business plan.
Last modified September 26th, 2019
3 Financial Statements
