GEB2112
Module 6
Chapter 11 1. Why is developing a financial plan so important to an entrepreneur about to launch a business?
A financial plan is like a road map to success. Using one will help keep you on track, help you from over spending, and maximize revenue

2. How should a small business manager use the 12 ratios discussed in this chapter?
They should use the right mix of ratio’s that will give the best picture of the business’s health. Looking at each ratio will help to determine which set or grouping of the 12 ratios are the best for the business

3. Outline the key points of the twelve ratios discussed in this chapter. What signals does each give a business owner? a) Current ratio b) Quick ratio c) Leverage ratio d) Debt to net worth ratio e) Times interest earned f) Average Inventory turnover g) Average collection period Ratio h) Average payable period ratio i) Net sales to Total assets j) Net profit on sales k) Net profit to assets l) Net profit to Equity

4. Describe the method for building a projected income statement and a projected balance sheet for a beginning business.
The method to build a pro forma for beginning a business can be done in many ways. In order to get the most accurate projections you will need statistics from like types of businesses and from neighboring businesses. You can do this by purchasing published information or you might be able to use public information from a publicly traded company who is very close to you.

5. Why are pro forma financial statements important to the financial planning process?
Pro forma statements are very important, They help you monitor the state of the business during certain periods to make sure you are still on target to hitting your financial plans