ENTREPRENEURSHIP Lecture No: 41 BY CH. SHAHZAD ANSAR

PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS Contd…

LONG-TERM VS SHORT-TERM DEBT LONG-TERM DEBT Loans and obligations with a maturity of longer than one year; usually accompanied by interest payments, also called funded debt. SHORT-TERM DEBT Debt with a short maturity, usually one year or less.

MANAGING COSTS AND PROFITS Costs are budgeted based on percentages of net sales. Comparison of actual and budgeted expenses can be misleading for ventures with multiple products or services. Allocating expenses over product lines be done as effectively as possible to avoid arbitrary allocation of costs. To look back on the first year of operation and make comparisons month-to-month 4

Ratio Analysis Liquidity Ratio It includes two ratios Current ratio Current ratio = current assets current liabilities 2:1 is generally considered favorable Acid test ratio Acid test = current assets - inventory ratio current liabilities 1:1 ratio would be considered favorable.

Ratio Analysis Contd… Activity Ratios: Average collection = accounts receivable period average daily sales Inventory = cost of goods sold turnover inventory Debt ratio = total liabilities total assets Debt to = total liabilities equity ratio stockholder’s equity

Ratio Analysis Contd… Profitability Ratios: Net profit = net profit margin net sales Return on = net profit investment total assets These all ratios shows the performance of firm

CREATING AWARENESS OF THE NEW VENTURE Publicity Internet Advertising Trade Shows Selecting an Advertising Agency