1. Section 36.1 Preparing Financial Documents
Marketing Essentials
n Chapter 36 Financing the Business
Section Preparing Financial Documents

2. Preparing Financial Documents
SECTION 36.1
Preparing Financial Documents
What You'll Learn
The purpose of preparing financial documents
How to develop a personal financial statement
How to determine start-up costs for a business

3. Preparing Financial Documents
SECTION 36.1
Preparing Financial Documents
Why It's Important
The most common reason for writing a business plan is to obtain financing for a business. In order to get the money you will need to start your business, you will need to prepare financial statements.

4. Preparing Financial Documents
SECTION 36.1
Preparing Financial Documents
Key Terms
personal financial statement
debt asset
liability
start-up costs

5. Preparing Financial Documents
SECTION 36.1
Preparing Financial Documents
The Financial Part of a Business Plan
A major purpose of the business plan is to put together financial information relating to your business. Five important financial documents are:
the personal financial statement
the start-up cost estimate
the income statement
the balance sheet
the cash flow statement

6. Preparing Financial Documents
SECTION 36.1
Preparing Financial Documents
The Personal Financial Statement
The personal financial statement is a summary of your current personal financial condition. It compares your assets to your liabilities at a particular point in time.
An asset is anything of monetary value that you own.
A liability is a debt you owe.

7. Preparing Financial Documents
SECTION 36.1
Preparing Financial Documents
Estimating Start-Up Costs
Start-up costs are a projection of how much money you will need for your first year of operation. You also need an estimate of operating costs after the first year.
Slide 1 of 3

8. Preparing Financial Documents
SECTION 36.1
Preparing Financial Documents
Estimating Start-Up Costs
Start-up costs vary for each type of business, but are based on factors:
The nature of your proposed business.
The size of your business.
The amount and kind of inventory needed.
The estimated time between starting the business and earning income from sales.
The operating expenses that must be paid before income is received.
Slide 2 of 3

9. Preparing Financial Documents
SECTION 36.1
Preparing Financial Documents
Estimating Start-Up Costs
Business start-up costs may be one-time costs or continuing costs.
One-time costs are expenses that will not be repeated after you begin operating the business, such as installation and deposits for telephone service.
Continuing costs are operating expenses you will pay throughout the life of the business, such as rent and payroll.
Slide 3 of 3

10. Preparing Financial Documents
SECTION 36.1
Preparing Financial Documents
Personal Costs
Your personal costs are those expenses that are necessary for you to live during the start-up phase. You will need to project your monthly living expenses and household cash needs for at least the first year of business. You should have enough money available to pay for up to six months of living expenses.

11. Preparing Financial Documents
SECTION 36.1
Preparing Financial Documents
Financing Sources
There are several funding sources used to start-up a business. Why are the sources divided into primary and secondary sources?

12. Reviewing Key Terms and Concepts
ASSESSMENT
36.1
Reviewing Key Terms and Concepts
1. Why is financial information included as part of a business plan?
2. What items should be identified on a personal financial statement?
3. What is the difference between an asset and a liability?
4. What are start-up costs?
5. What is the difference between one-time costs and continuing costs?

13. ASSESSMENT Thinking Critically 36.1
Why are friends and family usually consulted first when looking for loans?

14. Graphic Organizer 36.1 Start-Up Costs Start-Up Costs
Deposits (Rent, Utilities,
Phone)
Furniture and Equipment
Machinery
and
Equipment
Inventory
Start-Up
Costs
Transportation
Equipment
Working Capital
Building Improvements
Advertising
Professional Fees

15. Marketing Essentials
End of Section 36.1