Question

You are an entrepreneur developing your first business plan for a business selling over the internet. Right now you are working on the financial plan segment of your business plan and need to estimate the financing needs, both to launch your business and to operate it for the first 12 months during which you estimate you will incur a loss. You intend to apply for a bank loan to cover your first year’s financing needs. You have worked with an Excel spread sheet and tried to determine every single expense you can think of, plus estimating the sales that you are hoping to achieve in the first year. You have developed the following financial estimates:

First 12-Months Financial Estimates
Sales	50,000
Cost of Goods Sold	20,000
Salaries	35,000
Rent	25,000
Insurance	5,000
Website development (contracted out)	20,000
Selling Expenses	5,000
Office Equipment	5,000
Payroll Taxes	3,850
Computer Equipment	10,000
Office Supplies	2,500

Question:

1. How much do you need to project for your Capital Budget needs?

A. $35,000

B. $25,000

C. $10,000

D. $30,000

2. For the internet entrepreneur in the problem above, how much money do you expect to lose on your Profit and Loss Statement in the first year?

A. $46,350

B. $28,475

C. $48,550

D. $65,250

3. The entrepreneur planning to sell on the internet, assuming you have $10,000 in your savings to invest in the business, what is the minimum amount of money you need to borrow to be viable during the first year before you get your business to cash flow breakeven?

A. $71,350

B. $81,350

C. $93,350

D. $36,350

Answer 1

	1. How much do you need to project for your Capital Budget needs
	Office Equipment	$5,000
	Computer Equipment	$10,000
	Website Development	$20,000
	Capital Budget Needs	$35,000
	ANSWER:
	A. $35000
	2. For the internet entrepreneur in the problem above, how much money
	do you expect to lose on your Profit and Loss Statement in the first year
	PROFIT & LOSS STATEMENT
	Sales		$50,000
	Less:Cost of goods sold		$20,000
	Gross Profit		$30,000
	Less: Operating Expenses:
	Salaries	$35,000
	Rent	$25,000
	Insurance	$5,000
	Selling Expenses	$5,000
	Payroll taxes	$3,850
	Office Supplies	$2,500
	Total Operating Expenses		$76,350
	Net Profit/(Loss)		($46,350)
	ANSWER:
	A.$46350
	3. Minimum amount required to borrow
	Amount of Losses	$46,350
	Capital expenses	$35,000
	Total amount required	$81,350
	Less: Amount available	$10,000
	Minum amount to be borrowed	$71,350
	ANSWER:
	A. $71350