Why is developing a financial plan so important to an entrepreneur about to launch a business?

Expert Solution

The following are the reasons why a financial plan is important for an entrepreneur about to launch a business:

1) An entrepreneur has to manage cash flows. As soon as the business is launched,
there will be income and expenses. The entrepreneur has to manage the expenses.
2) An entrepreneur also has to manage his/her investments. In other words, the profits
from the business have to be invested properly.
3) The entrepreneur has to decide how much risk to take. Specifically, the entrepreneur will
have to do an analysis to decide what capital investments to make.
4) The entrepreneur has to ensure that the return from the business is more than the cost
of capital so that the business is financially viable.
5) The entrepreneur will also have to pay taxes every year, so every year the entrepreneur
will have to file a tax return.

jeff jeffy answered 2 years ago

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