Question

In: Finance

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

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

Solutions

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.

Related Solutions

You are an entrepreneur developing your first business plan for a business selling over the internet....
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...
explain what a financial plan is and why financial planning is so important • discuss how...
explain what a financial plan is and why financial planning is so important • discuss how management uses financial planning models in the planning process, and explain the importance of sales forecasts in the construction of financial planning models. • illustrate how the relationship between projected sales and balance sheet accounts can be determined discuss what factors determine a company’s sustainable growth rate, assess why it is of interest to management Discuss how dividend policy and capital structure impact financing...
Why is preparing a financial plan so important? How do financial ratios fit into the preparation...
Why is preparing a financial plan so important? How do financial ratios fit into the preparation of a financial plan?
Why is business continuity planning so important? Identify several reasons why testing the plan is a...
Why is business continuity planning so important? Identify several reasons why testing the plan is a good idea.
Assume yourself as an entrepreneur of a small scale business ( Restaurant ) Financial Plan The...
Assume yourself as an entrepreneur of a small scale business ( Restaurant ) Financial Plan The financial plan consists of a 12‐month profit and loss projection, a cash‐flow projection, a projected balance sheet, and a break‐even calculation. Together they constitute a reasonable estimate of your company’s financial future.
Why is it important to be an Entrepreneur?
Why is it important to be an Entrepreneur?
Why is the sales forecast so important in developing the master budget?
Why is the sales forecast so important in developing the master budget?
Business impact analysis (BIA) is an important exercise when developing a business continuity plan. The first...
Business impact analysis (BIA) is an important exercise when developing a business continuity plan. The first step in BIA is to identify critical business activities. Describe in your own words what you think critical activities are and give two (2) examples of such critical activities of a supercomputing centre which provides services to registered users via the Internet. Suppose the BIA team of the supercomputing centre is determining the recover time objective (RTO) of a critical activity that will need...
How important is market segmentation, targeting and positioning for an entrepreneur who is planning to launch...
How important is market segmentation, targeting and positioning for an entrepreneur who is planning to launch sneaker (shoe) business?
Why is it important for entrepreneur to determine the legal form of business ownership? When choosing...
Why is it important for entrepreneur to determine the legal form of business ownership? When choosing the legal form, what kind of tax considerations to make?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT