MGT/300 Survey of Small Business
A projected financial statement (Pro Forma) is comparable to a chronological income statement; with the exception of it projects the future rather than records the past. One of the most important sections of any business plan is this proposed financial projection. “One survey found that 74 percent of bankers say that financial documentation is the most important aspect of a business plan for entrepreneurs seeking loans” (Scarborough & Zimmerer, 2009, p. 196). The majority of Pro Forma consists of three different scenarios. Each scenario must be realistic. The forma projects a pessimistic, most likely and optimistic look at the future cost and revenue of a company. Team B will be discussing these three different scenarios for proposed new dance club.
The use of capital and human resources to ensure revenue and control cost of each scenario will be examined and measured against published statistics and ratio analysis of business the same industry. These industry standards are available from several sources such as Annual Statement Studies (RMA), industry trade associations, and government agencies.
Finally, the team will discuss the benefits of reviewing financial information in a pro forma and how important it is in launching a successful business. It is the most important tool for placing the company in the most stable condition to succeed, but is the essential tool needed to raise capital in the first formative years. It will be discussed how the pro forma will assist the company in the amount of cash needed, inventory, prices for products or services, and other assets to begin operation.
Scarborough, N.M., & Zimmerer, T.W. Effective Small Business Management (9th ed.) Prentice Hall, 2009 Upper Saddle River, NJ