You As The Business Manager Need To Be Able To Determine Lar
You As Thebusiness Managerneed To Be Able To Determine Larger Sources
You as the business manager need to be able to determine larger sources of funding by creating a financial plan to help reduce duplication of resources, identify requirements and risks, and determine various financing options. Completing this planning is an important step for all businesses to take if they want to succeed. Larger companies may delegate this process to financial managers, financial analysts, or operations managers. You decide to create a financial plan for your company to help distinguish between sources, requirements, and risks associated with various types of long- and short-term financing capital structure that your company can potentially use in the future.
Assessment Deliverable: Draft a 3- to 4-page financial plan for your company. This plan should include sections for a business case and profit-and-loss statements. Include the following items:
A business case that includes a description, type of business, and sources of funding
Note: Use your Week 5 Assessment Prep: Business Case Research assignment and feedback.
A profit-and-loss statement for a 3-year period
Project revenue. State realistic assumptions, such as growth per year, in your projections. Estimate direct costs, including capital, marketing, labor, and supply costs. A conclusion that includes an explanation of what working through a financial plan can do for a larger company. Cite references to support your assessment according to APA guidelines.
Paper For Above instruction
Creating a comprehensive financial plan is a critical task for any business seeking sustainable growth and stability. Such a plan not only aids in identifying the main sources of funding but also helps in strategic resource allocation, risk management, and future financial forecasting. For larger organizations, this process is often handled by dedicated financial managers or analysts. However, understanding the process and core components remains essential for all managers aiming to contribute effectively to their company's financial health.
Business Case: Company Description and Funding Sources
The hypothetical company for this financial planning exercise is a mid-sized technology startup specializing in innovative software solutions for the healthcare industry. The company's core products include electronic health record systems and telemedicine platforms. The type of business is a technology enterprise with a focus on health tech innovations, targeting healthcare providers and clinics as primary clients. Its mission is to streamline healthcare delivery through advanced digital tools, improving patient outcomes and operational efficiency.
Funding sources for this company are diverse and include initial seed funding from angel investors, venture capital investments for expansion, bank loans for infrastructure development, and government grants aimed at health tech innovation. The company also plans to explore strategic partnerships that can bring in non-equity funding or revenue-sharing arrangements. These sources are chosen to support both short-term operational needs and long-term growth initiatives.
Profit-and-Loss Statement (Projected for 3 Years)
In developing the profit-and-loss (P&L) statement, realistic assumptions about revenue growth and costs are pivotal. For the purpose of this plan, an annual revenue growth rate of 20% is assumed, based on market expansion and product adoption rates. The revenue projections are as follows:
- Year 1: $2 million
- Year 2: $2.4 million
- Year 3: $2.88 million
Direct costs include capital expenses related to software development, marketing campaigns, salaries for technical and administrative staff, and supplies necessary for operations. Estimated costs are:
- Year 1: $1 million
- Year 2: $1.2 million
- Year 3: $1.44 million
Using these figures, the projected profit and loss statements for the three-year period demonstrate the business's growth trajectory and financial health.
Sample Profit and Loss Breakdown:
| Year | Revenue | Direct Costs | Gross Profit | Operating Expenses | Net Income |
|---|---|---|---|---|---|
| Year 1 | $2,000,000 | $1,000,000 | $1,000,000 | $600,000 | $400,000 |
| Year 2 | $2,400,000 | $1,200,000 | $1,200,000 | $720,000 | $480,000 |
| Year 3 | $2,880,000 | $1,440,000 | $1,440,000 | $864,000 | $576,000 |
The assumptions underpinning these projections include a steady annual growth rate of 20%, consistent investment in marketing and product development, and controlled operating costs through effective resource management.
Conclusion: The Significance of a Financial Plan for Larger Companies
Developing and implementing a comprehensive financial plan is vital for the strategic growth of larger companies. Such a plan provides clarity on funding sources, highlights potential risks, and aligns financial resources with business objectives. It facilitates informed decision-making, enabling firms to leverage appropriate financing options to support expansion, innovation, and operational efficiency. Moreover, a well-structured financial plan can improve stakeholder confidence by demonstrating fiscal responsibility and strategic foresight. Ultimately, it serves as a roadmap to navigate complex financial terrains, sustain competitive advantage, and achieve long-term success.
Financial planning also promotes proactive risk management, helping companies to prepare for potential economic downturns, market fluctuations, or operational challenges. By projecting revenues and costs over multiple years, businesses can identify critical financial thresholds and develop contingency strategies. Consequently, a robust financial plan not only supports day-to-day operations but also safeguards the company's future, ensuring resilience in an ever-changing marketplace.
In summary, establishing a thorough financial plan equips larger companies with the tools necessary for sustainable growth. It fosters strategic decision-making, optimizes resource allocation, and aligns financial objectives with overall business goals. As such, financial planning should be viewed as a fundamental component of effective corporate governance and long-term success.
References
- Brigham, E. F., & Ehrhardt, M. C. (2019). Financial Management: Theory & Practice (16th ed.). Cengage Learning.
- Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2021). Corporate Finance (12th ed.). McGraw-Hill Education.
- Damodaran, A. (2015). Applied Corporate Finance (4th ed.). John Wiley & Sons.
- Higgins, R. C. (2018). Analysis for Financial Management (12th ed.). McGraw-Hill Education.
- Gitman, L. J., & Zutter, C. J. (2018). Principles of Managerial Finance (15th ed.). Pearson.
- Ross, S. A., & Westerfield, R. W. (2020). Fundamentals of Corporate Finance. McGraw-Hill Education.
- Healy, P. M., & Palepu, K. G. (2012). Business Analysis & Valuation: Using Financial Statements (5th ed.). Cengage Learning.
- Wheaton, W. C., & Nevitt, P. K. (2020). Financial Institutions, Markets, and Money. Pearson.
- Brigham, E. F., & Houston, J. F. (2022). Fundamentals of Financial Management (15th ed.). Cengage Learning.
- Myers, S. C. (2001). Capital Structure. Journal of Economic Perspectives, 15(2), 81–102.