Assignment Objectives:
This unit focuses upon the following CLO: Employ quantitative reasoning to compose projected financial statements for capital structure and forecast break-even points and profitability for new venture.
By using the above learning outcomes:
1. Prepare basic financial statements including initial balance sheet, projected basic income statement, and forecasted cash flow statement.
2. Explain how capital costs combine into a weighted average cost of capital (WACC) defining how new venture will borrow or gain equity financing.
3. Illustrate measures of profitability and efficiency that are important to the entrepreneur and equity investors.
Activity 1: Discussion
Instruction: What is cost-volume-profit analysis? And how would it help your firm to figure out when it would start collecting profits?
Activity 2: Journal Post
Instruction: What assets will you start your business with? Will you rent or buy a location? How much experience do you have in running a business? When do you think you will hit your break-even point? Do you have enough money to live on if you don't take any money from the business? Will your business be affected by seasonality? How much debt do you think you can personally carry (percentage wise - you do not have to reveal any personal information that makes you uncomfortable)? How much debt do you think the business can carry? What owner equity will you have on Day One of the business?
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