13.1 Assumptions

Explanation

Receivables Period
While some enterprises conduct a "cash only" business, most enterprises will make sales for which they do not receive immediate payment. To analyze the cash flow for your business it is important for you to estimate your receivables period. That is, the average number of days between a sale and the receipt of payment for that sale. So some sales may result in 'payment on delivery' while for others payment may take as long as ninety days. Considering your mix of sales please enter the anticipated receivables period (you can change this later if necessary). If you are a cash only business, use zero.

Payables Period
In the course of business you will incur a variety of debts for everything from pencils to computers to legal advice. In many cases the vendor will invoice you for payment at a date following the receipt of the goods or services. Some of these invoices will be paid immediately, others you will hold for a while. The average number of days between receipt of the invoice and payment of that invoice for all purchased goods or services is called the payables period. This number is important for analyzing your cash flow.

Percent Reserved for Taxes
When we make a profit we pay a percentage of that profit in taxes to the federal government. For each year of the plan indicate the percent of your profits you reserve for taxes.

Depreciation Period
The period of time over which your capital assets in the form of buildings can be depreciated. Also, for equipment.

Depreciation Period
The period of time over which your capital assets in the form of buildings can be depreciated. Also, for equipment.

Cash on Hand
Cash available as you begin business for the period addressed by your business plan.

Start-up Costs
Initial, one-time expenses.

Investment Capital
The amount you expect to receive from selling an interest in your business.

Customer Deposits
The amount you expect to receive from payment in advance fro the planned delivery of your product or service.

Sale of Assets
The amount you expect to receive from the sale of specific assets to raise operating capital.

Loans
The amount you expect to receive from a lender and the terms of repayment.

Capital Expenditures
Expenses for buildings or equipment.

Dividends
The amount of dividends you plan to pay to your stockholders for each year of the plan.

Inventory
The value of inventory of finished goods or materials to produce your product or service.

Sample from CitiLoc, Inc.

We will require capital investment as follows:

First Year       -   $1,250,000
Second Year   -   $500,000
3rd-5th Year   -   $500,000

We will make capital expenditures in the first year of $75,000 to acquire equipment. The equipment will be depreciated over a period of 7 years.

Taxes are calculated as 25% of revenue.