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Rutgers Ultra-Niche Crops | Business Plan Videos | Financial Plan

Rutgers Ultra-Niche Crops | Business Plan Videos | Financial Plan


A financial plan illustrates your
ability to repay your investor and to make a profit. A financial plan should
include financial projections of an income statement, balance sheet, and cash flow statement to give an indication of where your business is headed in the
next few years. An income statement, also called profit and loss statement, P&L
statement, or operating statement, documents the business’s profitability
during a particular period of time, usually one year. Profitability is the
measure of how much income your business is making in a relationship to the
resources used to produce that income. Income minus cost is a profit or loss.
Cost consists of variable cost and overhead cost. Variable costs change with
the level of production. Examples are cost of seed and fertilizer. Overhead are
fixed costs are spent regardless of the level of production, and are common to
all crops. These costs include what we call the dirty five: depreciation,
interest, repairs, insurance,and taxes. It also includes other costs such as
salaries of overhead personnel, that is the manager, salespeople, growers,
secretaries, bookkeepers, etc. The total cost of production is the sum of the
variable and the overhead costs. A balance sheet is a snapshot of ownership
of the business at a single moment in time. It shows how funds are invested in
the business through the assets and the financing methods used, liabilities and
owner’s equity. Liabilities are claims of outsiders, and net worth or owner’s
equity are claims of the owners. Net worth growth is usually one of the major
goals of a business. A cash flow statement is a projection of all sources
and uses of cash during a specified planning period. Cash flow plans show
when the major inputs and outputs of cash will take place. Owners of the farm
will want to have a line of credit or operating loan to cover cash shortfalls.
FInancial projections give some indication of where your business is
headed in the next few years.

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