Evaluating Financial Performance Essay

674 Words May 20th, 2016 3 Pages
Financing New Ventures

In Chapter 5, we learned about evaluating financial performance. We can evaluate performance by looking at financial ratios and conducting different forms of analyses. Some useful analyses are trend analysis, cross-sectional analysis, and industry comparables analysis. Trend analysis is used to examine a venture’s performance over time. Cross-sectional analysis is used to compare a venture’s performance compared to another company at the same point in time. Industry comparables analysis is used to compare a venture’s performance against the average company’s performance in the same industry. Next, we looked at MPC income statements and balance sheets. A major part of MPC is cash burn. Cash burn is the
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Efficiency ratios indicate how efficiently a venture uses its assets in producing sales. Chapter 6 discusses financial planning for short term and long term. The chapter begins by reviewing the venture life cycle. The stages of the venture life cycle are development, startup, survival, rapid growth, and maturity. Moving on to short term cash planning, some tools include sales schedules, purchase schedules, wages and commission schedules, and a cash budget. Being able to estimate sustainable sales growth rates is important for financial planning. Internally generated funds are the net income or profits after taxes earned over an accounting period. Sustainable sales growth rate is the rate at which a firm can grow sales base on the retention of profits in the business. It is also essential to estimate the additional financing needed to support this growth. Financing capital needed are the funds needed to acquire assets necessary to support a firm’s sales growth. Spontaneously generated funds increase in accounts payable and the accruals that occur with a sales increase. Additional funds needed is the gap remaining between the financial capital needed and that funded by spontaneously generated funds and retained earnings. According to the Small Business development corporation, financial forecasts assist in managing your finances. They are a future prediction of your business finances,

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