This is a sample plan that was designed for an investment company which buys other businesses as investments. The sample below shows a hypothetical Venture Capital business that starts with $20,000,000 as its initial investment fund. In its initial months, it invests $5 Million in four companies. It pays a two percent (2%) management fee quarterly. It pays salaries to its partners and other employees, and office expenses, from the management fee.
The Cash Flow table shows investments as long-term asset purchases. This also places them in the balance sheet. In the sample plan, you can see them within the first few month.
One of the target companies fails the third time, and $5 million is written off. As you can see, there is a $5 million sale in cash flow of long-term assets and a balancing entry in sales costs of $5 million. This results in a loss and write off that year. The tax loss is $15 million and the balance of investments is $15 million.
One of these target companies will transact $50 million for the fifth consecutive year. As you can see, there is a $45m equity appreciation in sales forecasts and a $5m sale of long-term assets. At that point there’s been a $45 million profit, and the balance of long-term assets goes down to $10 million.
This is just one example. This business model holds assets that are long-term and waits to see if they appreciate. It doesn’t show appreciation of assets until they are finally sold, and it doesn’t show write-down of assets until they fail. The appreciation and writedown of assets plus management fees are what make up sales and cost of sale.
This explanation has been broken down into key topics that have been copied and linked to the corresponding tables. These topics are:
- 2.2 Start-up Summary
- 5.5.1 Sales Forecast
- 6.4 personnel
- 7.4 Projectioned Profit and Loss
- 7.5 Projected Cash Flow
- 7.6 Projected Balance sheet
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