A business can be considered a financial success when it creates the highest value over time. This means it:
- turns a profit
- has a healthy balance sheet
- generates good cash flow
- generates a good ROI
- creates transferable value.
To attain these five objectives, say our experts, you need to start with a financial plan that includes both a historical record and future projections. By looking at the past to help plan and predict the future, you can gain much better control over your company’s financial performance. Ideally, a financial plan should contain three specific segments:
- a historical analysis
- a three-year plan
- a one-year plan.
Each of these segments is based upon data from the company’s balance sheet, income statement and cash flow documents, as well as selected financial ratios. In addition to the numbers, the financial plan should include analytical narrative – your analysis of what the numbers tell you – and the assumptions that underlie your projections.
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