Financial Mathematics

Before you start the business, you need to determine and write the requirements of operating a successful business. Please focus on the dollars as you apply concepts covered in the course so far. You are writing an essay that captures all of your initial thoughts and projections for a business that you will start up. Your essay should address everything in the six sections outlined below.

SECTION #1 -INTRODUCTION OF BUSINESS: Explain and describe the business you will start.

1. What will your business sell?
2. Why is this business interesting to you?

SECTION #2 - REVENUE & PROFITS: Discuss how your business will generate money.

1. What are your projected year #1 sales? Provide detail.
2. What are your projected year #1 expenses and costs? Provide detail.
3. What portion of your sales revenue will be consumed by expenses? Express in fractions and in percentages.
4. What portion of your sales revenue will be profits? Express in fractions and in percentages.

SECTION #3 - PRODUCT PRICE & COSTS: Explain the products/services that people will buy from your business.

1. Provide detail on the prices you will charge (be specific for each product/service you will sell);
2. Provide detail on the costs for each of your products
3. Explain your price mark-up in percentages and in dollars

SECTION #4 - INVESTMENT REQUIREMENTS: Discuss your banking and loans.

1. What business accounts will your open? Explain your banking requirements? Describe the bank(s) you would use.
2. Assume that you need to take out a business loan to cover your initial costs and expenses. The amount of the loan is equal to the amount of your projected year #1 expenses and costs (per item 1b above).

1. Describe that loan and show your annual repayment schedule over 10 years with 6% compound interest.
2. Then describe that loan and your repayment over 10 years with 8% simple interest.
3. How will you reflect the expense or the value of this equipment, supplies and inventory on your BALANCE SHEET?

SECTION #5 - BALANCE SHEET ASSESSMENT:

1. Prepare a BALANCE SHEET that reports your Year #1 business results in terms of ASSETS and LIABILITIES and EQUITY.
2. Explain your greatest Asset (versus all other assets) and your greatest Liability (versus all other Liabilities).

SECTION #6 - CONCLUDING THOUGHTS:

Summarize your business desires, concerns and expectations based on your content above.