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Table of Contents
Preface
1
How Businesses Make Money
1.1
Key Business Strategies
1.2
Where’s Your Focus?
1.3
Using Financial Statements
1.4
Chapter Summary
1.5
Exercises
2
Three Sample Companies
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2.1
Manufacturing Company: Boutique Handbags
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2.2
Professional Service Firm: Uptown Chiropractic
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2.3
Retail Store: Bonnie’s Beachwear
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2.4
Chapter Summary
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2.5
Exercises
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3
Cash Flow Statements: The Basics
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3.1
What Is Cash?
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3.2
Understanding the Cash Flow Statement
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3.3
Cash Flow at Bonnie’s Beachwear
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3.4
Organize Your Cash Flow by Activity
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3.5
Chapter Summary
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3.6
Exercises
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4
Profit and Loss Statement Basics
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4.1
Profit Is an Estimate
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4.2
Understanding the Profit and Loss Statement
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4.3
Examining the Profit and Loss Statement
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4.4
Bonnie’s Beachwear Profit and Loss Statement
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4.5
Chapter Summary
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4.6
Exercises
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5
Difference between Cash and Profit
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5.1
Asset and Financing Activity
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5.2
Timing
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5.3
Profit without Cash
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5.4
Cash without Profit
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5.5
Chapter Summary
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5.6
Exercises
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6
Balance Sheet Basics
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6.1
Understanding the Balance Sheet
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6.2
Examining the Balance Sheet
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6.3
Bonnie’s Beachwear Balance Sheet
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6.4
Chapter Summary
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6.5
Exercises
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7
How the Balance Sheet Varies by Business Type
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7.1
Retail Business
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7.2
Manufacturing Business
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7.3
Service Business
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7.4
Chapter Summary
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7.5
Exercises
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8
How Financial Statements Tie Together
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8.1
Operating Activities
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8.2
Financing Activities
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8.3
Asset Activities
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8.4
Chapter Summary
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8.5
Exercises
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9
Understanding the Indirect Cash Flow Statement
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9.1
Operating Cash Flow
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9.2
Examining the Indirect Operating Cash Flows at Bonnie’s Beachwear
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9.3
Examining Indirect Asset Activity and Financing Activity Cash Flow at Bonnie’s Beachwear
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9.4
Putting It All Together
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9.5
Chapter Summary
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9.6
Exercises
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10
Evaluating Profitability
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10.1
Gross Margin
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10.2
Operating Margin
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10.3
Net Margin
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10.4
Analyzing Your Margins
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10.5
Return on Assets
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10.6
Return on Equity
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10.7
Chapter Summary
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10.8
Exercises
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11
Working Capital and Operational Efficiency
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11.1
Working Capital
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11.2
Efficiency Ratios
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11.3
Efficiency at Boutique Handbags
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11.4
Analyzing Your Efficiency
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11.5
Managing Collection and Payment Periods
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11.6
Is Boutique Handbags Efficient?
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11.7
Chapter Summary
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11.8
Exercises
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12
Can You Pay Your Bills?
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12.1
Liquidity Ratios
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12.2
Liquidity at Bonnie’s Beachwear
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12.3
Understanding Liquidity Ratios
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12.4
Chapter Summary
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12.5
Exercises
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13
Can You Pay the Bank?
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13.1
Leverage Ratios
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13.2
Leverage at Uptown Chiropractic
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13.3
Industry Leverage Ratios
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13.4
Chapter Summary
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13.5
Exercises
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14
Measuring Percentage Change
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14.1
Understanding Percentage Change
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14.2
Percentage Change at Bonnie’s Beachwear
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14.3
Comparing Alternatives Using Percentage Change
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14.4
Chapter Summary
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14.5
Exercises
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15
Using Finance Tools to Manage Your Business
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15.1
Focus on Your Strategy
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15.2
Focus On Your Cash
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15.3
Use Your Tools
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15.4
Chapter Summary
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15.5
Exercises
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16
What to Consider When Starting Your Business
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16.1
Use Your Expertise
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16.2
Identify Products and Services
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16.3
Customers
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16.4
Prices and Margins
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16.5
Cash
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16.6
Working Capital Needs
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16.7
Return
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16.8
Chapter Summary
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16.9
Exercises
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17
Legal and Your Business
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17.1
Legal Structure
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17.2
Licenses and Permits
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17.3
Protecting Intellectual Capital
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17.4
Contracts
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17.5
Chapter Summary
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17.6
Exercises
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18
Accounting and Your Business
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18.1
Fiscal Year
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18.2
Cash and Accrual Accounting
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18.3
Accounting Software and Systems
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18.4
Chapter Summary
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18.5
Exercises
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19
Taxes and Your Business
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19.1
Income Taxes
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19.2
Payroll Taxes
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19.3
Sales Taxes
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19.4
Chapter Summary
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19.5
Exercises
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20
Starting Your Business
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20.1
Setting Up the Business
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20.2
Building Sales Volume
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20.3
Positive Cash Flow
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20.4
How Much Money Does a Business Need?
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20.5
Chapter Summary
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20.6
Exercises
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21
When Growth Makes Sense
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21.1
Growth to Meet Customer Demand
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21.2
Growth to Remain Operationally Efficient
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21.3
Growth to Remain Competitive
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21.4
Growth Due to Industry Changes
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21.5
Growth Requires Money
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21.6
Growth Requires Organizational Capacity
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21.7
Chapter Summary
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21.8
Exercises
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22
Planning and Budgeting Growth
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22.1
Understanding Projections
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22.2
First-Year Operations
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22.3
Growing Uptown Chiropractic
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22.4
How Fast Should You Grow?
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22.5
Chapter Summary
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22.6
Exercises
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23
Evaluating Growth
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23.1
Have Profits Increased?
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23.2
Have Margins Increased?
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23.3
Have Returns Increased?
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23.4
Chapter Summary
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23.5
Exercises
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24
Sales Projection Analysis
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24.1
Speaking Economics
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24.2
Break-even Volume
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24.3
Break-even Amount
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24.4
Can You Sell That Many?
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24.5
Chapter Summary
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24.6
Exercises
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25
Cost–Benefit Analysis
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25.1
Analyzing Investments and Capital Expenditures
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25.2
Return on Investment
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25.3
Payback Period
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25.4
Break-even on Investment
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25.5
Examining Investment Opportunities at Johnny’s Garage
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25.6
Limitations of Cost Benefit Analysis
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25.7
Chapter Summary
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25.8
Exercises
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26
Time Value of Money
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26.1
Understanding the Time Value of Money
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26.2
Future Value
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26.3
Present Value
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26.4
Net Present Value
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26.5
Determining Interest Rates and Discount Rates
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26.6
Internal Rate of Return
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26.7
Examining the Time Value of Money at Johnny’s Garage
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26.8
Chapter Summary
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26.9
Exercises
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27
Doing Business Internationally
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27.1
Exporting
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27.2
Importing
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27.3
Understanding International Payments
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27.4
Understanding Exchange Rates
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27.5
Hedging Exchange Rates
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27.6
Big Macs and Purchasing Power Parity
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27.7
Chapter Summary
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27.8
Exercises
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28
Finding Money to Start and Operate Your Business
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28.1
Your Money
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28.2
Family and Friends
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28.3
Small-Business Lenders
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28.4
Outside Investors and Venture Capitalists
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28.5
Crowdfunding
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28.6
Chapter Summary
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28.7
Exercises
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A
Planning Your Business
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A.1
The Purpose of Your Business
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A.2
The Products and Services You Plan to Sell
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A.3
Your Strategies
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A.4
Your Suppliers
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A.5
Your Margins
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A.6
Your Cash Collection Cycle
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B
Making Your Business Legal
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B.1
Planning Your Legal Structure
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C
Planning Your Accounting and Taxes
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C.1
Accounting Structure
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C.2
Tax Structure
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C.3
Federal and State Income Taxes
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D
Startup Expenses
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D.1
Asset Purchases
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D.2
Initial Inventory and Raw Materials Expenses
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D.3
Other Startup Expenses
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E
Sales and Cost of Goods Sold Forecast
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E.1
Product Name
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E.2
Average Price per Sale
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E.3
Cost of Goods Sold per Sale
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Inventory and Raw Material Purchases
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Payment for Purchases
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E.6
Unit Sales
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E.7
Payment for Sales
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F
Monthly Expenses
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F.1
Operating Expenses
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F.2
Financing Activities
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G
Cash Needs Forecast
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G.1
Sources of Startup Cash
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G.2
Projected Cash Flows
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G.3
Additional Cash Needs
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H
Sensitivity Analysis
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H.1
Revenue
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H.2
Cost of Goods Sold
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H.3
Unit Sales
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H.4
Operating Expenses
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H.5
Congratulations!
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I
Business Forecasting Model
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