Marketing Essentials

Section 2: Financial Aspects of a Business Plan

Answers to Practices

Practice 3 Answers
Mountain Air Bikes
Income Statement for the Year Ended December 31, 20—
Net Sales ……. $202,736
Cost of Goods Sold…. $124,375
Gross Profit …..$78,361

Operating Expenses:
Salaries….. $28,022
Rent ….. $14,211
Utilities….$5,214
Advertising…..$3,422
Total Operating Expenses…… $50,869
Net Income from Operations…. $27,492

$124,375
$78,361
$50,869
Salaries
$27,492

Practice 4 Answers
Mountain Air Bikes Balance Sheet
December 31, 20—

Current Assets
Cash….. $10,000
Accounts Receivable….$15,000
Inventory….$68,000

Fixed Assets
Building ….. $120,000
Equipment … $80,000
Vehicles… $30,000

Total Assets
Current Liabilities
Notes payable…. $3,000
Accounts Payable ….. $12,000
Salaries payable ….. $5,000
Taxes payable …. $1,000

Long-Term Liabilities
Notes Payable …. $90,000
Total Liabilities …. $111,000
Net Worth …… $212,000

$323,000 ($10,000 + $15,000 + $68,000 + $120,000 + $80,000 +$30,000 = $323,000)
$111,000 ($3,000 + $12,000 + $5,000 + $1,000 + $90,000 = $111,000)
$212,000 (323,000 - $111,000 = $212,000)

Practice 5 Answers

The amount of cash available for business operations is $11,000 ($23,000 - $12,000 = $11,000).
The cash flow is as follows:
Month 1: -$4,700 ($100 - $4,800 = $4,700);
Month 2: -$2,650 ($750 - $3,400 = $2,650);
Month 3 : -$1,720 ($980 - $2,700 = -$1,720).
The cumulative cash available at the end of each month is as follows:
Month 1: -$6,300 ($11,000 - $4,700 = $6,300); Month 2: $3,650 ($6,300 - $2,650 = $3,650); Month 3: $1,930 ($3,650 - $1,720 = $1,930).