Module 11 Written Assignment - Final Continuing Project

Date: 06/15/16

Forecasted Statement of income

LLC REALTY

BALANCE SHEET

FOR YEAR 2016

5. What decisions did you make? Why did you choose to make those decisions?

Decided that we would go through with the process of reconstructing the house and selling, and gaining profit of $16,824.00 after subtracting the Net Operating Income from the Net operating expenses.

6. Conclusion, summarize this business owner’s financial state. Does he/she have financial stability, why or why not?

I don’t think that this business owner’s financial state is good due to that fact that their Total Liabilities & Net Worth is more than their Equity (Net Worth). I used this formula to calculate how long that they would stay in business. This ratio shows you how many months their business can survive if sales suddenly stopped and none of their customers paid their bills that month:

•Cash in Bank / Monthly Expenses = Number of Months until Bankruptcy.

It is very possible for a business doing $1 million a year in revenue to double sales and go bankrupt in the process. Whether this happens or not depends on how quickly the cash is collected from customers and deposited in the bank relative to when you have to pay the bills for the increased expenses associated with the new revenue. 'If the entrepreneur has to increase expenses today, but collects that additional $1 million six months from now, they can very easily go bankrupt before they collect their money. The accounts receivable numbers reveal the cash coming into the business and highlight any problems with old receivables, meaning money you have had trouble collecting from customers. The accounts payable numbers show the cash commitments of the business over the next thirty days to vendors. Since you're on the hook to pay your bills, any aging trend in the amount of money you're owed could spell trouble.