Explain any four components of a financial plan.

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Four components of a financial plan: (i) Proforma investment decisions - relate to how the enterprise's funds are invested in different assets so as to earn the highest possible returns on investment. The entrepreneur must estimate the capital components: land and building, machinery and plant, installation cost, preliminary expenses, margin for working capital, expenses on research and development and investment in short-term assets such as raw material and cash level. This helps in understanding the total finance required, as inadequate or excess funds can severely damage the financial fortunes. (ii) Proforma financing decisions - summarise the projected sources of funds, including owner's funds and borrowed funds. The entrepreneur selects the best overall mix of financing to minimise capital cost and financial risk and maximise return on investment and profitability. (iii) Proforma income statement - the projected net profit, i.e., projected revenue minus projected costs and expenses; it summarises the profit data for the first year. 'Sales by month' must be calculated first, using forecasting techniques such as marketing research, industry sales, survey of buyers' intentions and expert opinions. (iv) Proforma cash flow - reflects the projected cash available, i.e., projected cash receipts minus projected cash disbursements. Cash flows when actual payments are received or made, not merely on making sales; many entrepreneurs use 'cash in LESS cash out' for internal monitoring, and a conservative approach with assumptions helps maintain funds for negative cash months.