A firm have a marketing plan, which is derived from the business plan,marketing strategy is part of the marketing plan.In the same token, a financial plan is derived from the business plan,a financial strategy is part of a financial plan.In business, it is important to have more cash coming in as cash flow than cash going out as out flow. The very purpose of being in business is to make a profit.To do so requires selling at a higher price than cost per unit. This is part of the economics of one unit.The cost of producing one unit must be less than the sale price of one unit.A business must establish funds, seed capital for starting the business, for variable and fixed cost,working capital,as well as cash reserve.A seed capital is a one time capital for starting or opening the business. For example,if you are starting a restaurant,your seed capital or start up expenses includes funds for chairs,tables, kitchen equipment etc.When starting a business,it is important to research the industry to know the entry and exit barriers, to segment the market and know your target market profile.It is also important to know the competition, their strength and weaknesses. In the restaurant business,you should decide on everyday $,$grab a bite or special occasion restaurant.for examples of seed capital.If the start up is $$20,000,$then you should at least $$30,000,$ $$10,000$ as reserve. The reserve will be used in case of unexpected expenses or higher cost than estimated.It is important to have a check list of items needed for start up and their cost.

There are two types of cost in small business, these are variable cost and fixed cost. Fixed cost are expenses that must be paid regardless of sale or no sales.The cost of heating up a classroom or a workplace is the same regardless of the number of students or workers. Variable cost goes up and down, depending on production or sales.The more produce, the more material you will use. Your cost varies, it depends on how much you produce.It is important to keep good records everyday in your small business.There are different types of costs.A business income statement shows profit and loss. A balance sheet is an important document that shows assets $,$ liabilities and equity in a given time. Assets are tangibles and intangibles that have monetary values that the company owns, liabilities are dept's the company must pay.Equity is assets minus liabilities.The cash flow statement of a business shows inflows of cash,money coming in and money flowing out of the business. It is important to have more money flowing in than money flowing out of the business.The rules for keeping cash flowing in is to collect cash as soon as possible, to pay bills by due date to avoid late fees and interests.It is also important to have enough cash on reserve before making expenses instead of buying cash. Avoid buying inventory that is not needed. A business working capital is the value of current assets minus current liabilities.The three types of cash flow are, cash flow for operations,money used to run the business.Investment cash flow is money in and out for investment,vehicles, real estate etc.Cash flow for financing is money used to finance the business. It is important to manage accounts receivables and account payables very well.

Business raise needed capital, it needs to grow in three ways. By financing with its own profit, this is self financing. Business can also finance with equity, by incorporating, then selling stock through the stock market to raise needed capital Stock buyers become equity owners.A company can also borrow money by dept financing to expand or operate the business.Each of these methods have advantages and disadvantages. There are different sources of business financing.Community development financial institutions are available to assist small business.

QUESTIONS:

$1$ Discuss fixed and variable costs.

$2$ Discuss an income statement.

$3$ Discuss cash flow.

$4$ Discuss different types of business financing.