Incorporating these assumptions, the completed proforma income statement look as follows: Prepare the spreadsheet. Projecting the Balance Sheet Example: ABC has the estimated the following relationships exist between sales and various balance sheet accounts: Operating cash needs to be maintained at $50,000 for all four years Accounts receivable will be maintained at 6% of sales and the investment in year zero runs off of expected sales in the first year (this is traditional treatment because the credit is extended closer to the beginning of the year than to the end of the year) Inventories will be maintained at 7% of sales and year zero will run off projected year one sales and year one inventories will run off year two sales -- and so on. We will invest $500,000 in plant property and equipment before we open the business - or in year zero, we will invest $50,000, $550,000, $100,000, and $100,000 in additional plant property and equipment in years one to four, respectively. Accounts payable will be 5% of sales and year zero amounts will run off projected year one sales and year one amounts off year two sales -- and so on. Accrued expenses will be 4% of sales and year zero amounts will run off projected year one sales and year one amounts off year two sales -- and so on. Long term debt will be $200,000 when we begin operations - or put another way -- in year zero Equity will be $390,000 when we begin operations - year zero