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Questions: 1.List the Major Components of a Business Plan. What Components are of primarily concerned to you, and why? 2.What is the significance of a Business Succession Plan? 3.What is the Importance of liquidity? 4.list each of the scarce resources that are used in Carry Yokis Lounge. 5.What management functions is Carol performing, and how do they apply to this scenario? 6.If they form a partnership, how would you recommend that they organize? 7.How should Joe go about getting financing? What is the probability that he can obtain a grant to start an Italian ice cream shop? 8.Construct an income statement using the following information: net sales, $500,000; salaries, $100,000; rent, $24,000; COGS, $250,000; utilities, $25,000; payroll taxes, $25,000; insurance, $12,000; and interest expense, $5,450. Answers: 1.A business plan is a formal document being prepared by the entrepreneur to demonstrate the objectives and the ways to achieve those objectives. The business plan sets the goals of the business and describes the ways to achieve them. The business plans are generally prepared for the specific purpose and that is raising finance from the public or the financial institutions. Thus, in order to be able to attract the public or the financial institutions to lend money, it is crucial to prepare the business plan aptly (Pinson, 2008). There are different components that the business plan is built upon. The major components of the business plan are listed as below: Executive Summary A short description of companys vision and mission Market analysis Resource description Financial analysis and projections Summary The financial projections and analysis is the component that I am the most concerned with. I am pursuing my higher studies in finance domain and keen to look for carrier in the same field, so, this is the reason that the financial analysis and projections is the most concerning part for me. 2.The business succession plan is made to provide for the mechanism that will be followed in the event of retirement of persons from the top management of the entity or owners in case of small business. The business succession planning is essential to ensure that the business runs hassle free when the business owners or the crucial people from the top management retire (Dahlke, 2012). In case if it is not planned, the switchover of the management or the ownership would not be systematic and it may hamper the business of the firm. The business succession plan provides for the procedures for switchover of the management or the ownership. Planning for the business succession in advance saves the time and cost associated with the business resumption after the switchover of the management or the ownership (Dahlke, 2012). 3.Liquidity refers to the sufficiency of liquid assets so that the short term liabilities could be paid out on the due dates. The liquid assets are such assets which can be converted into cash within a short of time period. The liquidity is important from the view point of smooth daily functioning of the business (Siddaiah, 2010). In order to carry out the day to day activities such as purchase of material, payment for wages, and payment for rents and utilities, the management needs have sufficient liquid assets in hands. In the absence of sufficient liquid assets, the management would not be able to carry out the day to day business activities smoothly and that will hamper the performance of the business. Therefore, to be able to maintain good operating performance of the business, it is essential to maintain sufficiency of liquidity (Siddaiah, 2010). 4.The major resources required to set up a business are money, people, equipment, and land and building. These are the scarce resources that the business has to manage adequately to achieve growth and maintain sustainability (Pride, Hughes, Kapoor, 2016). The list of scarce resources used in the Carry Yokis Lounge is given as follows: Money (Cash of $200000, $50,000 capital and $150,000 borrowed) People (Total 11, out of which two are bartenders, three servers, two assistant servers, two cooks, one dishwasher and a clean-up person) Furniture and Equipments (15 barstools, 4 tables, 40 chairs, 4 television sets, and one satellite dish) Land and Building (Lounge and Bar) 5.Carol Jones is performing human resource management function of the management. The human resource management function is concerned with hiring and training of the employees for the business. There are numerous tasks that a human resource manager performs in hiring and providing training to the employees. The hiring process involves planning and estimating the required workforce, determining the job specifications for employees, evaluating the candidates, and selecting the best suited ones (Price, 2011). Further, the work of human resource manager gets extended to training and learning of the employees. The human resource manager prepares plans for training and deployment of the workforce. In the current case, Carol Jones also performing the same functions. She is planning to hire workforce for her business and for that purpose she is preparing job descriptions, evaluation criteria, and training rules (Price, 2011). 6.Sam Jones, Mary Adams, and Larry Brown can form a general liability partnership firm to start the business. The terms of the partnership are set out through the partnership agreement. Thus, it is recommended that Sam Jones, Mary Adams, and Larry Brown agree to the terms of business through the partnership agreement. In the current case, Sam and Larry want to be equal partners which mean that they want to share the profits equally. Generally, the profit sharing in the partnership firm is based on the capital contribution of the partners. Therefore, in order to have profit sharing on equal basis, it is necessary for Sam and Larry to contribute the capital equally. However, Sam does not have money to contribute. The total capital requirement is $100,000 out of which Marry is contributing $60,000 and the rest $40,000 should be contributed equally by Sam and Larry. Now, Larry has $40,000 but Sam does not have cash. It is recommended to Sam to borrow $20,000 from Larry and contribute tow ards his capital. In such an arrangement, the profit sharing ratio (capital contribution ratio) would be 6:2:2 for Mary, Larry, and Sam respectively (Slorach Ellis, 2017). 7.Joe is considering opening a coffee and gelato shop for which he needs funds amounting to $120,000. Joe has $30,000 cash in hand and the rest he will have to arrange through loans or government grant. For the purpose of raising loan, Joe should visit banks and show them the business plan. The banks may after considering feasibility of the business plan and the property that he wishes to put as security for loan, may sanction loan. However, the probability of getting government grant is very low. This is because the government provide financial assistance to the generally to the business which are essential for the social and economic development. The business that Joe is considering starting is not of much importance from the social and the economic development (PKF International Ltd, 2015). 8. Income Statement Net sales 500,000.00 Cost of goods sold 250,000.00 Gross Profit 250,000.00 Less: Operating Expenses Salaries 100,000.00 Rent 24,000.00 Utilities 25,000.00 Payroll taxes 25,000.00 Insurance 12,000.00 Interest expense 5,450.00 Total 191,450.00 Net profit 58,550.00 References Dahlke, A. 2012. Business Succession Planning For Dummies. John Wiley Sons. Pinson, L. 2008. Anatomy of a Business Plan: A Step-by-step Guide to Building the Business and Securing Your Company's Future. aka associates. PKF International Ltd. 2015. Wiley IFRS 2015: Interpretation and Application of International Financial Reporting Standards. John Wiley Sons. Price, A. 2011. Human Resource Management. Cengage Learning. Pride, WM., Hughes, R.J., Kapoor, J.R. 2016. Foundations of Business. Cengage Learning. Siddaiah, T. 2010. International Financial Management. Pearson Education India. Slorach, J.S. Ellis, J. 2017. Business Law 2017-2018. Oxford University Press