Discuss the importance and purpose of the Income Statement (Profit & Loss Statement) and list some of the line items included in this report.
The Income Statement is a crucial part of a business report as it indicates the business revenues and expenses. The income statement reveals the company’s profitability, operational costs and income retention among others. In a business plan, the income statement is important since it helps the investor to forecast the cost of running the business, and its viability. It is also important to lending institutions as it helps them assess the profitability of the business and the projected net profits which helps determine if it is worth investing in the company.
An income statement contains Net sales, cost of material and production, general and administrative expenses, other income and expenses, pre-tax profit, taxes and net income.
Primary market research refers to the investigation on market trends done by the investor either personally or through a hired company. When conducting a primary market research, the business owner collects new data and goes out to collect new information regarding the market, analyzes this data and makes a report on the same. Secondary market research is done on existing market research reports done by other people/agencies. In this case, the investor does not rely on new data collected personally; he/she utilizes already made market research reports from databases, journals, news channels and survey reports by agencies to come up with his market research report. Secondary market research uses secondary data.
What is return on investment (ROI)? Discuss the factors that determine an investment's ROI
Return on investment is the assessment done to determine how efficient an investment is. It is the ratio of income appreciation over a given period. It can also be used to compare different investments to determine which has the best returns.
There are several factors determining the rate of investment:
Mix of investment: What the company invests in determines the rate of returns for example; stocks may have a higher return than bonds.
Strategy and operation- A good strategy and well-designed operations lead to higher returns
Economic environment- The right economic environment translates to high returns. Stressful economic circumstances like recession mean lower returns on investment.
External factors- Other factors like a country’s fiscal policy and political stability also influence ROI.
Discuss how operational advantages can contribute to a firm's competitive advantage.
Operational advantage can help a firm to reduce the cost of production and improve production efficacy, which results in better profitability. Improved profitability often goes a long way in impacting business operations and deliver to the customer. Businesses often reinvest the capital into the business, improving services for its customers and expanding their outreach or product range as applicable. This gives the business a competitive advantage by creating new market while also increasing customer satisfaction. Increased profitability also improves a company’s operations as there is a good liquidity to facilitate its strategies.
Discuss Social Responsibility as it relates to a business's operations plan.
Social responsibility is a way for businesses to give back to the community. Most successful businesses contribute to the community around them by adding something positive to the community or by limiting their negative impact in the community. To have an effective Social Responsibility output, companies need to have a strategy incorporated in the business plan. This way, the business allocates resources for its Social Responsibility projects alongside other projected expenses. It gives the company a good image and also helps the business to track its achievement of its Social Responsibility goals.