A Business Plan's Financial Forecasts Should Reflect the Company's Ability

question 107

True/False

A business plan's financial forecasts should reflect the company's ability to repay loans.

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Definitions:

Net Operating Income

Refers to the profit realized from a business's operations after subtracting all operating expenses, excluding taxes and interest.

Residual Income

The net income an enterprise or project generates above its cost of capital or required rate of return.

Contribution Margin Ratio

A calculation that shows what percentage of sales revenue is available to cover the fixed costs of a business after variable costs have been paid.

Fixed Expenses

Costs that remain constant regardless of any change in a company's activity level, such as lease payments, insurance, and property taxes.