This is a sample plan for an hypothetical investment company that invests in other companies. The hypothetical Venture Capital company starts with $20 million to start its initial investment fund. It invests $5,000,000 in each of its four initial companies within the first month of its existence. It receives a monthly management fee of two per cent (2%) of the fund’s value. It pays salaries and expenses to its partners and employees from the management fees.
The cash flow table lists investments as long-term investments. They are also included in the balance sheet as long term assets. These investments are visible in this sample plan for the first few months.
One of the target companies fails the third time, and $5 million is written off. You’ll see that the result is a $5m sale of long term assets in the cashflow and a balancing in of $5m in sales costs in the profit and losses. It results in a loss that year and a write-off. This results in a tax deduction and the investment balance is increased to $15 millions.
One of these target companies will transact $50 million for the fifth consecutive year. As you can see, there is a $45m equity appreciation in sales forecasts and a $5m sale of long-term assets. There’s now a $45million profit. Meanwhile, the balance of long term assets drops to $10million.
This is a simplified example. The business model holds long-term assets and waits for them to appreciate. It doesn’t track the value of assets and doesn’t record write-downs of assets after they are sold. Sales and cost-of-sales are the appreciation of assets and their write down, as well the management fees.
This explanation has been broken into key topics and copied to be linked to the tables. These are:
- 2.2 Summary of the Start-up
- 5.5.1 Sales Forecast
- 6.4 Employees
- 7.4 Projectioned Profits and Losses
- 7.5 Cash Flow Projected
- 7.6 Projected Balance sheet
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