Question

Write short notes on each of the following:

a. What is your understanding of the executive summary? Kindly state why it is one of, if not, the most important sections of a good business plan

b. Briefly describe your understanding and the purpose of (i) Income statement, (ii) Balance sheet, and (iii) Statement of cash flows.

c. With the aid of examples, explain the difference between internal and external growth strategies?

Answer 1

a) Executive summary in lay man's lanuage is a overview or a gist  of the document . It is considered one of the most important sections of business plan because it summarizes the important points of a business plan which is essential for the readers to know what lies in the coentext of the business plan.  It should be lucid and concise. It is the way to the business plan. It is seen that if the exceutive summary fails to capture the attention of the targetted reader , then maybe the whole plan would not be apprached at all.

So it is necessary to include factors like the history of the company , its achievements, financial overview , future takes and most importantly the summary of the business plan. All of this would be required for a good executive summary.  

b)(i) Income statement: It is also known as the profit and loss account which summarises the revenues and expenditure during a financial period. It is essential for making balance sheets . Its basic purpose is to reflect the results of the operations done by the organisation during a particular time period.

(ii) Balance sheet: Balance sheet is the statement shows the assets and liabilities in a tabular form at the time of clsoing of books in a particular financial year. The same is the purpose of balance sheet : to show the obligations and resources during a financial year at the closing iof books .Balance sheets are usually made for every type of business organisation ranging from sole proprietorship to huge business houses just differing on the complexity of the balance sheet.

(iii) Statement of cash flows: Statement of cash flow shows the inflows and outflows of cash and cash equivalents in a company during a financial year under activities like investing , operating, and financing activities of a company. Its basic purpose is to let the users know the inflow and outflow of cash and its equiovalents in the organisation from abovelisted activities and how to use it in the best way .

c) Internal growth strategies are the ones which are concerned with diversification , expansion and modernisation within the organisation itself whereas external growth strategy takes place when one or more firms combine to increase the profits , sale and operations of the organisation. It could be through merges (hostile , forced or friendly )., acquisitions, amalgmations, and takeovers

The following is explained with example:

Suppose bookstore ABC decides to expand its operations by including another section of children's section after an year of starting its operations.

Or it decides to advertise its bookstore featuring popular novels at train stations and bus stands.

Or it could declare discounts on certain books which are costly otherwise and offered at discounts for short period.

These are known as internal strategies of growth.

The banks in various countries merge (either forcefully or friendly ) . Eg: One of the biggest nationalised bank of india merged with the smaller banks. This was done to reduce the infrastructural cost , the NPAs and increase the advances, poriftability of the banks overall. This is known as the external strategies of growth.

(You can comment for doubts )