They show how profitable your business will be in the short and long term, and should include the following:

  • The income statement details the business's cash-generating ability. It projects such items as revenue, expenses, capital (in the form of depreciation) and cost of goods.
  • Cash flow statement details the amount of money coming into and going out of the business-monthly for the first year and quarterly for each year thereafter. The result is a profit or loss at the end of the period represented by each column.
  • The Balance sheet paints a picture of the business's financial strength in terms of assets, liabilities and equity over a set period. You should generate a balance sheet for each year profiled in the development of your business.

Excerpted from Start Your Own Business: The Only Start-Up Guide You'll Ever Need