BANTOG AGRI-MART

Cost of Project
Investment costs are defined as the sum of fixed capital and net working capital with
fixed capital constituting the resources required for constructing and equipping an investment
project and working capital corresponding to the resources needed to operate the project
totally.

FINANCIAL
ASSUMPTIONS

FINANCIAL ASSUMPTIONS
1. The financial assumption of this project study will cover a period of five-year
projection from 2017-2021.
2. The business will start operation on January 2017 and the financial statements will be
prepared every calendar year ending December 31.
3. Member fee would be 200 pesos for registration and will avail a P1,119,407 10 year
loan from Land Bank at 8.5% annual interest.
4. The proposed store will operate from Monday to Saturday from 8:00am-5pm.
5. Sales shall be based on forecasted sales in units.
6. Grocery items shall be sold on cash basis and the farm products shall be sold either on
account by members or cash by non-members.
7. After 3 years there will be an expansion of storage area which will cost additional
72,000 , purchase of new delivery truck costing 700,000 and additional employees.
Purchases
8.

Purchases shall be paid.

Price
9. Selling price of the products shall be as follows:

Inventory
10. Ending inventory on purchases shall be based on the industry inventory turnover, on
grocery items 15.6 and on farm products 12.3 and adjusted to 20.11 on grocery item
for 18.15 days holding the inventory and 40.11 on farm products for 9.05 days
holding the inventory because it will be an order basis. (
)

11. Minimized holding cost for farm products since it will be based on order basis. Only
few shall be retained.
Cash
12. Petty Cash Fund will be set aside at P10,000.00 annually using the Imprest Fund
system.
13. All cash on hand shall be deposited in the bank.

Depreciation
14. The store shall utilize straight line method of depreciation for its Property, Plant and
Equipment.

15. 15% of depreciation will be for administration and the rest for the store.
Tax
16. Exempted from tax.
Expenses
17. Utilities shall be allocated 30% to admin and 70% to store.
18. Normal rate on salaries will increase a total of 15 pesos per year and the overtime rate
is 125% based on the normal rate of salary.
19. Insurance shall be based on 1% of Fair value of the building and shall be renewable
for every year.
20. Repairs and Maintenance shall be estimated to be 1% of the book value of the
building and equipment for 2017 with an estimated increase of .5% annually. It will
be charged to administrative expense.
21. Corporate Social Responsibility shall be based on the 2% of the gross profit.
22. There would be a seminar for every 3 months so that the farmer will have more
knowledge about the proper way of farming.
Equity
23. 25% of the Net surplus shall be distributed to the share capital and the rest shall be
retained as undistributed net surplus for future development.
Note:

Insurance paid yearly

Salaries paid monthly, ending. No accrued salaries.

.Electricity paid monthly, beginning. Utilities Payable.

Advertising all paid. No prepaid account to maintain.

Interest expense paid yearly

FINANCIAL
STATEMENTS

FINANCIAL
ANALYSIS

* The length of time required for an investment to recover its initial outlay in terms of profits
or savings.
*Which means that bantog agri-mart can recover its initial investment within 3 years and 7
months.

*The rate at which an investment breaks even, Generally speaking, the higher a
project's internal rate of return, the more desirable it is to undertake the project.
* Therefore the project has a positive IRR which means that it is desirable.

*Net present value is the difference between the present value of cash inflows and the present
value of cash outflows that occur as a result of undertaking an investment project. It may be
positive, zero or negative.
* If present value of cash inflows is greater than the present value of the cash outflows, the
net present value is said to be positive and the investment proposal is considered to be
acceptable, therefore bantog agri-mart is acceptable.

*A means of testing the extent to which the results of an analysis of an INVESTMENT

project or company budget would change if one or more of the assumptions on which the
analysis is based were to change. It is the WHAT IF analysis, therefore Bantog Agri-mart is
a good investment because even if the assumptions changes it stills constitute a positive NPV
and a reasonable IRR.

*Bantog Agri-mart must sell on an average 24,025.75 units on year 2017 to meet their fixed
cost requirements.

* PROFITABILITY RATIO
Gross Profit Margin
Gross Profit Margins a key financial indicator used to assess the profitability of a company's
core activity, excluding fixed cost.
-The gross profit margin of the business is high so it means that it will be able to
cover expenses excluding fixed cost and still have a profit.

Operating Margin
Operating profit margin measures what proportion of a company's revenue is left over, after
deducting direct costs and overhead and before taxes and other indirect costs such as interest.
-The operating margin is good thereby indicating that the revenue generated from
operations exceeds the expenses therein.
Net Profit Margin
Net profit margin is a key financial indicator used to assess the profitability of a company, the
percentage of net profit relative to the revenue earned during a period.
-There is only a small percentage of net profit
Return on Assets
Return on Assets measures the net income produced by total assets during a period by
comparing net income to the average total assets. In other words, the return on assets ratio or
ROA measures how efficiently a company can manage its assets to produce profits during a
period.
-The ROA is good because the business have a good operation regarding its assets.
Return on Equity
Return on Equity- is a profitability ratio that measures the ability of a firm to generate profits
from its shareholders investments in the company.
-The ROE is good because the business can generate profits to investments.

* LIQUIDITY RATIO
Current Ratio
The current ratio is a liquidity and efficiency ratio that measures a firm's ability to pay off its
short-term liabilities with its current assets
-The current ratio is good because the business can pay off its short-term liabilities
with current assets
Quick Ratio
The quick ratio compares the total amount of cash + marketable securities + accounts
receivable to the amount of current liabilities.
-The quick ratio is stable then it fluctuates because of expansion of asset.

* ACTIVITY RATIO
Inventory Turnover
Inventory turnover is a measure of the number of times inventory is sold or used in a time
period such as a year
-The company has a great inventory turnover because it has the ability to sell or use in a time
period such as a year.
Average age of Inventory
Average age of inventory is the average number of days it takes for a firm to sell to
consumers a product it is currently holding as inventory
-The business has a good average age of inventory because the average number of
days it takes a firm to sell is stable.
Total Asset Turnover
Asset turnover ratio is the ratio of the value of a companys sales or revenues generated
relative to the value of its assets
-The company has a stable asset turnover ratio because the business can generate sales to the
value of its assets.

*SOLVENCY RATIO
Debt Ratio
The debt ratio is defined as the ratio of total long-term and short-term debt to total assets,
expressed as a decimal or percentage.
-

the debt ratio is decreasing and it just implicate that the business is less dependent on
leverage, such as the money borrowed or owed to others.
Times Interest Earned Ratio

Times interest earned (TIE) or interest coverage ratio is a measure of a company's ability to
honor its debt payments
-

the time interest earned ratio is increasing and it just implicate that the business has
sufficient earnings to pay off interest expense and hence its debt obligations.

NOTES TO
FINANCIAL
STATEMENTS

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