Chapter 5

Financial Analysis

Potato Project will require a 1,000,000 capital which is sufficient to finance the

start-up cost, pre-operating fund requirements (including machineries and all the

facilities) and all other expenses to be incurred. The total capital will be acquired

through contribution equally by four (4) partners.

This chapter presents the operations of the company in terms of financial

aspects. The financial statements include the Statement of Financial Position,

Statement of Financial Performance, Statement of Cash Flows, and Changes in

Partners Equity of the company in three (3) years of operations. This will be the basis

on whether the business will be feasible or not.

Supporting computations and schedules are also included in this chapter to

further prove the contents of each financial statement.

Financial Assumptions:

1. The Company will operate from Monday to Saturday, and sales are evenly

distributed during the year.

2. Sales are expected to increase by 3% in the first year and 4% on the following

year.

3. Inventories are maintained at a fixed amount throughout the year.

4. Machineries and equipments and all other properties have a useful life of five (5)

years, depreciated using straight line method.

5. Company will be subjected to 12% VAT on its purchases and sales.

6. Income tax of 30% shall be paid on net taxable amount.

7. VAT and Income Tax Payable represent the 4 th quarter tax that will be paid on

April 15 of the following year.

8. As demand of the product increases, Contribution Margin Rate decreases.