Chapter V

Financial Study
Financial study is the study of the profitability of a business. This is where the
initial investment is computed. In this chapter, the proponents will be able to compute
the total project cost of the proposed product. The projected financial statements will
also be seen in this chapter.
Objectives of the Study
The general objective of this chapter is to test the profitability of the project and
the sufficiency of the capital as well as to evaluate the financial performance of the
business. Its specific objectives are as follows:
1. To provide detailed listing of the cost to be incurred in the establishment and
operation of the business.
2. To determine the initial amount of capital needed and its possible requirement.
3. To create projection of operation needed and to analyse its performance through
financial assumptions and ratios.
4. To determine company’s earnings performance and liquidity of financial matter.
Initial Capital Requirement
The partners used the total project cost as the basis for the contribution to start
up the business. The capital that will be contributed by the partners will be used to buy
the materials needed to produce the product. Some office needs will also be shouldered
by the contribution.
The partners agreed that the initial capitalization is Php 370,000.00. The said
capital will be financed by the partners. The partners agreed to have an equal
contribution of Php 52, 857.14 to reach the target capital.
Sources of Financing
There are various ways to finance a business. It can be a borrowed fund or use
the personal savings. Borrowed funds are the loans acquired from the banks or other
lenders. Personal savings is the personal amount of money that are contributed by the
investors.
The partners agreed that their capital is Php 370,000.00. The funds will come
from the personal savings of the investors with the help of their families. The partners
agreed to have an equal contribution of Php 52, 857.14 to reach the target capital.
Total Project Cost
Total project cost is the amount of money needed to buy the resources that will
be needed to run the business. It is the estimation of the cost that will be needed to fund
the business.
 Assets are the resources owned by the company. Current assets are the
materials that are already considered to be converted to cash with a year. Fixed assets
are the assets that are expected to last for a long time while running the business, this
includes the furniture and fixtures of the company.
The initial investments of the partners will be cash basis. It is important to have
enough money to sustain the business. To achieve this, the proponents analyse the
project cost carefully to avoid cash shortage.
Table 5.1
Total Project Cost

SUBTOTAL TOTAL
FIXED ASSESTS
1,
Factor Furniture and Fixtures 699.05
3, 5,
Office Furnitures and Fixtures 873.00 572.05
OPERATION EXPENSE
212,
Direct Materials 003.00
128,
Indirect Materials 364.00
3,
Utilities 024.00

Office Supplies 238.00

Miscellaneous Expense 305.00

Advertising Expense 300.00

5,
Taxes and Licenses 314.00
349,
Freight Out -  548.00
355,
TOTAL PROJECT COSTS 120.05
14,
Cash Contingencies 879.95
370,
ADJUSTED TOTAL PROJECT COST 000.00

Table 5.1 shows the total project cost of the business for its first year. The cash
contingencies amounting to Php 14,879.95 will be used to fund the urgent and
emergency expenses of the company. With this, the total project cost amounts to Php
370,000.00.