CHAPTER V

FINANCIAL FEASIBILITY

The financial feasibility covers the capability of the business project which usually

involves the capital requirements of the business, where we can see in detail the estimated

amount of cash needed for the business to operate, equity and credit needs, the alternative equity

sources and capital availability, Income, and cost analysis, the assumptions or projected value of

the business in the succeeding years of operations and lastly the financial analysis of the business

which includes the financial health and profitability of the business.

Capital requirements ( Table 1)

No Particulars Amount
.

1 Equipment, Furniture and Fixtures, and Other Needed Facilities ₱164,350

2 Supplies ₱ 124,949.70

3 Basic compensation ₱ 101,250.00

4 Marketing cost ₱ 2,000.00

5 Permits, licenses and registration ₱ 4,550.00

6 Rent expense ₱ 15,000.00

 Total amount: ₱ 301,328.96

The estimated capital for the business to operate in the first month is ₱ 301,328.96

The capital will be financed by equity through the partners, Flores, Manto, Talatayod, Pajaron

and Nemeno

70% will be financed through equity personal savings

The following chart will present a breakdown of capital contributed by the partners.

(Table 2)

Capital Amount
Contribution

Flores ₱ 100,000.00

Manto ₱ 100,000.00

Talatayod ₱ 100,000.00

Pajaron ₱ 50,000.00

Nemeno ₱50,000.00

Total ₱ 400,000.00

Other capital needs (Schedule 4)

No Particulars Amount
 .

1 Electric, Water Utilities ₱ 10,000.00

2 Internet and telecommunications fee ₱ 1,500.00

3 Maintenance (appliances and equipment) ₱ 4,000.00

4 Misc. expense ₱5,000.00

Total : ₱ 20,500.00

Equity and Credit Needs

Sources of Capital/equity and their attainability

Capital/Equity Capital Profitability Status of Contingencies Order

Availability Financing and Fluctuations of
Priority

Personal Limited Maximizes Immediate Business and Low

Savings funds owner's profit availability personal finances
available are intertwined
 Friends and Depends on Maximizes Immediate Risk of damaging Medium
Family network size owner's profit availability personal
relationships if
unable to repay
loan

The capital needs will be met with the partner’s personal investment but the business is

open for additional investments towards close relatives and friends.

Furthermore Loans and source of credit can be used as a source to finance the start up of

the business. 60 percent will be financed through equity, personal savings and 40% will come

from loans and credit sources. 

The following details on the table are general information about its respective credit

source, some of the credit sources such as banks have different interest rates and fees.

Credit Availability Risks Interest Rates Fees and Other

Source Costs

Banks Widely Risk of high-interest Varies Origination fees, late

available rates and fees, strict depending on payment fees,
qualification credit score, prepayment
requirements. type of loan, penalties, and others.
and lender.
Credit Membership Limited availability, Typically Membership fees,
Unions required strict membership lower than loan application fees,
requirements. traditional prepayment
banks. penalties, and others.

Online Widely Risk of high interest Varies Origination fees, late

Lenders available, often rates and fees, depending on payment fees,
with fast potential for scams credit score, prepayment
approval times and fraud. type of loan, penalties, and others.
and lender.

Peer-to- Widely Potential for scams Varies Origination fees, late

Peer available and fraud, no depending on payment fees,
guarantee of funding. credit score, prepayment
type of loan, penalties, and others.
and lender.

Credit Widely Risk of high-interest Varies Annual fees, balance

Cards available, often rates and fees, depending on transfer fees, late
with instant potential for the card and the payment fees,
approval overspending, and user's credit interest charges, and
debt. score. others.

Friends Personal Risk of damaging Typically no No or minimal fees,

and network relationships, lack of interest rates. but potential for non-
Family legal protections, and financial costs such
formal repayment as strained
terms. relationships.
  

Income and cost analysis

Major assumptions throughout the years of business operations.

Financial assumptions

1.   The calendar year would be used in the following financial statements to maintain consistency.

2.    The year 2024 would be the start of business operations

3.    The estimated sales revenue of the business is ₱ 360,000 in a month or ₱ 12,000 a day

4.   Withdrawals are made equally annually

5.    Rent Expense is 15,000 annually 

6.    Start-up costs and pre-operating expenses are considered as period costs and should be expensed

as incurred.

7.      Total depreciation cost annually ₱20,204.625 of fixed assets.

8.      No supplies/inventory at the end of year

9.      No receivables at the end of year

10.  No accounts payable at the end of year

11.  Profit and loss sharing will be equal to the capital contribution
12.  Labor costs or salaries would depend on the government’s declaration regarding the basic

minimum wage, meaning salaries are not fixed throughout the years of business operations

13. No future partner additional investments

14. Loan payments are paid equally by each partner each year 

15. Loans have 14% annual interest rate

Projected Financial Statements

   Income statement( need i revise)

Particular Year 1 Year 2 Year 3

Revenues      

Net sales ₱ 360,000.00 ₱ ₱ 360,000.00

360,000.00

Cost of sales ₱ 124,949.70 ₱ ₱ 124,949.70

124,949.70

Gross profit ₱ 235,050.30 ₱ ₱ 287,959.72

260,177.85

       

Expenses      

Utilities ₱ 5,000.00 ₱ 5,400.00 ₱ 5,832.00

Internet and telecommunications ₱ 1,500.00 ₱ 1,620.00 ₱ 1,749.60

 Maintenance ₱ 4,000.00 ₱ 4,320.00 ₱ 4,665.60

Miscellaneous ₱ 9,500.00 ₱10,260.00 ₱ 11,097.60

Rent ₱ 15,000.00 ₱ 16,050.00 ₱ 17, 173.00

Permits and Licences ₱ 4,450.00 ₱ 4,450.00 ₱ 4,450.00

Depreciation expense ₱ 20,004.125 ₱ ₱ 20,004.125

20,004.125

Salaries expense ₱ 101,250 ₱ 101,250 ₱ 101,250

Total expenses 160,704.13 163,354.13 166,221.93

Income before taxes ₱ 74,346.175 ₱ 96,832.72 ₱121,737.79

       

Income tax ₱ 14,869.235 ₱ ₱ 24,347.558

19,364.746

       

Net Income ₱ 59,476.94 ₱ 77,458.98 ₱97,390.23

Statement of Partner’s equity

Year 1

Particular Flores Manto Talatayod

Initial Capital contribution ₱ 145,165 ₱122,700.00 ₱ 144,949.70

 Add: Additional Investment ₱0 ₱0 ₱0

Share in Net income ₱14,869.235 ₱11,895.388 ₱14,869.235

Total
₱160,034.235 ₱134,595.388 ₱159,818.935

Less: Withdrawal ₱0 ₱0 ₱0

Share in Net Loss ₱0 ₱0 ₱0

Total partner’s equity ₱ 454,448.558

Year 2

Particular Flores Manto Talatayod

Initial Capital contribution ₱160,034.235 ₱134,595.388 ₱159,818.935

Add: Additional Investment ₱0 ₱0 ₱0

Share in Net income ₱19,684.745 ₱15,747.796 ₱19,684.745

Total
₱179,718.980 ₱150,343.184 ₱179,503.680

Less: Withdrawal ₱0 ₱0 ₱0

Share in Net Loss ₱0 ₱0 ₱0

Total partner’s equity ₱ 509,565.844

 
 Year 3

Particular Flores Manto Talatayod

Initial Capital contribution ₱179,718.98 ₱150,343.184 ₱179,503.680

0

Add: Additional Investment ₱0 ₱0 ₱0

Share in Net income ₱25,016.519 ₱20,013.215 ₱25,016.519

    Total
₱204,735.49 ₱170,356.399 ₱204,735.499
9

Less: Withdrawal ₱0 ₱0 ₱0

Share in Net Loss ₱0 ₱0 ₱0

Total partner’s equity ₱579,827.397

Statement of Cash Flows

       

Cash flow statements Year 1 Year 2 Year 3

       

Cash on hand beginning ₱412,814.70    

Operating activities      

Cash from sales ₱ 360,000    

Utilities (₱ 5,000.00)    

Internet and telecommunications (₱ 1,500.00)    

Maintenance (₱ 4,000.00)    

Miscellaneous (₱ 9,500.00)    

Rent paid (₱ 15,000.00)    

Permits and Licences (₱ 4,450.00)    

Depreciation expense (₱    
20,004.125)

Salaries paid to employees (₱ 101,250)    

Paid to suppliers (₱    
124,949.70)

Income taxes paid (₱    

14,869.235)

Net cash from Operating activities ₱472,241.64    

       

Investing Activities