VI.

FINANCIAL PLAN

4.1 Project Cost

The total capital requirement of the business is presented in Table 5.1.

Table 5.1 Total Project Cost

Cost
Fixed Investment 5,000
Pre-operating Expenses 2,000
Working Capital 4,000

TOTAL PROJECT COST Php 10,000

5.2 Projected Income Statement

The projected income statement of the business for the first month of operation is shown
in Table 5.2 below.

Table 5.2 Projected Income Statement

Month 1
Total Sales
15,000
Less: Cost of Goods Sold 1,770
Gross Profit 10,000
Less: Administrative and Operating Expenses 7,822
NET PROFIT* Php 10,561

*The business assumed to earn the same net profit in the next months of operation.

5.3 Projected Cash Flow Statement

The cash flow statement of the business during the pre-operating period and first month
of operation is presented below.

Table 5.3 Projected Cash Flow Statement

Cash Inflow Pre-operating Month 1
Owner’s Equity 12,000 0
Cash Sales 0 15,000
Collection from Receivables 0 0
TOTAL CASH INFLOW 12,000 15,000
 Cash Outflows 2,000 0
Pre-operating
Fixed Expenses
Investments 5,000 0
Material/Merchandise/Supply Purchases 4,000 0
Direct Labor 0 0
Administrative & Operating Expenses 0 7,822
(minus amortization
TOTAL of pre-operating Exp.)
CASH OUTFLOW 11,000 7,822
NET CASH FLOW 1,000 9,020
Add: Beginning Cash Balance 700 950
ENDING CASH BALANCE* Php 1,700 Php 9,970

*The business assumed to have the same ending cash balance in the next months of operation.

5.3 Projected Balance Sheet

The projected balance sheet of the business for the pre-operating period and first month
of operation is displayed in Table 5.4.

Table 5.4 Projected Balance Sheet

Assets Pre-operating Month 1
Cash 1,000 5,000
Accounts Receivable 0 0
Raw Materials Inventory 500 1,000
Finished Goods Inventory 0 0
Merchandise Inventory 0 0
Supplies 500 500
Pre-operating Expenses 2,000 3,000
Equipment 1,000 1,000
TOTAL ASSETS 5,000 10,500
Liabilities
Accounts Payable 0 0
Loans 0 0
Total Liabilities 0 0
Owner’s Equity 12,000 12,000
Retained Earnings 0 15,000
Total Owner’s Equity 12,000 27,000
TOTAL LIABILITIES & OWNER’S EQUITY Php 12,000 Php 27,000

4.5 Financial Analysis

4.5.1 Break-even Point Sales

The break-even point sales are derived through the computation below:

BEP Sales = Monthly Sales x Monthly Operating Expenses

Monthly Sales – Monthly Cost of Goods Sold
 BEP Sales = 15,000 x 7,822
15,000 – 6,500

BEP Sales = Php 13,803.52

4.5.2 Return on Investment

Return on investment is determined using the formula below.

Return on Investment (ROI) = Net Income

Long-term Liabilities + Owner’s Equity

Return on Investment = 19,561 = 1.53%

12,000

4.5.3 Payback period

To determine the period when could the capital invested be recovered, payback is
computed using the formula below.

Payback Period = Total Project Cost

Annual Net Income

Payback Period = 10,000 = 0.13 year or 1.2** months

72,531