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7.0 Financial Plan
The following topics summarise the financial information of Stretch 'r Wings.
7.1 Important Assumptions
The following table summarises key financial assumptions.
General Assumptions
| General Assumptions |
| | 2000 | 2001 | 2002 | 2003 | 2004 |
| Plan Month | 1 | 2 | 3 | 4 | 5 |
| Current Interest Rate | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% |
| Tax Rate | 25.42% | 25.00% | 25.42% | 25.00% | 25.42% |
| Other | 0 | 0 | 0 | 0 | 0 |
7.2 Break-even Analysis
The following chart and table summarise the break-even analysis, including monthly units and sales break-even points.
Break-even Analysis
Break-even Analysis
| Break-even Analysis: |
| Monthly Units Break-even | 0.27 |
| Monthly Revenue Break-even | £7,041 |
| | |
| Assumptions: | |
| Average Per-Unit Revenue | £26,495.00 |
| Average Per-Unit Variable Cost | £5,800.00 |
| Estimated Monthly Fixed Cost | £5,500 |
7.3 Projected Profit and Loss
The detailed monthly pro forma income statement for the first year is included in the appendix. The annual estimates are included here.
Profit and Loss
| Pro Forma Profit and Loss |
| | 2000 | 2001 | 2002 | 2003 | 2004 |
| Sales | £29,690 | £230,740 | £357,915 | £464,095 | £634,320 |
| Direct Costs of Goods | £6,475 | £49,150 | £77,625 | £100,200 | £137,150 |
| Other | £0 | £0 | £0 | £0 | £0 |
| | ------------ | ------------ | ------------ | ------------ | ------------ |
| Cost of Goods Sold | £6,475 | £49,150 | £77,625 | £100,200 | £137,150 |
| Gross Margin | £23,215 | £181,590 | £280,290 | £363,895 | £497,170 |
| Gross Margin % | 78.19% | 78.70% | 78.31% | 78.41% | 78.38% |
| Expenses: | | | | | |
| Payroll | £20,000 | £117,640 | £126,000 | £152,320 | £158,500 |
| Sales and Marketing and Other Expenses | £15,300 | £28,400 | £30,000 | £37,500 | £40,000 |
| Depreciation | £0 | £1,200 | £1,200 | £1,200 | £1,200 |
| Leased Equipment | £0 | £0 | £0 | £0 | £0 |
| Utilities | £350 | £1,200 | £1,400 | £1,500 | £1,500 |
| Phone | £950 | £2,500 | £3,000 | £3,000 | £3,000 |
| Rent | £2,625 | £6,000 | £6,500 | £7,000 | £7,500 |
| Payroll Taxes (National Insurance) | £3,000 | £17,646 | £18,900 | £22,848 | £23,775 |
| Other | £0 | £0 | £0 | £0 | £0 |
| | ------------ | ------------ | ------------ | ------------ | ------------ |
| Total Operating Expenses | £42,225 | £174,586 | £187,000 | £225,368 | £235,475 |
| Profit Before Interest and Taxes | (£19,010) | £7,004 | £93,290 | £138,527 | £261,695 |
| Interest Expense | £1,946 | £2,354 | £2,579 | £1,934 | £1,676 |
| Taxes Incurred | £0 | £1,162 | £23,056 | £34,148 | £66,088 |
| Net Profit | (£20,956) | £3,487 | £67,655 | £102,445 | £193,931 |
| Net Profit/Sales | -70.58% | 1.51% | 18.90% | 22.07% | 30.57% |
Profit Yearly
7.4 Projected Cash Flow
Cash flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month and the other representing the monthly balance. The annual cash flow figures are included here. Detailed monthly numbers are included in the appendix. Payments on the three-year £20,000 loan will start in September, 2000. Further, to increase the cash balance in FY 2001, a one-year, £20,000 loan will be secured from the bank.
Cash
Cash Flow
| Pro Forma Cash Flow |
| | 2000 | 2001 | 2002 | 2003 | 2004 |
| | | | | | |
| Cash Received | | | | | |
| Cash from Operations: | | | | | |
| Cash Sales | £29,690 | £230,740 | £357,915 | £464,095 | £634,320 |
| Cash from Receivables | £0 | £0 | £0 | £0 | £0 |
| Subtotal Cash from Operations | £29,690 | £230,740 | £357,915 | £464,095 | £634,320 |
| | | | | | |
| Additional Cash Received | | | | | |
| VAT, VAT, HST/GST Received | £0 | £0 | £0 | £0 | £0 |
| New Current Borrowing | £0 | £20,000 | £0 | £0 | £0 |
| New Other Liabilities (interest-free) | £0 | £0 | £0 | £0 | £0 |
| New Fixed liabilities | £0 | £0 | £0 | £0 | £0 |
| Sales of Other Current Assets | £0 | £0 | £0 | £0 | £0 |
| Sales of Fixed assets | £0 | £0 | £0 | £0 | £0 |
| New Investment Received | £0 | £0 | £0 | £0 | £0 |
| Subtotal Cash Received | £29,690 | £250,740 | £357,915 | £464,095 | £634,320 |
| | | | | | |
| Expenditures | 2000 | 2001 | 2002 | 2003 | 2004 |
| Expenditures from Operations: | | | | | |
| Cash Spending | £2,412 | £13,344 | £17,226 | £20,786 | £29,278 |
| Payment of Accounts Payable | £41,125 | £239,138 | £294,541 | £356,949 | £434,241 |
| Subtotal Spent on Operations | £43,537 | £252,482 | £311,767 | £377,735 | £463,519 |
| | | | | | |
| Additional Cash Spent | | | | | |
| VAT, VAT, HST/GST Paid Out | £0 | £0 | £0 | £0 | £0 |
| Principal Repayment of Current Borrowing | £0 | £0 | £0 | £0 | £0 |
| Other Liabilities Principal Repayment | £0 | £0 | £21,000 | £0 | £0 |
| Fixed liabilities Principal Repayment | £2,584 | £7,750 | £7,750 | £5,160 | £0 |
| Purchase Other Current Assets | £0 | £0 | £0 | £0 | £0 |
| Purchase Fixed assets | £0 | £0 | £0 | £0 | £0 |
| Dividends | £0 | £0 | £0 | £0 | £0 |
| Subtotal Cash Spent | £46,121 | £260,232 | £340,517 | £382,895 | £463,519 |
| | | | | | |
| Net Cash Flow | (£16,431) | (£9,492) | £17,398 | £81,200 | £170,801 |
| Cash Balance | £33,569 | £24,077 | £41,476 | £122,676 | £293,477 |
7.5 Projected Balance Sheet
The projected balance sheet is quite solid. We do not project any trouble meeting our debt obligations, as long as we can achieve our specified objectives.
Balance Sheet
| Pro Forma Balance Sheet |
| | | | | | |
| Assets | | | | | |
| Current Assets | 2000 | 2001 | 2002 | 2003 | 2004 |
| Cash | £33,569 | £24,077 | £41,476 | £122,676 | £293,477 |
| Stock | £6,475 | £49,150 | £77,625 | £100,200 | £137,150 |
| Other Current Assets | £10,000 | £10,000 | £10,000 | £10,000 | £10,000 |
| Total Current Assets | £50,044 | £83,227 | £129,101 | £232,876 | £440,627 |
| Fixed assets | | | | | |
| Fixed assets | £0 | £0 | £0 | £0 | £0 |
| Accumulated Depreciation | £0 | £1,200 | £2,400 | £3,600 | £4,800 |
| Total Fixed assets | £0 | (£1,200) | (£2,400) | (£3,600) | (£4,800) |
| Total Assets | £50,044 | £82,027 | £126,701 | £229,276 | £435,827 |
| | | | | | |
| Liabilities and Capital | | | | | |
| Current Liabilities | 2000 | 2001 | 2002 | 2003 | 2004 |
| Accounts Payable | £3,585 | £19,830 | £25,598 | £30,888 | £43,509 |
| Current Borrowing | £0 | £20,000 | £20,000 | £20,000 | £20,000 |
| Other Current Liabilities | £0 | £0 | (£21,000) | (£21,000) | (£21,000) |
| Subtotal Current Liabilities | £3,585 | £39,830 | £24,598 | £29,888 | £42,509 |
| | | | | | |
| Fixed liabilities | £17,416 | £9,666 | £1,916 | (£3,244) | (£3,244) |
| Total Liabilities | £21,001 | £49,496 | £26,514 | £26,644 | £39,265 |
| | | | | | |
| Paid-in Capital | £62,000 | £62,000 | £62,000 | £62,000 | £62,000 |
| Retained Earnings | (£12,000) | (£32,956) | (£29,469) | £38,186 | £140,632 |
| Earnings | (£20,956) | £3,487 | £67,655 | £102,445 | £193,931 |
| Total Capital | £29,044 | £32,531 | £100,186 | £202,632 | £396,563 |
| Total Liabilities and Capital | £50,044 | £82,027 | £126,701 | £229,276 | £435,827 |
| Net Worth | £29,044 | £32,531 | £100,186 | £202,632 | £396,563 |
7.6 Business Ratios
The following table outlines important ratios from the laboratory apparatus and furniture industry, as determined by the Standard Industrial Classification (SIC) Index code 3821, Laboratory Equipment and Furniture.
Ratios
| Ratio Analysis |
| | 2000 | 2001 | 2002 | 2003 | 2004 | Industry Profile |
| Sales Growth | 0.00% | 677.16% | 55.12% | 29.67% | 36.68% | 5.10% |
| | | | | | | |
| Percent of Total Assets | | | | | | |
| Accounts Receivable | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 30.00% |
| Stock | 12.94% | 59.92% | 61.27% | 43.70% | 31.47% | 28.60% |
| Other Current Assets | 19.98% | 12.19% | 7.89% | 4.36% | 2.29% | 25.10% |
| Total Current Assets | 100.00% | 101.46% | 101.89% | 101.57% | 101.10% | 83.70% |
| Fixed assets | 0.00% | -1.46% | -1.89% | -1.57% | -1.10% | 16.30% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
| | | | | | | |
| Current Liabilities | 7.16% | 48.56% | 19.41% | 13.04% | 9.75% | 37.80% |
| Fixed liabilities | 34.80% | 11.78% | 1.51% | -1.41% | -0.74% | 14.30% |
| Total Liabilities | 41.96% | 60.34% | 20.93% | 11.62% | 9.01% | 52.10% |
| Net Worth | 58.04% | 39.66% | 79.07% | 88.38% | 90.99% | 47.90% |
| | | | | | | |
| Percent of Sales | | | | | | |
| Sales | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 78.19% | 78.70% | 78.31% | 78.41% | 78.38% | 38.90% |
| Selling, General & Administrative Expenses | 148.77% | 77.19% | 59.30% | 56.34% | 47.63% | 25.40% |
| Advertising Expenses | 8.42% | 6.50% | 4.19% | 4.31% | 3.15% | 1.40% |
| Profit Before Interest and Taxes | -64.03% | 3.04% | 26.06% | 29.85% | 41.26% | 2.00% |
| | | | | | | |
| Main Ratios | | | | | | |
| Current | 13.96 | 2.09 | 5.25 | 7.79 | 10.37 | 2.36 |
| Quick | 12.15 | 0.86 | 2.09 | 4.44 | 7.14 | 1.33 |
| Total Debt to Total Assets | 41.96% | 60.34% | 20.93% | 11.62% | 9.01% | 52.10% |
| Pre-tax Return on Net Worth | -72.15% | 14.29% | 90.54% | 67.41% | 65.57% | 3.80% |
| Pre-tax Return on Assets | -41.88% | 5.67% | 71.59% | 59.58% | 59.66% | 8.00% |
| | | | | | | |
| Additional Ratios | 2000 | 2001 | 2002 | 2003 | 2004 | |
| Net Profit Margin | -70.58% | 1.51% | 18.90% | 22.07% | 30.57% | n.a |
| Return on Equity | -72.15% | 10.72% | 67.53% | 50.56% | 48.90% | n.a |
| | | | | | | |
| Activity Ratios | | | | | | |
| Accounts Receivable Turnover | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | n.a |
| Collection Days | 0 | 0 | 0 | 0 | 0 | n.a |
| Stock Turnover | 0.67 | 1.77 | 1.22 | 1.13 | 1.16 | n.a |
| Accounts Payable Turnover | 12.47 | 12.88 | 11.73 | 11.73 | 10.27 | n.a |
| Payment Days | 13 | 17 | 28 | 28 | 30 | n.a |
| Total Asset Turnover | 0.59 | 2.81 | 2.82 | 2.02 | 1.46 | n.a |
| | | | | | | |
| Debt Ratios | | | | | | |
