Chapter V Financial AspectFRAMEWORK This aspect quantifies the results of the marketing, technical, management, taxation and legal phases of the project study, and expressesin peso terms the possible outcome of operating the project. This chapter presents the overall financial picture in terms of operating cash requirements, profitability and cash flows.MAJOR ASSUMPTION In the formulation of financial projection, assumptions play a vital role because they serve as the foundation for estimating the futureexpenditures, expenses, and revenues of the project as accurately as possible. These assumptions that the proponent made are based on theworkable facts and research. 1. The business operations will start on January 2010 and will operate continuously. 2. The total capital contribution is fifteen million pesos (15,000,000) where in the capital partners will contribute twenty five percent (25%) equivalent to one million two hundred fifty thousand pesos (1,250,000), and limited partners will contribute fifteen percent (15%) equivalent to seven hundred fifty thousand (750,000). 3. The pre-operating expenses is estimated to be at P 25,520.00 4. Total fixed assets are estimated to be at P 5,769.65.00 5. Depreciation is computed using the straight – line method. The company assumes a salvage value estimated to be ten percent (10%)of the cost fixed assets. 6. The company shall maintain a policy of ten percent (10%) increase of selling price and number of units sold annually. 7. Sales discount is estimated at ten percent (10%) of sales and sales returns and allowances are estimated at one percent (1%) 8. Purchase of the first year are estimated at P 2,292,382.50 for year one with an annual increase of ten percent (10%) 9. Overhead shall consist of the following accounts with a ten percent (10%). a) Light – P244,800.00 b) Water –P 22,965.00
c) Telephone – P 11,289.00 d) Repairs and maintenance – P3,044.89.0010. Raw materials are estimated for one month available for use.11. Operating expenses are estimated as follows: a) Rent expense – P 40,000.00 b) Retainer’s – P 40,000.00 c) Advertising - P 30,000.0012. Monthly SSS, withholding tax, philhealth and EC are based on the 2009 contribution as provided by Social Security System (SSS), bureau of internal revenue (BIR), and Philhealth Insurance Corporation. See the said contribution tables on the appendix section.13. Monthly PAG-IBIG contribution is considered one – hundred pesos (P100)14. Salaries and wages are based on the prescribed wage order by the department of labor and employment (DOLE) with an ten percent (10%) increase annually.
Cash Flows from investing activitiesPurchase of EquipmentsOffice Equipment 42,500.00Coffee Shop Machineries and equip. 202,959.00Furniture and Fixtures 55,900.00Net Cash Provided by Investing Activities 301,359.00Cash Flows From Financing ActivitiesContributed Capital 5,000,000.00Drawing 400,000.00 400,000.00 400,000.00 400,000.00 400,000.00Net Cash Provided by Financing Activities 4,600,000.00 1,213,143.70 1,345,118.49 1,581,467.31 1,859,587.00Increase (Decrease in Cash ) 4,298,641.00 1,213,143.70 1,345,118.49 1,581,467.31 1,859,587.00Cash Beginning of Year -- 4,298,641.00 5,511,784.70 6,856,903.19 8.437.370.50Cash End of Year 4,298,641,00 5,511,784.70 6,856,903.19 8.437.370.50 10,296,958.00Cash on Hand 429,864.10 551,178.47 685,690.32 843,737.05 1,029,695.80Cash on Bank 3,868,776.90 4,960,606.23 6,171,212.82 7,593,633.45 9,267,262.20Interest on Bank Deposit 154,751.08 198,424.25 246,848.51 303,745.34 370,690.49
2008 2009 2010 2011 2012FINANCIAL STATEMENT ANALYSISNet Income 839,766.44 1,067,051.70 1,205,016.04 1,380,385.51 1,571,292.37Contributed Capital 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00(Earnings rate on resource provided by owners) 17% 21% 24% 28% 31%RATE ON RETURN SALESNet Income 839,766.44 1,067,051.70 1,205,016.04 1,380,385.51 1,571,292.37Sales 7,641,275.00 8,405,402.50 9,245,942.75 10,170,537.03 11,187,590.73(indicated Net Profitability of each peso Sales) 11% 13% 13% 14% 14%PAYBACK PERIODNet Investment 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00Annual Cash Return 4,298,641.00 5,511,784.19 6,856,903.19 8,437,370.50 10,296,958.00(Indicates the year investments made may had return 1.16 0.91 0.73 0.59 0.49to the company inflow of cash)