5. financial feasibility

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5. financial feasibility

  1. 1.  ALL PROJECTS ARE CONSIDERED VIABLEONLY WHEN THEY ARE EXPECTED TO:◦ BE PROFITABLE TO MEET SHORT- TERMOBLIGATIONS◦ BE LIQUID & TO REMAIN LIQUID DURINGADVERSITIES◦ GROW IN THEIR ABILITY FINANCE THEIROPERATIONS MOSTLY FROM NET-WORTHSOURCES RATHER THAN CREDIT APPLICATIONS◦ BE ABLE TO SERVICE THEIR FINANCING CHARGES.
  2. 2.  MAJOR ASSUMPTIONS TOTAL PROJECT COSTS INITIAL WORKING CAPITAL REQUIREMENTS ALTERNATIVE SOURCE OF FINANCINGCONSIDERED, IF ANY SOURCES OF FINANCING THE PROJECT BEGINNING & PRO-FORMA FINANCIALSTATEMENTS FINANCIAL ANALYSES
  3. 3.  IN THE FORMULATION OF FINANCIALPROJECTIONS, ASSUMPTIONS PLAY A MAJORROLE BECAUSE THEY SERVE AS THEFOUNDATION FOR ESTIMATING THE FUTUREEXPENDITURES, EXPENSES, & REVENUES OFTHE PROJECT AS ACCURATE AS POSSIBLE. THESE ASSUMPTIONS, THEREFORE, MUST BEBASED ON WELL-CONSIDERED, REALISTIC &WORKABLE FACTS.
  4. 4.  1. EXISTING BUSINESS PRACTICES IN THE INDUSTRYWHERE THE PROJECT BELONGS MAY PROVIDE SOMEVALUABLE INFORMATION & INSIGHTS ON:◦ CREDIT TERM◦ CREDIT EXTENSION◦ BAD-DEBT ALLOCATIONS◦ BAD-DEBT WRITE-OFF◦ QUALITY-CONTROL COSTS◦ DIVIDENT POLICIES◦ SALES RETURNS, ALLOWANCES, & DISCOUNTS◦ LABOR & MANAGEMENT COMPENSATION◦ OVERHEAD ACCOUNTS◦ INVENTORY COSTING◦ OPERATING ACCOUNTS◦ FIXED- ASSET REQUIREMENTS◦ METHOD OF DEPRECIATION & AMORTIZATION◦ INTANGIBLE ASSET PRE-REQUISITE
  5. 5.  2. PREVIOUSLY MADE FEASIBILITY STUDIES DIRECTLY RELATEDTO THE PROJECT MAY CONTRIBUTE ADDITIONAL FACTORS TOBE CONSIDERED, WHICH EITHER CONFIRM OR CONTRADICTFINDINGS IN INDUSTRY STANDARDS, SPECIFICALLY THOSEITEMS INVOLVED IN THE COMPUTATIONS OF:◦ SELLING PRICE◦ SALES FORECASTS◦ UNFORSEEN COSTS◦ PRODUCTION VOLUME◦ PRODUCT MIX
  6. 6.  GOVERNMENTAL REGULATIONS & INCENTIVES DIRECTLY ORINDIRECTLY AFFECT THE PROJECT, SUCH AS:◦ IMPORT POLICIES◦ EXPORT POLICIES◦ TAX RATES◦ TAX EXEMPTIONS◦ PRICE CEILINGS◦ RELEVANT PRESIDENTIAL DECREES OR LOI
  7. 7.  OTHER PERTINENT DATA WHICH CAN JUSTIFYTHE ASSUMPTIONS OF THE STUDY, SUCH AS◦ INDUSTRY POLICIES◦ PRE-FEASIBILITY STUDIES◦ SYMPOSIUM & CONFERENCES, &◦ MATERIAL OUTPUTS OF INDUSTRY ASSOCIATIONS.
  8. 8.  ESTIMATES OF THE PROJECT’S INITIALCOST/ASSET REQUIREMENT WHICH MUST BEBASED ON THE MATERIALS, SUPPLIES,EQUIPMENT, PHYSICAL PLANT, & MANPOWERNEEDS OF THE PROJECT SPECIFIED IN THETECHNICAL PORTION.
  9. 9.  LAND & LAND IMPROVEMENTS◦ COST OF LAND, NOTARY FEES, REGISTRATION DUTIES, &OTHER RELATED COSTS BUILDINGS, INCLUDING ELECTRIC & WATER UTILITIES,FURNITURE & FIXTURES◦ BUILDING COST, WELLS, WATER PIPES, ELECTRICALCONNECTIONS, GAS SUPPLY, TELEPHONE SYSTEM,RESERVOIR & TANKS, WASTE WATER DISPOSAL, FENCING,ROADS & PATHS, EMPLOYEES HOUSING, & FIRE PROTECTION EQUIPMENT, PLUS INSTALLATION COSTS PURCHASE & INSTALLATION OF MACHINERY◦ PURCHASE TAXES, FREIGHT & INSURANCE EXPENSES,CUSTOMS DUTIES TRIAL-RUN ASSOCIATED WITH ELECTRIC UTILITIES,EQUIPMENT & MACHINERY◦ ELECTRICITY & TELEPHONE LINES, ELECTRICAL EQUIPMENT,INTERNAL TRANSPORT EQUIPMENT, VEHICLES, OFFICEEQUIPMENT & SUPPLIES, FURNITURE & FIXTURES,MAINTENANCE & CLEANING EQUIPMENT, & SPARE PARTS
  10. 10.  INVENTORY INVESTMENTS◦ PURCHASES OF MATERIALS & SUPPLIES◦ FREIGHT EXPENSES INVENTORY-RELATED COSTS◦ INDIRECT & DIRECT LABOR W/ CORRESPONDING FRINGE BENEFITS◦ HEAT, LIGHT, & POWER◦ MAINTENANCE◦ WAREHOUSING EXPENSES RELATED TO RAW MATERIALS◦ MATERIALS IN PROCESS◦ FINISHED GOODS CASH CREDITS◦ PRE-PAID EXPENSES (COST OF INITIAL INVESTIGATIONS, PRE-FEASIBILITY STUDIES,RESEARCH & TECHNICAL STUDIES, ECONOMIC & MARKETING STUDIES,FINANCIAL & PROFITABILITY STUDIES, DESIGN STUDIES, &CONSULTING- ENGINEERING FEES).◦ INTANGIBLE ASSETS (PATENTS, LICENSES, GOODWILL, REPRODUCTION RIGHTS)◦ OPERATING SALARIES◦ WAGES & FRINGE BENEFITS◦ ENGINEERING COSTS◦ OPERATING TAXES◦ OFFICE SUPPLIES◦ COMMUNICATION FACILITIES◦ OFFICE UTILITIES◦ BILLING COSTS◦ TRANSPORTATION COSTS◦ EXPENSES FOR ADVERTISING◦ BORROWING COSTS◦ PROVISIONS FOR UNFORSEEN COSTS
  11. 11.  STEPS IN DECIDING ON THE FINANCINGSCHEME TO SUPPORT THE PROJECT:◦ LIST THE ALTERNATIVE SOURCES OF FINANCING◦ DETERMINE SOURCES SELECTED OR PROPOSED AS AFUNCTION OF MAXIMUM PROFITABILITY◦ FINALIZE THE AMOUNT & TERMS FOR EACH SOURCESELECTED◦ STATE THE STATUS OF FINANCING FROM EACHSOURCE◦ SPECIFY THE FINANCING OF CONTINGENCIES &FLUCTUATIONS IN WORKING CAPITAL◦ PINPOINT ALTERNATIVE SOURCES OF FINANCING INORDER OF PRIORITY
  12. 12.  PRESENT IN AN ORDERLY &UNDERSTANDABLE FORM THE CASH BUDGET,THE OPERATING PERFORMANCE, & THEFINANCIAL CONDITION OF A BUSINESSENTERPRISE IT DEPICT THE PROGRESS OF A FIRM INFINANCIAL TERMS
  13. 13.  1. THE INCOME STATEMENT- IS THECOMPUTATION OF THE PROJECT’S TOTALREVENUES & TOTAL COST FOR ONE PERIODOR FISCAL YEAR,THEREBY ARRIVING AT THECONCERN’S NET INCOME OR DEFICIT WITHINTHE PERIOD, TOGETHER WITH ITSPERFORMANCE IN TERMS OF PROFITABILITY &COST CONTROL
  14. 14.  2. THE CASH-FLOW STATEMENT or THE CASHBUDGET- IS A SYSTEMATIC PRESENTATION OFCASH RECEIPTS & DISBURSEMENTS FOR AGIVEN OPERATING PERIOD OR FISCAL YEAR,TAKING FOR GRANTED THE “ACCRUALCONCEPT” IN ACCOUNTING.
  15. 15.  3. THE BALANCE SHEET- SHOWS THE ASSETSDERIVED BY THE PROJECT FROM CORRESPONDINGLIABILITIES & EQUITIES (NET WORTH). IT IS ANOVERALL PICTURE OF A FIRM’S FINANCIALCONDITION AS OF A CETAIN TIME.
  16. 16.  THIS PORTION GAUGES THE PROJECT’SPROFITABILITY, LIQUIDITY, CASH SOLVENCY &GROWTH OVER TIME.
  17. 17.  THESE MEASURES ARE USED TO DETERMINE A FIRM’S ABILITY TO MEETSHORT-TERM OBLIGATIONS, & TO REMAIN SOLVENT IN THE EVENT OFADVERSITIES.◦ 1. CURRENT RATIO = CURRENT ASSETSCURRENT LIABILITIES◦ 2. QUICK or ACID-TEST RATIO = CURRENT ASSETS- INVENTORIESCURRENT LIABILITIES◦ 3. LIQUIDITY OF INVENTORIES = COST OF SALESAVERAGE INVENTORY◦ 4. DEFENSIVE POSITION = CASH + MARKETABLE SECURITIES + RECEIVABLESPROJECTED OPERATING EXPENDITURE/NUMBER OF DAYS
  18. 18.  THESE TESTS ARE EMPLOYED TO PRESENT THE PROJECT’S ABILITYTO MEET LONG-TERM OBLIGATIONS.◦ 1. DEBT-TO-NETWORTH RATIO = TOTAL LIABILITIESTOTAL EQUITIES◦ 2. TOTAL CAPITALIZATION RATIO = LONG-TERM LIABILITIESLONG-TERM LIABILITIES & EQUITIES
  19. 19.  THESE SHOWS THE OPERATIONAL PERFORMANCE & EFFICIENCY OFTHE PROJECT.◦ 1. NET PROFIT MARGIN = NET INCOME AFTER TAXSALES◦ 2. OPERATING PROFIT MARGIN = PROFIT BEFORE INTEREST & TAXESSALES◦ 3. GROSS PROFIT MARGIN = GROSS PROFITSALES◦ 4. RETURN ON FINANCIER’S INVESTMENT = NET INCOME + INTERESTSTOCK EQUITY & LONG-TERM LIABILITY◦ 5. RETURN ON OWNER’S INVESTMENT = NET INCOMESTOCK EQUITY◦ 6. RETURN ON COMMON STOCK EQUITY = NET INCOME – PREFERRED STOCK DIVIDENDSNET-WORTH – PAR VALUE OF PREFERRED STOCK◦ 7. RETURN ON NET OPERATING PROFIT = PROFIT BEFORE INTEREST & TAXESTOTAL TANGIBLE ASSETS◦ 8. ASSET TURNOVER = SALESTOTAL TANGIBLE ASSETS◦ 9. RETURN ON ASSETS, OR EARNING POWER = NET INCOMETOTAL TANGIBLE ASSETS
  20. 20.  TEST OF TOTAL DEBT COVERAGE = PROFIT BEFORE INTEREST & TAXES(INTEREST + PRINCIPAL PAYMENT)(1/1 – INCOME TAX RATE)
  21. 21.  THIS TECHNIQUE IS EMPLOYED TO DETERMINE THEMAJOR USES & SOURCES OF FUNDS WITHIN ONE YEARIN A PROJECT’S LIFE.◦ 1. CASH-FLOW ANALYSIS a. SOURCES OF FUNDS: NET DECREASE IN ANY ASSET OTHER THAN CASH NET INCREASE IN ANY LIABILITY PROCEEDS FROM THE SALE OF STOCKS FUNDS PROVIDED BY OPERATIONS b. USES OF FUNDS: NET INCREASE IN ANY ASSET OTHER THAN CASH & FIXED ASSETS GROSS INCREASE IN FIXED ASSETS NET DECREASE IN ANY LIABILITY A RETIREMENT OF STOCK CASH DIVIDENDS
  22. 22. ◦ 2. WORKING CAPITAL-FLOW ANALYSIS a. SOURCES OF FUNDS: NET DECREASE IN ANY ASSET OTHER THAN CURRENT ASSETS NET INCREASE IN LONG-TERM LIABILITIES PROCEEDS FROM THE SALE OF STOCKS FUNDS PROVIDED BY OPERATIONS b. USES OF FUNDS: NET INCREASE IN OTHER ASSETS GROSS INCREASE IN FIXED ASSETS NET DECREASE IN LONG-TERM LIABILITIES RETIREMENT OF STOCK CASH DIVIDENDS
  23. 23.  THESE FUNCTIONS INDICATE HOW THE PROJECT EMPLOYS ASSETS FORWHICH IT PAYS A FIXED COST. BEFORE THESE TESTS ARE APPLIED, ACLARIFICATION SHOULD BE MADE ON WHAT “VARIABLE” & “FIXED” COSTSARE.◦ 1. BREAK-EVEN VOLUME ANALYSISBEV = FIXED COSTSSELLING PRICE – VARIABLE COST/UNIT◦ 2. BREAK-EVEN CASH ANALYSISBEC = CASH FIXED COSTSSELLING PRICE – CASH VARIABLE COST/UNIT◦ 3. BREAK-EVEN SELLING PRICE ANALYSISBESP = VARIABLE COSTS + FIXED COSTSUNIT VOLUME= TOTAL COST X SELLING PRICESALES◦ 4. BREAK-EVEN SALES ANALYSISBES = BESP X UNIT VOLUME= FIXED COST1 – (VARIABLE COST/NET SALES)
  24. 24.  THESE TECHNIQUES PRESENT HOW A PROJECT EMPLOYSFUNDS WHICH PAY A FIXED RETURN.◦ EARNINGS PER SHARE = NET INCOMESHARES◦ DIVIDENDS PER SHARE = NET INCOME – PREFERRED STOCK DIVIDENDS – RETAINED EARNINGSCOMMON SHARE
  25. 25.  THESE FINANCIAL TOOLS EVALUATE THEJUSTIFICATION FOR INVESTING IN THEPROJECT.◦ AVERAGE RATE OF RETURN = AVERAGE NET INCOMEAVERAGE NET INVESTMENT◦ PAYBACK PERIOD IN YEARS = INITIAL-YEAR CASH OUTFLOWSUCCEEDING ANNUAL NET CASH FLOW◦ CAPITAL RECOVERY OR CASH PAY-OFF PERIOD IN YEARS = STOCKSANNUAL CASH DIVIDENDS
  26. 26. Expected SalesLess: Raw materialsLabor costUtilitiesMarketing expensesDepreciation costsOthersEquals: Net profitsROI = Net profit / Total expenses X 100%.
  27. 27. PARTICULAR Y1 Y2 Y3 Y4 Y5Sales in unitsProduct X @ P68.0025, 000.00 43, 000.00 51, 800.00 54, 000.00 57, 100.00Sales 1, 700, 000.00 2, 924, 000.00 3, 522, 400.00 3, 672, 000.00 3, 882, 800.00LESS: Cost of SalesDirect materials & laborManufacturing overhead776, 300.0073, 200.001, 237, 300.00131, 800.001, 534, 700.00143, 800.001, 559, 000.00157, 000.001, 636, 800.00171, 400.00Total 849, 500.00 1, 369, 100.00 1, 678, 500.00 1, 716, 000.00 1, 808, 200.00Raw materials inventory, beginning 0.00 54, 500.00 54, 500.00 104, 500.00 104, 500.00Raw materials inventory, ending (54, 500.00) (54, 500.00) (104, 500.00) (104, 500.00) (194, 500.00)Cost of Sales 795, 000.00 1, 369, 100.00 1, 628, 500.00 1, 716, 000.00 1, 718, 200.00Gross Profit on Sales 905, 000.00 1, 554, 900.00 1, 893, 900.00 1, 956, 000.00 2, 164, 600.00LESS: Operating expensesSalaries and Wages 107, 800.00 221, 700.00 266, 200.00 319, 400.00 383, 200.00Employee’s benefits 21, 500.00 31, 000.00 37, 000.00 44, 700.00 53, 700.00Representation 6, 000.00 6, 000.00 6, 000.00 6, 000.00 6, 000.00Retainer’s fee 6, 300.00 10, 800.00 10,800.00 11, 800.00 13, 000.00Taxes and licenses 9, 200.00 9, 200.00 9, 200.00 10, 100.00 11, 100.00Rental 2, 500.00 6, 000.00 6, 000.00 6, 100.00 6, 500.00Office supplies 1, 500.00 2, 600.00 2, 900.00 3, 200.00 3, 500.00Light and power 1, 100.00 1, 900.00 2, 100.00 2, 400.00 2, 600.00Miscellaneous 7, 800.00 14, 500.00 17, 000.00 20, 200.00 24, 000.00Allowance for depreciation 1, 500.00 2, 500.00 2, 500.00 2, 500.00 2, 500.00Provisions for bad debts 15, 000.00 10, 000.00 5, 000.00 2, 000.00 2, 100.00Amortization of operating expenses 2, 000.00 2, 000.00 2, 000.00 2, 000.00 2, 000.00Total operating expenses 182, 200.00 318, 200.00 366, 700.00 430, 400.00 509, 600.00Income operating expenses 722, 800.00 1, 236, 700.00 1, 527, 200.00 1, 525, 600.00 1, 655, 000.00LESS: Financial charges 18, 000.00 .00 .00 .00 .00Income before income tax 704, 800.00 1, 236, 700.00 1, 527, 200.00 1, 525, 600.00 1, 655, 000.00Income tax 246, 600.00 432, 800.00 534, 500.00 533, 900.00 547, 700.00SAMPLE PROJECTED INCOME STATEMENT
  28. 28. Projected Income StatementFor the years ended December 31,2011-20152011 2012 2013 2014 2015Net Sales (Schedule 1) 192,469,820.22 224,547,396.48 261,151,729.98 302,873,254.90 350,380,415.90Less: Cost of Goods Sold (Schedule 2) 68,980,408.74 76,640,389.80 84,354,256.81 92,497,006.62 100,847,746.28Gross Profit 123,489,411.48 147,907,006.68 176,797,473.17 210,376,248.28 249,532,669.62Less: Administrative ExpensesOrganizational Cost 9,551,729.00Amortization of Software 30,000.00 30,000.00 30,000.00 30,000.00 30,000.00Office Supplies Expense (Schedule 4) 130,968.00 154,542.24 162,125.29 167,431.06 172,520.30Insurance Expense (Schedule 5) 215,223.53 221,680.24 228,330.66 235,180.57 242,236.00Depreciation Expense (Schedule 6) 1,712,027.33 1,712,027.33 1,712,027.33 1,712,027.33 1,712,027.33Salaries Expense (Schedule 7) 6,435,000.00 6,435,000.00 6,435,000.00 6,435,000.00 6,435,000.00SSS Contribution (Schedule 7) 273,679.20 273,679.20 273,679.20 273,679.20 273,679.20Pag-Ibig Contribution (Schedule 7) 43,200.00 43,200.00 43,200.00 43,200.00 43,200.00Philhealth Contribution (Schedule 7) 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00Utilities Expense (Schedule 8) 1,485,160.00 1,529,714.80 1,575,606.24 1,622,874.43 1,671,560.66Property Tax (Schedule 11) 108,578.26 111,835.61 115,190.68 118,646.40 122,205.80Repairs and Maintanance (Schedule12) 72,000.00 74,160.00 76,384.80 78,676.34 81,036.63Advertising Expense (Schedule 13) 257,500.00 265,225.00 273,181.75 281,377.20 289,818.52Training Expenses (Schedule 15 ) 1,757,500.00 1,757,500.00 1,757,500.00 1,757,500.00 1,757,500.00Miscellaneous Expense (Schedule 16) 19,456.28 19,456.28 19,456.28 19,456.28 19,456.28Total Administrative Expenses 22,152,021.60 12,688,020.70 12,761,682.22 12,835,048.82 12,910,240.72Total 101,337,389.88 135,218,985.98 164,035,790.95 197,541,199.46 236,622,428.90Add: Interest Income on Bonds (Schedule 16) 2,100,000.00 4,900,000.00 10,500,000.00 24,500,000.00Income before Interest and Taxes 101,337,389.88 137,318,985.98 168,935,790.95 208,041,199.46 261,122,428.90Less: Interest Expense (Schedule 10) 24,000,000.00 15,600,000.00 7,800,000.00 0.00 0.00Income before Taxes 77,337,389.88 121,718,985.98 161,135,790.95 208,041,199.46 261,122,428.90Less: Income Tax 35% (Schedule 14) 27,068,086.46 42,601,645.09 56,397,526.83 72,814,419.81 91,392,850.12Net Income 50,269,303.42 79,117,340.89 104,738,264.12 135,226,779.65 169,729,578.79
  29. 29. Item Period 1 Period 2 Period 3SalesExpenses____________________________________Add: beg balanceEnding cash balance
  30. 30. Cash Flow from Operating Activities(Inc.) Dec. in Prepaid Insurance (2,396,457.43)Net Cash Provided by (used in) Operating Activities (2,396,457.43)Cash Flow from Investing ActivitiesPurchased of Fixed Assets (420,587,622.00)Payments for Organization/Pre-Operating Cost (9,551,729.00)Net Cash Flow Provided by (used in) Investing Activities (430,139,351.00)Cash Flow from Financing ActivitiesProceeds from Issuance of Stocks 300,000,000.00Proceeds from Bank Loan 150,000,000.00Net Cash Provided by (used in) Financing Activities 450,000,000.00Net Increase (Decrease) in Cash 17,464,191.57Cash Balance, Beg. 0.00Cash Balance, End. 17,464,191.57
  31. 31. PARTICULAR Y1 Y2 Y3 Y4 Y5CASH FLOWS:Operational Inflows:Sales1, 700, 000.00 2, 924, 000.00 3, 522, 400.00 3, 672, 000.00 3, 882, 800.00Adjustment for receivables:BeginningEnding0.00(300, 000.00)300, 000.00(497, 000.00)497, 000.00(598, 800.00)598, 800.00(624, 200.00)624, 200.00(660, 000.00)Net inflow from sales 1, 400, 000.00 2, 727, 000.00 3, 420, 600.00 3, 646, 600.00 3, 847, 000.00Non-operational inflows:Loan ProceedsPaid-up capital200, 000.00100, 000.000.000.000.000.000.000.000.000.00Total non- operational inflows 300, 000.00 0.00 0.00 0.00 0.00Total Cash Inflows 1, 700, 000.00 2, 727, 000.00 3, 420, 600.00 3, 646, 600.00 3, 847, 000.00Cash Outflows:Cash Operating Expenses 1, 197, 500.00 2, 093, 100.00 2, 508, 200.00 2, 661, 300.00 2, 846, 400.00Adjustment for accounts payable:BeginningEnding0.00(105, 700.00)105, 700.00(108, 200)0.00108, 200.000.00133, 600.000.00133, 400.00Build-up of inventories 54, 500.00 0.00 (133, 600.00) (133, 400.00) (136, 900.00)Total Operating Outflow 1, 146, 300.00 2, 090, 600.00 50, 000.00 0.00 0.00Non-operating outflow 2, 532, 800.00 2, 661, 500.00 2, 842, 900.00Debt servicing:PrincipalInterest200, 000.0018, 000.000.000.000.000.000.000.000.000.00Fixed Asset acquisitions:Land & land improvementsBuildingMachinery & equipmentDelivery of equityOffice equipment85, 000.0090, 000.0040, 000.0015, 000.005, 000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.00Pre-operating expensesSales taxDividends10, 000.0085, 000.000.000.00146, 200.00250, 000.000.00176, 100.00634, 700.000.00183, 600.00800, 000.000.00194, 100.00700, 000.00Total non-operating outflow 548, 000.00 396, 200.00 810, 800.00 983, 600.00 894, 100.00Total cash outflow 1, 694, 300.00 2, 486, 800.00 3, 343, 600.00 3, 645, 100.00 3, 737, 000.00Net cash inflow/ (outflow)ADD: Beginning cash balance5, 700.000.00240, 200.005, 700.0077, 000.00245, 900.001, 500.00322, 900.00110, 000.00324, 400.00
  32. 32. Projected Cash Flow StatementFor the years ended December 31,2008-20122011 2012 2013 2014 2015Cash Flow from Operating ActivitiesNet Income 50,269,303.42 79,117,340.89 104,738,264.12 135,226,779.65 169,729,578.79Adjustments to Reconcille Net IncomeOrganization Cost 9,551,729.00Amortization of Software 30,000.00 30000 30000 30000 30000Depreciation Expense 19,245,640.67 19,245,640.67 19,245,640.67 19,245,640.67 19,245,640.67(Inc.) Dec. Accounts Receivable (2,004,897.46) (334,145.84) (381,293.93) (434,592.51) (494,871.93)(Inc.) Dec. Inventory (1,190,113.46) (192,540.91) (171,642.97) (193,190.47) (201,069.07)(Inc.) Dec. in Factory Overhead Supplies (49,224.00) (1,476.00) (1,464.00) (1,464.00) (1,524.00)(Inc.) Dec. Unused Office Supplies (23,112.00) (4,160.16) (1,338.18) (936.31) (898.10)(Inc.) Dec. in Prepaid Insurance (71,893.74) (74,050.55) (76,272.06) (78,560.00) (80,917.01)Inc. (Dec.) Accounts Payable 386,123.00 7,777.00 11,756.00 11,756.00 11,761.00Inc. (Dec.) SSS Contribution Payable 82,776.32Inc. (Dec.) Pag-Ibig Contribution Payable 17,000.00Inc. (Dec.) Philhelth Contribution Payable 23,025.00Inc. (Dec.) Witholding Tax Contribution Payable 126,757.82Inc. (Dec.)Utilities Payable 1,760,390.00 52,818.57 54,396.26 56,029.39 57,709.02Inc. (Dec.) Vat Payable 577,409.46 96,232.73 109,813.00 125,164.58 142,521.48Inc. (Dec.) Interest Payable 12,000,000.00 (4,200,000.00) (3,900,000.00) (3,900,000.00)Inc. (Dec.) Income Tax Payable 6,920,802.86 3,883,389.66 3,448,970.43 4,104,223.25 4,644,607.58Net Cash Provided by (used in) Operating Activities 97,651,716.89 97,626,826.05 123,106,829.33 154,190,850.25 193,082,538.42Cash Flow from Investing ActivitiesPurchased of Fixed AssetsInvestment in Bonds (15,000,000.00) (20,000,000.00) (40,000,000.00) (100,000,000.00) (135,000,000.00)Additional Investment on tank (540,000.00) (556,200.00) (572,886.00) (590,072.58) (607,774.76)Net Cash Flow Provided by (used in) Investing Activities (15,540,000.00) (20,556,200.00) (40,572,886.00) (100,590,072.58) (135,607,774.76)Cash Flow from Financing ActivitiesProceeds from Issuance of StocksProceeds from Bank LoanPayments Of Dividends 0.00 (12,500,000.00) (17,500,000.00) (45,000,000.00) (57,500,000.00)Payment of Bank Loan (70,000,000.00) (65,000,000.00) (65,000,000.00) 0.00 0.00Net Cash Provided by (used in) Financing Activities (70,000,000.00) (77,500,000.00) (82,500,000.00) (45,000,000.00) (57,500,000.00)Net Increase (Decrease) in Cash 12,111,716.89 (429,373.95) 33,943.33 8,600,777.67 (25,236.34)Cash Balance, Beg. 17,464,191.57 29,575,908.46 29,146,534.51 29,180,477.85 37,781,255.51Cash Balance, End. 29,575,908.46 29,146,534.51 29,180,477.85 37,781,255.51 37,756,019.18
  33. 33. ItemAssetsCashAccount receivablesInventoryMachinery equipmentFurniture and fixtureBuildingLiabilitiesAccounts payableBank loansBusiness CapitalTotal Assets = Total Liabilities + Capital
  34. 34. Assets:Current AssetsCash 20,464,191.57Prepaid Insurance 2,396,457.43Total Current Assets 22,860,649.00Non-Current AssetsProperty Plant and Equipment 420,587,622.00Organization Cost 6,551,729.00Total Non-Current Assets 427,139,351.00Total Assets 450,000,000.00Liabilities and Stockholders Equity:Non-Current LiabilityBank Loan 200,000,000.00Stockholders EquityCommon Stock, 100par, 5,000,000 shares authorized 250,000,000.00Total Liabilities and Stockholders Equity 450,000,000.00
  35. 35. PARTICULAR Y1 Y2 Y3 Y4 Y5ASSETSCurrent Assets:Cash on HandAccounts receivablesLESS: Allowances for bad debtsInventories:Raw materialsFinished goodsGoods in process5, 700.00300, 000.00(15, 000.00)54, 000.000.000.00245, 900.00497, 000.00(25, 000.00)54, 000.000.000.00322, 900.00598, 800.00(30, 000.00)104, 500.000.000.00324, 400.00624, 200.00(32, 000.00)104, 500.000.000.00434, 400660, 000.00(34, 000.00)104, 500.000.000.00TOTAL CURRENT ASSETS 344, 700.00 771, 900.00 996, 200.00 1, 021, 100.00 1, 164, 800.00Fixed Assets:Land & land improvementsBuildingsMachinery & equipmentDelivery equityOffice equipment85, 000.0090, 000.0040, 000.0015, 000.005, 000.0085, 000.0090, 000.0040, 000.0015, 000.005, 000.0085, 000.0090, 000.0040, 000.0015, 000.005, 000.0085, 000.0090, 000.0040, 000.0015, 000.005, 000.0085, 000.0090, 000.0040, 000.0015, 000.005, 000.00Total fixed assets 235, 000.00 235, 000.00 235, 000.00 235, 000.00 235, 000.00LESS: Accumulated depreciation (8, 800.00) (23, 800.00) (38, 000.00) (53, 800.00) (68, 800.00)Net book value 226, 200.00 211, 100.00 196, 200.00 181, 200.00 166, 200.00Deferred chargesOrganization & pre-operating expenses 8, 000.00 6, 000.00 4, 000.00 2, 000.0 0.00TOTAL ASSETS 578, 900.00 989, 100.00 1, 196, 400.00 1, 204, 300.00 1, 331, 000.00SAMPLE. PROJECTED BALANCE SHEET
  36. 36. LIABILITIES & OWNER’S EQUITYCurrent Liabilities:Accounts payableIncome tax payable0.00105, 700.000.00108, 200.000.00133, 600.000.00133, 400.000.00136, 900.00Total current liabilities 105, 700.00 108, 200.00 133, 600.00 133, 400.00 136, 900.00Long-term liabilityTotal Liabilities 105, 700.00 108, 200.00 133, 600.00 133, 400.00 136, 900.00OWNER’S EQUITYContributed Capital 100, 000.00 100, 000.00 100, 000.00 100, 000.00 100, 000.00Retained Earnings:Balance, beginning 0.00 373, 200.00 780, 900.00 962, 800.00 970, 900.00Net Income before the year 458, 200.00 803, 900.00 992, 700.00 991, 700.00 1, 017, 300.00Dividends paid 0.00 (250, 000.) (634, 700.00) (800, 000.00) (7000,00.00)Sales tax (85, 000.00) (146, 200.00) (176, 100.00) (183, 600.00) (194, 100.00)Total Owner’s Equity 473, 200.00 800, 900.00 1, 062, 800.00 1, 070, 900.00 1, 194, 100.00TOTAL LIABILITIES & OWNER’S EQUITY 578, 900.00 989, 100.00 1, 196, 400.00 1, 204, 300.00 1, 331, 000.00
  37. 37. Projected Balance SheetAs of December 31,2008-2012Assets 2011 2012 2013 2014 2015Current AssetsCash 29,575,908.46 29,146,534.51 29,180,477.85 37,781,255.51 37,756,019.18Accounts Receivable (Schedule 1) 2,004,897.46 2,339,043.30 2,720,337.23 3,154,929.74 3,649,801.67Inventory (Schedule 2) 1,190,113.46 1,382,654.37 1,554,297.34 1,747,487.81 1,948,556.88Factory Overhead Supplies (Schedule 3) 49,224.00 50,700.00 52,164.00 53,628.00 55,152.00Unused Office Supplies (Schedule 4) 23,112.00 27,272.16 28,610.34 29,546.66 30,444.76Prepaid Insurance (Schedule 5) 2,468,351.17 2,542,401.72 2,618,673.78 2,697,233.78 2,778,150.79Total Current Assets 35,311,606.55 35,488,606.06 36,154,560.54 45,464,081.50 46,218,125.28Non-Current AssetsProperty Plant and Equipment (Schedule 6) 401,851,981.33 383,132,540.66 364,429,782.99 345,744,214.90 327,076,348.99Investment in Bonds 15,000,000.00 35,000,000.00 75,000,000.00 175,000,000.00 310,000,000.00Total Non-Current Assets 416,851,981.33 418,132,540.66 439,429,782.99 520,744,214.90 637,076,348.99Total Assets 452,163,587.88 453,621,146.72 475,584,346.53 566,208,299.39 683,294,477.26Liabilities and Stockholders EquityCurrent LiabilitiesAccounts Payable (Schedule 3) 386,123.00 393,900.00 405,656.00 417,412.00 429,173.00SSS Contribution Payable (Schedule 7) 82,776.32 82,776.32 82,776.32 82,776.32 82,776.32Pag-Ibig Contribution Payable (Schedule 7) 17,000.00 17,000.00 17,000.00 17,000.00 17,000.00Philhealth Contribution Payable (Schedule 7) 23,025.00 23,025.00 23,025.00 23,025.00 23,025.00Witholding Tax Contribution Payable (Schedule 7) 126,757.82 126,757.82 126,757.82 126,757.82 126,757.82Utilities Payable (Schedule 8) 1,760,390.00 1,813,208.57 1,867,604.82 1,923,634.22 1,981,343.24VAT Payable (Schedule 9) 577,409.46 673,642.19 783,455.19 908,619.77 1,051,141.25Interest Payable (Schedule 10) 12,000,000.00 7,800,000.00 3,900,000.00 0.00 0.00Income Tax Payable (Schedule 14) 6,920,802.86 10,804,192.52 14,253,162.96 18,357,386.20 23,001,993.78Total Current Liabilities 21,894,284.46 21,734,502.41 21,459,438.11 21,856,611.32 26,713,210.40Non-Current LiabilityBank Loan (Schedule 10) 130,000,000.00 65,000,000.00 0.00 0.00 0.00Total Liabilities 151,894,284.46 86,734,502.41 21,459,438.11 21,856,611.32 26,713,210.40Stockholders EquityCommon Stock, 100par, 5,000,000 shares authorized 250,000,000.00 250,000,000.00 250,000,000.00 250,000,000.00 250,000,000.00Retained Earnings 50,269,303.42 116,886,644.31 204,124,908.42 294,351,688.07 406,581,266.86Total Stockholders Equity 300,269,303.42 366,886,644.31 454,124,908.42 544,351,688.07 656,581,266.86Total Liabilities and Stockholders Equity 452,163,587.88 453,621,146.72 475,584,346.53 566,208,299.39 683,294,477.26

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