ACC604 COURSE PROJECTBUSINESS PLAN FINANCIAL PROJECTIONS rev..docx

ACC604 COURSE PROJECTBUSINESS PLAN: FINANCIAL
PROJECTIONS
rev. 9-2009 by D. Schwartz
Objectives of the Project
This project is designed to provide students with the
opportunity to gather and analyze the data needed to prepare the
financial section of a business plan, and to synthesize the data
into the form of a written report accompanied by projected
income statements, cash flow statements, and balance sheets for
the first two years of a four-year business plan.
The Purpose of Your Business Plan
Business plans are developed for various purposes, such as
providing potential investors or lenders with a credible
projection of revenue, profit, and capital requirements. The
failure rate for small businesses is extremely high, often
because the entrepreneur underestimated the amount of capital
that would be required. The question to be answered by this
business plan project: “How much capital (cash) will I need to
invest, and when (in what months) will it be needed?” The
answer will appear on the Cash Flow Statement in the form of
any negative ending cash balance that results after all data other
than owner investment has been entered.
The Business
You have spent the last 15 years in a high-paying but stressful
job in a technology company, and have now decided to start a
business of your own. Being an excellent cook, your plan is to
open a specialty restaurant in an upscale suburban shopping

mall. (You may select any nationality cuisine or other specialty
you wish.) Your restaurant will serve lunch and dinner during
the hours 11:00 a.m. to 9:00 p.m., seven days a week. Revenue
is expected to average $10 per lunch patron, and $20 per dinner
patron. Though you plan to do some advertising, you are
counting on word-of-mouth recommendation by very satisfied
customers as the primary source of your clientele. Your
restaurant will accept cash or major credit card only, no checks
or charge accounts.
You have found available restaurant space in a suitable location
that you can lease for a term of 5 years at a monthly rental of
$2,000 plus 3% of gross revenue. There is space for 10 tables
seating four persons each, and an additional 10 tables seating
two persons. You estimate that kitchen equipment, tables,
chairs, and table settings will cost $60,000 to be financed by
$12,000 in down payment and a $48,000 bank loan at 10%
interest, the principal to be repaid in 48 monthly installments.
Redecorating and remodeling is expected to cost $40,000, with
another $10,000 for sales registers, computer system, and office
equipment – all to be paid for in cash. An additional $10,000 in
leasehold improvements and $5,000 in office equipment is
anticipated for the second year of operation. For the purpose of
calculating depreciation expense, you estimate that all
equipment and furniture will have a useful life of 5 years which
equates to a 20% annual straight-line depreciation rate.
Your savings are primarily in tax deferred retirement accounts,
and cannot be used to start a new business. However, you have
sufficient equity in your home to obtain a line-of-credit loan of
up to $125,000 at 8% interest, and will draw against the line as
additional cash investment is needed by the business. (Being a
personal loan, it will not appear on the books of the business.)
Eventually, the business will apply for an unsecured line of
credit loan of its own, but at least two years of successful
operations are required in order to qualify.

You will be managing the operation and also doing most of the
gourmet cooking during the first several months. Though you
will not be on the payroll as a salaried employee, you do plan to
draw $4,000 a month for personal living expenses. (It is
suggested that one-half this amount be treated as “Officers
Salaries” to be entered on the Income Statement, and the other
half as “Payroll Expense” to be entered as a “cook” on the
Payroll schedule.)
The company will elect to file federal and state income taxes as
an “S Corporation” to achieve limited liability protection and
pass-through income tax treatment. As such, the corporation
will pay no income tax. Instead, stockholders report their share
of any profit or loss on their individual income tax returns.
Assume the cost to set up the corporation will be $1,000 in
attorney’s fees and $800 in California state franchise tax. The
corporation will continue to pay a minimum franchise tax of
$800 each year thereafter.
Payrolls will be prepared semi-monthly by Paychex, a payroll
service, at an estimated monthly fee of $200, which covers
quarterly and year-end federal and state tax returns, W-2’s and
1099’s. Other check disbursements and daily deposits will be
recorded weekly in Peachtree computer accounting software by
your niece who recently received an “A-“ in her high school
accounting course. She will be paid $100 per month. Near the
end of the 12th month of each year, a CPA will make any
necessary adjustments to the computer figures, and compile
year-end financial statements and prepare federal and state tax
returns for an estimated yearly fee of $2,000.
REQUIRED

USING THE EXCEL TEMPLATE
Download the Excel file called Bplan Financials.Copythe file
under a new name that contains your last name, and use the
copy to complete your projected financial statements. Carefully
review the instructions in the worksheet called “Readme”. This
Excel template contains sample data for a widget wholesaler. Be
sure youdelete and/or replace all of the sample data with your
own data. Also be sure to back up your file after each work
session.
The following suggestions are intended to supplement the
instructions in the “Readme” worksheet with particular regard
to a business plan for a startup restaurant.
· Assumptions
The average inventory turnover ratio for a particular industry
can be found at http://moneycentral.msn.com. (See
Moneycentral.com, above, for instructions on the use of this
website.)
· Meals projections
Assume you have two “products” to sell, luncheon meals and
dinner meals. The anticipated average bill (before sales tax) is
indicated in the fact situation, above. It is suggested that you
use as a practical capacity two seatings at each table during the
lunch hours, and three seatings during the evening dinner hours.
Use the blank worksheet in the Excel template called “Meals” to
show your calculation of the number of lunch meals and dinner
meals for the first month of operations. When estimating the
number of meals that will be served in each of the first twelve
months, start with a low percentage of practical capacity (say

about 25%) for the first month of operation, and gradually build
to a moderate percentage of capacity (say about 50%) by the
12th month. Reflect the increasing number of lunch and dinner
meals for each of the twelve months of the first year in the
worksheet called “Sales”. Do not show dollar amounts on the
Meals worksheet; the dollar amounts will appear automatically
when the number of meals is entered in the “Sales” worksheet.
The second year’s sales might be projected to be 10% to 15%
greater than sales in December of the first year, multiplied by
12.
Checkpoint: Sales figures should be growing each month to
about $65,000 to $75,000 in December which equates to about
$600,000 to $700,000 for the first year, and $900,000 to
$1,100,000 in the second year
· Cost of Goods Sold (Cost of Food and Beverage Sales)
Use the same cost of goods sold percentage for both products.
One source for the industry average for full-service restaurants
is the National Restaurant Association (see table on page 6).
Also shown are percentage norms for Salary and Wages and
some other major categories of expense.
· Inventory of Food and Beverage (for balance sheet)
One of the assumptions called for on the “Assumptions”
worksheet is the inventory turnover ratio which is the basis for
calculating the amount of inventory needed tgo be kept on hand.
The formula for inventory turnover ratio is as follows:
Ratio = Cost of Goods Sold Example: $450,000 =
4.5
Inventory $100,000
Therefore, to solve for the Inventory amount when the ratio and
the Cost of Goods Sold is known:

Inventory = Cost of Goods Sold = $450,000 = $100,000
Ratio 4.5
Note, however, that you estimate the need for a minimum
inventory of $5,000 at all times.
· Payroll Expense (cooks, hostess, servers, busboys, etc.)
Use the Payroll worksheet for payroll other than Officers
Salaries. When estimating the number of employees in each
category, consider the number of hours per week that your
restaurant will be open for business, not including daily set up
and clean-up time. For approximate hourly wage rates of each
category, research the hourly rates in your area.
To estimate the number of servers needed, use as a rule-of-
thumb the equivalent of one full-time server for every 30 meals
or fraction thereof served each day.
Use the Income Statement account “Officers salaries” for the
salary of owner/managers. In the case of a manager who
performs both management and non-managerial functions (e.g.
maitre d’ or chef), it is suggested that the salary be split
between “Officers Salaries” and “Other Payroll” by including
the latter on the Payroll worksheet.
Checkpoint: check the reasonableness of your total payroll
figures by comparing the National Restaurant Association’s
percentage for Salaries and Wages with the sum of your second
year’s Officers Salaries plus Other Payroll expense percentages.
(The first year of a startup business is not representative.)
· Advertising Expense
It is suggested that you use a fixed monthly amount for
newspaper advertising that approximates 3% of the projected

sales revenue for the 12th month (December) of the first year.
For the second year, project a 15% increase over the 12th month
of the first year, multiplied by 12.
· Depreciation Expense and Accumulated Depreciation on the
balance sheet
Depreciation is calculated by the Excel template using the
straight-line rate shown on the Assumptions worksheet.
· Rent Expense (Occupancy Cost)
Refer to information provided in the fact situation on the first
page of these project instructions.
· Interest Expense
Interest expense is calculated by the Excel program. It
automatically applies 1/12th of the annual rate indicated in the
Assumptions worksheet to the loan balance at a given month-
end. (Loan amortization schedules are not used.) However, there
is no automatic calculation of payments on principal, so in the
case of installment loans, it is necessary to divide the original
loan balance by the number of months in the term of the loan,
and enter the monthly payments as a negative figure on the Cash
Flow Statement.
· Remaining operating expenses
For Insurance, Supplies, Repair and Maintenance, Utilities and
other expenses:
To earn maximum point credit for this project, speak with the
owner of a local restaurant that is about the size of the
restaurant you are planning. Explain that you are a National
University student and have been assigned this project for your
MBA accounting class, and show him/her your assignment. For
the second year, project a 15% increase over the 12th month of
the first year, multiplied by 12.
[Do NOT add or delete any rows on this or any other exhibit.]
Checkpoint: If after completing your income statement your 2nd

year profit (income before taxes) is more than 10% of Sales,
replace the amount for Other Expenses in both years so as to
reduce the 2nd year profit to between 5 and 10%.
· Cash used for Investing Activities (Cash Flow statement)Use
the Cash Flows statement to enter the purchase of capital assets
for cash: replace the three existing titles in the yellow cells with
“Kitchen equipment”, “Leasehold improvements”, and “Office
equipment”, and enter the cost of each as a negative amount
since these investments result in negative cash flows.
· Capital from Financing Activities
1. Long-term and/or short-term borrowing (Cash Flow
statement)Enter cash proceeds from borrowing, such as a bank
loan, as positive figures (positive cash flow), and loan
repayments as negative figures (negative cash flows).
2. Capital paid in by owners(Cash Flow statement)
These are the very last figures to be entered, because you
cannot know how much investor cash will be needed until all
other positive and negative cash flows have been projected.
Enter the amount of cash needed to provide a minimum cash
balance each month of about $10,000, but not more than
$35,000 at the end ofany period, including the second year. Use
any excess cash to pay off loans early. If there is still an excess,
withdraw some of the capital that was paid in by the investors,
and/or increase your salary (Officers Salaries).which will
increase your W-2 income and thereby increase your Social
Security tax and account balance.
3.
WE NEED TO USE THE EXCELL SHEET. NO ESSAY.. JUST
THE EXCELL SHEET

7
BPlan_Financials_template_-_Sep_20092.xlsx
AAN EXCEL TEMPLATEFOR BUSINESS PLAN FINANCIAL
DATAFIRST TWO YEARS(CONTAINS SAMPLE
DATA)September 2009DONALD A. SCHWARTZ, J. D., CPA
ReadMeOVERVIEW(see Intructions below)This financial model
enables the user to enter projected sales and cost of sales,
operating expenses,and anticipated capital expenditures for
fixed assets. If accounts receivable and/or inventory
areinvolved, the program automatically calculates the amounts
based upon user-anticipated turnoverrates. Depreciation expense
is calculated on the basis of a user-designated annual rate. From
this information, the program produces an income statement and
a preliminary cash flow state-ment showing the end-of-period
cash balance. For any period in which the resulting cash balance
isnegative, the user must enter sufficient inflow of cash from
shareholders and/or from lenders to resultin a positive cash
balance. A user-anticipated interest rate is automatically applied
to resulting loanbalances and the income statement is revised
accordingly. The balance sheet is then completedautomatically
by the program. Financial statement ratios and graphs of key
financial data are alsoproduced automatically. However, the
user must research industry ratio averages to compare with
theprojected ratios, and be prepared to explain any significant
differences.The first year is projected on a monthly basis.
Subsequent years are often projected on an annual
basis.INSTRUCTIONSFOR COMPLETING PROJECTED
FINANCIAL STATEMENTSSteps:1Copy this file under a
different file name, such as "Bplan [your last name], and use the

copy. Do notmake changes to this original. 2Input data should
be entered only in cells with yellow backgrounds (like this one).
Numbers and text that are in black are the result of formulas.
Do NOT enter data in these cellsunless otherwise instructed. Do
NOT add or delete rows or columns.Note: this version of the
program contains sample data (blue numbers in yellow cells) in
mostof the worksheets, including those that may not be
applicable to your particular business: Be sure to delete or
change to "0" all such sample data on each and every worksheet
before com-pleting (or bypassing) that worksheet.
Don Schwartz: Instructions contained in a "comment box" such
as this appear only on the screen. They will not print, nor will
they appear on worksheets that have been copied/pasted (as a
table) into a Word document.
3Starting with the "Assumptions" worksheet, complete each
worksheet in the order it appears.(see instructions for each
worksheet below)However, when assembling the business plan,
rearrange the worksheets into Exhibit andSchedule number
order, for example: A, A-1, B, B-1, B-2, ... 4The graphs (bar
charts) which summarize key financial projections should be
individually copiedand pasted in the introductory "Financial
Objectives" section of the Word document by using
PasteSpecial, Paste (not Paste Link) As: Microsoft Excel Chart
Object. (See instructions under "Graphs"tab)Navigation:There
are four scroll arrows at the bottom left corner of the worksheet.
To scroll the tabs to theright one tab at a time, click on the first
right arrow. To skip directly to the last tab, click on the
rightarrow with the vertical line.Caution:Before copying all or
part of a worksheet or importing it into another Excel file, first
save the entirefile under a new name. Copy the desired range
and then, without moving the cursor, use PasteSpecial to paste
Values only, NOT formulas. This converts formulas to values so
they can be copiedsafely."Exhibits"To be used as a cover page
which lists the projected financial statement exhibits and
schedules that follow. In the "Cross-reference page number"

column, enter the page number(s) of the narrative sectionof the
business plan that explains how the projected figures in this
schedule were arrived at. This isespecially important for
projected sales, cost of goods or services, payroll expense and
other majorexpenses on the Income Statement, and for capital
expenditures on the Cash Flows statement."Assumptions"
worksheetAccounts payableIt is assumed that the Cost of Goods
Sold and operating expenses are paid in the month followingthe
month in which they are incurred, except rent and payroll-
related expenses which are paid . in the same month.
Depreciation expense which requires no cash outlay is also an
exception.Depreciation rateFor simplicity, it is assumed that all
depreciable assets have the same estimated useful life
(annualrate). Use whatever rate (e.g. 20%) that is appropriate
for the type of asset which has the largestmonetary
value.Product/Service namesIf there are several major products
or services, list each of these (5 maximum) separately. All
othersshould be aggregated in a single "catchall" category. If
categorization is not practical, then enter atleast one category
with a name such as "All products".Unit pricesIf it is practical
to set an average unit price for each product category (or hourly
billing rate in thecase of hourly services), then enter such
price(s) or rate(s). They will later be multiplied times
theprojected number of units to be sold (or hours billed). If this
is not practical, then be sure to replaceany sample figures with
zeros.Sales Forecast - 1st Year of business planIf it is practical
to project the number of units (or billable hours) that will be
sold in each product category,then enter that number. That
number of units will be multiplied times the unit price entered
under "UnitPrices" to arrive at Total Sales amounts for each
product. If it is not practical to project the number of unitsto be
sold, then manually enter the "Total Sales" figure for each
month at the bottom of this schedule. "Costing" of goods or
services soldThis schedule is designed to arrive at a projected
cost of goods or services sold and resulting Gross Profitfor
companies that sell merchandise. However, it should also be

used by service companies that bill on aper hour or per project
basis and can estimate the direct labor and material cost per
billable hour or peraverage project unit.If this schedule is NOT
USED, be sure to delete any blue sample figures in yellow
cells.For those companies for which "Cost of goods sold" (or
"Cost of services sold") is practical and appropriate, the
system provides two alternatives: Unit Costing If it is practical
to estimate the average cost of each unit of product or service,
product category,then enter such unit costs. Enter variable costs
only. All fixed costs are to be entered asOperating Expenses on
the Income Statement. If it is NOT practical to apply unit
costing, thenconsider the alternative "Achievable Gross Margin
%", below.Service companies that bill customers on a per hour
or per project basis should enter theirdirect labor/materials cost
as the "unit cost" to be multiplied times the projected billable
hoursor project units that have been entered in the Sales
Forecast schedule. Any labor cost which isentered here and also
in the Payroll - 1st year schedule must be subtracted out on line
"D" ofthat schedule (see "Payroll - 1st Year of business plan",
below).in order to avoid duplication.Achievable Gross Profit
Margin %If the company sells merchandise but it is not
practical to determine a unit cost for each productcategory, then
enter a gross profit margin % that is reasonably achievable (i.e.,
customers will paythe resulting mark-up.) For guidance as to
what is reasonable, refer to the average gross profit % foryour
industry, per http://moneycentral.msn.com or similar financial
website.Cost of Sales (Goods or Services Sold) - 1st year of
business planThis schedule requires no data entry. Its purpose is
to provide audit trail, only.Payroll - 1st year of business
planThe payroll for all salaried and hourly employees (except
officers and owner/managers) should beentered on this
schedule, including any direct labor involved with
manufacturing, construction, or service.Do NOT include
independent contractors, commission agents and the like.If any
employee payroll cost has been included in the "Costing"
schedule (see above), it must besubtracted on line "D" of this

schedule to avoid duplication.Totals from this schedule are
automatically carried into the Income Statement under "Other
Payroll".Salary of Owner/ManagersThe salaries of officers and
owner/managers should be entered directly onto the Income
Statement as"Officers Salaries". See Income Statement - 1st
year of business plan" below.)If an owner/manager spends 25%
or more of his/her time directly on the company's product
orservice, It is suggested that an appropriate portion of his/her
salary be included on the Payrollschedule, and the rest as
Officers Salaries on the Income Statement.Even if an
owner/manager will not be on the payroll, it is suggested that a
reasonable monthlycompensation figure be entered so as to
reflect the true costs of doing business. Advertising and
Promotion - 1st year of business planThis schedule must be used
to enter any advertising and promotional expense: Totals from
this scheduleare automatically used on the Income Statement. A
detailed explanation of these planned expensesshould be
contained in the Marketing Plan section of the business
plan.Income Statement (two years) First yearEnter estimated
expenses in yellow cells only. Other cells contain formulas and
should be left intact.Blue titles in yellow cells may be changed.
However, do NOT change any of the black titles in whitecells
unless otherwise instructed.It is suggested that "Officers
Salaries" be used to reflect actual salaries to be paid
owner/managers, orin the case of a proprietorship or
partnership, anticipated living expense withdrawals in lieu of
salaries.Note that income tax is calculated only in the case of
profits. The income tax on losses is assumed tobe "0" rather
than negative.Breakeven sales figures are calculated by dividing
total fixed expense (Total Operating Expense plusInterest
Expense) by the Contribution Margin Ratio (Sales minus
variable Cost of Sales divided by Sales). In this case, the
Contribution Margin Ratio is the same as the Gross Profit %.
Second YearProjected Sales and Operating Expense figures for
the second year should be entered directly on this exhibit,
though some of the expenses such as depreciation and interest

expense arecalculated automatically. You may want to use the
"12 times the last month of the first year" asan annual base
figure, and multiply this base times 1 + a reasonable percentage
of increase;e.g. 1.1 = 10% increase..Cost of Goods Sold
amounts for the second year can be calculated by multiplying
the Sales figure bythe Cost of Sales (Cost of Goods Sold)
percentage (%) for the last month of the first year. That
percentage is the complement of the Gross Profit % ( "1" minus
the Gross Profit%). (See IncomeStatement sample
amounts).Whatever approaches have been used to project Sales,
Cost of Sales, and Operating Expenses, they should be
explained in the business plan narrative.Cash Flow (two
years)Cash used for investment A maximum of three fixed asset
categories may be used. The three sample names in the
yellowcells may be replaced with any desired category names.
These names will appear on the balancesheets automatically.
Enter as a NEGATIVE amount under "Cash used for capital
assets" the cost ofequipment and other depreciable assets
needed, including any capital leases. (Monthly paymentson
leases of two years or less should be treated as Lease Expense
on the Income Statement ratherthan "Capital Assets" on the
Cash Flows statement.) If any fixed assets are donated by
owners, treatsuch assets as having been purchased for cash (use
a realistic market value), and enter acorresponding amount of
capital paid-in by owners under "Cash from financing
activities".Cash from financing activitiesEnter as POSITIVE
amounts any planned contribution of equity capital by owners,
and anticipatedborrowing. Line-of-credit loans are short-term
liabilities. Enter repayments as negative figures.Then look at
the "Cash - Ending Balance" for each month:If any are negative,
it will be necessary to enter additional paid-in capital or
borrowing inamounts sufficient to produce positive Ending
balances of cash. Negative cash balancesare not valid. (If no
additional equity capital or borrowing is available, then the
company may be insolvent and beforced to terminate operations
and liquidate its assets.)Too much cash?Note that If ending cash

balance is substantially more than monthly operating expenses,
it maybe unrealistically high, or expenses may be unrealistically
low.Balance Sheet (two years)All figures are calculated
automatically (The "BS Formulas" worksheet shows the
formulas that areused). Make sure every period is in balance
!Ratios (see Ratios tab)Financial Statement ratios for the
subject company are automatically calculated by formula. When
copying ratio figures, be sure to use "Paste Special" to paste
"Values" rather than formulas.Industryaverages for the related
industry can be obtained from websites such as
http://moneycentral.msn.com. Show the industry classification
(e.g., "Retail-Sporting Goods") fromwhich the ratios were
drawn. Review all of your ratios, and make sure they make
sense! Graphs (charts)Figures for the sample graphs are
automatically calculated by formula. You may wish to add
othercharts of your own design. They are NOT intended to be
part of the financial exhibits: they should beindividually
copied/pasted into appropriate sections of your business plan
document. Whencopying a chart into a Word document, follow
the instructions shown in this "Graphs" worksheet.
Assumptions
Don Schwartz: Enter ONLY in yellow cells
NAME OF COMPANY: Sample CompanyFINANCIAL
ASSUMPTIONSUNITPRODUCT/SERVICE
NAMESPRICESSales commission rate (if applicable)5% [if
none, enter 0]At least 1, maximum 6if applicable*1Midget
Widgets$1.00Payroll taxes: % of gross wages
(approx.)12%2Giant Widgets$200.00Employee benefits: % of
gross wages5%34Interest rate - short term (line of
credit)9%5Interest rate - long term, secured 7%6* See ReadMe
tab, "Unit prices"Accounts payable - one month's cost of goods
sold and most operating expensesDepreciation rate - straight
line 20% [Use life of major asset. Enter as a percentage; e.g. 5
years = .20]Accounts receivable turnover6.0 [If more than 50%
of Total Sales is for cash or credit card, enter "0"]6.0

NU: This is a formula. Do not enter anything in this cell.
Inventory turnover ratio4.1 [If less than 50% of revenue is
from sale of merchandise, enter "0"]4.1
NU: This is a formula. Do not enter anything in this cell.
.
Minimum base inventory needed for startup5,000Income tax
rate (federal and state, approx.)25% [If company is not a "C"
Corporation, enter "0"]
MealsUse this worksheet to show your calculation of the
number of lunch meals and dinner meals projected for the first
month of operation, based on the facts and assumptions
provided. Upon completion, enter the number of lunch meals
and dinner meals in the Sales worksheet.
SalesSchedule B-2Sample CompanySALES FORECAST -
FIRST YEARJan
Ok to change months on this schedule, onlyFebMarAprMayJun
JulAugSepOctNovDecYear 1TotalUnit SalesMidget
Widgets1002003004005007001,0001,5002,0003,0004,0005,0001
8,700Giant Widgets246101420253040506070331--------Unit
Prices [from "Assumptions"]Midget
Widgets$1.001.001.001.001.001.001.001.001.001.001.001.00-
Giant
Widgets200.00200.00200.00200.00200.00200.00200.00200.002
00.00200.00200.00200.00--
0.000.000.000.000.000.000.000.000.000.000.000.00--
0.000.000.000.000.000.000.000.000.000.000.000.00--
0.000.000.000.000.000.000.000.000.000.000.000.00--
0.000.000.000.000.000.000.000.000.000.000.000.00-Total Sales
Midget Widgets100
Don Schwartz: Enter projected Total Sales below ONLY if Unit
Prices above are zero

2003004005007001,0001,5002,0003,0004,0005,000$
18,700Giant
Widgets4008001,2002,0002,8004,0005,0006,0008,00010,00012,
00014,00066,200-000000000000--000000000000--
000000000000--000000000000-
Totals5001,0001,5002,4003,3004,7006,0007,50010,00013,0001
6,00019,000$84,900
CostingSchedule B-4Sample CompanyCOSTING OF GOODS
OR SERVICES
Midget WidgetsGiant Widgets----Unit Price [from
"Assumptions"]$1.00$200.00$0.00$0.00$0.00$0.00Unit Costs,
if applicable (if not applicable, use the alternative "Achievable
Gross Profit Margin%, below)
Don Schwartz: For manufactured goods or services, list variable
direct labor and material costs only, no fixed costsCost of goods
purchased 0.30130.00Total variable cost per
unit$0.30$130.00$0.00$0.00$0.00$0.00Gross profit per
unit$0.70$70.00$0.00$0.00$0.00$0.00Gross profit margin
%70.0%35.0%0.0%0.0%0.0%0.0%Achievable Gross Profit
Margin %
Don Schwartz: If Unit Costing (above) is not applicable, enter
achievable Gross Profit Margin % below (see ReadMe under
"Costing"
CoGSSchedule B-3Sample CompanyCOST OF
GOODS/SERVICES
Don Schwartz: All figures are automatically calculated
JanFebMarAprMayJun JulAugSepOctNovDecYear 1TotalUnit
Sales [from Sales Forecast Sched B-2]Midget
Widgets1002003004005007001000150020003000400050001870
0Giant Widgets246101420253040506070331-0000000000000-

0000000000000-0000000000000-0000000000000Unit Cost
[from Costing Sched B-4]Midget
Widgets$0.30$0.30$0.30$0.30$0.30$0.30$0.30$0.30$0.30$0.30
$0.30$0.30$0.30Giant
Widgets130.00130.00130.00130.00130.00130.00130.00130.001
30.00130.00130.00130.00130.00-
0.000.000.000.000.000.000.000.000.000.000.000.000.00-
0.000.000.000.000.000.000.000.000.000.000.000.000.00-
0.000.000.000.000.000.000.000.000.000.000.000.000.00-
0.000.000.000.000.000.000.000.000.000.000.000.000.00Total
Cost [calculated] Midget
Widgets3060901201502103004506009001,2001,500$5,610Giant
Widgets2605207801,3001,8202,6003,2503,9005,2006,5007,800
9,10043,030-0000000000000-0000000000000-0000000000000-
0000000000000Totals2905808701420197028103550435058007
400900010600$48,640
PayrollSchedule B-5Sample CompanyPROJECTED PAYROLL -
FIRST YEAR
JanFebMarAprMayJun JulAugSepOctNovDecTotalA - Number
of persons in each category (excluding Officers Salaries to be
entered on Income Statement) Use ".5" for each part-time
person
Don Schwartz: Note: If any of these employees are included as
direct labor in the "Costing" schedule, subtract that amount on
line "D", below.
Office staff0.50.51.01.01.01.01.01.01.01.01.01.0Sales
person1.01.01.01.01.01.01.0Category CCategory DCategory
ECategory FB - Average monthly gross pay per full-time (or
equivalent part-time) person, based on hourly wage rates in
your area for each category Office
staff1,0001,0001,0001,0001,0001,0001,0001,0001,0001,0001,00
01,000Sales
person1,0001,0001,0001,0001,0001,0001,000Category

CCategory DCategory ECategory FC - Total (A times B)Office
staff5005001,0001,0001,0001,0001,0001,0001,0001,0001,0001,
000$11,000Sales
person000001,0001,0001,0001,0001,0001,0001,0007,000Catego
ry C0000000000000Category D0000000000000Category
E0000000000000Category
F00000000000005005001,0001,0001,0002,0002,0002,0002,0002
,0002,0002,000$18,000D - Less: any direct labor cost already
included on the "Costing" Schedule B-4 (use Minus
sign)000000000000Total "Other Payroll", to Income
Statement):5005001,0001,0001,0002,0002,0002,0002,0002,0002
,0002,000
AdverSchedule B-6Sample CompanyPROJECTED
ADVERTISING AND PROMOTION - FIRST YEAR
JanFebMarAprMayJun JulAugSepOctNovDecYear
1TotalNewspaper3,0002,0002,0001,0001,0001,00050050050050
050050013,000Radio3,0002,0002,0007,000TV0Trade
shows1,0001,000Other0Other0Other0Totals$6,000$4,000$5,000
$1,000$1,000$1,000$500$500$500$500$500$500$21,000
IncStateSchedule B-1Sample CompanyPROJECTED INCOME
STATEMENT - YEARS 1 AND 2
Do NOT replace figures in white
cellsTotalJanFebMarAprMayJun JulAugSepOctNovDec1st
Year2nd YearSales (per Sched. B-
2)5001,0001,5002,4003,3004,7006,0007,50010,00013,00016,00
019,00084,900275,000100.0%Cost of sales (Sched. B-
3)2905808701,4201,9702,8103,5504,3505,8007,4009,00010,600
48,640153,421
NU: Represents December's Cost of Sales % (100% minus Gross
Profit %) times Sales 55.8%Gross
Profit2104206309801,3301,8902,4503,1504,2005,6007,0008,40

036,260121,57944.2%Gross Profit
%42.0%42.0%42.0%40.8%40.3%40.2%40.8%42.0%42.0%43.1%
43.8%44.2%42.7%44.2%Operating expenses:Officers
salaries5005005005005005005005005005005005006,0009,5003.
5%Other payroll (Sched. B-
5)5005001,0001,0001,0002,0002,0002,0002,0002,0002,0002,00
018,00022,0008.0%Payroll
taxes12%1201201801801803003003003003003003002,8803,780
1.4%Employee
benefits5%50507575751251251251251251251251,2001,5750.6
%Advertising (Sched. B-
6)6,0004,0005,0001,0001,0001,00050050050050050050021,000
7,5002.7%Commissions5%255075120165235300375500650800
9504,24513,7505.0%Depreciation7507507507507507507507507
507507507509,00011,0004.0%Insurance -
liability1501501501501501501501501501501501501,8002,2000
.8%Insurance - casualty
2002002002002002002002002002002002002,4003,0001.1%Leg
al and
accounting1001001001001001001001001001001001001,2001,30
00.5%Rent1,0005005005005005005005005005005005006,5008,
0502.9%Supplies2002002002002002002002002002002002002,4
002,8001.0%Telephone150150150150150150150150150150150
1501,8002,3000.8%Utilities400400400400400400400400400400
4004004,8006,2002.3%Other
000000000000000.0%Other000000000000000.0%Total
operating
expenses10,1457,6709,2805,3255,3706,6106,1756,2506,3756,52
56,6756,82583,22594,95534.5%Profit before interest and
taxes(9,935)(7,250)(8,650)(4,345)(4,040)(4,720)(3,725)(3,100)(
2,175)(925)3251,575(46,965)26,624Less: Interest
expense(175)(175)(175)(175)(175)(175)(175)(175)(175)(175)(1
75)(175)(2,100)(3,000)1.1%Profit before
taxes(10,110)(7,425)(8,825)(4,520)(4,215)(4,895)(3,900)(3,275)
(2,350)(1,100)1501,400(49,065)23,6248.6%Less: income
taxes25%005,906Net

profit(10,110)(7,425)(8,825)(4,520)(4,215)(4,895)(3,900)(3,275
)(2,350)(1,100)1501,400(49,065)17,718Net profit %----------
0.9%7.4%-6.4%
Don Schwartz: Projected profit margins in excess of 10% after
taxes could be unrealistically high
NU: Represents December's Cost of Sales % (100% minus Gross
Profit %) times Sales Sales required to break even (Operating
expenses + Interest expense are assumed to be fixed; Cost of
sales is assumed variable)??
Cash FlowSchedule C-1Sample CompanyPROJECTED CASH
FLOWS - YEARS 1 AND 2
TotalJanFebMarAprMayJun JulAugSepOctNovDec1st Year2nd
YearNet profit [per Income
Statement](10,110)(7,425)(8,825)(4,520)(4,215)(4,895)(3,900)(
3,275)(2,350)(1,100)1501,400(49,065)17,718Add:Depreciation7
507507507507507507507507507507507509,00011,000Less:
Increase in receivables ( - )(1,000)
Don Schwartz: Increases in receivables, inventory, and accounts
payable are based on balance sheet changes
(500)(500)(700)(780)(987)(1,076)(1,182)(1,475)(1,780)(2,002)(
2,168)(14,150)(31,683)Increase in inventory ( -
)(5,000)000(766)(2,459)(2,166)(2,341)(4,244)(4,683)(4,683)(4,
683)(31,024)(6,395)Add:Increase in accts
payable7,490(1,710)1,290(3,450)5508402408001,4501,6001,600
1,60012,3002,593Total cash from
operations(7,870)(8,885)(7,285)(7,920)(4,461)(6,750)(6,152)(5,
249)(5,869)(5,213)(4,185)(3,101)(72,939)(6,767)Cash used for
capital assets:Office equipment(10,000)
Don Schwartz: Use MINUS sign
(10,000)(5,000)Computer network(35,000)(35,000)(5,000)Other

depreciable assets-Total cash for
investment(45,000)00000000000(45,000)(10,000)Cash from
financing activities:Capital paid in by owners40,000
Don Schwartz: Enter financing figures last, and only enough to
result in a relatively small positive ending bank balance
20,000010,0000010,00010,0000010,000100,0000Long-term
borrowing (repaid)30,000
NU: For a startup company, Long-term borrowing should be
limited to 80% of investment in capital assets (above)
Don Schwartz: Increases in receivables, inventory, and accounts
payable are based on balance sheet changes
0000000000030,0000Short-term borrowing
(repaid)000000000000010,000Total cash from
financing70,00020,0000010,0000010,00010,0000010,000130,00
010,000 Net increase
(decrease)17,13011,115(7,285)(7,920)5,539(6,750)(6,152)4,751
4,131(5,213)(4,185)6,89912,061(6,767)Cash - beginning
balance017,13028,24520,96013,04018,57911,8295,67710,42814
,5599,3465,162012,061Cash - ending
balance17,13028,24520,96013,04018,57911,8295,67710,42814,
5599,3465,16212,06112,0615,293--
BalSheet
Don Schwartz: Receivables and Inventory are based on turnover
ratios. However, startup
inventory is at least equal to the first 4 months of Cost of Goods
SoldSchedule A-1Sample CompanyPROJECTED BALANCE
SHEETS - YEARS 1 AND 21st Year2nd
YearBeginningJanFebMarAprMayJun
JulAugSepOctNovDecDecBalancesCash (per Cash
Flow)17,13028,24520,96013,04018,57911,8295,67710,42814,55
99,3465,16212,0615,293Accounts
receivable1,0001,5002,0002,7003,4804,4675,5436,7258,2009,98

011,98214,15045,833Inventory5,0005,0005,0005,0005,7668,224
10,39012,73216,97621,65926,34131,02437,420Other current
assets Total Current Assets-
23,13034,74527,96020,74027,82524,52021,61029,88539,73540,
98543,48557,23588,546Office
equipment10,00010,00010,00010,00010,00010,00010,00010,000
10,00010,00010,00010,00015,000Computer
network35,00035,00035,00035,00035,00035,00035,00035,00035
,00035,00035,00035,00040,000Other depreciable
assets0000000000000 Less: accumulated deprec-750-1,500-
2,250-3,000-3,750-4,500-5,250-6,000-6,750-7,500-8,250-9,000-
20,000 Total Assets-
67,38078,24570,71062,74069,07565,02061,36068,88577,98578,
48580,23593,235123,546Liabilities
Don Schwartz: Accounts Payable = Cost of Sales + operating
expenses other than payroll-related expenses, depreciation and
rent expenseAccounts
payable7,4905,7807,0703,6204,1705,0105,2506,0507,5009,1001
0,70012,30014,893Short-term loans (Cash
Flow)00000000000010,000Long-term liab. (Cash
Flow)30,00030,00030,00030,00030,00030,00030,00030,00030,0
0030,00030,00030,00030,000 Total liabilities-
37,49035,78037,07033,62034,17035,01035,25036,05037,50039,
10040,70042,30054,893Owners' EquityPaid-in capital (Cash
Flow)40,00060,00060,00060,00070,00070,00070,00080,00090,0
0090,00090,000100,000100,000Retained earnings at
beginning of year000000000000-49,065Net profit - current
year-10,110-17,535-26,360-30,880-35,095-39,990-43,890-
47,165-49,515-50,615-50,465-49,06517,718 Total equity-
29,89042,46533,64029,12034,90530,01026,11032,83540,48539,
38539,53550,93568,653Total liabilities & equity-
67,38078,24570,71062,74069,07565,02061,36068,88577,98578,
48580,23593,235123,546--------------
RatiosExhibit DSample CompanyPROJECTED FINANCIAL
STATEMENT RATIOSIndustryYear 1Year 2IndustryRetail -

Sporting GoodsAverageProfitability RatiosGross Profit Margin
(if applicable)42.7%44.2%Gross Profit / SalesNet Profit
MarginNet Loss6.4%Net income / SalesReturn on Assets (aka
ROI)Net Loss14.3%Net income / Total AssetsReturn on
EquityNet Loss25.8%Ne income / Total EquityAsset
Management RatiosReceivables turnover6.06.0Sales / Accounts
ReceivableNumber of days to collect receivables60.860.8365
(days) / Receivable turnover ratioInventory turnover1.64.1Cost
of Sales / InventoryDebt RatioDebt to Net Worth (Debt to
Equity)0.80.8Total Liabilities / Total EquityLiquidity
RatiosCurrent Ratio4.73.6Total Current Assets / Total Current
LiabilitiesQuick Ratio 2.12.1Cash and Accounts Receivable /
Total Current Liabilities
Don Schwartz: For industry averages, refer to a library copy of
Dun and Bradstreet’s Industry Norms and Key Business Ratios
or other similar publication, or go to
http://moneycentral.msn.com.
GraphsAll figures are automatically calculated by formula:To
copy a chart into a Word document, follow the instructions to
the right > > >To copy an Excel chart into a Word document or
PowerPoint:Chart 1 - Projected Sales and ProfitYear 1Year 21.
In Microsoft Excel, click the chart you want to
copy.Sales84,900275,000Profit(49,065)17,7182. Click Copy
Chart 2 - Capital RequirementsYear 1Year 24. Click where you
want to paste the chart.Paid-
in100,000100,000Borrowed30,00040,0005. On the Edit menu in
Word or PowerPoint, click Paste Special.Chart 3 - Debt / Equity
Relationship Year 1Year 26. In the As box, click Microsoft
Excel Chart Object.Total debt42,30054,893Total
equity50,93568,6537. Click "Paste" button. (NOT "Paste Link")
The chart is pasted as an embedded object.Sample - Chart 1:
Projected Sales and Profit (Loss)
Sales Year 1 Year 2 84900 275000 Profit
Year 1 Year 2 -49065 17717.960526315801

Capital Requirements
Paid-in Year 1 Year 2 100000 100000 Borrowed
Year 1 Year 2 30000 40000
Total Debt and Equity
Total debtYear 1 Year 2 42300 54893.42105263158
Total equity Year 1 Year 2 50935
68652.960526315801
javascript:HelpPopup('oftip9.hlp','IDH_MSOTCID_0019_1');jav
ascript:HelpPopup('oftip9.hlp','IDH_MSOTCID_0019_1');
BS formulasSample CompanyBalance Sheet CalculationsThis
worksheet is for audit trail purposes only, and should not be
incorporated in the business planCALCULATION
FORMULASCashFrom "Cash - ending balance" at end of Cash
Flow StatementAccounts receivableSales per Income Statement
divided by Accts Recvble turnover ratioInventoryAnnualized
Cost of Goods Sold divided by inventory turnover ratioOffice
equipmentPrior balance minus any increase from Cash Flow
StatementComputer networkPrior balance minus any increase
from Cash Flow StatementOther depreciable assetsPrior balance
minus any increase from Cash Flow StatementLess: accumulated
depr.Prior balance plus Depreciation from Cash Flow
StatementAccounts payableOne month's Cost of Sales (COGS)
plus operating expenses otherthan payroll-related expenses,
depreciation, and rent expenseShort-term loanPrior balance plus

any increase (or decrease) from Cash Flow StatementLong-term
liabilitiesPrior balance plus any increase (or decrease) from
Cash Flow StatementPaid-in capital Prior balance plus increase
from Cash Flow StatementRetained earnings - beginningPrior
balance plus Net profit - current periodNet profit - current
periodFrom Income Statement

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