2. 2
Table of Contents
1.0 Executive Summary
Highlights
1.1 Objectives
1.2 Mission
1.3 Keys to Success
2.0 Company Summary
2.1 Company Ownership
2.2 Company History
Past Performance
Past Performance
2.3 Company Locations and Facilities
3.0 Products
3.1 Product Description
3.2 Sales Literature
3.3 Sourcing
3.4 Technology
4.0 Market Analysis Summary
4.1 Market Segmentation
4.2 Industry Analysis
4.3.Distribution Channels
5.0 Strategy and Implementation Summary
5.1 Strategy Pyramids
5.2 Value Proposition
5.3 Competitive Edge
5.4 Marketing Strategy
5.4.1 Pricing Strategy
5.4.2 Promotion Strategy
5.5 Sales Strategy
5.5.1 Sales Forecast
Sales Monthly
Sales Forecast
6.0 Management Summary
6.1 Organizational Structure
6.2 Management Team
6.3 Management Team Gaps
6.4 Personnel Plan
Personnel
7.0 Financial Plan
7.1 Projected Profit and Loss
Profit and Loss
7.5 Projected Cash Flow
Cash
Cash Flow
7.6 Projected Balance Sheet
Balance Sheet
7.7 Business Ratios
Ratios
3. 3
1. Executive Summary
1.0 Executive Summary
Patwoods Processing Inc. has been riding a growth spurt, having expanded the market to Luzon and
penetrating the Export Market. Bolstered by the development of new designs for decorative and
carved mouldings, we were able to develop new products which target the high end market.
This annual business plan calls for another year of accelerated growth. Because our sales growth has
brought some working capital implications, we are carefully planning to manage growth and provide
for steady cash flow.
We also expect to be profitable as never before. In all, this plan is a healthy company with good
growth prospects, looking to manage its orderly growth in the near future.
Highlights
-
5,000,000.00
10,000,000.00
15,000,000.00
20,000,000.00
25,000,000.00
30,000,000.00
35,000,000.00
40,000,000.00
Jan-Mar Apr-Jun Jul-Sep Oct-Dec
Projected Conso IS-2007
Sales
Gross Profit
Net Income
1.1 Objectives
1. Focus on the new products to increase monthly sales beyond the P10 million mark by 2007.
2. Maintain a gross margin close to 30%.
3. Increase the net profit to more than 15% of sales by 2007.
1.2 Mission
Patwoods Processing Inc helps create elegant homes with well-designed woodworking products that
complements the over-all interior design of homes, in which people can enjoy living in style. We are
sensitive to the look and feel of good wood. We always provide the best possible value to our
customers who care about quality woodworking products, and we want every peso spent with us to
be well spent. We also create and nurture a healthy, creative, respectful, and fun office and plant
environment, in which our employees are fairly compensated and encouraged to respect the
customer and the quality of the product we produce. We seek fair and responsible profit, enough to
keep the company financially healthy for the long term and to fairly compensate owners and investors
for their money and risk.
4. 4
1.3 Keys to Success
Uncompromising commitment to the quality of the end product: quality wood, quality
workmanship, quality design, quality of end result.
Successful niche marketing: we need to find the quality-conscious customer in the right
channels, and we need to make sure that customer can find us.
5. 5
2. Company Summary
2.0 Company Summary
Patwoods Processing Inc. is a privately-owned manufacturer of quality woodworking products who
care about elegant interior design of homes. Our customers are in all levels of business that can
afford very high quality woodworking products, plus a growing portion of high-end elegant homes.
2.1 Company Ownership
Patwoods Processing Inc is a corporation, one of the companies owned by the Amadeo family. It was
created in 1995 and the purpose was to process the trees grown by a tree farm also owned by the
Amadeo family, the Industrial Tree Plantation.
2.2 Company History
In the height of rampant illegal logging operation in the virgin forests land of Mindanao sometime
in1989, Mr.Patricio Amadeo saw an opportunity in the need to grow trees. This was the time that
Phela Resources Corporation was born. He converted more than 3,000 hectares of barren land into
an Industrial Tree Plantation of Gmelina arborea R. Br.trees species.
Phela Resources Corporation-Wood Processing Division, manufacturer of mouldings, kitchen cabinet
doors, closet doors, french windows, airvents and other woodworking products came into existence
way back in 1995. The company’s aim was to introduce the Gmelina trees as an alternative to
naturally grown trees like Lauan, Apitong, Yakal and other forest trees. Last 2006, Phela Resources
Corporation-Wood Processing Division was separated and became a new company under Patwoods
Processing Inc, to honor its founder, Mr. Patricio Amadeo.
2.3 Past Performance
Profitability and working capital were problems during our recent growth, but we believe we now have
costs and cash flow under control.
(1,000,000.00)
-
1,000,000.00
2,000,000.00
3,000,000.00
4,000,000.00
5,000,000.00
6,000,000.00
7,000,000.00
8,000,000.00
9,000,000.00
APRIL MAY JUNE JULY AUGUST SEPTEMBER
NET SALES
GROSS PROFIT
NET INCOME
2.4 Company Locations and Facilities
Patwoods Processing Inc is located in MCDC Compound, Purok Masikap,Lagao, Gen.Santos City.
The facility includes sawmill, kiln driers, woodworking plant, warehouse and office.
6. 6
3. Products
3.0 Products
Patwoods Processing Inc offers very high quality but affordable woodworking products designed to
effectively incorporate elegance into homes. The key to the line are the carved and decorative
mouldings that give homes elegance without the high costs.
3.1 Product Description
Mouldings - also called interior trims or casings. The most common of trims are baseboard, which
covers the joint where the walls meet the floor. Cornice, crown moldings or ceiling trim to cover the
joint between the walls and the ceiling.
To separate different wall treatment moldings are also used as picture rail or chair rails.
a. Base board – as the name implies it is applied at the base of the wall. It is used to separate the
wall from the floor or to cover gaps between them. Sizes available are 1” x 3” x 8’ and 1” x 4” x
8’. Product codes: BB 318, BB 364, BB 04, BB 45, BB 03, BB 48918, BB 41 and BB 46.
b. Cornice Moldings – this molding is used to cover the joint between the ceiling and the walls. In
contemporary construction ceiling trim or Cornice Molding is mainly ornamental, it can also be
used to hide flaws or disguise imperfections. Crown molding is a wide, thin trim that projects out
from the junction of the ceiling and walls; it comes in various widths and angles. Product codes:
(1 x 1) M15, M33 & M07, (1 x 2) M04, M08, M17, (1 x 3) M11, M01, C375, C376, C31, (1 x 4)
M25, C479, C483, M01, M22, (1 x 5) C581, M23, C565.
c. Door Casing & Window Casing – these types of moldings are used to give finer details on the
window jamb and doorjamb. Its main function is mainly ornamental and to hide flaws. Product
codes: (1 x 1) WC 138, (1 x 2) DC21, DC22, DC23, DC24, M02, M14, M16, S55 (1 x 3) DC31.
d. Picture Rail & Chair Rails & Ceiling clips – Traditional interior finishing used picture rails, as the
name connotes, it is used to hang picture frames in the wall. Chair rails or Cap moldings was
originally installed in dining rooms or other rooms where chairs are being moved about, to protect
the walls from being scraped. Ceiling clips are usually used to hide flaws in the ceiling or cover
the gaps. Product Codes: (1 x 1) Spacer 04, M31, S15, M09, M194, M 13.
e. Picture Frame – is used to frame pictures. Product codes: (1 x 1) PF04, PF17, (1 x 2) PF05.
d. Carved Moldings – These are usually crown moldings and are hand carved. These moldings
are for mainly decorative / ornamental.
Cabinet Doors - models are Cabinet Door Panel (CDW), Cabinet Door Glass (CDG) and Cabinet
Door Open Glass (CDO). Our Cabinet doors are unique from others because of its slip in method of
installing glass. CDG (French type cabinet door) and the CDO Cabinet Door models are very
convenient and easy to install.
3 Easy Steps in installing glass in CDG and CDO
1. Remove the removable glass clip
2. Slip the glass in.
3. Return the glass clip.
Sizes available are 12” x 24”, 14” x 24”, 15” x 24”, 16” x 24” and 18” x 24
7. 7
3.2 Sales Literature
For 2007 we plan to develop a company catalog, which would include some other products for the
same target customers. The focus will be the carved and decorative mouldings catalog, with kitchen
cabinet doors, closet doors, French windows and air ventilation ducts.
3.3 Sourcing
Our Gen.Santos location is a distinct advantage for local wood. We can buy higher quality Gmelina
than either of our competitors. Since our sales increased over the last two years, we have been able
to buy at better prices, because of higher volumes.
We work with local wood suppliers. Mr. Orlando Yumul supplies most of our Gmelina. His source is
from Sarangani Province. This is a good, stable supplier. There are numerous small sawmills all over
South Cotabato, Sarangani Province and Cotabato City and they are a good second source for filling
in when our main suppliers were short.
3.4 Technology
From the tree farm, G’melina trees are cut and transported to the sawmill where it will be milled to
desired dimensions. After milling the G’melina lumber will be placed inside the Kiln Drier. Drying time
usually takes 30-60 days. When the lumber has attained the Moisture Content (MC) of 12% and
below, it will now be transferred to the wood processing section where it will be classified, planed,
ripped, and finger-jointed according to its use. Some lumber may be directly processed into
mouldings, while others will undergo additional processes like laminating, composing, shaping and
assembly.
8. 8
4. Market Analysis Summary
4.0 Market Analysis Summary
Our target market is a person who wants to have an elegant home, combined with an old fashioned
sense of fine woods and fine woodworking. This person may be building a new home or making
home improvements. The common bond is the appreciation of quality, and the lack of price
constraints.
4.1 Market Segmentation
Well-connected home owners who are in medium to high end market.
Interior designers and General Contractors whose clients are the above targeted audience,
well-connected home owners. Professionals of all types are becoming savvier as the
competition becomes fiercer. Any designer or contractor who not only drives around his
immediate area to find quality fixtures, additions and accessories for their client’s home, but is
able to search nationwide has an edge on their competition.
4.2 Industry Analysis
The woodworking industry has undergone a great deal of change in the past 10 years. The growth of
Do-It-Yourself stores (like CitiHardware with 21 branches all over Visayas and Mindanao and soon to
open in Manila and Wilcon Builders Depot with 13 branches in Manila and 1 in Davao) made the
woodworking products dominant as home improvement became a popular weekend pastime for
people wanting to improve their living conditions (and the value of their house).
4.3 Distribution Channels
Our main distributors are the Do-It-Yourself stores in the Philippines. Our number one distributor is
the CitiHardware chain of stores. They have twenty-one branches all over Visayas and Mindanao and
an expansion to Manila is on the works. Next is the Wilcon Builder’s Supply which has eleven stores
in Manila and one in Davao.
9. 9
Local Sales-January to November 2006
1% 4%
5%
1%
56%
6%
0%1%
4%
0%
22% AHD
CAT
COH
CPBS
CITIHARDWARE
HE HARDWARE
MELY'S
ORO TRACIS
ORTIGAS HOME DEPOT
SOLID GOLD
WBS
10. 10
5. Strategy and Implementation Summary
5.0 Strategy and Implementation Summary
We focus on a special kind of customer, the person who wants very high quality woodworking
products to work beautifully with their homes. Our customer might be building or improving their
homes. What is important to the customer is elegance, fine workmanship, ease of use, design and
practicality.
Our marketing strategy assumes that we need to go into specialty channels to address our target
customer's needs. We position as the highest quality, offering status and prestige levels of purchase.
The product strategy is also based on quality, in this case the intersection of technical understanding
with very high quality woodworking and professional materials, and workmanship.
5.1 Strategy Pyramids
Our main strategy at Patwoods Processing Inc. is to position ourselves at the top of the quality scale,
featuring our combination of technology and fine old-fashioned woodworking, for the buyer who wants
the best quality at practical price. Tactics underneath that strategy include research and development
related to new designs and new technology, choosing the right channels of distribution, and
communicating our quality position to the market.
5.2 Value Proposition
Patwoods Processing Inc gives the discriminating home owners, interior designers and general
contractor, who cares about design and quality woodworking products, at a relatively practical price.
5.3 Competitive Edge
Our competitive edge is our dominance in the woodworking industry using G’melina wood. We are
the pioneer in developing G’melina arborea, a planted specie as an alternative to naturally grown
trees like Lauan,Apitong and Yakal. Local and export market has accepted G’melina wood
commercially and we have somehow paved the way for protecting our forests.
5.4 Marketing Strategy
Our products are positioned very carefully: these are high-quality woodworking products combining
workmanship and design for the customer who understands quality and elegance.
Our marketing strategy is providing home owners, interior designers and general contractors with a
wide range of woodworking products from plain mouldings, kitchen cabinet doors to the high-end
carved and decorative products without the very high costs of building or improving a home.
11. 11
5.4.1 Pricing Strategy
We will maintain our pricing position as quality with practicality. We are the best product available, for
the most discriminating consumer with a budget.
5.4.2 Promotion Strategy
Our most important vehicles for sales promotion are the brochures and outdoor billboards.
5.5 Sales Strategy
Our strategy focuses first on maintaining the identity with the buyer who appreciates the best
available quality without the high costs. We've been able to find these customers using direct sales to
distributors.
Our work with distributors has been promising. We hope to continue the relationship with distributors
selling directly to costumer, even though this takes working capital to support receivables.
5.5.1 Sales Forecast
We are expecting to increase sales grow from P80 million last year to P136M in the next year, which
is almost doubling in size. The growth forecast is in line with our last year, and is relatively high for
our industry because we are developing new products. In 2007 we expect growth closer to 100% per
year, to a projected total of more than 136 million.
We are projecting significant change in the product line, or in the proportion between different lines.
The key to our growth is to make sure that all production lines are operating at 80-100% capacity.
Sales Monthly
-
2,000,000.00
4,000,000.00
6,000,000.00
8,000,000.00
10,000,000.00
12,000,000.00
14,000,000.00
Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec
Projected Consolidated Sales
RCC
Airvents
TRD Mouldings
RP Mouldings
Scroll Carved Mouldings
Carved Mouldings
Acacia Lamina
Pallets
Laminated Products
Finger Jointed Sticks (Export)
French Window
Closet Door
Cabinet Door
Plain Mouldings
12. 12
6. Management Summary
6.0 Management Summary
We are a small-medium enterprise company owned and operated by Eduardo O Amadeo. Eduardo is
a hands-on President of the company by managing the daily operations of the woodworking plant.
Management style reflects the participation of the owners. The company respects its community of
co-workers and treats all workers well. We attempt to develop and nurture the company as
community.
6.1 Organizational Structure
Eduardo O. Amadeo, President, is responsible for overall business management. Our department
heads of Woodworking, Procurement, and Marketing report directly to Eduardo.
As an owner, Eduardo Amadeo develops business strategy and long-term plans. Eduardo is strong
on product know-how, technology, management and business know-how.
6.2 Management Team
Eduardo O Amadeo, President, have successfully managed other companies in the Amadeo Group
of Companies like Amadeo Fishing Corporation and EOA Lumber.
Marvin Cabangon, Woodworking Department Head, was the former head of Marketing Department.
He was responsible for introducing new designs for decorative mouldings like the SC,RP and TRD.
Loida Dofiles, Marketing Department Head, was the former Accounts Officer. She has the degree of
Bachelor of Science in Business Administration major in Accounting.
6.3 Management Team Gaps
We depend on our professionals for some key management help. We don't have a strong background
in preventive maintenance for our woodworking machines.
As we grow we will need to develop more manufacturing technique, more mass production.
6.4 Personnel Plan
The personnel table assumes slow growth in employees. We need to have a stronger benefits policy
(with medical and insurance, plus a profit sharing plan from the net income per month) and very low
turnover.
Salaries are generally in accordance with Labor Code, so we ultimately pay what is really due for our
people.
As we grow, we expect to see steady increases in our personnel to match the increases in sales.
14. 14
7. Financial Plan
7.0 Financial Plan
The financial picture is quite encouraging. We have an existing credit line with International Exchange
Bank with limit of P5M. The credit line is easily supported by assets.
7.1 Projected Profit and Loss
We do expect a significant increase in profitability this year, and in the future, because we have
learned how to deal with the increasing sales levels of selling through channels. Despite the lower
profitability levels of recent years, we expect to pass 15% in 2007.
-
5,000,000.00
10,000,000.00
15,000,000.00
20,000,000.00
25,000,000.00
30,000,000.00
35,000,000.00
40,000,000.00
Jan-Mar Apr-Jun Jul-Sep Oct-Dec
Projected Conso IS-2007
Sales
Gross Profit
Net Income Before Incentives
15. 15
Pro Forma Profit and Loss
Jan-Mar Apr-Jun Jul-Sep Oct-Nov TOTAL
Sales 27,003,802.61 32,929,370.14 36,333,883.09 39,630,786.35 135,897,842.18
Raw Materials 10,264,410.18 12,463,783.19 13,750,501.72 14,992,467.69 51,471,162.78
Direct Labor 5,577,298.30 6,686,128.24 7,443,642.79 8,220,556.26 27,927,625.59
Manufacturing Overhead 3,166,087.24 3,853,737.77 4,244,962.43 4,627,746.05 15,892,533.49
Cost of Goods Sold 19,007,795.73 23,003,649.20 25,439,106.93 27,840,769.99 95,291,321.85
Gross Margin 7,996,006.88 9,925,720.94 10,894,776.16 11,790,016.35 40,606,520.33
Gross Margin % 30% 30% 30% 30% 30%
Operating Expenses:
Sales and Marketing Expenses:
Sales and Marketing Payroll 328,581.46 377,127.22 394,517.61 408,355.10 1,508,581.40
Freight and Handling 450,000.00 495,000.00 544,500.00 598,950.00 2,088,450.00
Advertising/Promotion 150,000.00 150,000.00 150,000.00 150,000.00 600,000.00
Travel 50,000.00 50,000.00 50,000.00 50,000.00 200,000.00
Total Sales and Marketing Expenses 978,581.46 1,072,127.22 1,139,017.61 1,207,305.10 4,397,031.40
Sales and Marketing % 4% 3% 3% 3% 3%
General and Administrative Expenses:
General and Administrative Payroll 624,681.46 673,227.22 690,617.61 704,455.10 2,692,981.40
Depreciation 100,000.00 100,000.00 100,000.00 100,000.00 400,000.00
Repairs and Maintenance 1,000,000.00 1,100,000.00 1,210,000.00 1,331,000.00 4,641,000.00
Representation 50,000.00 55,000.00 60,500.00 66,550.00 232,050.00
Other General and Administrative
Expenses 820,028.45 884,459.28 1,074,053.79 1,298,869.46 4,077,410.98
Total General and Administrative
Expenses 2,594,709.91 2,812,686.50 3,135,171.40 3,500,874.56 12,043,442.38
General and Administrative % 10% 9% 9% 9% 9%
Other Expenses:
Contract/Consultants 60,000.00 60,000.00 60,000.00 60,000.00 240,000.00
Total Other Expenses 60,000.00 60,000.00 60,000.00 60,000.00 240,000.00
Other % 0.22% 0.18% 0.17% 0.15% 0.18%
Total Operating Expenses 3,633,291.38 3,944,813.71 4,334,189.02 4,768,179.66 16,680,473.77
Profit Before Interest and Taxes 4,362,715.50 5,980,907.23 6,560,587.14 7,021,836.69 23,926,046.55
Interest Expense 1,000,000.00 880,000.00 774,400.00 681,472.00 3,335,872.00
Taxes Incurred 60,000.00 60,000.00 60,000.00 60,000.00 60,000.00
Net Profit 3,302,715.50 5,040,907.23 5,726,187.14 6,280,364.69 20,530,174.55
Net Profit/Sales 12% 15% 16% 16% 15%
16. 16
7.2 Projected Cash Flow
Although we expect to be more profitable in 2007, we still have drains on the cash flow. We need to
pay significant amount of liabilities. Because of our increased sales through channels, and necessary
increase in inventory levels, we need to increase working capital. We plan to extend our credit line to
cover as much as P5M in short-term credit, backed by receivables and inventory.
-
2,000,000.00
4,000,000.00
6,000,000.00
8,000,000.00
10,000,000.00
12,000,000.00
JAN-MAR APR-JUN JUL-SEP OCT-DEC
Cash Flow-2007
NET CASH FLOW
CASH BALANCE
17. 17
PROJECTED CASH FLOW STATEMENT
FOR THE YEAR 2007
JAN-MAR APR-JUN JUL-SEP OCT-DEC TOTAL
CASH BEGINNING BALANCE DECEMBER 2006 (988,716.54) 1,485,443.96 2,783,489.09 5,161,134.68 (988,716.54)
CASH RECEIVED
CASH FROM OPERATIONS
1. Cash Sales 1,054,281.63 1,388,807.51 1,559,033.15 1,723,878.32 5,726,000.61
2. Cash from Receivables-Present Quarter 10,705,698.05 7,777,322.04 8,730,585.66 9,653,718.58 36,867,324.33
3. Cash from Receivables-Previous Quarter 2,530,275.91 3,333,138.02 3,741,679.57 9,605,093.50
Subtotal Cash from Operations 11,759,979.68 11,696,405.46 13,622,756.84 15,119,276.46 52,198,418.44
ADDITIONAL CASH RECEIVED
1. Trade Checks Rediscounting 11,597,097.93 15,276,882.58 17,149,364.70 18,962,661.49 62,986,006.70
2. EXAL 5,918,170.00 5,153,220.00 5,153,220.00 5,153,220.00 21,377,830.00
Subtotal Additional Cash Received 17,515,267.93 20,430,102.58 22,302,584.70 24,115,881.49 84,363,836.70
TOTAL CASH RECEIVED 29,275,247.61 32,126,508.04 35,925,341.53 39,235,157.95 136,562,255.14
EXPENDITURES
EXPENDITURES FROM OPERATIONS
1. Purchases 10,264,410.18 12,463,783.19 13,750,501.72 14,992,467.69 51,471,162.78
3. Direct Labor 5,577,298.30 6,686,128.24 7,443,642.79 8,220,556.26 27,927,625.59
4 Manufacturing Overhead (Net of Depreciation) 3,166,087.24 3,853,737.77 4,244,962.43 4,627,746.05 15,892,533.49
5. Marketing and Administrative Expenses 3,573,291.38 3,884,813.71 4,274,189.02 4,708,179.66 16,440,473.77
Subtotal Expenditures from Operations 22,581,087.11 26,888,462.91 29,713,295.95 32,548,949.66 111,731,795.63
ADDITIONAL CASH SPENT
1. Other Liabilities Principal Repayment 3,000,000.00 3,000,000.00 3,000,000.00 3,000,000.00 12,000,000.00
2. Payment of Interest Expense 1,000,000.00 880,000.00 774,400.00 681,472.00 3,335,872.00
3. Payment of Taxes 60,000.00 60,000.00 60,000.00 60,000.00 240,000.00
4. Purchase Warehouse Inventory System 100,000.00 100,000.00
5. Purchase of Electronic DTR System 60,000.00 60,000.00
Subtotal Additional Cash Spent 4,220,000.00 3,940,000.00 3,834,400.00 3,741,472.00 15,735,872.00
TOTAL CASH SPENT 26,801,087.11 30,828,462.91 33,547,695.95 36,290,421.66 127,467,667.63
NET CASH FLOW 2,474,160.50 1,298,045.13 2,377,645.58 2,944,736.30 9,094,587.51
CASH BALANCE 1,485,443.96 2,783,489.09 5,161,134.68 8,105,870.97 8,105,870.97
18. 18
7.3 Pro-forma Balance Sheet
Our projected balance sheet shows an increase in net worth to more than P42M in 2007, at which
point we expect to be making 15% profit on sales of P 136 million. With the present financial
projections we will be careful in supporting our working capital credit line, because we have to grow
receivables and inventory to support growth in sales through channels.
Pro-forma Balance Sheet
Assets
Current Assets
Cash 8,105,870.97
Accounts Receivable 4,137,307.96
Notes Receivable 6,000,000.00
Inventory 18,000,000.00
Other Current Assets 5,500,000.00
Total Current Assets 41,743,178.93
Long-term Assets
Long-term Assets 25,954,151.22
Accumulated Depreciation 3,669,530.50
Total Long-term Assets 22,284,620.72
Total Assets 64,027,799.65
Liabilities and Capital
Current Liabilities
Accounts Payable 513,520.06
Current Borrowing 5,376,034.91
Other Current Liabilities 4,814,836.25
Subtotal Current Liabilities 10,704,391.22
Long-term Liabilities 11,276,521.65
Total Liabilities 21,980,912.87
Stockholder's Equity
Retained Earnings 21,516,712.23
Projected Net Income 21,317,441.91
Total Stockholder's Equity 42,834,154.14
Total Liabilities and Stockholder's
Equity 64,815,067.01
Net Worth (A-L) 42,046,886.78
19. 19
7.4 Business Ratios
Our ratios look healthy and solid. Gross margin is projected to be at 30%, return on assets getting to
about 37%, and return on equity at 48% or better. Debt and liquidity ratios also look tough, with debt
to net worth running at more than .51 to one. The projections, if we make them, are manageable.
PATWOODS PROCESSING INC.
FINANCIAL HIGHLIGHTS 2007
1 CONSOLIDATED NET INCOME P 20,530,174.55
2 RATIO ANALYSIS
2.1 Liquidity Ratio
a) Current Ratio current assets (exc. adv) 36,243,178.93 3.39
current liabilities 10,704,391.22
b) Quick or Acid Test Ratio cash + mark'ble sec. + re'bles 18,243,178.93 1.70
current liabilities 10,704,391.22
2.2 Working Capital Ratio
a) Receivable Turnover net credit sales 108,794,011.57 26.30
average receivables 4,137,307.96
b) Inventory Turnover cost of goods sold 93,705,479.99 5.21
average inventory 18,000,000.00
c) Number of days in inventory working days 30.00 5.76
inventory turnover 5.21
d) Number of days in receivables working days 30.00 1.14
receivable turnover 26.30
2.3 Profitability Ratios (Tests of Profitability)
a) Return on Assets income before interest & taxes 23,926,046.55 0.37
average total assets 64,027,799.65
=
It measures the number of times that the current liabilities could be paid with the
available current assets.
=
The firm's paying ability in the very, very near term.
The time required to complete one (1) collection cycle from the time
receivables are recorded, then collected, to the time new receivables are
recorded again.
=
=
It measures the number of times that inventory is replaced during the period.
=
=
=
A measure of operating effeciency. It indicates how well the firm's management
has used the assets under its control to generate income.
20. 20
b) Return on Owners' Equity net income 20,530,174.55 0.48
ave. owners' equity 42,834,154.14
2.4 Leverage Ratios (Tests of Solvency)
a) Debt Ratio total liabilities 21,980,912.87 0.34
total assets 64,027,799.65
b) Equity Ratio total owners' equity 42,834,154.14 0.67
total assets 64,027,799.65
c) Debt to Equity Ratio total Liabilities 21,980,912.87 0.51
total owners' equity 42,834,154.14
d) Times Interest Earned income before tax + int. exp 27,261,918.55 5.93
interest expense 4,597,151.29
=
=
=
=
=
Measures the amount earned on the owners' investment.
Indicates the percentage of total assets provided by creditors.
Indicates the percentage of total assets provided by the owners.
Determines the amount provided by creditors relative to that provided by the
owners.
Determines the extent to which operations cover interest expense.
21. 21
Annexes
a.) Price Masterlist
b.) Comparative Sales 2005 and 2006
c.) Comparative Sales 2005 and 2006 Per Product-Graph
d.) Comparative Total Sales 2005 and 2006-Graph
e.) Comparative Sales Woodworking Department 2005 and 2006-Graph
f.) Comparative Sales RPD 2005 and 2006-Graph
g.) Schedule of Production-Woodworking Department
h.) Schedule of Production-RPD
i.) Updated List of Employees
j.) Strategies and Action Program 2007
