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University of Phoenix Faculty MaterialFinancial Prospectus Expec.docx
- 1. University of Phoenix Faculty Material Financial Prospectus Expectations Prepare a 1,950- to 2,500-word paper with the following components of a financial prospectus for your venture. The Financial Prospectus must include the information you provided in the Venture Concepts Paper and Venture Budgeting and Forecasting Paper. The information from your previous assignments must be revised, as necessary, based on material covered in this class. Organize your prospectus into the following order: 1. Description of Venture 2. Development Concept 3. Management Biographies 4. Competitive Product or Service Statement (Market Analysis) 5. Construction and Preopening Budget 6. Operating Pro-Forma (Budget) 7. Samples of Financial Statements to be Used 8. Summary of Proposed Investment Terms 9. Return on Investment Analysis 10. Statement of the Viability of the Venture as an Investment An explanation of each component of the prospectus may be found in the description of terms below. Description of Terms 1. Description of Venture a. An introductory illustration of the venture, with an overview of the brand and the product or service to be offered
- 2. b. Details of the product or service are covered in item 4. 2. Development Concept a. The description focuses on components that must be built or created to support the venture. b. Include the components of any physical structure, equipment, or anything that requires development investment. 3. Management Biographies a. Use one page or less to describe the background of each of the principle owners. b. If this venture requires special technical expertise, include the biographies of whoever is going to bring this needed expertise to the organization. 4. Competitive Product or Service Statement a. A market analysis to show how this venture’s product or service competes with similar products or services in its market b. Include how the product or service may be produced efficiently by this venture to achieve targeted profit margins. 5. Construction and Preopening Budget a. The budget in the virtual organization, Kudler Foods, may be used as a model for this portion. b. Include all of the costs associated with getting the venture to the point of performing its first sale. The budget, however, must include enough working capital to pay for its operations until the net profits may cover these expenses. 6. Operating Pro-Forma a. The operating budget for the first 12 months that this venture will be operating after startup and training periods b. If the venture requires phased operations when it first opens, these first few months need not be included in the pro-forma so that the pro-forma may illustrate a typical 12-month period as a new venture. 7. Samples of Financial Statements to be Used
- 3. a. An inventory of the financial statements that will be used to measure the performance of the venture, using data from the pro-forma b. Include an Income Statement, Balance Sheet, and any other financial statements that would be significant and appropriate to illustrating the success of this venture. 8. Summary of Proposed Investment Terms a. A description of how investors will benefit from this venture 1) The capitalization plan of Kudler Foods virtual organization shows how the venture capital partners will receive there investment back as soon as 80% of the venture’s net profits may pay it, and then 10% of the net profits of the venture until they are bought out or the venture is dissolved. b. A description of what levels of investment will be accepted, if there are minimum or maximum levels of investment. 1) Privately held ventures usually offer membership units in a limited liability company at amounts equal to approximately 3% of the total startup cost, or whatever calculates to a round number such as $10,000 or $50,000. 2) Publicly traded ventures offer shares of stock typically offered at a price that is the value of the venture once it is operational divided by the amount of shares to be in inventory, which is usually 1,000,000. 9. Return on Investment Analysis a. An illustration of how much investors will earn on the money that they invest in this venture b. This analysis typically begins with a payback analysis, which illustrates how soon the investors will be paid back their initial investment. c. After illustrating how soon the investor will be paid back and what dividends will be received according to the pro-forma, the
- 4. actual ROI is expressed as a percentage using the following calculation: [annual dividends] / [initial investment]. 10. Statement of the Viability of the Venture as an Investment a. The selling statement that convinces venture capitalists and banks to invest in or loan money to the venture b. Include statements that confirm the feasibility of the pro- forma and statements that confirm how realistic the startup budget is. Running Head: Forecast Financials 1 Forecast Financials 6 Forecasted Financials Forecasted Financials would help the company to estimate its performance over the first few years. The forecast income statement will make it easy to tell the forecasted income in the first few years. On the other hand, the projected statement of financial position gives a reflection of the entire future financial performance and the general nature of the business as a whole (Caux, 2005). This is an illustration of how Kudler venture would perform. It gives an estimation of revenues and expenses and postulate of profit and loss. Going by the industry standards it is estimated that the business in the first year of operation will make the quoted volume of sales. This is based on the industry standards but an allowance for variance of 20% to the lower is provided for ( Association for Financial Professionals, 2006). The expenses likely to be incurred during the operation in the first year include wages and salaries, insurance, real estate (RE) taxes, maintenance, advertising, research and development, rents, interest on bank notes and capital venture loan. All these
- 5. details are summarized in the table below. Kudler Forecast Budget Income Statement (First Year of Operation) $ $ Sales 3,001,115 Cost of Goods Sold (1,200,669) Gross Profit 1,800,446 Wages and Salaries 222,000 Insurance 25,000 RE Taxes 12,000 Utilities 10,000
- 6. Maintenance 25,000 Advertising 100,000 R & D 30,000 Rent 24,000 Bank Loan Interest 152,528.67 Depreciation 36,000 Interest on Venture Capital Loan 420,859.73 (1,057,388) Net Income 743,058 The balance sheet of Kudler is expected to look as follows. It is estimated that at the end of the first year the firm will have accumulated some accounts payable and a depreciation charge
- 7. against its assets. Kudler Balance Sheet (First Year of Operation) $ $ Cash Accounts Payable 192,609 Accounts Receivable Accumulated Depreciation 36,000 Inventory 10 year 7.5% Long-term Loan (Bal. Fig) 1,953,400.20 5 Year 15% Venture Capital Loan 2,564,422.26 Cash from principal Owners 300,000
- 8. Cash from Venture Capital Partners 600,000 Fixed Assets Net Income 464,446 Total Assets Total Liabilities 752,446 The firm will acquire a 10 year 7.5% bank note of $2,100,000 which will have annual interest obligations. It will also acquire a 5 year 15% venture capital loan of $3,000,000. The schedule for the amortization is given as below. Annual Amortization Schedule for the 10 year 7.5% Bank Note · Annual Schedule Beginning Balance Interest Principal Ending Balance 1 $2,100,000.00 $152,528.67 $146,599.77 $1,953,400.20 2 $1,953,400.20 $141,147.71 $157,980.73 $1,795,419.47 3
- 10. $11,805.80 $287,322.64 $0.00 Annual Amortization Schedule for the 5 year 15% Venture Capital Loan Annual Amortization Schedule Beginning Balance Interest Principal Ending Balance 1 $3,000,000.00 $420,859.73 $435,577.75 $2,564,422.26 2 $2,564,422.26 $350,838.67 $505,598.81 $2,058,823.42 3 $2,058,823.42 $269,561.36 $586,876.12 $1,471,947.29 4 $1,471,947.29 $175,218.36 $681,219.12 $790,728.17 5 $790,728.17 $65,709.31
- 11. $790,728.17 $0.00 Preopening Budget The preopening budget is a n outline that will help the business to predict the total cost of opening the venture. Some of these costs are one-time. Others include initial investments, and operating costs (Bort, 2010). Te budget will also act as a checklist for documenting all resources of Kudler. The resources include those allocated for the startup. Kudler Preopening Budget (First Year of Operation) Amount ($) Amount INVESTIGATORY PROJECT AND SUPERVISION Travel and Miscellaneous 25,000 Development Fee 1,000,000 Appraisal 23,000 Travel Out-of-Pocket 20,0000
- 12. Environmental 13,000 Payroll 125,000 Transportation Study 15,000 SUBTOTAL __1,145,000 Legal 25,000 ________ PROFESSIONAL FEES & CONSTRUCTION SUBTOTAL ___101,000 Architect 14,000 Reimbursable 8,000
- 13. LAND Mechanical & Electrical 38,000 Land 588,000 Structural 45,000 Closing Costs 45,000 Civil 62,000 Brokerage Fees 28,000 Landscaping ____34,000 Legal For Acquisition 15,000 SUBTOTAL __167,000 Survey 18,000
- 14. ________ CONSTRUCTION COSTS SUBTOTAL __694,000 General Contract - Building 100,000 Remodeling Fees 150,000 INITIAL COSTS New Building Construction Fees 1,860,027 Travel & Miscellaneous 12,000 Bond 9,000 Soils 13,650 Builder's Risk 18,000
- 15. Engineering Fees 20,500 Building Permit & Plan Review 28,500 Architectural Fees 16,680 Utility Tap Fees 10,000 Use Permit 10,000 SUBTOTAL 2,075,527 Model / Renderings 14,250 ________ LAND IMPROVEMENTS SUBTOTAL ___87,080 Landscaping : Exterior
- 16. 15,000 Landscaping : Interior 17,260 INTANGIABLES SUBTOTAL _32,260 Accounting 35,000 Permit Expediter 8,000 PROFESSIONAL FEES: FF&E Consulting Fee 16,280 Interior Design 78,000 Liquor License 12,250 Kitchen
- 17. 52,000 Title Insurance 25,000 Out-of-Pocket 8,000 Legal 16,250 SUBTOTAL 130,000 112,780 Furniture, Fixtures & Equipment 729,500 Equipment: General Building Systems 25,000 FINANCING FEES: CONSTRUCTION
- 18. Equipment: Operating 35,000 Interest 573,388.4 Supplies 628,000 Taxes 272,670.3 Pre-Opening 145,000 Insurance 25,000 Working Capital 32,000 ________ Contingency (10%) 190,950 871,058.7 Interest Reserve __4,500
- 19. PROJECT TOTAL 1,785,450 References Association for Financial Professionals. (2006). Cash Flow Forecasting,. Bort, R. (2010). , "Medium-Term Funds Flow Forecasting", Corporate Cash Management Handbook, Warren Gorham & Lamont, . Caux, T. d. (2005). , "Cash Forecasting", Treasurer's Companion, Association of Corporate Treasurers. Running head: Business Conceptual Venture 1 4 Business Conceptual Venture One conceptual small business venture which I would be willing to plan and operate for this particular assignment is a fast food restaurant. In order to start off, I would require a restaurant, heating system, ventilator, boiling equipment, some initial fund capital, some customers among other things. For the restaurant we will need the following: a scullery sink, hand washing sink, refrigerator, convection oven, a preparation table. We will in addition to all these need an ice machine. I will be willing to take not less than five employees. I would require facilities for this restaurant such as private dining, and washrooms. Additionally I will require service counter and the kitchen. The kitchen I intend to have is an open one. The wash rooms will always be kept as tidy as possible and at full service
- 20. of water facilities. The restaurant will also be with adequate lighting systems, decorations, furniture and so on. For customers who will need privacy of handling, there will be private dining halls for them. The customers will order for food through the counter upon paying cash. The bill will be processed and the customer will wait to be served with food. The target customer demographics as far as the operations of this restaurant will be concerned will be to attract the children which imply that the advertisements will be based on children attraction. Based on this the advertisements will be made on TV and will bear colorful cartoons, niceties and other delicacies. Additionally the advertisements will bear pizzas and burgers. The advertisements will be set such that everyday there will appear a different cartoon. We will maintain a secret recipe and the price of the delicacies and other meals of the restaurant will be born in the advertisements. Given the strict Federal regulations as far as sales of alcoholic beverages are concerned, the restaurant will have two divisions. The first division will serve strictly customers who are aged below eighteen and the other side will host those of the age of the majority. Shortly after starting the operations the restaurant will venture into casino business and other gambling errands such as snooker games and pool tables. Once in a while we will be engaging our clients in competitions such as soda drinking competitions, beer drinking competition and we will seek their participation in other games. A current company which I consider appropriate to this restaurant venture is Applebee’s Restaurant. Applebee’s International Inc. is based in America and it develops, franchises, and oversees the activities of Applebee’s Bar and Grill chains. It had 2019 restaurants as of 2011 December across the United States and 15 others in outside the states. It focuses on casual dining and offers basically American dishes. Additionally it offers chicken, pasta, and shrimp among other delicacies. All of the restaurants under Applebee’s have a bar
- 21. area and they sell alcoholic beverages. Applebee’s chain started operation in November 1980 after it was founded by Bill and Palmer. The two opened the first restaurant. The company was started with a small amount of money and they had targeted those customers below the age of majority. They did several advertisements to attract them. They used to give colorful cartoons and had their price rates published on the products. They did not find sufficient viability in all these attempts. In one case, they served noodle which is Chinese dish but they had saw this into the American restaurant. It did not work well for them. This was a great setback for them. With time they understood the tastes and preferences off their customers and today Applebee’s is a proud commander of the 2019 chains across the states. References Alexander, D. (2006). Fast Food Fix: 75+ amazing recipe makeovers of your fas food restaurant favouites. Emmaus,Pa.: Rodale. ISBN=1594863105. Schlosser, E. (2012). Fast Food Nation: The Dark Side of the all-American Meal. Boston: Mariner/Books. Houghton Mifflin. Harcourt. ISBN=0547750331.