Stretch 'r Wings

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Aircraft Equipment Maker Business Plan

Financial Plan

The following topics summarize the financial information of Stretch 'r Wings.

7.1 Important Assumptions

The following table summarizes key financial assumptions.

General Assumptions
Year 1 Year 2 Year 3 Year 4 Year 5
Plan Month 1 2 3 4 5
Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00%
Tax Rate 25.42% 25.00% 25.42% 25.00% 25.42%
Other 0 0 0 0 0

7.2 Break-even Analysis

The following chart and table summarize the break-even analysis, including monthly units and sales break-even points.

Break-even Analysis
Monthly Units Break-even 1
Monthly Revenue Break-even $4,500
Assumptions:
Average Per-Unit Revenue $7,422.50
Average Per-Unit Variable Cost $1,618.75
Estimated Monthly Fixed Cost $3,519

7.3 Projected Profit and Loss

The detailed monthly pro forma income statement for the first year is included in the appendix. The annual estimates are included here.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5
Sales $29,690 $230,740 $357,915 $464,095 $634,320
Direct Cost of Sales $6,475 $49,150 $77,625 $100,200 $137,150
Other $0 $0 $0 $0 $0
Total Cost of Sales $6,475 $49,150 $77,625 $100,200 $137,150
Gross Margin $23,215 $181,590 $280,290 $363,895 $497,170
Gross Margin % 78.19% 78.70% 78.31% 78.41% 78.38%
Expenses
Payroll $20,000 $117,640 $126,000 $152,320 $158,500
Sales and Marketing and Other Expenses $15,300 $28,400 $30,000 $37,500 $40,000
Depreciation $0 $0 $0 $0 $0
Leased Equipment $0 $0 $0 $0 $0
Utilities $350 $1,200 $1,400 $1,500 $1,500
Phone $950 $2,500 $3,000 $3,000 $3,000
Rent $2,625 $6,000 $6,500 $7,000 $7,500
Payroll Taxes $3,000 $17,646 $18,900 $22,848 $23,775
Other $0 $0 $0 $0 $0
Total Operating Expenses $42,225 $173,386 $185,800 $224,168 $234,275
Profit Before Interest and Taxes ($19,010) $8,204 $94,490 $139,727 $262,895
EBITDA ($19,010) $8,204 $94,490 $139,727 $262,895
Interest Expense $1,784 $2,400 $2,000 $600 $200
Taxes Incurred $0 $1,451 $23,508 $34,782 $66,768
Net Profit ($20,794) $4,353 $68,982 $104,345 $195,927
Net Profit/Sales -70.04% 1.89% 19.27% 22.48% 30.89%

7.4 Projected Cash Flow

Cash flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month and the other representing the monthly balance. The annual cash flow figures are included here. Detailed monthly numbers are included in the appendix. The initial $20,000 loan will be repaid over five years. Further, to increase the cash balance in FY 2001, a one-year, $20,000 loan will be secured from the bank.

Pro Forma Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Received
Cash from Operations
Cash Sales $29,690 $230,740 $357,915 $464,095 $634,320
Subtotal Cash from Operations $29,690 $230,740 $357,915 $464,095 $634,320
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0 $0 $0
New Current Borrowing $0 $20,000 $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0 $0 $0
New Long-term Liabilities $0 $0 $0 $0 $0
Sales of Other Current Assets $0 $0 $0 $0 $0
Sales of Long-term Assets $0 $0 $0 $0 $0
New Investment Received $0 $0 $0 $0 $0
Subtotal Cash Received $29,690 $250,740 $357,915 $464,095 $634,320
Expenditures Year 1 Year 2 Year 3 Year 4 Year 5
Expenditures from Operations
Cash Spending $20,000 $117,640 $126,000 $152,320 $158,500
Bill Payments $22,436 $124,938 $168,928 $212,357 $287,020
Subtotal Spent on Operations $42,436 $242,578 $294,928 $364,677 $445,520
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $20,000 $0 $0
Other Liabilities Principal Repayment $0 $0 $0 $0 $0
Long-term Liabilities Principal Repayment $3,996 $4,000 $4,000 $4,000 $4,004
Purchase Other Current Assets $0 $0 $0 $0 $0
Purchase Long-term Assets $0 $0 $0 $0 $0
Dividends $0 $0 $0 $0 $0
Subtotal Cash Spent $46,432 $246,578 $318,928 $368,677 $449,524
Net Cash Flow ($16,742) $4,162 $38,987 $95,418 $184,796
Cash Balance $43,258 $47,421 $86,408 $181,826 $366,622

7.5 Projected Balance Sheet

The projected balance sheet is quite solid. We do not project any trouble meeting our debt obligations, as long as we can achieve our specified objectives.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Current Assets
Cash $43,258 $47,421 $86,408 $181,826 $366,622
Inventory $7,123 $17,973 $28,385 $36,806 $50,305
Other Current Assets $10,000 $10,000 $10,000 $10,000 $10,000
Total Current Assets $60,381 $75,393 $124,793 $228,631 $426,927
Long-term Assets
Long-term Assets $0 $0 $0 $0 $0
Accumulated Depreciation $0 $0 $0 $0 $0
Total Long-term Assets $0 $0 $0 $0 $0
Total Assets $60,381 $75,393 $124,793 $228,631 $426,927
Liabilities and Capital Year 1 Year 2 Year 3 Year 4 Year 5
Current Liabilities
Accounts Payable $15,170 $9,830 $14,248 $17,741 $24,115
Current Borrowing $0 $20,000 $0 $0 $0
Other Current Liabilities $0 $0 $0 $0 $0
Subtotal Current Liabilities $15,170 $29,830 $14,248 $17,741 $24,115
Long-term Liabilities $16,004 $12,004 $8,004 $4,004 $0
Total Liabilities $31,174 $41,834 $22,252 $21,745 $24,115
Paid-in Capital $62,000 $62,000 $62,000 $62,000 $62,000
Retained Earnings ($12,000) ($32,794) ($28,441) $40,541 $144,886
Earnings ($20,794) $4,353 $68,982 $104,345 $195,927
Total Capital $29,206 $33,559 $102,541 $206,886 $402,812
Total Liabilities and Capital $60,381 $75,393 $124,793 $228,631 $426,927
Net Worth $29,206 $33,559 $102,541 $206,886 $402,812

7.6 Business Ratios

The following table outlines important ratios from the laboratory apparatus and furniture industry, as determined by the Standard Industrial Classification (SIC) Index code 3821, Laboratory Equipment and Furniture.

Ratio Analysis
Year 1 Year 2 Year 3 Year 4 Year 5 Industry Profile
Sales Growth 0.00% 677.16% 55.12% 29.67% 36.68% 5.10%
Percent of Total Assets
Inventory 11.80% 23.84% 22.75% 16.10% 11.78% 28.60%
Other Current Assets 16.56% 13.26% 8.01% 4.37% 2.34% 25.10%
Total Current Assets 100.00% 100.00% 100.00% 100.00% 100.00% 83.70%
Long-term Assets 0.00% 0.00% 0.00% 0.00% 0.00% 16.30%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Liabilities 25.12% 39.57% 11.42% 7.76% 5.65% 37.80%
Long-term Liabilities 26.51% 15.92% 6.41% 1.75% 0.00% 14.30%
Total Liabilities 51.63% 55.49% 17.83% 9.51% 5.65% 52.10%
Net Worth 48.37% 44.51% 82.17% 90.49% 94.35% 47.90%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Gross Margin 78.19% 78.70% 78.31% 78.41% 78.38% 38.90%
Selling, General & Administrative Expenses 148.77% 77.19% 59.30% 56.34% 47.63% 25.40%
Advertising Expenses 8.42% 6.50% 4.19% 4.31% 3.15% 1.40%
Profit Before Interest and Taxes -64.03% 3.56% 26.40% 30.11% 41.45% 2.00%
Main Ratios
Current 3.98 2.53 8.76 12.89 17.70 2.36
Quick 3.51 1.92 6.77 10.81 15.62 1.33
Total Debt to Total Assets 51.63% 55.49% 17.83% 9.51% 5.65% 52.10%
Pre-tax Return on Net Worth -71.20% 17.29% 90.20% 67.25% 65.22% 3.80%
Pre-tax Return on Assets -34.44% 7.70% 74.11% 60.85% 61.53% 8.00%
Additional Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Net Profit Margin -70.04% 1.89% 19.27% 22.48% 30.89% n.a
Return on Equity -71.20% 12.97% 67.27% 50.44% 48.64% n.a
Activity Ratios
Inventory Turnover 10.91 3.92 3.35 3.07 3.15 n.a
Accounts Payable Turnover 2.48 12.17 12.17 12.17 12.17 n.a
Payment Days 27 38 25 27 26 n.a
Total Asset Turnover 0.49 3.06 2.87 2.03 1.49 n.a
Debt Ratios
Debt to Net Worth 1.07 1.25 0.22 0.11 0.06 n.a
Current Liab. to Liab. 0.49 0.71 0.64 0.82 1.00 n.a
Liquidity Ratios
Net Working Capital $45,210 $45,563 $110,545 $210,890 $402,812 n.a
Interest Coverage -10.66 3.42 47.24 232.72 1,313.16 n.a
Additional Ratios
Assets to Sales 2.03 0.33 0.35 0.49 0.67 n.a
Current Debt/Total Assets 25% 40% 11% 8% 6% n.a
Acid Test 3.51 1.92 6.77 10.81 15.62 n.a
Sales/Net Worth 1.02 6.88 3.49 2.24 1.57 n.a
Dividend Payout 0.00 0.00 0.00 0.00 0.00 n.a