Fantastic Florals

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Artificial Flowers Import Business Plan

Financial Plan

  • Fantastic Florals, Inc. projects the gross margin to be at approximately 25 percent. Sales projection for 1995 is at $1.1 million, increasing to $1.5 million in 1996 and $2 million in 1997.
  • Cash-flow analysis, balance sheet, business ratio, break-even analysis, and other financial details are shown in the appendix.

7.1 Important Assumptions

General assumptions in FFI's financial plan indicate the assumption of a stable economy without any major recessions or booms in both the U.S. and Indonesian economies.

General Assumptions
Year 1 Year 2 Year 3
Plan Month 1 2 3
Current Interest Rate 10.00% 10.00% 10.00%
Long-term Interest Rate 10.00% 10.00% 10.00%
Tax Rate 30.00% 30.00% 30.00%
Other 0 0 0

7.2 Start-up Funding

The owner will contribute $35,000 to finance the start-up requirements. FFI is also seeking a short-term loan of $35,000, to be repaid by July 1997 (two and a half years), for the remainder of necessary start-up funding.

Start-up Funding
Start-up Expenses to Fund $3,100
Start-up Assets to Fund $70,000
Total Funding Required $73,100
Assets
Non-cash Assets from Start-up $0
Cash Requirements from Start-up $70,000
Additional Cash Raised $0
Cash Balance on Starting Date $70,000
Total Assets $70,000
Liabilities and Capital
Liabilities
Current Borrowing $35,000
Long-term Liabilities $0
Accounts Payable (Outstanding Bills) $3,100
Other Current Liabilities (interest-free) $0
Total Liabilities $38,100
Capital
Planned Investment
Owner $35,000
Investor $0
Additional Investment Requirement $0
Total Planned Investment $35,000
Loss at Start-up (Start-up Expenses) ($3,100)
Total Capital $31,900
Total Capital and Liabilities $70,000
Total Funding $73,100

7.3 Key Financial Indicators

Key financial indicators for Fantastic Florals, Inc. include:

  • Constant gross margins.
  • Sales on credit.
  • Net worth.
  • Return on equity.

7.4 Break-even Analysis

FFI's break-even analysis indicates that the firm has a strong balance of costs and sales.

Break-even Analysis
Monthly Units Break-even 2,284
Monthly Revenue Break-even $37,667
Assumptions:
Average Per-Unit Revenue $16.49
Average Per-Unit Variable Cost $10.92
Estimated Monthly Fixed Cost $12,738

7.5 Projected Profit and Loss

Fantastic Florals, Inc. projects profits for every month of 1995 and on into both 1996 and 1997, in addition to positive growth margins for the same time periods.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $1,143,065 $1,525,269 $1,850,373
Direct Cost of Sales $756,512 $1,009,932 $1,229,583
Shipping, etc. $40,235 $44,260 $48,688
Total Cost of Sales $796,747 $1,054,192 $1,278,271
Gross Margin $346,318 $471,077 $572,102
Gross Margin % 30.30% 30.88% 30.92%
Expenses
Payroll $43,200 $80,000 $108,000
Marketing/Promotion $84,455 $118,860 $162,302
Depreciation $0 $0 $0
Rent $15,600 $17,160 $18,876
Utilities $2,400 $2,640 $2,904
Insurance $7,200 $7,920 $8,712
Payroll Taxes $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $152,855 $226,580 $300,794
Profit Before Interest and Taxes $193,463 $244,497 $271,308
EBITDA $193,463 $244,497 $271,308
Interest Expense $2,778 $1,500 $417
Taxes Incurred $57,206 $72,899 $81,267
Net Profit $133,480 $170,097 $189,624
Net Profit/Sales 11.68% 11.15% 10.25%

7.6 Projected Cash Flow

FFI's cash balance is expected to increase each year, providing the necessary capital for expansion into different product lines and distribution channels.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $857,299 $1,143,951 $1,387,779
Cash from Receivables $232,800 $363,607 $447,529
Subtotal Cash from Operations $1,090,099 $1,507,558 $1,835,308
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $1,090,099 $1,507,558 $1,835,308
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $43,200 $80,000 $108,000
Bill Payments $916,116 $1,339,812 $1,556,038
Subtotal Spent on Operations $959,316 $1,419,812 $1,664,038
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $13,332 $13,332 $8,336
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $0 $0 $0
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $972,648 $1,433,144 $1,672,374
Net Cash Flow $117,451 $74,415 $162,934
Cash Balance $187,451 $261,865 $424,800

7.7 Projected Balance Sheet

The balance sheet indicates a positive and ever-increasing net worth for FFI.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $187,451 $261,865 $424,800
Accounts Receivable $52,967 $70,677 $85,741
Inventory $88,783 $118,524 $144,302
Other Current Assets $0 $0 $0
Total Current Assets $329,200 $451,066 $654,843
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $329,200 $451,066 $654,843
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $142,153 $107,253 $129,742
Current Borrowing $21,668 $8,336 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $163,821 $115,589 $129,742
Long-term Liabilities $0 $0 $0
Total Liabilities $163,821 $115,589 $129,742
Paid-in Capital $35,000 $35,000 $35,000
Retained Earnings ($3,100) $130,380 $300,477
Earnings $133,480 $170,097 $189,624
Total Capital $165,380 $335,477 $525,101
Total Liabilities and Capital $329,200 $451,066 $654,843
Net Worth $165,380 $335,477 $525,101

7.8 Business Ratios

The ratios illustrated in the table indicate strong, consistent growth. Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5193, Flowers and Florist's Supplies, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 33.44% 21.31% 6.22%
Percent of Total Assets
Accounts Receivable 16.09% 15.67% 13.09% 25.17%
Inventory 26.97% 26.28% 22.04% 28.25%
Other Current Assets 0.00% 0.00% 0.00% 28.53%
Total Current Assets 100.00% 100.00% 100.00% 81.95%
Long-term Assets 0.00% 0.00% 0.00% 18.05%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 49.76% 25.63% 19.81% 45.52%
Long-term Liabilities 0.00% 0.00% 0.00% 13.34%
Total Liabilities 49.76% 25.63% 19.81% 58.86%
Net Worth 50.24% 74.37% 80.19% 41.14%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 30.30% 30.88% 30.92% 13.07%
Selling, General & Administrative Expenses 21.06% 21.93% 22.19% 5.31%
Advertising Expenses 1.05% 0.89% 0.76% 0.67%
Profit Before Interest and Taxes 16.92% 16.03% 14.66% 1.00%
Main Ratios
Current 2.01 3.90 5.05 1.53
Quick 1.47 2.88 3.94 0.82
Total Debt to Total Assets 49.76% 25.63% 19.81% 62.11%
Pre-tax Return on Net Worth 115.30% 72.43% 51.59% 3.32%
Pre-tax Return on Assets 57.92% 53.87% 41.37% 8.77%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 11.68% 11.15% 10.25% n.a
Return on Equity 80.71% 50.70% 36.11% n.a
Activity Ratios
Accounts Receivable Turnover 5.40 5.40 5.40 n.a
Collection Days 56 59 62 n.a
Inventory Turnover 12.00 9.74 9.36 n.a
Accounts Payable Turnover 7.42 12.17 12.17 n.a
Payment Days 27 35 27 n.a
Total Asset Turnover 3.47 3.38 2.83 n.a
Debt Ratios
Debt to Net Worth 0.99 0.34 0.25 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $165,380 $335,477 $525,101 n.a
Interest Coverage 69.64 162.98 650.93 n.a
Additional Ratios
Assets to Sales 0.29 0.30 0.35 n.a
Current Debt/Total Assets 50% 26% 20% n.a
Acid Test 1.14 2.27 3.27 n.a
Sales/Net Worth 6.91 4.55 3.52 n.a
Dividend Payout 0.00 0.00 0.00 n.a