Bicycle Manufacturer Business Plan

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Financial Plan

The following sections will outline important Financial Information.

8.1 Important Assumptions

The following table details important Financial Assumptions.

General Assumptions
2003 2004 2005
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

8.2 Break-even Analysis

The Break-even Analysis is shown below.

Break-even Analysis
Monthly Revenue Break-even $12,582
Assumptions:
Average Percent Variable Cost 59%
Estimated Monthly Fixed Cost $5,160

8.3 Projected Profit and Loss

The following table will indicate Projected Profit and Loss.

Pro Forma Profit and Loss
2003 2004 2005
Sales $119,821 $280,903 $332,424
Direct Cost of Sales $70,680 $173,581 $205,082
Other Costs of Goods $0 $0 $0
Total Cost of Sales $70,680 $173,581 $205,082
Gross Margin $49,141 $107,322 $127,342
Gross Margin % 41.01% 38.21% 38.31%
Expenses
Payroll $41,500 $59,400 $73,000
Sales and Marketing and Other Expenses $4,800 $4,800 $4,800
Depreciation $996 $996 $996
Rent $4,200 $4,200 $4,200
Utilities $1,800 $1,800 $1,800
Insurance $2,400 $2,400 $2,400
Payroll Taxes $6,225 $8,910 $10,950
Other $0 $0 $0
Total Operating Expenses $61,921 $82,506 $98,146
Profit Before Interest and Taxes ($12,780) $24,816 $29,196
EBITDA ($11,784) $25,812 $30,192
Interest Expense $0 $0 $0
Taxes Incurred $0 $7,445 $8,759
Net Profit ($12,780) $17,371 $20,437
Net Profit/Sales -10.67% 6.18% 6.15%

8.4 Projected Cash Flow

The following table and chart will indicate Projected Cash Flow.

Pro Forma Cash Flow
2003 2004 2005
Cash Received
Cash from Operations
Cash Sales $29,955 $70,226 $83,106
Cash from Receivables $67,585 $180,724 $239,738
Subtotal Cash from Operations $97,540 $250,950 $322,844
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 $70,000 $0 $0
Subtotal Cash Received $167,540 $250,950 $322,844
Expenditures 2003 2004 2005
Expenditures from Operations
Cash Spending $41,500 $59,400 $73,000
Bill Payments $90,136 $210,618 $240,472
Subtotal Spent on Operations $131,636 $270,018 $313,472
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
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 $5,000 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $136,636 $270,018 $313,472
Net Cash Flow $30,904 ($19,068) $9,372
Cash Balance $36,359 $17,291 $26,663

8.5 Projected Balance Sheet

The following table will indicate the projected Balance Sheet.

Pro Forma Balance Sheet
2003 2004 2005
Assets
Current Assets
Cash $36,359 $17,291 $26,663
Accounts Receivable $22,281 $52,234 $61,814
Inventory $10,111 $24,832 $29,339
Other Current Assets $800 $800 $800
Total Current Assets $69,551 $95,157 $118,616
Long-term Assets
Long-term Assets $6,000 $6,000 $6,000
Accumulated Depreciation $996 $1,992 $2,988
Total Long-term Assets $5,004 $4,008 $3,012
Total Assets $74,555 $99,165 $121,628
Liabilities and Capital 2003 2004 2005
Current Liabilities
Accounts Payable $10,667 $17,906 $19,931
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $10,667 $17,906 $19,931
Long-term Liabilities $0 $0 $0
Total Liabilities $10,667 $17,906 $19,931
Paid-in Capital $70,000 $70,000 $70,000
Retained Earnings $6,668 ($6,112) $11,259
Earnings ($12,780) $17,371 $20,437
Total Capital $63,888 $81,259 $101,696
Total Liabilities and Capital $74,555 $99,165 $121,628
Net Worth $63,888 $81,259 $101,696

8.6 Business Ratios

The following table will display the common Business Ratios associated with this company as well as industry averages.

Ratio Analysis
2003 2004 2005 Industry Profile
Sales Growth 565.67% 134.44% 18.34% 4.01%
Percent of Total Assets
Accounts Receivable 29.88% 52.67% 50.82% 15.71%
Inventory 13.56% 25.04% 24.12% 39.55%
Other Current Assets 1.07% 0.81% 0.66% 24.92%
Total Current Assets 93.29% 95.96% 97.52% 80.18%
Long-term Assets 6.71% 4.04% 2.48% 19.82%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 14.31% 18.06% 16.39% 40.00%
Long-term Liabilities 0.00% 0.00% 0.00% 14.33%
Total Liabilities 14.31% 18.06% 16.39% 54.33%
Net Worth 85.69% 81.94% 83.61% 45.67%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 41.01% 38.21% 38.31% 31.56%
Selling, General & Administrative Expenses 51.68% 32.02% 32.16% 19.76%
Advertising Expenses 0.00% 0.00% 0.00% 1.49%
Profit Before Interest and Taxes -10.67% 8.83% 8.78% 1.66%
Main Ratios
Current 6.52 5.31 5.95 1.80
Quick 5.57 3.93 4.48 0.69
Total Debt to Total Assets 14.31% 18.06% 16.39% 59.54%
Pre-tax Return on Net Worth -20.00% 30.54% 28.71% 3.82%
Pre-tax Return on Assets -17.14% 25.03% 24.00% 9.44%
Additional Ratios 2003 2004 2005
Net Profit Margin -10.67% 6.18% 6.15% n.a
Return on Equity -20.00% 21.38% 20.10% n.a
Activity Ratios
Accounts Receivable Turnover 4.03 4.03 4.03 n.a
Collection Days 56 65 83 n.a
Inventory Turnover 10.91 9.93 7.57 n.a
Accounts Payable Turnover 9.36 12.17 12.17 n.a
Payment Days 27 24 28 n.a
Total Asset Turnover 1.61 2.83 2.73 n.a
Debt Ratios
Debt to Net Worth 0.17 0.22 0.20 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $58,884 $77,251 $98,684 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.62 0.35 0.37 n.a
Current Debt/Total Assets 14% 18% 16% n.a
Acid Test 3.48 1.01 1.38 n.a
Sales/Net Worth 1.88 3.46 3.27 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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General Assumptions
2003 2004 2005
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
Break-even Analysis
Monthly Revenue Break-even $12,582
Assumptions:
Average Percent Variable Cost 59%
Estimated Monthly Fixed Cost $5,160
Pro Forma Profit and Loss
2003 2004 2005
Sales $119,821 $280,903 $332,424
Direct Cost of Sales $70,680 $173,581 $205,082
Other Costs of Goods $0 $0 $0
Total Cost of Sales $70,680 $173,581 $205,082
Gross Margin $49,141 $107,322 $127,342
Gross Margin % 41.01% 38.21% 38.31%
Expenses
Payroll $41,500 $59,400 $73,000
Sales and Marketing and Other Expenses $4,800 $4,800 $4,800
Depreciation $996 $996 $996
Rent $4,200 $4,200 $4,200
Utilities $1,800 $1,800 $1,800
Insurance $2,400 $2,400 $2,400
Payroll Taxes $6,225 $8,910 $10,950
Other $0 $0 $0
Total Operating Expenses $61,921 $82,506 $98,146
Profit Before Interest and Taxes ($12,780) $24,816 $29,196
EBITDA ($11,784) $25,812 $30,192
Interest Expense $0 $0 $0
Taxes Incurred $0 $7,445 $8,759
Net Profit ($12,780) $17,371 $20,437
Net Profit/Sales -10.67% 6.18% 6.15%
Pro Forma Cash Flow
2003 2004 2005
Cash Received
Cash from Operations
Cash Sales $29,955 $70,226 $83,106
Cash from Receivables $67,585 $180,724 $239,738
Subtotal Cash from Operations $97,540 $250,950 $322,844
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 $70,000 $0 $0
Subtotal Cash Received $167,540 $250,950 $322,844
Expenditures 2003 2004 2005
Expenditures from Operations
Cash Spending $41,500 $59,400 $73,000
Bill Payments $90,136 $210,618 $240,472
Subtotal Spent on Operations $131,636 $270,018 $313,472
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
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 $5,000 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $136,636 $270,018 $313,472
Net Cash Flow $30,904 ($19,068) $9,372
Cash Balance $36,359 $17,291 $26,663
Pro Forma Balance Sheet
2003 2004 2005
Assets
Current Assets
Cash $36,359 $17,291 $26,663
Accounts Receivable $22,281 $52,234 $61,814
Inventory $10,111 $24,832 $29,339
Other Current Assets $800 $800 $800
Total Current Assets $69,551 $95,157 $118,616
Long-term Assets
Long-term Assets $6,000 $6,000 $6,000
Accumulated Depreciation $996 $1,992 $2,988
Total Long-term Assets $5,004 $4,008 $3,012
Total Assets $74,555 $99,165 $121,628
Liabilities and Capital 2003 2004 2005
Current Liabilities
Accounts Payable $10,667 $17,906 $19,931
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $10,667 $17,906 $19,931
Long-term Liabilities $0 $0 $0
Total Liabilities $10,667 $17,906 $19,931
Paid-in Capital $70,000 $70,000 $70,000
Retained Earnings $6,668 ($6,112) $11,259
Earnings ($12,780) $17,371 $20,437
Total Capital $63,888 $81,259 $101,696
Total Liabilities and Capital $74,555 $99,165 $121,628
Net Worth $63,888 $81,259 $101,696
Ratio Analysis
2003 2004 2005 Industry Profile
Sales Growth 565.67% 134.44% 18.34% 4.01%
Percent of Total Assets
Accounts Receivable 29.88% 52.67% 50.82% 15.71%
Inventory 13.56% 25.04% 24.12% 39.55%
Other Current Assets 1.07% 0.81% 0.66% 24.92%
Total Current Assets 93.29% 95.96% 97.52% 80.18%
Long-term Assets 6.71% 4.04% 2.48% 19.82%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 14.31% 18.06% 16.39% 40.00%
Long-term Liabilities 0.00% 0.00% 0.00% 14.33%
Total Liabilities 14.31% 18.06% 16.39% 54.33%
Net Worth 85.69% 81.94% 83.61% 45.67%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 41.01% 38.21% 38.31% 31.56%
Selling, General & Administrative Expenses 51.68% 32.02% 32.16% 19.76%
Advertising Expenses 0.00% 0.00% 0.00% 1.49%
Profit Before Interest and Taxes -10.67% 8.83% 8.78% 1.66%
Main Ratios
Current 6.52 5.31 5.95 1.80
Quick 5.57 3.93 4.48 0.69
Total Debt to Total Assets 14.31% 18.06% 16.39% 59.54%
Pre-tax Return on Net Worth -20.00% 30.54% 28.71% 3.82%
Pre-tax Return on Assets -17.14% 25.03% 24.00% 9.44%
Additional Ratios 2003 2004 2005
Net Profit Margin -10.67% 6.18% 6.15% n.a
Return on Equity -20.00% 21.38% 20.10% n.a
Activity Ratios
Accounts Receivable Turnover 4.03 4.03 4.03 n.a
Collection Days 56 65 83 n.a
Inventory Turnover 10.91 9.93 7.57 n.a
Accounts Payable Turnover 9.36 12.17 12.17 n.a
Payment Days 27 24 28 n.a
Total Asset Turnover 1.61 2.83 2.73 n.a
Debt Ratios
Debt to Net Worth 0.17 0.22 0.20 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $58,884 $77,251 $98,684 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.62 0.35 0.37 n.a
Current Debt/Total Assets 14% 18% 16% n.a
Acid Test 3.48 1.01 1.38 n.a
Sales/Net Worth 1.88 3.46 3.27 n.a
Dividend Payout 0.00 0.00 0.00 n.a