Todd, West, and Associates

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Computer Engineering Business Plan

Financial Plan

The following is the financial plan for Todd, West, and Associates.

7.1 Break-even Analysis

The monthly break-even point is shown in the table and chart below.

Break-even Analysis
Monthly Revenue Break-even $25,450
Assumptions:
Average Percent Variable Cost 0%
Estimated Monthly Fixed Cost $25,450

7.2 Projected Profit and Loss

The following table and charts highlight the projected profit and loss for the next three years.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $340,577 $388,000 $430,000
Direct Cost of Sales $0 $0 $0
Other Production Expenses $0 $0 $0
Total Cost of Sales $0 $0 $0
Gross Margin $340,577 $388,000 $430,000
Gross Margin % 100.00% 100.00% 100.00%
Expenses
Payroll $252,000 $264,000 $276,000
Sales and Marketing and Other Expenses $0 $0 $0
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $3,600 $3,600 $3,600
Insurance $0 $0 $0
Rent $12,000 $12,000 $12,000
Payroll Taxes $37,800 $39,600 $41,400
Other $0 $0 $0
Total Operating Expenses $305,400 $319,200 $333,000
Profit Before Interest and Taxes $35,177 $68,800 $97,000
EBITDA $35,177 $68,800 $97,000
Interest Expense $2,883 $2,676 $2,460
Taxes Incurred $9,688 $19,837 $28,362
Net Profit $22,606 $46,287 $66,178
Net Profit/Sales 6.64% 11.93% 15.39%

7.3 Projected Cash Flow

The following table and chart highlight the projected cash flow for the next three years.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $85,144 $97,000 $107,500
Cash from Receivables $209,420 $284,593 $316,826
Subtotal Cash from Operations $294,565 $381,593 $424,326
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 $294,565 $381,593 $424,326
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $252,000 $264,000 $276,000
Bill Payments $60,773 $76,524 $86,991
Subtotal Spent on Operations $312,773 $340,524 $362,991
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 $3,600 $3,600 $3,600
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $316,373 $344,124 $366,591
Net Cash Flow ($21,809) $37,469 $57,735
Cash Balance $39,191 $76,661 $134,395

7.4 Projected Balance Sheet

The following table highlights the projected balance sheet for the next three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $39,191 $76,661 $134,395
Accounts Receivable $46,013 $52,419 $58,094
Other Current Assets $0 $0 $0
Total Current Assets $85,204 $129,080 $192,489
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $85,204 $129,080 $192,489
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $5,198 $6,387 $7,218
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $5,198 $6,387 $7,218
Long-term Liabilities $46,400 $42,800 $39,200
Total Liabilities $51,598 $49,187 $46,418
Paid-in Capital $20,000 $20,000 $20,000
Retained Earnings ($9,000) $13,606 $59,893
Earnings $22,606 $46,287 $66,178
Total Capital $33,606 $79,893 $146,071
Total Liabilities and Capital $85,204 $129,080 $192,489
Net Worth $33,606 $79,893 $146,071

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the NAISC code 541614, Process, Physical Distribution, and Logistics Consulting, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 13.92% 10.82% 7.23%
Percent of Total Assets
Accounts Receivable 54.00% 40.61% 30.18% 19.37%
Other Current Assets 0.00% 0.00% 0.00% 50.13%
Total Current Assets 100.00% 100.00% 100.00% 70.99%
Long-term Assets 0.00% 0.00% 0.00% 29.01%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 6.10% 4.95% 3.75% 34.21%
Long-term Liabilities 54.46% 33.16% 20.36% 15.24%
Total Liabilities 60.56% 38.11% 24.11% 49.45%
Net Worth 39.44% 61.89% 75.89% 50.55%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 100.00% 100.00% 100.00% 23.92%
Selling, General & Administrative Expenses 93.80% 88.49% 85.02% 11.77%
Advertising Expenses 0.00% 0.00% 0.00% 0.57%
Profit Before Interest and Taxes 10.33% 17.73% 22.56% 0.85%
Main Ratios
Current 16.39 20.21 26.67 1.60
Quick 16.39 20.21 26.67 1.31
Total Debt to Total Assets 60.56% 38.11% 24.11% 56.90%
Pre-tax Return on Net Worth 96.10% 82.77% 64.72% 2.82%
Pre-tax Return on Assets 37.90% 51.23% 49.11% 6.54%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 6.64% 11.93% 15.39% n.a
Return on Equity 67.27% 57.94% 45.31% n.a
Activity Ratios
Accounts Receivable Turnover 5.55 5.55 5.55 n.a
Collection Days 57 62 63 n.a
Accounts Payable Turnover 12.69 12.17 12.17 n.a
Payment Days 27 27 28 n.a
Total Asset Turnover 4.00 3.01 2.23 n.a
Debt Ratios
Debt to Net Worth 1.54 0.62 0.32 n.a
Current Liab. to Liab. 0.10 0.13 0.16 n.a
Liquidity Ratios
Net Working Capital $80,006 $122,693 $185,271 n.a
Interest Coverage 12.20 25.71 39.43 n.a
Additional Ratios
Assets to Sales 0.25 0.33 0.45 n.a
Current Debt/Total Assets 6% 5% 4% n.a
Acid Test 7.54 12.00 18.62 n.a
Sales/Net Worth 10.13 4.86 2.94 n.a
Dividend Payout 0.00 0.00 0.00 n.a