Kaolin Calefactors

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Custom Pottery Business Plan

Financial Plan

The following sections will outline important financial information.

Please note under the Ratios table there is a bit of a discrepancy under the gross margin category as well as the selling/general and administrative expense category. The explanation for these differences are that the costs associated with doing business have been placed into different categories relative to the industry average. This is why one figure is higher than the industry average and another is lower.

7.1 Important Assumptions

The following table details important financial assumptions.

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 Break-even Analysis

The Break-even Analysis indicates that approximately $4,400 will be needed in monthly revenue to reach the break-even point.

Break-even Analysis
Monthly Revenue Break-even $4,449
Assumptions:
Average Percent Variable Cost 17%
Estimated Monthly Fixed Cost $3,693

7.3 Projected Profit and Loss

The following table will indicate projected profit and loss.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $40,728 $80,668 $94,723
Direct Cost of Sales $6,924 $13,714 $16,103
Other Production Expenses $0 $0 $0
Total Cost of Sales $6,924 $13,714 $16,103
Gross Margin $33,805 $66,955 $78,620
Gross Margin % 83.00% 83.00% 83.00%
Expenses
Payroll $30,000 $35,000 $40,000
Sales and Marketing and Other Expenses $2,100 $1,900 $1,700
Depreciation $1,116 $1,116 $1,116
Leased Equipment $0 $0 $0
Utilities/ DSL/ web hosting $1,800 $1,800 $1,800
Insurance $600 $600 $600
Rent $4,200 $4,200 $4,200
Payroll Taxes $4,500 $5,250 $6,000
Other $0 $0 $0
Total Operating Expenses $44,316 $49,866 $55,416
Profit Before Interest and Taxes ($10,511) $17,089 $23,204
EBITDA ($9,395) $18,205 $24,320
Interest Expense $0 $0 $0
Taxes Incurred $0 $5,127 $6,961
Net Profit ($10,511) $11,962 $16,243
Net Profit/Sales -25.81% 14.83% 17.15%

7.4 Projected Cash Flow

The following chart and table will indicate projected cash flow.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $40,728 $80,668 $94,723
Subtotal Cash from Operations $40,728 $80,668 $94,723
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 $40,728 $80,668 $94,723
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $30,000 $35,000 $40,000
Bill Payments $18,222 $31,814 $36,972
Subtotal Spent on Operations $48,222 $66,814 $76,972
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 $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $48,222 $66,814 $76,972
Net Cash Flow ($7,493) $13,854 $17,751
Cash Balance $4,257 $18,111 $35,862

7.5 Projected Balance Sheet

The following table will indicate the projected balance sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $4,257 $18,111 $35,862
Other Current Assets $0 $0 $0
Total Current Assets $4,257 $18,111 $35,862
Long-term Assets
Long-term Assets $5,600 $5,600 $5,600
Accumulated Depreciation $1,116 $2,232 $3,348
Total Long-term Assets $4,484 $3,368 $2,252
Total Assets $8,741 $21,479 $38,114
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $1,902 $2,679 $3,071
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $1,902 $2,679 $3,071
Long-term Liabilities $0 $0 $0
Total Liabilities $1,902 $2,679 $3,071
Paid-in Capital $18,000 $18,000 $18,000
Retained Earnings ($650) ($11,161) $801
Earnings ($10,511) $11,962 $16,243
Total Capital $6,839 $18,801 $35,043
Total Liabilities and Capital $8,741 $21,479 $38,114
Net Worth $6,839 $18,801 $35,043

7.6 Business Ratios

The following Ratios table compares standard ratios based on the Standard Industry Code #3269, Pottery Products, to the planned numbers for Kaolin Calefactors.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 98.06% 17.42% 5.10%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 39.20%
Total Current Assets 48.70% 84.32% 94.09% 76.70%
Long-term Assets 51.30% 15.68% 5.91% 23.30%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 21.76% 12.47% 8.06% 34.10%
Long-term Liabilities 0.00% 0.00% 0.00% 19.80%
Total Liabilities 21.76% 12.47% 8.06% 53.90%
Net Worth 78.24% 87.53% 91.94% 46.10%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 83.00% 83.00% 83.00% 38.40%
Selling, General & Administrative Expenses 108.81% 68.17% 65.85% 21.60%
Advertising Expenses 2.21% 1.12% 0.95% 1.20%
Profit Before Interest and Taxes -25.81% 21.18% 24.50% 2.80%
Main Ratios
Current 2.24 6.76 11.68 1.77
Quick 2.24 6.76 11.68 1.01
Total Debt to Total Assets 21.76% 12.47% 8.06% 53.90%
Pre-tax Return on Net Worth -153.71% 90.89% 66.21% 3.40%
Pre-tax Return on Assets -120.26% 79.56% 60.88% 7.40%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -25.81% 14.83% 17.15% n.a
Return on Equity -153.71% 63.63% 46.35% n.a
Activity Ratios
Accounts Payable Turnover 10.58 12.17 12.17 n.a
Payment Days 27 26 28 n.a
Total Asset Turnover 4.66 3.76 2.49 n.a
Debt Ratios
Debt to Net Worth 0.28 0.14 0.09 n.a
Current Liab. to Liab. 1.00 1.00 1.00 n.a
Liquidity Ratios
Net Working Capital $2,355 $15,433 $32,791 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.21 0.27 0.40 n.a
Current Debt/Total Assets 22% 12% 8% n.a
Acid Test 2.24 6.76 11.68 n.a
Sales/Net Worth 5.96 4.29 2.70 n.a
Dividend Payout 0.00 0.00 0.00 n.a