The business of Cutting Edge Drapery does not require substantial outlays for inventory and virtually all sales are on a cash basis, so increases in sales will not be accompanied by initial cash-flow deficits.
Average per-unit revenue and variable costs are weighted averages based on sales/costs of each category of "products." It is assumed that each unit is a 15-hour job involving 2.5 installation hours.
Total fixed costs are a total of all other costs, not including production wages.
Monthly break-even is very achievable.
Outlined below, and in the following table and chart, are some of the intrinsic facets of the projected profit and loss for Cutting Edge Drapery.
As can be seen from the Cash Flow chart and table below, Cutting Edge Drapery has a number of advantages that provide for a large amount of growth in the company's cash account. Because it is the policy of the company's clients to provide the fabric for the soft window treatment products, the company has a very low cost of goods sold account and therefore a high gross margin. Furthermore, the custom nature of the business means that there is no inventory cost to speak of or accounts payable. Finally, the company does not posess any debt or long term capital assets that would affect the cash flow. With the ability to generate so much cash flow, it is assumed that the company will seek to use this asset to expand its markets and production capacity in the near future.
The following table shows our projected Balance Sheet.
The following table outlines some of the more important ratios from the interior design/sewing industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 7389.