Abbey Electronic Services

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Electronics Repair Business Plan

Financial Plan

The following is the financial plan for Abbey Electronic Services.

7.1 Break-even Analysis

The monthly break-even point is presented in the table and chart below.
Break-even Analysis
Monthly Revenue Break-even $17,777
Assumptions:
Average Percent Variable Cost 4%
Estimated Monthly Fixed Cost $17,002

7.2 Projected Profit and Loss

The following table and chart show projected profit and loss for three years.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $235,000 $252,000 $275,000
Direct Cost of Sales $10,250 $11,700 $12,800
Other Production Expenses $0 $0 $0
Total Cost of Sales $10,250 $11,700 $12,800
Gross Margin $224,750 $240,300 $262,200
Gross Margin % 95.64% 95.36% 95.35%
Expenses
Payroll $144,000 $156,000 $174,000
Sales and Marketing and Other Expenses $7,400 $5,400 $5,400
Depreciation $2,220 $2,220 $2,220
Leased Equipment $14,400 $14,400 $14,400
Utilities $2,400 $2,400 $2,400
Insurance $0 $0 $0
Rent $12,000 $12,000 $12,000
Payroll Taxes $21,600 $23,400 $26,100
Other $0 $0 $0
Total Operating Expenses $204,020 $215,820 $236,520
Profit Before Interest and Taxes $20,730 $24,480 $25,680
EBITDA $22,950 $26,700 $27,900
Interest Expense $10,000 $10,000 $10,000
Taxes Incurred $3,219 $4,344 $4,704
Net Profit $7,511 $10,136 $10,976
Net Profit/Sales 3.20% 4.02% 3.99%

7.3 Projected Cash Flow

The table and chart show the projected cash flow for three years.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $235,000 $252,000 $275,000
Subtotal Cash from Operations $235,000 $252,000 $275,000
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 $235,000 $252,000 $275,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $144,000 $156,000 $174,000
Bill Payments $74,582 $83,456 $87,462
Subtotal Spent on Operations $218,582 $239,456 $261,462
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 $218,582 $239,456 $261,462
Net Cash Flow $16,418 $12,544 $13,538
Cash Balance $25,618 $38,162 $51,700

7.4 Projected Balance Sheet

The table shows the projected balance sheet for three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $25,618 $38,162 $51,700
Other Current Assets $0 $0 $0
Total Current Assets $25,618 $38,162 $51,700
Long-term Assets
Long-term Assets $100,000 $100,000 $100,000
Accumulated Depreciation $2,220 $4,440 $6,660
Total Long-term Assets $97,780 $95,560 $93,340
Total Assets $123,398 $133,722 $145,040
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $6,687 $6,875 $7,217
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $6,687 $6,875 $7,217
Long-term Liabilities $100,000 $100,000 $100,000
Total Liabilities $106,687 $106,875 $107,217
Paid-in Capital $50,000 $50,000 $50,000
Retained Earnings ($40,800) ($33,289) ($23,153)
Earnings $7,511 $10,136 $10,976
Total Capital $16,711 $26,847 $37,823
Total Liabilities and Capital $123,398 $133,722 $145,040
Net Worth $16,711 $26,847 $37,823

7.5 Business Ratios

Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 7622, Radio and Television Repair, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 7.23% 9.13% 6.10%
Percent of Total Assets
Other Current Assets 0.00% 0.00% 0.00% 27.50%
Total Current Assets 20.76% 28.54% 35.65% 76.90%
Long-term Assets 79.24% 71.46% 64.35% 23.10%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 5.42% 5.14% 4.98% 36.90%
Long-term Liabilities 81.04% 74.78% 68.95% 15.80%
Total Liabilities 86.46% 79.92% 73.92% 52.70%
Net Worth 13.54% 20.08% 26.08% 47.30%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 95.64% 95.36% 95.35% 0.00%
Selling, General & Administrative Expenses 92.44% 91.33% 92.26% 83.50%
Advertising Expenses 0.85% 0.00% 0.00% 0.50%
Profit Before Interest and Taxes 8.82% 9.71% 9.34% 3.10%
Main Ratios
Current 3.83 5.55 7.16 2.26
Quick 3.83 5.55 7.16 1.47
Total Debt to Total Assets 86.46% 79.92% 73.92% 52.70%
Pre-tax Return on Net Worth 64.21% 53.94% 41.46% 7.00%
Pre-tax Return on Assets 8.70% 10.83% 10.81% 14.70%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 3.20% 4.02% 3.99% n.a
Return on Equity 44.95% 37.75% 29.02% n.a
Activity Ratios
Accounts Payable Turnover 12.15 12.17 12.17 n.a
Payment Days 27 30 29 n.a
Total Asset Turnover 1.90 1.88 1.90 n.a
Debt Ratios
Debt to Net Worth 6.38 3.98 2.83 n.a
Current Liab. to Liab. 0.06 0.06 0.07 n.a
Liquidity Ratios
Net Working Capital $18,931 $31,287 $44,483 n.a
Interest Coverage 2.07 2.45 2.57 n.a
Additional Ratios
Assets to Sales 0.53 0.53 0.53 n.a
Current Debt/Total Assets 5% 5% 5% n.a
Acid Test 3.83 5.55 7.16 n.a
Sales/Net Worth 14.06 9.39 7.27 n.a
Dividend Payout 0.00 0.00 0.00 n.a