Safe Current

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Electronics Retailer Business Plan

Financial Plan

The following sections outline important financial information.

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 what will be needed in monthly revenue to reach the break even point.

Break-even Analysis
Monthly Revenue Break-even $13,732
Assumptions:
Average Percent Variable Cost 32%
Estimated Monthly Fixed Cost $9,301

7.3 Projected Cash Flow

The following chart and table displays projected cash flow.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $131,871 $193,567 $221,453
Subtotal Cash from Operations $131,871 $193,567 $221,453
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 $15,000 $0 $0
Subtotal Cash Received $146,871 $193,567 $221,453
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $85,400 $74,400 $66,500
Bill Payments $69,962 $101,544 $116,462
Subtotal Spent on Operations $155,362 $175,944 $182,962
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 $7,200 $7,813 $7,878
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $162,562 $183,757 $190,840
Net Cash Flow ($15,691) $9,810 $30,614
Cash Balance $6,209 $16,019 $46,633

7.4 Projected Profit and Loss

The following table presents projected profit and loss.

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $131,871 $193,567 $221,453
Direct Cost of Sales $42,551 $62,459 $71,457
Other Costs of Goods $0 $0 $0
Total Cost of Sales $42,551 $62,459 $71,457
Gross Margin $89,320 $131,108 $149,996
Gross Margin % 67.73% 67.73% 67.73%
Expenses
Payroll $85,400 $74,400 $66,500
Sales and Marketing and Other Expenses $6,000 $8,000 $10,000
Depreciation $1,404 $1,404 $1,404
Rent $6,000 $6,000 $6,000
Utilities $0 $0 $0
Insurance $0 $0 $0
Payroll Taxes $12,810 $9,675 $9,975
Other $0 $0 $0
Total Operating Expenses $111,614 $99,479 $93,879
Profit Before Interest and Taxes ($22,294) $31,629 $56,117
EBITDA ($20,890) $33,033 $57,521
Interest Expense $4,610 $3,889 $3,105
Taxes Incurred $0 $8,322 $15,904
Net Profit ($26,904) $19,418 $37,109
Net Profit/Sales -20.40% 10.03% 16.76%

7.5 Business Ratios

The following business ratios detail both ratios specific to Safe Current as well as ratios specific to the general industry. Variances in Safe Current's ratios relative to the industry's can be explained by the fact that Safe Current is able to leverage the valuable assets of TCIC, an electric utility, to achieve above market margins. As a small business unit of an electrical utility it is normal for business ratios to be different from the competition.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 46.78% 14.41% 8.79%
Percent of Total Assets
Inventory 22.53% 23.67% 15.38% 17.86%
Other Current Assets 10.42% 7.46% 4.24% 43.53%
Total Current Assets 54.52% 70.94% 85.47% 77.93%
Long-term Assets 45.48% 29.06% 14.53% 22.07%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 29.51% 20.71% 13.67% 31.98%
Long-term Liabilities 148.65% 86.96% 38.28% 20.70%
Total Liabilities 178.16% 107.67% 51.96% 52.68%
Net Worth -78.16% -7.67% 48.04% 47.32%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 67.73% 67.73% 67.73% 20.85%
Selling, General & Administrative Expenses 88.10% 54.09% 50.95% 6.60%
Advertising Expenses 0.00% 0.00% 0.00% 0.49%
Profit Before Interest and Taxes -16.91% 16.34% 25.34% 1.44%
Main Ratios
Current 1.85 3.43 6.25 1.96
Quick 1.08 2.28 5.13 1.15
Total Debt to Total Assets 178.16% 107.67% 51.96% 57.62%
Pre-tax Return on Net Worth 119.55% -898.84% 155.82% 3.71%
Pre-tax Return on Assets -93.44% 68.95% 74.86% 8.76%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -20.40% 10.03% 16.76% n.a
Return on Equity 0.00% 0.00% 109.07% n.a
Activity Ratios
Inventory Turnover 10.91 7.80 7.00 n.a
Accounts Payable Turnover 9.23 12.17 12.17 n.a
Payment Days 27 30 28 n.a
Total Asset Turnover 4.58 4.81 3.13 n.a
Debt Ratios
Debt to Net Worth 0.00 0.00 1.08 n.a
Current Liab. to Liab. 0.17 0.19 0.26 n.a
Liquidity Ratios
Net Working Capital $7,200 $20,209 $50,844 n.a
Interest Coverage -4.84 8.13 18.07 n.a
Additional Ratios
Assets to Sales 0.22 0.21 0.32 n.a
Current Debt/Total Assets 30% 21% 14% n.a
Acid Test 1.08 2.28 5.13 n.a
Sales/Net Worth 0.00 0.00 6.51 n.a
Dividend Payout 0.00 0.00 0.00 n.a

7.6 Projected Balance Sheet

The following table details the projected balance sheet.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $6,209 $16,019 $46,633
Inventory $6,487 $9,522 $10,894
Other Current Assets $3,000 $3,000 $3,000
Total Current Assets $15,697 $28,542 $60,527
Long-term Assets
Long-term Assets $14,500 $14,500 $14,500
Accumulated Depreciation $1,404 $2,808 $4,212
Total Long-term Assets $13,096 $11,692 $10,288
Total Assets $28,793 $40,234 $70,815
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $8,497 $8,333 $9,683
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $8,497 $8,333 $9,683
Long-term Liabilities $42,800 $34,987 $27,109
Total Liabilities $51,297 $43,320 $36,793
Paid-in Capital $20,000 $20,000 $20,000
Retained Earnings ($15,600) ($42,504) ($23,086)
Earnings ($26,904) $19,418 $37,109
Total Capital ($22,504) ($3,086) $34,023
Total Liabilities and Capital $28,793 $40,234 $70,815
Net Worth ($22,504) ($3,086) $34,023