ATI's financial plan is detailed in following sections. Preliminary estimates suggest that ATI will experience slow growth in the first two quarters of operation. This is partly due to ATI's status as a start-up company and seasonal factors. Income estimates are based, in part, on anticipated revenues from accounts that were secured by ATI employees prior to their departure from former employers. ATI has sufficient cash to endure the negative cash flow situation that it may encounter initially. ATI also anticipates an increase in gross margin and sales volume. Thus, the overall financial plan presents a conservative but realistic depiction of ATI's financial position.
ATI assumes the following:
The following chart indicates ATI's key financial indicators for the first three years. ATI anticipates growth in sales with relatively stable operating expenses. Favorable economic conditions and forecasts of continued growth in the adventure travel market support ATI's planned financial success.
The following table details ATI's break-even analysis, including monthly sales break-even points.
Break-even calculations assume a 20% gross margin. This is a conservative estimate, and it will be improved as strategic relationships develop and the benefits of ATI's offerings are realized by customers.
ATI's profit picture improves as operations progress into the third quarter of the first year of operation. ATI anticipates improving its gross margin from 22% in year one to 23% in year two. Annual estimates of profit and loss are detailed in the following table.
Monthly cash flow is shown in the following illustration. Annual cash flow figures are estimated based on a 60-day collection period. Cash flow for the first year of operation becomes positive mid-year.
The pro forma balance sheet indicates sustained and planned growth. Net worth improves considerably in year two and will provide ATI with a strong financial position. Monthly estimates are included in the appendix.
The following table details our primary business ratios. Initial analysis indicates that ATI's ratios for profitability, risk, and return are financially favorable and will improve greatly in year two of operation. Industry Profile ratios are based on Standard Industry Classification (SIC) Index code 4724.