Pasta Manufacturer Business Plan

The Pasta Tree

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Financial Plan

The following is financial plan for The Pasta Tree.

7.1 Break-even Analysis

The monthly break-even point is $24,989.

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Break-even Analysis
Monthly Revenue Break-even $24,989
Assumptions:
Average Percent Variable Cost 10%
Estimated Monthly Fixed Cost $22,490

7.2 Projected Profit and Loss

The following table and charts are the projected profit and loss for three years.

Pro Forma Profit and Loss
FY 2003 FY 2004 FY 2005
Sales $313,000 $346,000 $419,000
Direct Cost of Sales $31,300 $35,300 $40,300
Other Production Expenses $0 $0 $0
Total Cost of Sales $31,300 $35,300 $40,300
Gross Margin $281,700 $310,700 $378,700
Gross Margin % 90.00% 89.80% 90.38%
Expenses
Payroll $199,200 $215,136 $247,406
Sales and Marketing and Other Expenses $6,000 $8,000 $10,000
Depreciation $9,600 $9,600 $9,600
Leased Equipment $0 $0 $0
Utilities $3,600 $12,000 $12,000
Insurance $9,600 $9,600 $9,600
Rent $12,000 $12,000 $12,000
Payroll Taxes $29,880 $32,270 $37,111
Other $0 $0 $0
Total Operating Expenses $269,880 $298,606 $337,717
Profit Before Interest and Taxes $11,820 $12,094 $40,983
EBITDA $21,420 $21,694 $50,583
Interest Expense $4,760 $3,405 $1,715
Taxes Incurred $2,118 $2,607 $11,780
Net Profit $4,942 $6,082 $27,488
Net Profit/Sales 1.58% 1.76% 6.56%

7.3 Projected Cash Flow

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

Pro Forma Cash Flow
FY 2003 FY 2004 FY 2005
Cash Received
Cash from Operations
Cash Sales $78,250 $86,500 $104,750
Cash from Receivables $203,750 $254,756 $303,755
Subtotal Cash from Operations $282,000 $341,256 $408,505
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 $50,000 $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 $332,000 $341,256 $408,505
Expenditures FY 2003 FY 2004 FY 2005
Expenditures from Operations
Cash Spending $199,200 $215,136 $247,406
Bill Payments $94,829 $115,954 $133,454
Subtotal Spent on Operations $294,029 $331,090 $380,860
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $1,200 $1,200 $600
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $18,000 $18,300 $13,700
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $313,229 $350,590 $395,160
Net Cash Flow $18,771 ($9,335) $13,345
Cash Balance $88,771 $79,437 $92,781

7.4 Projected Balance Sheet

The following table shows the projected balance sheet for three years.

Pro Forma Balance Sheet
FY 2003 FY 2004 FY 2005
Assets
Current Assets
Cash $88,771 $79,437 $92,781
Accounts Receivable $45,000 $49,744 $60,240
Inventory $3,410 $3,846 $4,391
Other Current Assets $5,000 $5,000 $5,000
Total Current Assets $142,181 $138,027 $162,412
Long-term Assets
Long-term Assets $36,736 $36,736 $36,736
Accumulated Depreciation $14,848 $24,448 $34,048
Total Long-term Assets $21,888 $12,288 $2,688
Total Assets $164,069 $150,315 $165,100
Liabilities and Capital FY 2003 FY 2004 FY 2005
Current Liabilities
Accounts Payable $9,839 $9,503 $11,100
Current Borrowing $1,800 $600 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $11,639 $10,103 $11,100
Long-term Liabilities $42,000 $23,700 $10,000
Total Liabilities $53,639 $33,803 $21,100
Paid-in Capital $0 $0 $0
Retained Earnings $105,488 $110,430 $116,512
Earnings $4,942 $6,082 $27,488
Total Capital $110,430 $116,512 $144,000
Total Liabilities and Capital $164,069 $150,315 $165,100
Net Worth $110,430 $116,512 $144,000

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 5149, Groceries and related products, are shown for comparison.

Ratio Analysis
FY 2003 FY 2004 FY 2005 Industry Profile
Sales Growth 56.50% 10.54% 21.10% 4.60%
Percent of Total Assets
Accounts Receivable 27.43% 33.09% 36.49% 33.30%
Inventory 2.08% 2.56% 2.66% 26.00%
Other Current Assets 3.05% 3.33% 3.03% 20.90%
Total Current Assets 86.66% 91.83% 98.37% 80.20%
Long-term Assets 13.34% 8.17% 1.63% 19.80%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 7.09% 6.72% 6.72% 45.20%
Long-term Liabilities 25.60% 15.77% 6.06% 10.00%
Total Liabilities 32.69% 22.49% 12.78% 55.20%
Net Worth 67.31% 77.51% 87.22% 44.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 90.00% 89.80% 90.38% 44.10%
Selling, General & Administrative Expenses 88.44% 88.08% 83.95% 26.70%
Advertising Expenses 1.92% 2.31% 2.39% 0.70%
Profit Before Interest and Taxes 3.78% 3.50% 9.78% 0.80%
Main Ratios
Current 12.22 13.66 14.63 1.69
Quick 11.92 13.28 14.24 1.01
Total Debt to Total Assets 32.69% 22.49% 12.78% 55.20%
Pre-tax Return on Net Worth 6.39% 7.46% 27.27% 3.60%
Pre-tax Return on Assets 4.30% 5.78% 23.78% 8.00%
Additional Ratios FY 2003 FY 2004 FY 2005
Net Profit Margin 1.58% 1.76% 6.56% n.a
Return on Equity 4.48% 5.22% 19.09% n.a
Activity Ratios
Accounts Receivable Turnover 5.22 5.22 5.22 n.a
Collection Days 58 67 64 n.a
Inventory Turnover 9.76 9.73 9.79 n.a
Accounts Payable Turnover 9.62 12.17 12.17 n.a
Payment Days 30 31 28 n.a
Total Asset Turnover 1.91 2.30 2.54 n.a
Debt Ratios
Debt to Net Worth 0.49 0.29 0.15 n.a
Current Liab. to Liab. 0.22 0.30 0.53 n.a
Liquidity Ratios
Net Working Capital $130,542 $127,924 $151,312 n.a
Interest Coverage 2.48 3.55 23.90 n.a
Additional Ratios
Assets to Sales 0.52 0.43 0.39 n.a
Current Debt/Total Assets 7% 7% 7% n.a
Acid Test 8.06 8.36 8.81 n.a
Sales/Net Worth 2.83 2.97 2.91 n.a
Dividend Payout 0.00 0.00 0.00 n.a
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Break-even Analysis
Monthly Revenue Break-even $24,989
Assumptions:
Average Percent Variable Cost 10%
Estimated Monthly Fixed Cost $22,490
Pro Forma Profit and Loss
FY 2003 FY 2004 FY 2005
Sales $313,000 $346,000 $419,000
Direct Cost of Sales $31,300 $35,300 $40,300
Other Production Expenses $0 $0 $0
Total Cost of Sales $31,300 $35,300 $40,300
Gross Margin $281,700 $310,700 $378,700
Gross Margin % 90.00% 89.80% 90.38%
Expenses
Payroll $199,200 $215,136 $247,406
Sales and Marketing and Other Expenses $6,000 $8,000 $10,000
Depreciation $9,600 $9,600 $9,600
Leased Equipment $0 $0 $0
Utilities $3,600 $12,000 $12,000
Insurance $9,600 $9,600 $9,600
Rent $12,000 $12,000 $12,000
Payroll Taxes $29,880 $32,270 $37,111
Other $0 $0 $0
Total Operating Expenses $269,880 $298,606 $337,717
Profit Before Interest and Taxes $11,820 $12,094 $40,983
EBITDA $21,420 $21,694 $50,583
Interest Expense $4,760 $3,405 $1,715
Taxes Incurred $2,118 $2,607 $11,780
Net Profit $4,942 $6,082 $27,488
Net Profit/Sales 1.58% 1.76% 6.56%
Pro Forma Cash Flow
FY 2003 FY 2004 FY 2005
Cash Received
Cash from Operations
Cash Sales $78,250 $86,500 $104,750
Cash from Receivables $203,750 $254,756 $303,755
Subtotal Cash from Operations $282,000 $341,256 $408,505
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 $50,000 $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 $332,000 $341,256 $408,505
Expenditures FY 2003 FY 2004 FY 2005
Expenditures from Operations
Cash Spending $199,200 $215,136 $247,406
Bill Payments $94,829 $115,954 $133,454
Subtotal Spent on Operations $294,029 $331,090 $380,860
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $1,200 $1,200 $600
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $18,000 $18,300 $13,700
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $313,229 $350,590 $395,160
Net Cash Flow $18,771 ($9,335) $13,345
Cash Balance $88,771 $79,437 $92,781
Pro Forma Balance Sheet
FY 2003 FY 2004 FY 2005
Assets
Current Assets
Cash $88,771 $79,437 $92,781
Accounts Receivable $45,000 $49,744 $60,240
Inventory $3,410 $3,846 $4,391
Other Current Assets $5,000 $5,000 $5,000
Total Current Assets $142,181 $138,027 $162,412
Long-term Assets
Long-term Assets $36,736 $36,736 $36,736
Accumulated Depreciation $14,848 $24,448 $34,048
Total Long-term Assets $21,888 $12,288 $2,688
Total Assets $164,069 $150,315 $165,100
Liabilities and Capital FY 2003 FY 2004 FY 2005
Current Liabilities
Accounts Payable $9,839 $9,503 $11,100
Current Borrowing $1,800 $600 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $11,639 $10,103 $11,100
Long-term Liabilities $42,000 $23,700 $10,000
Total Liabilities $53,639 $33,803 $21,100
Paid-in Capital $0 $0 $0
Retained Earnings $105,488 $110,430 $116,512
Earnings $4,942 $6,082 $27,488
Total Capital $110,430 $116,512 $144,000
Total Liabilities and Capital $164,069 $150,315 $165,100
Net Worth $110,430 $116,512 $144,000
Ratio Analysis
FY 2003 FY 2004 FY 2005 Industry Profile
Sales Growth 56.50% 10.54% 21.10% 4.60%
Percent of Total Assets
Accounts Receivable 27.43% 33.09% 36.49% 33.30%
Inventory 2.08% 2.56% 2.66% 26.00%
Other Current Assets 3.05% 3.33% 3.03% 20.90%
Total Current Assets 86.66% 91.83% 98.37% 80.20%
Long-term Assets 13.34% 8.17% 1.63% 19.80%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 7.09% 6.72% 6.72% 45.20%
Long-term Liabilities 25.60% 15.77% 6.06% 10.00%
Total Liabilities 32.69% 22.49% 12.78% 55.20%
Net Worth 67.31% 77.51% 87.22% 44.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 90.00% 89.80% 90.38% 44.10%
Selling, General & Administrative Expenses 88.44% 88.08% 83.95% 26.70%
Advertising Expenses 1.92% 2.31% 2.39% 0.70%
Profit Before Interest and Taxes 3.78% 3.50% 9.78% 0.80%
Main Ratios
Current 12.22 13.66 14.63 1.69
Quick 11.92 13.28 14.24 1.01
Total Debt to Total Assets 32.69% 22.49% 12.78% 55.20%
Pre-tax Return on Net Worth 6.39% 7.46% 27.27% 3.60%
Pre-tax Return on Assets 4.30% 5.78% 23.78% 8.00%
Additional Ratios FY 2003 FY 2004 FY 2005
Net Profit Margin 1.58% 1.76% 6.56% n.a
Return on Equity 4.48% 5.22% 19.09% n.a
Activity Ratios
Accounts Receivable Turnover 5.22 5.22 5.22 n.a
Collection Days 58 67 64 n.a
Inventory Turnover 9.76 9.73 9.79 n.a
Accounts Payable Turnover 9.62 12.17 12.17 n.a
Payment Days 30 31 28 n.a
Total Asset Turnover 1.91 2.30 2.54 n.a
Debt Ratios
Debt to Net Worth 0.49 0.29 0.15 n.a
Current Liab. to Liab. 0.22 0.30 0.53 n.a
Liquidity Ratios
Net Working Capital $130,542 $127,924 $151,312 n.a
Interest Coverage 2.48 3.55 23.90 n.a
Additional Ratios
Assets to Sales 0.52 0.43 0.39 n.a
Current Debt/Total Assets 7% 7% 7% n.a
Acid Test 8.06 8.36 8.81 n.a
Sales/Net Worth 2.83 2.97 2.91 n.a
Dividend Payout 0.00 0.00 0.00 n.a