University Telephones

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Telephone Sales Business Plan

Financial Plan

The following is the financial plan for University Telephones.

7.1 Break-even Analysis

The monthly break-even point is approximately $28,300.

Break-even Analysis
Monthly Revenue Break-even $28,318
Assumptions:
Average Percent Variable Cost 47%
Estimated Monthly Fixed Cost $15,050

7.2 Projected Balance Sheet

The following table highlights the projected balance sheet for the next three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $21,509 $18,733 $37,092
Inventory $14,960 $15,214 $15,589
Other Current Assets $0 $0 $0
Total Current Assets $36,469 $33,946 $52,682
Long-term Assets
Long-term Assets $50,000 $50,000 $50,000
Accumulated Depreciation $2,400 $4,800 $7,200
Total Long-term Assets $47,600 $45,200 $42,800
Total Assets $84,069 $79,146 $95,482
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $17,184 $16,817 $17,913
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $17,184 $16,817 $17,913
Long-term Liabilities $39,200 $28,400 $17,600
Total Liabilities $56,384 $45,217 $35,513
Paid-in Capital $40,000 $40,000 $40,000
Retained Earnings ($8,000) ($12,315) ($6,071)
Earnings ($4,315) $6,244 $26,040
Total Capital $27,685 $33,929 $59,969
Total Liabilities and Capital $84,069 $79,146 $95,482
Net Worth $27,685 $33,929 $59,969

7.3 Projected Profit and Loss

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

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $340,000 $359,000 $404,000
Direct Cost of Sales $159,300 $162,000 $166,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $159,300 $162,000 $166,000
Gross Margin $180,700 $197,000 $238,000
Gross Margin % 53.15% 54.87% 58.91%
Expenses
Payroll $132,000 $146,000 $158,000
Sales and Marketing and Other Expenses $0 $0 $0
Depreciation $2,400 $2,400 $2,400
Leased Equipment $0 $0 $0
Utilities $2,400 $2,400 $2,400
Insurance $0 $0 $0
Rent $24,000 $12,000 $12,000
Payroll Taxes $19,800 $21,900 $23,700
Other $0 $0 $0
Total Operating Expenses $180,600 $184,700 $198,500
Profit Before Interest and Taxes $100 $12,300 $39,500
EBITDA $2,500 $14,700 $41,900
Interest Expense $4,415 $3,380 $2,300
Taxes Incurred $0 $2,676 $11,160
Net Profit ($4,315) $6,244 $26,040
Net Profit/Sales -1.27% 1.74% 6.45%

7.4 Projected Cash Flow

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

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $340,000 $359,000 $404,000
Subtotal Cash from Operations $340,000 $359,000 $404,000
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 $340,000 $359,000 $404,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $132,000 $146,000 $158,000
Bill Payments $177,691 $204,976 $216,840
Subtotal Spent on Operations $309,691 $350,976 $374,840
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 $10,800 $10,800 $10,800
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $320,491 $361,776 $385,640
Net Cash Flow $19,509 ($2,776) $18,360
Cash Balance $21,509 $18,733 $37,092

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 3661, Telephone Equipment, are shown for comparison.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 5.59% 12.53% 10.50%
Percent of Total Assets
Inventory 17.79% 19.22% 16.33% 26.50%
Other Current Assets 0.00% 0.00% 0.00% 31.10%
Total Current Assets 43.38% 42.89% 55.17% 83.50%
Long-term Assets 56.62% 57.11% 44.83% 16.50%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 20.44% 21.25% 18.76% 48.90%
Long-term Liabilities 46.63% 35.88% 18.43% 13.30%
Total Liabilities 67.07% 57.13% 37.19% 62.20%
Net Worth 32.93% 42.87% 62.81% 37.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 53.15% 54.87% 58.91% 41.50%
Selling, General & Administrative Expenses 54.42% 53.14% 52.47% 26.80%
Advertising Expenses 0.00% 0.00% 0.00% 1.00%
Profit Before Interest and Taxes 0.03% 3.43% 9.78% 2.60%
Main Ratios
Current 2.12 2.02 2.94 1.71
Quick 1.25 1.11 2.07 0.97
Total Debt to Total Assets 67.07% 57.13% 37.19% 62.20%
Pre-tax Return on Net Worth -15.59% 26.29% 62.03% 3.00%
Pre-tax Return on Assets -5.13% 11.27% 38.96% 7.80%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin -1.27% 1.74% 6.45% n.a
Return on Equity -15.59% 18.40% 43.42% n.a
Activity Ratios
Inventory Turnover 10.34 10.74 10.78 n.a
Accounts Payable Turnover 11.34 12.17 12.17 n.a
Payment Days 27 30 29 n.a
Total Asset Turnover 4.04 4.54 4.23 n.a
Debt Ratios
Debt to Net Worth 2.04 1.33 0.59 n.a
Current Liab. to Liab. 0.30 0.37 0.50 n.a
Liquidity Ratios
Net Working Capital $19,285 $17,129 $34,769 n.a
Interest Coverage 0.02 3.64 17.17 n.a
Additional Ratios
Assets to Sales 0.25 0.22 0.24 n.a
Current Debt/Total Assets 20% 21% 19% n.a
Acid Test 1.25 1.11 2.07 n.a
Sales/Net Worth 12.28 10.58 6.74 n.a
Dividend Payout 0.00 0.00 0.00 n.a