Stretch 'r Wings
Financial Plan
The following topics summarize the financial information of Stretch ‘r Wings.
7.1 Important Assumptions
The following table summarizes key financial assumptions.
| General Assumptions | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Plan Month | 1 | 2 | 3 | 4 | 5 |
| Current Interest Rate | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% | 10.00% | 10.00% |
| Tax Rate | 25.42% | 25.00% | 25.42% | 25.00% | 25.42% |
| Other | 0 | 0 | 0 | 0 | 0 |
7.2 Break-even Analysis
The following chart and table summarize the break-even analysis, including monthly units and sales break-even points.
| Break-even Analysis | |
| Monthly Units Break-even | 1 |
| Monthly Revenue Break-even | $4,500 |
| Assumptions: | |
| Average Per-Unit Revenue | $7,422.50 |
| Average Per-Unit Variable Cost | $1,618.75 |
| Estimated Monthly Fixed Cost | $3,519 |
7.3 Projected Profit and Loss
The detailed monthly pro forma income statement for the first year is included in the appendix. The annual estimates are included here.
| Pro Forma Profit and Loss | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Sales | $29,690 | $230,740 | $357,915 | $464,095 | $634,320 |
| Direct Cost of Sales | $6,475 | $49,150 | $77,625 | $100,200 | $137,150 |
| Other | $0 | $0 | $0 | $0 | $0 |
| Total Cost of Sales | $6,475 | $49,150 | $77,625 | $100,200 | $137,150 |
| Gross Margin | $23,215 | $181,590 | $280,290 | $363,895 | $497,170 |
| Gross Margin % | 78.19% | 78.70% | 78.31% | 78.41% | 78.38% |
| Expenses | |||||
| Payroll | $20,000 | $117,640 | $126,000 | $152,320 | $158,500 |
| Sales and Marketing and Other Expenses | $15,300 | $28,400 | $30,000 | $37,500 | $40,000 |
| Depreciation | $0 | $0 | $0 | $0 | $0 |
| Leased Equipment | $0 | $0 | $0 | $0 | $0 |
| Utilities | $350 | $1,200 | $1,400 | $1,500 | $1,500 |
| Phone | $950 | $2,500 | $3,000 | $3,000 | $3,000 |
| Rent | $2,625 | $6,000 | $6,500 | $7,000 | $7,500 |
| Payroll Taxes | $3,000 | $17,646 | $18,900 | $22,848 | $23,775 |
| Other | $0 | $0 | $0 | $0 | $0 |
| Total Operating Expenses | $42,225 | $173,386 | $185,800 | $224,168 | $234,275 |
| Profit Before Interest and Taxes | ($19,010) | $8,204 | $94,490 | $139,727 | $262,895 |
| EBITDA | ($19,010) | $8,204 | $94,490 | $139,727 | $262,895 |
| Interest Expense | $1,784 | $2,400 | $2,000 | $600 | $200 |
| Taxes Incurred | $0 | $1,451 | $23,508 | $34,782 | $66,768 |
| Net Profit | ($20,794) | $4,353 | $68,982 | $104,345 | $195,927 |
| Net Profit/Sales | -70.04% | 1.89% | 19.27% | 22.48% | 30.89% |
7.4 Projected Cash Flow
Cash flow projections are critical to our success. The monthly cash flow is shown in the illustration, with one bar representing the cash flow per month and the other representing the monthly balance. The annual cash flow figures are included here. Detailed monthly numbers are included in the appendix. The initial $20,000 loan will be repaid over five years. Further, to increase the cash balance in FY 2001, a one-year, $20,000 loan will be secured from the bank.
| Pro Forma Cash Flow | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Cash Received | |||||
| Cash from Operations | |||||
| Cash Sales | $29,690 | $230,740 | $357,915 | $464,095 | $634,320 |
| Subtotal Cash from Operations | $29,690 | $230,740 | $357,915 | $464,095 | $634,320 |
| Additional Cash Received | |||||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 | $0 | $0 |
| New Current Borrowing | $0 | $20,000 | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 | $0 | $0 |
| Subtotal Cash Received | $29,690 | $250,740 | $357,915 | $464,095 | $634,320 |
| Expenditures | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Expenditures from Operations | |||||
| Cash Spending | $20,000 | $117,640 | $126,000 | $152,320 | $158,500 |
| Bill Payments | $22,436 | $124,938 | $168,928 | $212,357 | $287,020 |
| Subtotal Spent on Operations | $42,436 | $242,578 | $294,928 | $364,677 | $445,520 |
| Additional Cash Spent | |||||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $20,000 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $3,996 | $4,000 | $4,000 | $4,000 | $4,004 |
| Purchase Other Current Assets | $0 | $0 | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 | $0 | $0 |
| Subtotal Cash Spent | $46,432 | $246,578 | $318,928 | $368,677 | $449,524 |
| Net Cash Flow | ($16,742) | $4,162 | $38,987 | $95,418 | $184,796 |
| Cash Balance | $43,258 | $47,421 | $86,408 | $181,826 | $366,622 |
7.5 Projected Balance Sheet
The projected balance sheet is quite solid. We do not project any trouble meeting our debt obligations, as long as we can achieve our specified objectives.
| Pro Forma Balance Sheet | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Assets | |||||
| Current Assets | |||||
| Cash | $43,258 | $47,421 | $86,408 | $181,826 | $366,622 |
| Inventory | $7,123 | $17,973 | $28,385 | $36,806 | $50,305 |
| Other Current Assets | $10,000 | $10,000 | $10,000 | $10,000 | $10,000 |
| Total Current Assets | $60,381 | $75,393 | $124,793 | $228,631 | $426,927 |
| Long-term Assets | |||||
| Long-term Assets | $0 | $0 | $0 | $0 | $0 |
| Accumulated Depreciation | $0 | $0 | $0 | $0 | $0 |
| Total Long-term Assets | $0 | $0 | $0 | $0 | $0 |
| Total Assets | $60,381 | $75,393 | $124,793 | $228,631 | $426,927 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
| Current Liabilities | |||||
| Accounts Payable | $15,170 | $9,830 | $14,248 | $17,741 | $24,115 |
| Current Borrowing | $0 | $20,000 | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 | $0 | $0 |
| Subtotal Current Liabilities | $15,170 | $29,830 | $14,248 | $17,741 | $24,115 |
| Long-term Liabilities | $16,004 | $12,004 | $8,004 | $4,004 | $0 |
| Total Liabilities | $31,174 | $41,834 | $22,252 | $21,745 | $24,115 |
| Paid-in Capital | $62,000 | $62,000 | $62,000 | $62,000 | $62,000 |
| Retained Earnings | ($12,000) | ($32,794) | ($28,441) | $40,541 | $144,886 |
| Earnings | ($20,794) | $4,353 | $68,982 | $104,345 | $195,927 |
| Total Capital | $29,206 | $33,559 | $102,541 | $206,886 | $402,812 |
| Total Liabilities and Capital | $60,381 | $75,393 | $124,793 | $228,631 | $426,927 |
| Net Worth | $29,206 | $33,559 | $102,541 | $206,886 | $402,812 |
7.6 Business Ratios
The following table outlines important ratios from the laboratory apparatus and furniture industry, as determined by the Standard Industrial Classification (SIC) Index code 3821, Laboratory Equipment and Furniture.
| Ratio Analysis | ||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Industry Profile | |
| Sales Growth | 0.00% | 677.16% | 55.12% | 29.67% | 36.68% | 5.10% |
| Percent of Total Assets | ||||||
| Inventory | 11.80% | 23.84% | 22.75% | 16.10% | 11.78% | 28.60% |
| Other Current Assets | 16.56% | 13.26% | 8.01% | 4.37% | 2.34% | 25.10% |
| Total Current Assets | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 83.70% |
| Long-term Assets | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 16.30% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 25.12% | 39.57% | 11.42% | 7.76% | 5.65% | 37.80% |
| Long-term Liabilities | 26.51% | 15.92% | 6.41% | 1.75% | 0.00% | 14.30% |
| Total Liabilities | 51.63% | 55.49% | 17.83% | 9.51% | 5.65% | 52.10% |
| Net Worth | 48.37% | 44.51% | 82.17% | 90.49% | 94.35% | 47.90% |
| Percent of Sales | ||||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 78.19% | 78.70% | 78.31% | 78.41% | 78.38% | 38.90% |
| Selling, General & Administrative Expenses | 148.77% | 77.19% | 59.30% | 56.34% | 47.63% | 25.40% |
| Advertising Expenses | 8.42% | 6.50% | 4.19% | 4.31% | 3.15% | 1.40% |
| Profit Before Interest and Taxes | -64.03% | 3.56% | 26.40% | 30.11% | 41.45% | 2.00% |
| Main Ratios | ||||||
| Current | 3.98 | 2.53 | 8.76 | 12.89 | 17.70 | 2.36 |
| Quick | 3.51 | 1.92 | 6.77 | 10.81 | 15.62 | 1.33 |
| Total Debt to Total Assets | 51.63% | 55.49% | 17.83% | 9.51% | 5.65% | 52.10% |
| Pre-tax Return on Net Worth | -71.20% | 17.29% | 90.20% | 67.25% | 65.22% | 3.80% |
| Pre-tax Return on Assets | -34.44% | 7.70% | 74.11% | 60.85% | 61.53% | 8.00% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Net Profit Margin | -70.04% | 1.89% | 19.27% | 22.48% | 30.89% | n.a |
| Return on Equity | -71.20% | 12.97% | 67.27% | 50.44% | 48.64% | n.a |
| Activity Ratios | ||||||
| Inventory Turnover | 10.91 | 3.92 | 3.35 | 3.07 | 3.15 | n.a |
| Accounts Payable Turnover | 2.48 | 12.17 | 12.17 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 38 | 25 | 27 | 26 | n.a |
| Total Asset Turnover | 0.49 | 3.06 | 2.87 | 2.03 | 1.49 | n.a |
| Debt Ratios | ||||||
| Debt to Net Worth | 1.07 | 1.25 | 0.22 | 0.11 | 0.06 | n.a |
| Current Liab. to Liab. | 0.49 | 0.71 | 0.64 | 0.82 | 1.00 | n.a |
| Liquidity Ratios | ||||||
| Net Working Capital | $45,210 | $45,563 | $110,545 | $210,890 | $402,812 | n.a |
| Interest Coverage | -10.66 | 3.42 | 47.24 | 232.72 | 1,313.16 | n.a |
| Additional Ratios | ||||||
| Assets to Sales | 2.03 | 0.33 | 0.35 | 0.49 | 0.67 | n.a |
| Current Debt/Total Assets | 25% | 40% | 11% | 8% | 6% | n.a |
| Acid Test | 3.51 | 1.92 | 6.77 | 10.81 | 15.62 | n.a |
| Sales/Net Worth | 1.02 | 6.88 | 3.49 | 2.24 | 1.57 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | n.a |
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