Fantastic Florals
Financial Plan
- Fantastic Florals, Inc. projects the gross margin to be at approximately 25 percent. Sales projection for 1995 is at $1.1 million, increasing to $1.5 million in 1996 and $2 million in 1997.
- Cash-flow analysis, balance sheet, business ratio, break-even analysis, and other financial details are shown in the appendix.
7.1 Important Assumptions
General assumptions in FFI’s financial plan indicate the assumption of a stable economy without any major recessions or booms in both the U.S. and Indonesian economies.
| 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 Start-up Funding
The owner will contribute $35,000 to finance the start-up requirements. FFI is also seeking a short-term loan of $35,000, to be repaid by July 1997 (two and a half years), for the remainder of necessary start-up funding.
| Start-up Funding | |
| Start-up Expenses to Fund | $3,100 |
| Start-up Assets to Fund | $70,000 |
| Total Funding Required | $73,100 |
| Assets | |
| Non-cash Assets from Start-up | $0 |
| Cash Requirements from Start-up | $70,000 |
| Additional Cash Raised | $0 |
| Cash Balance on Starting Date | $70,000 |
| Total Assets | $70,000 |
| Liabilities and Capital | |
| Liabilities | |
| Current Borrowing | $35,000 |
| Long-term Liabilities | $0 |
| Accounts Payable (Outstanding Bills) | $3,100 |
| Other Current Liabilities (interest-free) | $0 |
| Total Liabilities | $38,100 |
| Capital | |
| Planned Investment | |
| Owner | $35,000 |
| Investor | $0 |
| Additional Investment Requirement | $0 |
| Total Planned Investment | $35,000 |
| Loss at Start-up (Start-up Expenses) | ($3,100) |
| Total Capital | $31,900 |
| Total Capital and Liabilities | $70,000 |
| Total Funding | $73,100 |
7.3 Key Financial Indicators
Key financial indicators for Fantastic Florals, Inc. include:
- Constant gross margins.
- Sales on credit.
- Net worth.
- Return on equity.
7.4 Break-even Analysis
FFI’s break-even analysis indicates that the firm has a strong balance of costs and sales.
| Break-even Analysis | |
| Monthly Units Break-even | 2,284 |
| Monthly Revenue Break-even | $37,667 |
| Assumptions: | |
| Average Per-Unit Revenue | $16.49 |
| Average Per-Unit Variable Cost | $10.92 |
| Estimated Monthly Fixed Cost | $12,738 |
7.5 Projected Profit and Loss
Fantastic Florals, Inc. projects profits for every month of 1995 and on into both 1996 and 1997, in addition to positive growth margins for the same time periods.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $1,143,065 | $1,525,269 | $1,850,373 |
| Direct Cost of Sales | $756,512 | $1,009,932 | $1,229,583 |
| Shipping, etc. | $40,235 | $44,260 | $48,688 |
| Total Cost of Sales | $796,747 | $1,054,192 | $1,278,271 |
| Gross Margin | $346,318 | $471,077 | $572,102 |
| Gross Margin % | 30.30% | 30.88% | 30.92% |
| Expenses | |||
| Payroll | $43,200 | $80,000 | $108,000 |
| Marketing/Promotion | $84,455 | $118,860 | $162,302 |
| Depreciation | $0 | $0 | $0 |
| Rent | $15,600 | $17,160 | $18,876 |
| Utilities | $2,400 | $2,640 | $2,904 |
| Insurance | $7,200 | $7,920 | $8,712 |
| Payroll Taxes | $0 | $0 | $0 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $152,855 | $226,580 | $300,794 |
| Profit Before Interest and Taxes | $193,463 | $244,497 | $271,308 |
| EBITDA | $193,463 | $244,497 | $271,308 |
| Interest Expense | $2,778 | $1,500 | $417 |
| Taxes Incurred | $57,206 | $72,899 | $81,267 |
| Net Profit | $133,480 | $170,097 | $189,624 |
| Net Profit/Sales | 11.68% | 11.15% | 10.25% |
7.6 Projected Cash Flow
FFI’s cash balance is expected to increase each year, providing the necessary capital for expansion into different product lines and distribution channels.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $857,299 | $1,143,951 | $1,387,779 |
| Cash from Receivables | $232,800 | $363,607 | $447,529 |
| Subtotal Cash from Operations | $1,090,099 | $1,507,558 | $1,835,308 |
| 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 | $1,090,099 | $1,507,558 | $1,835,308 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $43,200 | $80,000 | $108,000 |
| Bill Payments | $916,116 | $1,339,812 | $1,556,038 |
| Subtotal Spent on Operations | $959,316 | $1,419,812 | $1,664,038 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $13,332 | $13,332 | $8,336 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $972,648 | $1,433,144 | $1,672,374 |
| Net Cash Flow | $117,451 | $74,415 | $162,934 |
| Cash Balance | $187,451 | $261,865 | $424,800 |
7.7 Projected Balance Sheet
The balance sheet indicates a positive and ever-increasing net worth for FFI.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $187,451 | $261,865 | $424,800 |
| Accounts Receivable | $52,967 | $70,677 | $85,741 |
| Inventory | $88,783 | $118,524 | $144,302 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $329,200 | $451,066 | $654,843 |
| Long-term Assets | |||
| Long-term Assets | $0 | $0 | $0 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $0 | $0 | $0 |
| Total Assets | $329,200 | $451,066 | $654,843 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $142,153 | $107,253 | $129,742 |
| Current Borrowing | $21,668 | $8,336 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $163,821 | $115,589 | $129,742 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $163,821 | $115,589 | $129,742 |
| Paid-in Capital | $35,000 | $35,000 | $35,000 |
| Retained Earnings | ($3,100) | $130,380 | $300,477 |
| Earnings | $133,480 | $170,097 | $189,624 |
| Total Capital | $165,380 | $335,477 | $525,101 |
| Total Liabilities and Capital | $329,200 | $451,066 | $654,843 |
| Net Worth | $165,380 | $335,477 | $525,101 |
7.8 Business Ratios
The ratios illustrated in the table indicate strong, consistent growth. Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 5193, Flowers and Florist’s Supplies, are shown for comparison.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 33.44% | 21.31% | 6.22% |
| Percent of Total Assets | ||||
| Accounts Receivable | 16.09% | 15.67% | 13.09% | 25.17% |
| Inventory | 26.97% | 26.28% | 22.04% | 28.25% |
| Other Current Assets | 0.00% | 0.00% | 0.00% | 28.53% |
| Total Current Assets | 100.00% | 100.00% | 100.00% | 81.95% |
| Long-term Assets | 0.00% | 0.00% | 0.00% | 18.05% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 49.76% | 25.63% | 19.81% | 45.52% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 13.34% |
| Total Liabilities | 49.76% | 25.63% | 19.81% | 58.86% |
| Net Worth | 50.24% | 74.37% | 80.19% | 41.14% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 30.30% | 30.88% | 30.92% | 13.07% |
| Selling, General & Administrative Expenses | 21.06% | 21.93% | 22.19% | 5.31% |
| Advertising Expenses | 1.05% | 0.89% | 0.76% | 0.67% |
| Profit Before Interest and Taxes | 16.92% | 16.03% | 14.66% | 1.00% |
| Main Ratios | ||||
| Current | 2.01 | 3.90 | 5.05 | 1.53 |
| Quick | 1.47 | 2.88 | 3.94 | 0.82 |
| Total Debt to Total Assets | 49.76% | 25.63% | 19.81% | 62.11% |
| Pre-tax Return on Net Worth | 115.30% | 72.43% | 51.59% | 3.32% |
| Pre-tax Return on Assets | 57.92% | 53.87% | 41.37% | 8.77% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 11.68% | 11.15% | 10.25% | n.a |
| Return on Equity | 80.71% | 50.70% | 36.11% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 5.40 | 5.40 | 5.40 | n.a |
| Collection Days | 56 | 59 | 62 | n.a |
| Inventory Turnover | 12.00 | 9.74 | 9.36 | n.a |
| Accounts Payable Turnover | 7.42 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 35 | 27 | n.a |
| Total Asset Turnover | 3.47 | 3.38 | 2.83 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.99 | 0.34 | 0.25 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $165,380 | $335,477 | $525,101 | n.a |
| Interest Coverage | 69.64 | 162.98 | 650.93 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.29 | 0.30 | 0.35 | n.a |
| Current Debt/Total Assets | 50% | 26% | 20% | n.a |
| Acid Test | 1.14 | 2.27 | 3.27 | n.a |
| Sales/Net Worth | 6.91 | 4.55 | 3.52 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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