Discover Productions
Financial Plan
The company is seeking first round funding in the amount of $914,900 for staffing purposes, purchasing software and hardware computing equipment, office costs, and other Internet related costs. The company is also seeking second round funding in the amount of $3 million for developing B2B Web-based applications, and their educational application software.
The following sections outline the financial plan for Discover Productions.
General Assumptions | |||
FY 2001 | FY 2002 | FY 2003 | |
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 | 25.42% | 25.00% | 25.42% |
Other | 0 | 0 | 0 |
7.1 Projected Profit and Loss
Discover Productions’ estimated income statements for FY2000-2002 are outlined below.




Pro Forma Profit and Loss | |||
FY 2001 | FY 2002 | FY 2003 | |
Sales | $1,075,000 | $16,125,000 | $45,125,000 |
Direct Cost of Sales | $100,000 | $1,500,000 | $3,000,000 |
Other | $38,000 | $570,000 | $600,000 |
Total Cost of Sales | $138,000 | $2,070,000 | $3,600,000 |
Gross Margin | $937,000 | $14,055,000 | $41,525,000 |
Gross Margin % | 87.16% | 87.16% | 92.02% |
Expenses | |||
Payroll | $434,783 | $2,200,000 | $3,600,000 |
Sales and Marketing and Other Expenses | $483,600 | $3,780,000 | $5,765,000 |
Depreciation | $36,000 | $100,000 | $150,000 |
Utilities | $3,600 | $5,000 | $6,000 |
Insurance | $14,400 | $40,000 | $60,000 |
Rent | $18,000 | $40,000 | $70,000 |
Utilities | $24,000 | $25,000 | $25,000 |
Continuing Education | $36,000 | $518,000 | $575,000 |
Payroll Taxes | $65,217 | $330,000 | $540,000 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $1,115,600 | $7,038,000 | $10,791,000 |
Profit Before Interest and Taxes | ($178,600) | $7,017,000 | $30,734,000 |
EBITDA | ($142,600) | $7,117,000 | $30,884,000 |
Interest Expense | $5,452 | $4,856 | $3,782 |
Taxes Incurred | $0 | $1,753,036 | $7,810,597 |
Net Profit | ($184,052) | $5,259,108 | $22,919,621 |
Net Profit/Sales | -17.12% | 32.61% | 50.79% |
7.2 Projected Cash Flow
The table below provides the company’s projected cash flow for FY2000-2002.

Pro Forma Cash Flow | |||
FY 2001 | FY 2002 | FY 2003 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $268,750 | $4,031,250 | $11,281,250 |
Cash from Receivables | $698,750 | $10,028,750 | $29,864,680 |
Subtotal Cash from Operations | $967,500 | $14,060,000 | $41,145,930 |
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 | $3,914,900 | $0 | $0 |
Subtotal Cash Received | $4,882,400 | $14,060,000 | $41,145,930 |
Expenditures | FY 2001 | FY 2002 | FY 2003 |
Expenditures from Operations | |||
Cash Spending | $434,783 | $2,200,000 | $3,600,000 |
Bill Payments | $753,996 | $7,926,120 | $17,642,544 |
Subtotal Spent on Operations | $1,188,779 | $10,126,120 | $21,242,544 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
Principal Repayment of Current Borrowing | $0 | $2,624 | $0 |
Other Liabilities Principal Repayment | $0 | $0 | $0 |
Long-term Liabilities Principal Repayment | $646 | $8,963 | $9,902 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $1,052,000 | $1,500,000 | $1,500,000 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $2,241,425 | $11,637,707 | $22,752,446 |
Net Cash Flow | $2,640,975 | $2,422,293 | $18,393,484 |
Cash Balance | $2,670,975 | $5,093,269 | $23,486,753 |
7.3 Balance Sheet
The projected Balance Sheet is shown below.
Pro Forma Balance Sheet | |||
FY 2001 | FY 2002 | FY 2003 | |
Assets | |||
Current Assets | |||
Cash | $2,670,975 | $5,093,269 | $23,486,753 |
Accounts Receivable | $147,500 | $2,212,500 | $6,191,570 |
Other Current Assets | $5,000 | $5,000 | $5,000 |
Total Current Assets | $2,823,475 | $7,310,769 | $29,683,323 |
Long-term Assets | |||
Long-term Assets | $1,152,000 | $2,652,000 | $4,152,000 |
Accumulated Depreciation | $56,000 | $156,000 | $306,000 |
Total Long-term Assets | $1,096,000 | $2,496,000 | $3,846,000 |
Total Assets | $3,919,475 | $9,806,769 | $33,529,323 |
Liabilities and Capital | FY 2001 | FY 2002 | FY 2003 |
Current Liabilities | |||
Accounts Payable | $64,273 | $704,046 | $1,516,880 |
Current Borrowing | $5,000 | $2,376 | $2,376 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $69,273 | $706,422 | $1,519,256 |
Long-term Liabilities | $49,354 | $40,391 | $30,489 |
Total Liabilities | $118,627 | $746,813 | $1,549,745 |
Paid-in Capital | $3,939,900 | $3,939,900 | $3,939,900 |
Retained Earnings | $45,000 | ($139,052) | $5,120,056 |
Earnings | ($184,052) | $5,259,108 | $22,919,621 |
Total Capital | $3,800,848 | $9,059,956 | $31,979,577 |
Total Liabilities and Capital | $3,919,475 | $9,806,769 | $33,529,323 |
Net Worth | $3,800,848 | $9,059,956 | $31,979,577 |
7.4 Business Ratios
The following table contains important business ratios for the consulting industry, as determined by the Standard Industry Classification (SIC) Index code 8748.
Ratio Analysis | ||||
FY 2001 | FY 2002 | FY 2003 | Industry Profile | |
Sales Growth | 115.00% | 1400.00% | 179.84% | 12.40% |
Percent of Total Assets | ||||
Accounts Receivable | 3.76% | 22.56% | 18.47% | 26.10% |
Other Current Assets | 0.13% | 0.05% | 0.01% | 44.70% |
Total Current Assets | 72.04% | 74.55% | 88.53% | 74.50% |
Long-term Assets | 27.96% | 25.45% | 11.47% | 25.50% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 1.77% | 7.20% | 4.53% | 44.30% |
Long-term Liabilities | 1.26% | 0.41% | 0.09% | 16.00% |
Total Liabilities | 3.03% | 7.62% | 4.62% | 60.30% |
Net Worth | 96.97% | 92.38% | 95.38% | 39.70% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 87.16% | 87.16% | 92.02% | 0.00% |
Selling, General & Administrative Expenses | 104.28% | 54.55% | 40.95% | 80.80% |
Advertising Expenses | 11.16% | 6.05% | 2.77% | 1.30% |
Profit Before Interest and Taxes | -16.61% | 43.52% | 68.11% | 2.20% |
Main Ratios | ||||
Current | 40.76 | 10.35 | 19.54 | 1.75 |
Quick | 40.76 | 10.35 | 19.54 | 1.38 |
Total Debt to Total Assets | 3.03% | 7.62% | 4.62% | 60.30% |
Pre-tax Return on Net Worth | -4.84% | 77.40% | 96.09% | 3.80% |
Pre-tax Return on Assets | -4.70% | 71.50% | 91.65% | 9.70% |
Additional Ratios | FY 2001 | FY 2002 | FY 2003 | |
Net Profit Margin | -17.12% | 32.61% | 50.79% | n.a |
Return on Equity | -4.84% | 58.05% | 71.67% | n.a |
Activity Ratios | ||||
Accounts Receivable Turnover | 5.47 | 5.47 | 5.47 | n.a |
Collection Days | 58 | 36 | 45 | n.a |
Accounts Payable Turnover | 12.26 | 12.17 | 12.17 | n.a |
Payment Days | 28 | 16 | 22 | n.a |
Total Asset Turnover | 0.27 | 1.64 | 1.35 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.03 | 0.08 | 0.05 | n.a |
Current Liab. to Liab. | 0.58 | 0.95 | 0.98 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $2,754,202 | $6,604,347 | $28,164,066 | n.a |
Interest Coverage | -32.76 | 1,445.00 | 8,127.25 | n.a |
Additional Ratios | ||||
Assets to Sales | 3.65 | 0.61 | 0.74 | n.a |
Current Debt/Total Assets | 2% | 7% | 5% | n.a |
Acid Test | 38.63 | 7.22 | 15.46 | n.a |
Sales/Net Worth | 0.28 | 1.78 | 1.41 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |