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Cigar World

Financial Plan

Based on our projections, we feel a loan to our company is a sound investment. In order to proceed, we are requesting a loan of $150,000. The funds will be used for manufacturing and production, marketing, and to cover initial operating expenses. The company is planning on going public within the next 12 to 18 months and this will provide additional funds to repay the loan. We can provide an exit for this loan immediately after going public by a recapitalization of funds.

7.1 Business Ratios

The following table contains important ratios from the Tobacco and Tobacco Products industry (SIC 5194), as determined by the Standard Industry Classification (SIC) Index.

Ratio Analysis
2000 2001 2002 Industry Profile
Sales Growth 38.89% 220.00% 63.13% 8.50%
Percent of Total Assets
Accounts Receivable 22.85% 18.42% 13.18% 29.90%
Inventory 0.68% 0.64% 0.30% 27.70%
Other Current Assets 2.01% 0.51% 0.22% 24.50%
Total Current Assets 95.75% 97.63% 98.26% 82.10%
Long-term Assets 4.25% 2.37% 1.74% 17.90%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 13.71% 3.97% 2.39% 46.30%
Long-term Liabilities 4.92% 0.98% 0.30% 10.90%
Total Liabilities 18.64% 4.95% 2.70% 57.20%
Net Worth 81.36% 95.05% 97.30% 42.80%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 95.80% 95.25% 96.86% 22.90%
Selling, General & Administrative Expenses 40.46% 30.77% 28.99% 16.20%
Advertising Expenses 2.00% 1.25% 0.77% 0.70%
Profit Before Interest and Taxes 75.16% 86.19% 90.28% 1.30%
Main Ratios
Current 6.98 24.61 41.08 1.72
Quick 6.93 24.45 40.96 0.95
Total Debt to Total Assets 18.64% 4.95% 2.70% 57.20%
Pre-tax Return on Net Worth 130.79% 104.58% 76.65% 3.30%
Pre-tax Return on Assets 106.41% 99.40% 74.59% 7.70%
Additional Ratios 2000 2001 2002
Net Profit Margin 55.53% 64.47% 67.26% n.a
Return on Equity 97.88% 78.43% 57.17% n.a
Activity Ratios
Accounts Receivable Turnover 4.71 4.71 4.71 n.a
Collection Days 57 51 63 n.a
Inventory Turnover 10.91 13.25 8.75 n.a
Accounts Payable Turnover 9.80 12.17 12.17 n.a
Payment Days 28 22 25 n.a
Total Asset Turnover 1.43 1.16 0.83 n.a
Debt Ratios
Debt to Net Worth 0.23 0.05 0.03 n.a
Current Liab. to Liab. 0.74 0.80 0.89 n.a
Liquidity Ratios
Net Working Capital $1,429,924 $6,479,464 $15,127,078 n.a
Interest Coverage 77.36 367.18 931.63 n.a
Additional Ratios
Assets to Sales 0.70 0.86 1.21 n.a
Current Debt/Total Assets 14% 4% 2% n.a
Acid Test 5.27 19.81 35.45 n.a
Sales/Net Worth 1.76 1.22 0.85 n.a
Dividend Payout 0.00 0.00 0.00 n.a

7.2 Important Assumptions

The table below shows the assumptions that are important to the success of Cigar World.

General Assumptions
2000 2001 2002
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

7.3 Break-even Analysis

As the table below shows, Cigar World’s margins provide enough resources to break-even.

Cigar manufacturing business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $44,792
Assumptions:
Average Percent Variable Cost 4%
Estimated Monthly Fixed Cost $43,000

7.4 Projected Profit and Loss

The table below shows our projected income statement.

Cigar manufacturing business plan, financial plan chart image

Cigar manufacturing business plan, financial plan chart image

Cigar manufacturing business plan, financial plan chart image

Cigar manufacturing business plan, financial plan chart image

Pro Forma Profit and Loss
2000 2001 2002
Sales $2,500,000 $8,000,000 $13,050,000
Direct Cost of Sales $100,000 $370,000 $400,000
Other $5,000 $10,000 $10,000
Total Cost of Sales $105,000 $380,000 $410,000
Gross Margin $2,395,000 $7,620,000 $12,640,000
Gross Margin % 95.80% 95.25% 96.86%
Expenses
Payroll $240,000 $401,100 $466,000
Sales and Marketing and Other Expenses $218,000 $230,000 $295,000
Depreciation $6,000 $10,000 $10,000
Utilities $2,000 $3,500 $4,000
Insurance $10,000 $15,000 $15,000
Rent $2,500 $5,000 $5,000
Payroll Taxes $37,500 $60,000 $63,750
Other $0 $0 $0
Total Operating Expenses $516,000 $724,600 $858,750
Profit Before Interest and Taxes $1,879,000 $6,895,400 $11,781,250
EBITDA $1,885,000 $6,905,400 $11,791,250
Interest Expense $24,290 $18,780 $12,646
Taxes Incurred $466,585 $1,719,155 $2,991,187
Net Profit $1,388,125 $5,157,465 $8,777,417
Net Profit/Sales 55.53% 64.47% 67.26%

7.5 Projected Cash Flow

The company’s cash reserves are sufficient for everyday operations and investments.

Cigar manufacturing business plan, financial plan chart image

Pro Forma Cash Flow
2000 2001 2002
Cash Received
Cash from Operations
Cash Sales $625,000 $2,000,000 $3,262,500
Cash from Receivables $1,526,750 $5,123,850 $8,983,035
Subtotal Cash from Operations $2,151,750 $7,123,850 $12,245,535
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $150,000 $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 $2,301,750 $7,123,850 $12,245,535
Expenditures 2000 2001 2002
Expenditures from Operations
Cash Spending $240,000 $401,100 $466,000
Bill Payments $803,720 $2,350,065 $3,690,286
Subtotal Spent on Operations $1,043,720 $2,751,165 $4,156,286
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $78,081 $6,864
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $14,201 $17,926 $19,803
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $60,000 $100,000 $120,000
Dividends $0 $0 $0
Subtotal Cash Spent $1,117,921 $2,947,172 $4,302,953
Net Cash Flow $1,183,829 $4,176,678 $7,942,582
Cash Balance $1,223,829 $5,400,507 $13,343,089

7.6 Projected Balance Sheet

The company’s projected balance sheets for fiscal year 2000-2002 are provided below.

Pro Forma Balance Sheet
2000 2001 2002
Assets
Current Assets
Cash $1,223,829 $5,400,507 $13,343,089
Accounts Receivable $398,250 $1,274,400 $2,078,865
Inventory $11,880 $43,956 $47,520
Other Current Assets $35,000 $35,000 $35,000
Total Current Assets $1,668,959 $6,753,863 $15,504,474
Long-term Assets
Long-term Assets $85,000 $185,000 $305,000
Accumulated Depreciation $11,000 $21,000 $31,000
Total Long-term Assets $74,000 $164,000 $274,000
Total Assets $1,742,959 $6,917,863 $15,778,474
Liabilities and Capital 2000 2001 2002
Current Liabilities
Accounts Payable $89,035 $202,480 $312,341
Current Borrowing $150,000 $71,919 $65,055
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $239,035 $274,399 $377,396
Long-term Liabilities $85,799 $67,873 $48,070
Total Liabilities $324,834 $342,272 $425,466
Paid-in Capital $25,000 $25,000 $25,000
Retained Earnings $5,000 $1,393,125 $6,550,591
Earnings $1,388,125 $5,157,465 $8,777,417
Total Capital $1,418,125 $6,575,591 $15,353,008
Total Liabilities and Capital $1,742,959 $6,917,863 $15,778,474
Net Worth $1,418,125 $6,575,591 $15,353,008