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.
| 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.
| 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.
| 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 |
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