Eagle Computers
Financial Plan
The following subtopics help present the financial plan for Eagle Computers.
7.1 Important Assumptions
The key underlying assumptions of our financial plan shown in the following general assumption table are:
- We assume access to the start-up funding necessary to provide adequate initial capitalization and establish our company.
- We assume continued steady economic growth in Hawaii as predicted by Bank of Hawaii, and other Hawaii economists.
- We assume continued steady population growth of the West Hawaii community.
- We assume continued steady increase in tourism to the Kona area as predicted by the Department of Business, Economic Development and Tourism for the State of Hawaii.
- We assume continued usage of IBM-compatible computers in the home and at work.
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 Break-even Analysis
For our break-even analysis, we assume running costs which include our full payroll, rent and utilities, and an estimation of other running costs.
We will monitor gross margins very closely, and maintain them at or above 50% by taking advantage of all promotions and discounts offered by our manufacturers and by our higher-profit revenue generators of computer service and Computer Rental Stations.
The chart shows what we need to sell per month to break even, according to these assumptions. This is about 6% of our projected sales for our first year.

Break-even Analysis | |
Monthly Revenue Break-even | $12,868 |
Assumptions: | |
Average Percent Variable Cost | 50% |
Estimated Monthly Fixed Cost | $6,447 |
7.3 Projected Profit and Loss
There are two important assumptions with our Projected Profit and Loss statement:
- Our revenue is based on minimum estimated averages against highest expense expectations.
- Our major expense of rent is fixed for the next three years.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $219,550 | $232,977 | $247,333 |
Direct Cost of Sales | $109,550 | $111,741 | $113,976 |
Other Costs of Goods | $0 | $0 | $0 |
Total Cost of Sales | $109,550 | $111,741 | $113,976 |
Gross Margin | $110,000 | $121,236 | $133,357 |
Gross Margin % | 50.10% | 52.04% | 53.92% |
Expenses | |||
Payroll | $49,500 | $57,000 | $65,000 |
Sales and Marketing and Other Expenses | $280 | $280 | $280 |
Depreciation | $0 | $0 | $0 |
Rent | $15,600 | $15,600 | $15,600 |
Utilities | $3,600 | $3,600 | $3,600 |
Security Alarm System | $360 | $360 | $360 |
Insurance | $600 | $600 | $600 |
Payroll Taxes | $7,425 | $8,550 | $9,750 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $77,365 | $85,990 | $95,190 |
Profit Before Interest and Taxes | $32,635 | $35,246 | $38,167 |
EBITDA | $32,635 | $35,246 | $38,167 |
Interest Expense | $3,310 | $2,974 | $2,624 |
Taxes Incurred | $8,797 | $9,681 | $10,663 |
Net Profit | $20,527 | $22,590 | $24,880 |
Net Profit/Sales | 9.35% | 9.70% | 10.06% |
7.4 Projected Cash Flow
Our projected cash flow includes planned borrowing to increase our capital and thereby ensure a positive cash balance while our business is becoming established. Though the cash flow is negative on and off throughout the year, we will maintain a healthy cash balance, which steadily increases in both the second and third years.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $219,550 | $232,977 | $247,333 |
Subtotal Cash from Operations | $219,550 | $232,977 | $247,333 |
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 | $35,000 | $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 | $254,550 | $232,977 | $247,333 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $49,500 | $57,000 | $65,000 |
Bill Payments | $136,766 | $156,082 | $157,370 |
Subtotal Spent on Operations | $186,266 | $213,082 | $222,370 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
Principal Repayment of Current Borrowing | $0 | $0 | $0 |
Other Liabilities Principal Repayment | $0 | $0 | $0 |
Long-term Liabilities Principal Repayment | $3,504 | $3,504 | $3,504 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $189,770 | $216,586 | $225,874 |
Net Cash Flow | $64,780 | $16,390 | $21,460 |
Cash Balance | $66,805 | $83,195 | $104,655 |
7.5 Projected Balance Sheet
Our Projected Balance Sheet shows we will not have any difficulty meeting our debt obligations as long as our revenue projections are met.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $66,805 | $83,195 | $104,655 |
Inventory | $12,320 | $12,566 | $12,818 |
Other Current Assets | $0 | $0 | $0 |
Total Current Assets | $79,125 | $95,762 | $117,473 |
Long-term Assets | |||
Long-term Assets | $0 | $0 | $0 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $0 | $0 | $0 |
Total Assets | $79,125 | $95,762 | $117,473 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $15,076 | $12,627 | $12,962 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $15,076 | $12,627 | $12,962 |
Long-term Liabilities | $31,496 | $27,992 | $24,488 |
Total Liabilities | $46,572 | $40,619 | $37,450 |
Paid-in Capital | $20,000 | $20,000 | $20,000 |
Retained Earnings | ($7,975) | $12,552 | $35,142 |
Earnings | $20,527 | $22,590 | $24,880 |
Total Capital | $32,552 | $55,142 | $80,023 |
Total Liabilities and Capital | $79,125 | $95,762 | $117,473 |
Net Worth | $32,552 | $55,142 | $80,023 |
7.6 Business Ratios
The company’s projected business ratios are provided in the table below. The final column, Industry Profile, shows the industry profile ratios based on the Standard Industrial Classification (SIC) code 5734, Computer and Software Stores.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 6.12% | 6.16% | 5.90% |
Percent of Total Assets | ||||
Inventory | 15.57% | 13.12% | 10.91% | 28.69% |
Other Current Assets | 0.00% | 0.00% | 0.00% | 23.57% |
Total Current Assets | 100.00% | 100.00% | 100.00% | 76.76% |
Long-term Assets | 0.00% | 0.00% | 0.00% | 23.24% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 19.05% | 13.19% | 11.03% | 38.11% |
Long-term Liabilities | 39.81% | 29.23% | 20.85% | 12.34% |
Total Liabilities | 58.86% | 42.42% | 31.88% | 50.45% |
Net Worth | 41.14% | 57.58% | 68.12% | 49.55% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 50.10% | 52.04% | 53.92% | 32.91% |
Selling, General & Administrative Expenses | 40.75% | 42.34% | 43.86% | 16.33% |
Advertising Expenses | 0.00% | 0.00% | 0.00% | 3.48% |
Profit Before Interest and Taxes | 14.86% | 15.13% | 15.43% | 1.13% |
Main Ratios | ||||
Current | 5.25 | 7.58 | 9.06 | 1.84 |
Quick | 4.43 | 6.59 | 8.07 | 0.96 |
Total Debt to Total Assets | 58.86% | 42.42% | 31.88% | 53.76% |
Pre-tax Return on Net Worth | 90.09% | 58.52% | 44.42% | 2.48% |
Pre-tax Return on Assets | 37.06% | 33.70% | 30.26% | 5.36% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 9.35% | 9.70% | 10.06% | n.a |
Return on Equity | 63.06% | 40.97% | 31.09% | n.a |
Activity Ratios | ||||
Inventory Turnover | 10.91 | 8.98 | 8.98 | n.a |
Accounts Payable Turnover | 10.07 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 33 | 30 | n.a |
Total Asset Turnover | 2.77 | 2.43 | 2.11 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 1.43 | 0.74 | 0.47 | n.a |
Current Liab. to Liab. | 0.32 | 0.31 | 0.35 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $64,048 | $83,134 | $104,511 | n.a |
Interest Coverage | 9.86 | 11.85 | 14.55 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.36 | 0.41 | 0.47 | n.a |
Current Debt/Total Assets | 19% | 13% | 11% | n.a |
Acid Test | 4.43 | 6.59 | 8.07 | n.a |
Sales/Net Worth | 6.74 | 4.23 | 3.09 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |