The following subsections outline the financial plan for Markam Driving School.
8.1 Break-even Analysis
The company's Break-even Analysis is based on the company's running costs, including payroll, and its present fixed costs, not including the expenses associated with the firm's planned expansion.
Break-even Analysis
Monthly Revenue Break-even
$74,087
Assumptions:
Average Percent Variable Cost
40%
Estimated Monthly Fixed Cost
$44,452
8.2 Projected Profit and Loss
The following table is the projected Profit and Loss statement for Markam.
Pro Forma Profit and Loss
2002
2003
2004
Sales
$1,004,038
$1,108,401
$1,242,325
Direct Cost of Sales
$401,615
$387,940
$422,390
Other Production Expenses
$0
$0
$0
Total Cost of Sales
$401,615
$387,940
$422,390
Gross Margin
$602,423
$720,460
$819,934
Gross Margin %
60.00%
65.00%
66.00%
Expenses
Payroll
$335,500
$458,000
$528,000
Sales and Marketing and Other Expenses
$52,000
$58,000
$66,000
Depreciation
$3,200
$5,000
$5,000
Leased Equipment
$22,000
$16,000
$10,000
Utilities
$4,600
$8,000
$8,000
Insurance
$13,800
$14,400
$14,400
Rent
$52,000
$72,000
$72,000
Payroll Taxes
$50,325
$68,700
$79,200
Other
$0
$0
$0
Total Operating Expenses
$533,425
$700,100
$782,600
Profit Before Interest and Taxes
$68,998
$20,360
$37,334
EBITDA
$72,198
$25,360
$42,334
Interest Expense
$1,975
$1,400
$800
Taxes Incurred
$20,107
$5,688
$10,960
Net Profit
$46,916
$13,272
$25,574
Net Profit/Sales
4.67%
1.20%
2.06%
8.3 Projected Cash Flow
The following table and chart show the projected cash flow and cash balance figures for Markam Driving School.
Pro Forma Cash Flow
2002
2003
2004
Cash Received
Cash from Operations
Cash Sales
$1,004,038
$1,108,401
$1,242,325
Subtotal Cash from Operations
$1,004,038
$1,108,401
$1,242,325
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
$1,004,038
$1,108,401
$1,242,325
Expenditures
2002
2003
2004
Expenditures from Operations
Cash Spending
$335,500
$458,000
$528,000
Bill Payments
$554,858
$647,453
$679,508
Subtotal Spent on Operations
$890,358
$1,105,453
$1,207,508
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
$6,000
$6,000
$6,000
Purchase Other Current Assets
$0
$0
$0
Purchase Long-term Assets
$0
$0
$0
Dividends
$0
$40,000
$40,000
Subtotal Cash Spent
$896,358
$1,151,453
$1,253,508
Net Cash Flow
$107,680
($43,052)
($11,183)
Cash Balance
$120,618
$77,566
$66,383
8.4 Projected Balance Sheet
The following table contains the projected balance sheet.
Pro Forma Balance Sheet
2002
2003
2004
Assets
Current Assets
Cash
$120,618
$77,566
$66,383
Other Current Assets
$2,000
$2,000
$2,000
Total Current Assets
$122,618
$79,566
$68,383
Long-term Assets
Long-term Assets
$74,000
$74,000
$74,000
Accumulated Depreciation
$15,200
$20,200
$25,200
Total Long-term Assets
$58,800
$53,800
$48,800
Total Assets
$181,418
$133,366
$117,183
Liabilities and Capital
2002
2003
2004
Current Liabilities
Accounts Payable
$67,280
$51,956
$56,199
Current Borrowing
$0
$0
$0
Other Current Liabilities
$0
$0
$0
Subtotal Current Liabilities
$67,280
$51,956
$56,199
Long-term Liabilities
$17,000
$11,000
$5,000
Total Liabilities
$84,280
$62,956
$61,199
Paid-in Capital
$30,000
$30,000
$30,000
Retained Earnings
$20,222
$27,138
$410
Earnings
$46,916
$13,272
$25,574
Total Capital
$97,138
$70,410
$55,984
Total Liabilities and Capital
$181,418
$133,366
$117,183
Net Worth
$97,138
$70,410
$55,984
8.5 Business Ratios
The industry business ratios given in the table are those for vocational schools based on the Standard Industrial Classification (SIC) code 8299. Most of the ratios are similar to our own. The only major difference between our company and others is our reliance on long-term assets. This is due to having the majority of our investment in a fleet of cars. Overall the ratios reflect a healthy and growing company with few danger signs.
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