FireStarters
Financial Plan
The following is the financial plan for FireStarters.
7.1 Break-even Analysis
The monthly break-even point, based on forecasted monthly expenses and costs, is shown in the table and chart below.

Break-even Analysis | |
Monthly Revenue Break-even | $27,657 |
Assumptions: | |
Average Percent Variable Cost | 25% |
Estimated Monthly Fixed Cost | $20,615 |
7.2 Projected Profit and Loss
The following table and charts present the projected profit and loss for three years. First year monthlies are in the appendix.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $395,650 | $610,000 | $750,000 |
Direct Cost of Sales | $100,740 | $164,000 | $210,000 |
Other Production Expenses | $0 | $0 | $0 |
Total Cost of Sales | $100,740 | $164,000 | $210,000 |
Gross Margin | $294,910 | $446,000 | $540,000 |
Gross Margin % | 74.54% | 73.11% | 72.00% |
Expenses | |||
Payroll | $177,600 | $192,600 | $212,000 |
Sales and Marketing and Other Expenses | $0 | $130,000 | $150,000 |
Depreciation | $7,140 | $7,140 | $7,140 |
Leased Equipment | $0 | $0 | $0 |
Utilities | $6,000 | $6,000 | $6,000 |
Insurance | $6,000 | $6,000 | $6,000 |
Rent | $24,000 | $24,000 | $24,000 |
Payroll Taxes | $26,640 | $28,890 | $31,800 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $247,380 | $394,630 | $436,940 |
Profit Before Interest and Taxes | $47,530 | $51,370 | $103,060 |
EBITDA | $54,670 | $58,510 | $110,200 |
Interest Expense | $13,830 | $12,750 | $12,570 |
Taxes Incurred | $10,110 | $11,586 | $27,147 |
Net Profit | $23,590 | $27,034 | $63,343 |
Net Profit/Sales | 5.96% | 4.43% | 8.45% |
7.3 Projected Cash Flow
The following table and chart is detail the projected cash flow for three years. The appendices include first year cash flow monthly estimates.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $395,650 | $610,000 | $750,000 |
Subtotal Cash from Operations | $395,650 | $610,000 | $750,000 |
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 | $395,650 | $610,000 | $750,000 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $177,600 | $192,600 | $212,000 |
Bill Payments | $103,957 | $364,975 | $463,540 |
Subtotal Spent on Operations | $281,557 | $557,575 | $675,540 |
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 | $21,600 | $1,800 | $1,800 |
Purchase Other Current Assets | $19,800 | $19,800 | $19,800 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $322,957 | $579,175 | $697,140 |
Net Cash Flow | $72,693 | $30,825 | $52,860 |
Cash Balance | $137,293 | $168,118 | $220,978 |
7.4 Projected Balance Sheet
The following table shows the projected balance sheet for three years.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $137,293 | $168,118 | $220,978 |
Inventory | $6,270 | $10,207 | $13,070 |
Other Current Assets | $19,800 | $39,600 | $59,400 |
Total Current Assets | $163,363 | $217,926 | $293,448 |
Long-term Assets | |||
Long-term Assets | $50,000 | $50,000 | $50,000 |
Accumulated Depreciation | $7,140 | $14,280 | $21,420 |
Total Long-term Assets | $42,860 | $35,720 | $28,580 |
Total Assets | $206,223 | $253,646 | $322,028 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $9,633 | $31,822 | $38,661 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $9,633 | $31,822 | $38,661 |
Long-term Liabilities | $128,400 | $126,600 | $124,800 |
Total Liabilities | $138,033 | $158,422 | $163,461 |
Paid-in Capital | $200,000 | $200,000 | $200,000 |
Retained Earnings | ($155,400) | ($131,810) | ($104,776) |
Earnings | $23,590 | $27,034 | $63,343 |
Total Capital | $68,190 | $95,224 | $158,567 |
Total Liabilities and Capital | $206,223 | $253,646 | $322,028 |
Net Worth | $68,190 | $95,224 | $158,567 |
7.5 Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios based on the NAICS code 454111, Electronic Shopping, a subcategory of the Retail Trade, are shown for comparison.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 54.18% | 22.95% | 7.56% |
Percent of Total Assets | ||||
Inventory | 3.04% | 4.02% | 4.06% | 37.60% |
Other Current Assets | 9.60% | 15.61% | 18.45% | 29.04% |
Total Current Assets | 79.22% | 85.92% | 91.13% | 78.59% |
Long-term Assets | 20.78% | 14.08% | 8.87% | 21.41% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 4.67% | 12.55% | 12.01% | 38.50% |
Long-term Liabilities | 62.26% | 49.91% | 38.75% | 19.42% |
Total Liabilities | 66.93% | 62.46% | 50.76% | 57.92% |
Net Worth | 33.07% | 37.54% | 49.24% | 42.08% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 74.54% | 73.11% | 72.00% | 34.85% |
Selling, General & Administrative Expenses | 68.58% | 68.68% | 63.55% | 16.95% |
Advertising Expenses | 0.00% | 21.31% | 20.00% | 2.50% |
Profit Before Interest and Taxes | 12.01% | 8.42% | 13.74% | 1.10% |
Main Ratios | ||||
Current | 16.96 | 6.85 | 7.59 | 1.79 |
Quick | 16.31 | 6.53 | 7.25 | 0.70 |
Total Debt to Total Assets | 66.93% | 62.46% | 50.76% | 65.04% |
Pre-tax Return on Net Worth | 49.42% | 40.56% | 57.07% | 2.65% |
Pre-tax Return on Assets | 16.34% | 15.23% | 28.10% | 7.59% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 5.96% | 4.43% | 8.45% | n.a |
Return on Equity | 34.59% | 28.39% | 39.95% | n.a |
Activity Ratios | ||||
Inventory Turnover | 2.45 | 19.91 | 18.04 | n.a |
Accounts Payable Turnover | 11.79 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 20 | 27 | n.a |
Total Asset Turnover | 1.92 | 2.40 | 2.33 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 2.02 | 1.66 | 1.03 | n.a |
Current Liab. to Liab. | 0.07 | 0.20 | 0.24 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $153,730 | $186,104 | $254,787 | n.a |
Interest Coverage | 3.44 | 4.03 | 8.20 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.52 | 0.42 | 0.43 | n.a |
Current Debt/Total Assets | 5% | 13% | 12% | n.a |
Acid Test | 16.31 | 6.53 | 7.25 | n.a |
Sales/Net Worth | 5.80 | 6.41 | 4.73 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |