The following sections shows in detail that Kouros Brothers Ltd. will be profitable and will easily repay its new loan within six years.
The key underlying assumptions of our financial plan shown in the following general assumption table are:
Other key business assumptions are:
Our Break-even Analysis is shown in the following table and chart.
We will monitor direct costs very closely, and maintain them at or below 65% by taking advantage of all promotions and discounts offered by authorized manufacturers as they have tentatively agreed to offer us "end column" pricing as a new dealer incentive. We anticipate surpassing our break-even point once local farmers begin to spend their new government grant money.
The following table shows the projected Profit and Loss statement for the next five years. Our largest operating expenses are payroll-related, to cover necessary staff. We are adding a salesperson, and a welder/fitter and lathe man to work on repairs of existing equipment and to finish the in-house designed patented vegetable and cereal equipment.
Direct costs of goods reflects costs for purchasing inventory and having it delivered to our store. The third row shows additional direct costs for manufacturing our patented vegetable and cereal equipment.
Depreciation reflects the declining value of our long-term assets:
Cash flow reflects the seasonal purchasing of our customers. Our Cash Balance will increase as customers return to us for repeat sales, after their initial great experiences with us, based on the reasonable assumption of Funding support by Government, which is expected to be 256 millions for 2005-6. This agriculture development plan for 2004-2006 is supported by European Union for all its new members and this funding support will allow the Farmers and Agriculture crop producers to buy the neccessary equipments and to boost their sales and product quality.
The Cash Flow table shows the projected new long-term loan amount (£50,000), received in January, and the repayment of existing and new loans.
The table also shows how we will use this £50,000, to purchase a new, wider range of demonstration equipment, as long-term assets in January. This equipment is necessary to convince skeptical local farmers about the effectiveness of the new machines - we must have at least one model of each machine, which we can bring to their fields and demonstrate to them. Since this equipment is being used, we are depreciating it over nine years (see "Depreciation" in the Profit and Loss statement, above). We will sell this first round of demo equipment at the beginning of 2008, for its depreciated value, and buy another £30,000 of new demo equipment of the latest models, funded by cash flows from the business. This replacement equipment will also be depreciated over nine years.
Estimated balance sheets for the years 2005-2009 are provided below. The demonstration equipment we plan to buy shows up under long-term assets, bought in January of 2005, depreciated, sold in 2008, and replaced with £30,000 of new demo equipment. We project an increasing net worth.
The table below presents common business ratios as a reference. Our business is part of the planting, haying, harvesting and processing machinery Industry (SIC Code 3523.01). Industry Profile Ratios are shown in the final column for comparison.