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Financial Plan

It is assumed that the owner’s private resources will be sufficient to finance any monthly cash-flow shortage. However, it would be advisable to establish a bank relationship as soon as possible. Sales could very well increase at a much sharper rate than assumed in these conservative projections. Sharper sales will result in a greater need for funds in support of inventory and receivables. An over-draft line of credit of $15,000-20,000 would be an excellent cushion to fall back on.

7.1 Important Assumptions

Payroll burden is calculated at 12.65% made up of 7.65% social security, 2% unemployment, and 3% worker’s compensation. Payables are assumed to reach levels equal to one month’s operating expenses. Accounts receivable are assumed to be 45 days, although sales terms are net 30 and some sales require some payment in advance.

Inventory turnover reflects the fact that containers carrying 200 chairs (400 if a 40 ft. container) cause peaks and valleys in inventory. Inventory levels have been calculated monthly by deducting that month’s projected sales and adding inventory of new stocks when sales projections indicate a new container filled with chairs should arrive to prevent a stock-out.

General Assumptions
FY 1999 FY 2000 FY 2001
Plan Month 1 2 3
Current Interest Rate 0.00% 0.00% 0.00%
Long-term Interest Rate 0.00% 0.00% 0.00%
Tax Rate 25.42% 25.00% 25.42%
Other 0 0 0

7.2 Key Financial Indicators

The following chart outlines our key financial indicators for fiscal years 1996-2001.

Furniture import business plan, financial plan chart image

7.3 Break-even Analysis

Our break-even analysis is summarized by the following chart and table.

Furniture import business plan, financial plan chart image

Break-even Analysis
Monthly Revenue Break-even $9,979
Assumptions:
Average Percent Variable Cost 40%
Estimated Monthly Fixed Cost $5,987

7.4 Projected Profit and Loss

There are many factors to include when determining a projected profit and loss statement, these are included in the following table.

Furniture import business plan, financial plan chart image

Furniture import business plan, financial plan chart image

Furniture import business plan, financial plan chart image

Furniture import business plan, financial plan chart image

Pro Forma Profit and Loss
FY 1999 FY 2000 FY 2001
Sales $139,320 $185,760 $232,200
Direct Cost of Sales $55,728 $74,304 $92,880
Other $0 $0 $0
Total Cost of Sales $55,728 $74,304 $92,880
Gross Margin $83,592 $111,456 $139,320
Gross Margin % 60.00% 60.00% 60.00%
Expenses
Payroll $43,992 $54,000 $59,000
Sales and Marketing and Other Expenses $17,320 $17,320 $17,320
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities (Telephone) $6,000 $6,000 $6,000
Insurance (Liability/Fire) $1,500 $1,500 $1,500
Rent (Warehouse) $0 $4,800 $4,800
Payroll Taxes $3,036 $6,199 $7,464
Agent Commission $0 $0 $0
Other $0 $0 $0
Total Operating Expenses $71,848 $89,819 $96,084
Profit Before Interest and Taxes $11,744 $21,638 $43,237
EBITDA $11,744 $21,638 $43,237
Interest Expense $0 $0 $0
Taxes Incurred $2,786 $5,409 $10,989
Net Profit $8,958 $16,228 $32,247
Net Profit/Sales 6.43% 8.74% 13.89%

7.5 Projected Cash Flow

Our projected cash flow is outlined in the following chart and table.

Furniture import business plan, financial plan chart image

Pro Forma Cash Flow
FY 1999 FY 2000 FY 2001
Cash Received
Cash from Operations
Cash Sales $0 $0 $0
Cash from Receivables $128,486 $178,949 $225,389
Subtotal Cash from Operations $128,486 $178,949 $225,389
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 $5,000 $0 $0
Sales of Other Current Assets $21,000 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $154,486 $178,949 $225,389
Expenditures FY 1999 FY 2000 FY 2001
Expenditures from Operations
Cash Spending $43,992 $54,000 $59,000
Bill Payments $76,502 $116,146 $140,907
Subtotal Spent on Operations $120,494 $170,146 $199,907
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 $12,000 $12,000 $12,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $132,494 $182,146 $211,907
Net Cash Flow $21,992 ($3,197) $13,482
Cash Balance $34,992 $31,795 $45,277

7.6 Projected Balance Sheet

The table below outlines the projected balance sheet.

Pro Forma Balance Sheet
FY 1999 FY 2000 FY 2001
Assets
Current Assets
Cash $34,992 $31,795 $45,277
Accounts Receivable $20,434 $27,245 $34,056
Inventory $6,130 $8,173 $10,217
Other Current Assets $0 $0 $0
Total Current Assets $61,556 $67,213 $89,550
Long-term Assets
Long-term Assets $3,000 $3,000 $3,000
Accumulated Depreciation $3,000 $3,000 $3,000
Total Long-term Assets $0 $0 $0
Total Assets $61,556 $67,213 $89,550
Liabilities and Capital FY 1999 FY 2000 FY 2001
Current Liabilities
Accounts Payable $8,234 $9,664 $11,753
Current Borrowing $0 $0 $0
Other Current Liabilities $15,000 $15,000 $15,000
Subtotal Current Liabilities $23,234 $24,664 $26,753
Long-term Liabilities $173,000 $161,000 $149,000
Total Liabilities $196,234 $185,664 $175,753
Paid-in Capital $10,000 $10,000 $10,000
Retained Earnings ($153,636) ($144,678) ($128,450)
Earnings $8,958 $16,228 $32,247
Total Capital ($134,678) ($118,450) ($86,203)
Total Liabilities and Capital $61,556 $67,213 $89,550
Net Worth ($134,678) ($118,450) ($86,203)

7.7 Business Ratios

Poppi’s ratios can be seen in the table below. NAICS code 423210, Furniture Merchant Wholesalers, was used for Industry Profile comparisons.

Ratio Analysis
FY 1999 FY 2000 FY 2001 Industry Profile
Sales Growth 16.10% 33.33% 25.00% 6.12%
Percent of Total Assets
Accounts Receivable 33.20% 40.53% 38.03% 26.55%
Inventory 9.96% 12.16% 11.41% 40.47%
Other Current Assets 0.00% 0.00% 0.00% 20.71%
Total Current Assets 100.00% 100.00% 100.00% 87.73%
Long-term Assets 0.00% 0.00% 0.00% 12.27%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 37.75% 36.69% 29.88% 35.88%
Long-term Liabilities 281.04% 239.54% 166.39% 10.04%
Total Liabilities 318.79% 276.23% 196.26% 45.92%
Net Worth -218.79% -176.23% -96.26% 54.08%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 60.00% 60.00% 60.00% 13.68%
Selling, General & Administrative Expenses 40.25% 46.58% 43.37% 5.84%
Advertising Expenses 4.31% 3.23% 2.58% 0.69%
Profit Before Interest and Taxes 8.43% 11.65% 18.62% 1.61%
Main Ratios
Current 2.65 2.73 3.35 2.22
Quick 2.39 2.39 2.97 0.98
Total Debt to Total Assets 318.79% 276.23% 196.26% 50.20%
Pre-tax Return on Net Worth -8.72% -18.27% -50.16% 5.00%
Pre-tax Return on Assets 19.08% 32.19% 48.28% 10.03%
Additional Ratios FY 1999 FY 2000 FY 2001
Net Profit Margin 6.43% 8.74% 13.89% n.a
Return on Equity 0.00% 0.00% 0.00% n.a
Activity Ratios
Accounts Receivable Turnover 6.82 6.82 6.82 n.a
Collection Days 44 47 48 n.a
Inventory Turnover 10.30 10.39 10.10 n.a
Accounts Payable Turnover 9.80 12.17 12.17 n.a
Payment Days 29 28 27 n.a
Total Asset Turnover 2.26 2.76 2.59 n.a
Debt Ratios
Debt to Net Worth 0.00 0.00 0.00 n.a
Current Liab. to Liab. 0.12 0.13 0.15 n.a
Liquidity Ratios
Net Working Capital $38,322 $42,550 $62,797 n.a
Interest Coverage 0.00 0.00 0.00 n.a
Additional Ratios
Assets to Sales 0.44 0.36 0.39 n.a
Current Debt/Total Assets 38% 37% 30% n.a
Acid Test 1.51 1.29 1.69 n.a
Sales/Net Worth 0.00 0.00 0.00 n.a
Dividend Payout 0.00 0.00 0.00 n.a