Pegasus Sports
Financial Plan
Our goal is to acquire a business loan for 10 years. Our present plan is to utilize the borrowed money for the first year’s operating capital, with cash input on a monthly basis. Such cash input will aid our operating costs and salaries. We should reach our break-even point after our first year. Upon receiving our loan, we would like to incorporate, as this will protect our company, investors, lenders, products, and stockholders. We expect sales to be healthy the first year, and grow steadily through the third year.
If sales don’t measure up to our expectations, this could add an additional six months and an influx of another $20,000, which could be carried by credit card, but we don’t expect this to happen.
These are our strong points:
- We want to finance growth mainly through cash flow. We recognize that this means we will will have to grow at a slower pace than we would like, but this will enable us to build sales through investing in more advertising.
- Our most important asset is inventory turnover. Our ability to schedule production from month to month will help to control inventory costs.
- Collection is not a problem, since we will be credited payment to our bank account in two days by American Merchant Center for all our credit card sales over the Internet.
7.1 Important Assumptions
The financial plan depends on important assumptions, most of which are shown in the General Assumptions table. The key underlying assumptions are:
- A slow-growth economy, without major recession.
- No unforeseen changes in technology to make our products immediately obsolete.
- Access to equity capital and financing sufficient to maintain our financial plan as presented in this table.
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 12.00% | 12.00% | 12.00% |
Long-term Interest Rate | 10.50% | 10.50% | 10.50% |
Tax Rate | 25.00% | 25.00% | 25.00% |
Other | 0 | 0 | 0 |
7.2 Break-even Analysis
Aside from the standard financial break-even shown, the following is a simplified breakdown of our first year’s overall numbers in broad terms:
First Year’s Projected Sales: | $473,843 |
Less 25%Tax: | – $11,846 |
– | $461,997 |
Less Production Costs: | -$129,520 |
– | $332,477 |
Less Operating Costs: | – $71,450 |
Profit: | $261,027 |
Plus Loan: | $ 50,000 |
Cash at end of the first year: | $311,027 |
Production Costs for Year 2001: | -$281,065 |
Projected Profit 1st Year: | $29,962 |
For more detail, see the Projected Profit and Loss Table in the Appendix.

Break-even Analysis | |
Monthly Units Break-even | 70 |
Monthly Revenue Break-even | $8,756 |
Assumptions: | |
Average Per-Unit Revenue | $125.62 |
Average Per-Unit Variable Cost | $34.34 |
Estimated Monthly Fixed Cost | $6,363 |
7.3 Key Financial Indicators
- The most important indicator is inventory turnover. We have to make sure that turnover stays above 10, or we are clogged with inventory.
- Collection is not a problem, since payment to our bank is two days after receiving our orders via credit card. However, by October 1999, we will initiate skate shop sales and experience an approximately 30-45 day average payment delay. This could cause a change in cash flow, but can be easily managed.

7.4 Projected Profit and Loss
Our goal is to acquire a business loan for a total of ten years. Our present plan is to utilize the borrowed money for the first year’s operating expenses, with cash input on a monthly basis. Such cash input will aid in our advertising, operating costs, and salaries. This loan should help us maintain production and operating costs while developing our customer base and sales. Should sales lag, we plan to maintain solvency with credit card financing. We should reach our break-even point after our first year. Our sales projection is very conservative, considering the sales potential.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $473,843 | $1,104,890 | $1,699,830 |
Direct Cost of Sales | $129,520 | $281,000 | $431,000 |
Other Costs of Goods | $0 | $0 | $0 |
Total Cost of Sales | $129,520 | $281,000 | $431,000 |
Gross Margin | $344,323 | $823,890 | $1,268,830 |
Gross Margin % | 72.67% | 74.57% | 74.64% |
Expenses | |||
Payroll | $35,000 | $280,000 | $400,000 |
Sales and Marketing and Other Expenses | $18,650 | $36,300 | $49,500 |
Depreciation | $0 | $0 | $0 |
Leased Equipment | $1,800 | $5,000 | $10,000 |
Utilities | $600 | $1,500 | $2,000 |
Insurance | $6,000 | $12,000 | $12,000 |
Rent | $10,800 | $12,000 | $15,000 |
Payroll Taxes | $3,500 | $28,000 | $40,000 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $76,350 | $374,800 | $528,500 |
Profit Before Interest and Taxes | $267,973 | $449,090 | $740,330 |
EBITDA | $267,973 | $449,090 | $740,330 |
Interest Expense | $5,330 | $6,880 | $8,148 |
Taxes Incurred | $65,661 | $110,552 | $183,046 |
Net Profit | $196,982 | $331,657 | $549,137 |
Net Profit/Sales | 41.57% | 30.02% | 32.31% |
7.5 Projected Cash Flow
- We want to finance our first year’s growth through a loan.
- The most important indicator is inventory turnover. Our ability to schedule production from month to month will help control inventory costs.
- Collection is not a problem since we will be credited payment to our bank account in two days by American Merchants Center, our credit card company for Internet sales.
- Selling our products over the Internet will allow us full retail price and maximize our profit.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $473,843 | $1,104,890 | $1,699,830 |
Subtotal Cash from Operations | $473,843 | $1,104,890 | $1,699,830 |
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 | $50,000 | $34,500 | $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 | $523,843 | $1,139,390 | $1,699,830 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $35,000 | $280,000 | $400,000 |
Bill Payments | $219,748 | $532,692 | $762,618 |
Subtotal Spent on Operations | $254,748 | $812,692 | $1,162,618 |
Additional Cash Spent | |||
Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
Principal Repayment of Current Borrowing | $4,500 | $0 | $0 |
Other Liabilities Principal Repayment | $0 | $0 | $0 |
Long-term Liabilities Principal Repayment | $0 | $3,450 | $6,900 |
Purchase Other Current Assets | $2,000 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $261,248 | $816,142 | $1,169,518 |
Net Cash Flow | $262,595 | $323,248 | $530,312 |
Cash Balance | $272,591 | $595,839 | $1,126,152 |
7.6 Projected Balance Sheet
As shown on the balance sheet in the following table, we expect a healthy growth in the net worth by the end of the third year.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $272,591 | $595,839 | $1,126,152 |
Inventory | $28,545 | $61,930 | $94,988 |
Other Current Assets | $2,000 | $2,000 | $2,000 |
Total Current Assets | $303,136 | $659,769 | $1,223,140 |
Long-term Assets | |||
Long-term Assets | $0 | $0 | $0 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $0 | $0 | $0 |
Total Assets | $303,136 | $659,769 | $1,223,140 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $49,358 | $43,284 | $64,418 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $49,358 | $43,284 | $64,418 |
Long-term Liabilities | $50,000 | $81,050 | $74,150 |
Total Liabilities | $99,358 | $124,334 | $138,568 |
Paid-in Capital | $16,000 | $16,000 | $16,000 |
Retained Earnings | ($9,204) | $187,778 | $519,436 |
Earnings | $196,982 | $331,657 | $549,137 |
Total Capital | $203,778 | $535,436 | $1,084,572 |
Total Liabilities and Capital | $303,136 | $659,769 | $1,223,140 |
Net Worth | $203,778 | $535,436 | $1,084,572 |
7.7 Business Ratios
Standard business ratios are included in the table, based on NAICS code 339920 for the Sporting and Athletic Goods Manufacturing industry. The ratio shows a plan for balanced and healthy growth.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 133.18% | 53.85% | 8.66% |
Percent of Total Assets | ||||
Inventory | 9.42% | 9.39% | 7.77% | 23.04% |
Other Current Assets | 0.66% | 0.30% | 0.16% | 22.61% |
Total Current Assets | 100.00% | 100.00% | 100.00% | 75.65% |
Long-term Assets | 0.00% | 0.00% | 0.00% | 24.35% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 16.28% | 6.56% | 5.27% | 37.93% |
Long-term Liabilities | 16.49% | 12.28% | 6.06% | 14.30% |
Total Liabilities | 32.78% | 18.85% | 11.33% | 52.23% |
Net Worth | 67.22% | 81.15% | 88.67% | 47.77% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 72.67% | 74.57% | 74.64% | 22.53% |
Selling, General & Administrative Expenses | 30.26% | 44.21% | 42.22% | 5.73% |
Advertising Expenses | 2.53% | 2.26% | 2.06% | 0.36% |
Profit Before Interest and Taxes | 56.55% | 40.65% | 43.55% | 2.95% |
Main Ratios | ||||
Current | 6.14 | 15.24 | 18.99 | 1.88 |
Quick | 5.56 | 13.81 | 17.51 | 1.19 |
Total Debt to Total Assets | 32.78% | 18.85% | 11.33% | 53.00% |
Pre-tax Return on Net Worth | 128.89% | 82.59% | 67.51% | 4.52% |
Pre-tax Return on Assets | 86.64% | 67.02% | 59.86% | 9.61% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 41.57% | 30.02% | 32.31% | n.a |
Return on Equity | 96.67% | 61.94% | 50.63% | n.a |
Activity Ratios | ||||
Inventory Turnover | 10.85 | 6.21 | 5.49 | n.a |
Accounts Payable Turnover | 5.45 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 32 | 25 | n.a |
Total Asset Turnover | 1.56 | 1.67 | 1.39 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.49 | 0.23 | 0.13 | n.a |
Current Liab. to Liab. | 0.50 | 0.35 | 0.46 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $253,778 | $616,486 | $1,158,722 | n.a |
Interest Coverage | 50.28 | 65.27 | 90.86 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.64 | 0.60 | 0.72 | n.a |
Current Debt/Total Assets | 16% | 7% | 5% | n.a |
Acid Test | 5.56 | 13.81 | 17.51 | n.a |
Sales/Net Worth | 2.33 | 2.06 | 1.57 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |