Mt. Hood Records
Financial Plan
The following sections presents important financial information.
8.1 Important Assumptions
The following table lists important financial assumptions.
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 10.00% | 10.00% | 10.00% |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
| Tax Rate | 30.00% | 30.00% | 30.00% |
| Other | 0 | 0 | 0 |
8.2 Break-even Analysis
The Break-even Analysis indicates what is needed in monthly revenue to break even.
| Break-even Analysis | |
| Monthly Revenue Break-even | $1,502 |
| Assumptions: | |
| Average Percent Variable Cost | 0% |
| Estimated Monthly Fixed Cost | $1,502 |
8.3 Projected Profit and Loss
The following table and charts illustrated projected profit and loss.
Explanations for some line items:
- Sales and Marketing– The compilation CDs will be used for marketing purposes. The initial goal is to develop visibility for Mt. Hood Records as a record label. This will assist in the process of introducing up and coming bands bands to Mt. Hood Records. Once the bands have been signed to exclusive contracts by Mt. Hood Records, then the signed bands will be the only bands on the compilation CDs. Mt. Hood Records has not purchased any equipment for the mixing, mastering, CD production, and artwork/barcode expenses. These activities will be outsourced to keep capital expenditures low. Expenses related to the cost of production of the compilation captured in the sales and marketing costs include:
- initial studio recording time
- mixing, mastering expenses
- CD label costs (artwork, barcode, etc.)
- Promotional CDs given out.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $0 | $82,160 | $143,766 |
| Direct Cost of Sales | $0 | $23,161 | $33,022 |
| Other Costs of Goods | $0 | $0 | $0 |
| Total Cost of Sales | $0 | $23,161 | $33,022 |
| Gross Margin | $0 | $59,000 | $110,744 |
| Gross Margin % | 0.00% | 71.81% | 77.03% |
| Expenses | |||
| Payroll | $1,600 | $24,000 | $56,000 |
| Sales and Marketing and Other Expenses | $13,500 | $14,500 | $15,500 |
| Depreciation | $400 | $400 | $400 |
| Rent | $0 | $4,000 | $4,000 |
| Website expenses | $1,560 | $1,800 | $2,000 |
| Utilities | $360 | $800 | $1,000 |
| Insurance | $360 | $600 | $800 |
| Payroll Taxes | $240 | $3,600 | $8,400 |
| Returned CDs | $0 | $1,200 | $1,200 |
| Total Operating Expenses | $18,020 | $50,900 | $89,300 |
| Profit Before Interest and Taxes | ($18,020) | $8,100 | $21,444 |
| EBITDA | ($17,620) | $8,500 | $21,844 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $0 | $2,430 | $6,433 |
| Net Profit | ($18,020) | $5,670 | $15,011 |
| Net Profit/Sales | 0.00% | 6.90% | 10.44% |
8.4 Projected Cash Flow
The following chart and table show the projected cash flow.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $0 | $20,540 | $35,942 |
| Cash from Receivables | $0 | $61,620 | $107,825 |
| Subtotal Cash from Operations | $0 | $82,160 | $143,766 |
| 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 | $0 | $82,160 | $143,766 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $1,600 | $24,000 | $56,000 |
| Bill Payments | $15,595 | $48,234 | $70,690 |
| Subtotal Spent on Operations | $17,195 | $72,234 | $126,690 |
| 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 | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $17,195 | $72,234 | $126,690 |
| Net Cash Flow | ($17,195) | $9,926 | $17,076 |
| Cash Balance | $2,155 | $12,081 | $29,158 |
8.5 Projected Balance Sheet
The following table presents the projected balance sheet.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $2,155 | $12,081 | $29,158 |
| Accounts Receivable | $0 | $0 | $0 |
| Inventory | $0 | $0 | $0 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $2,155 | $12,081 | $29,158 |
| Long-term Assets | |||
| Long-term Assets | $2,000 | $2,000 | $2,000 |
| Accumulated Depreciation | $400 | $800 | $1,200 |
| Total Long-term Assets | $1,600 | $1,200 | $800 |
| Total Assets | $3,756 | $13,281 | $29,958 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $425 | $4,281 | $5,947 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $425 | $4,281 | $5,947 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $425 | $4,281 | $5,947 |
| Paid-in Capital | $28,000 | $28,000 | $28,000 |
| Retained Earnings | ($6,650) | ($24,670) | ($19,000) |
| Earnings | ($18,020) | $5,670 | $15,011 |
| Total Capital | $3,330 | $9,000 | $24,011 |
| Total Liabilities and Capital | $3,756 | $13,281 | $29,958 |
| Net Worth | $3,330 | $9,000 | $24,011 |
8.6 Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios based on the Music recording and distribuiting industry NAICS code 512220, are shown for comparison.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 0.00% | 74.98% | -22.55% |
| Percent of Total Assets | ||||
| Accounts Receivable | 0.00% | 0.00% | 0.00% | 16.48% |
| Inventory | 0.00% | 0.00% | 0.00% | 21.02% |
| Other Current Assets | 0.00% | 0.00% | 0.00% | 31.62% |
| Total Current Assets | 57.39% | 90.96% | 97.33% | 69.12% |
| Long-term Assets | 42.61% | 9.04% | 2.67% | 30.88% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 11.32% | 32.24% | 19.85% | 25.08% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 16.76% |
| Total Liabilities | 11.32% | 32.24% | 19.85% | 41.84% |
| Net Worth | 88.68% | 67.76% | 80.15% | 58.16% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 0.00% | 71.81% | 77.03% | 29.18% |
| Selling, General & Administrative Expenses | 0.00% | 64.91% | 66.59% | 10.66% |
| Advertising Expenses | 0.00% | 0.00% | 0.00% | 0.44% |
| Profit Before Interest and Taxes | 0.00% | 9.86% | 14.92% | 5.25% |
| Main Ratios | ||||
| Current | 5.07 | 2.82 | 4.90 | 2.54 |
| Quick | 5.07 | 2.82 | 4.90 | 1.38 |
| Total Debt to Total Assets | 11.32% | 32.24% | 19.85% | 49.40% |
| Pre-tax Return on Net Worth | -541.06% | 89.99% | 89.31% | 6.25% |
| Pre-tax Return on Assets | -479.79% | 60.98% | 71.58% | 12.35% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 0.00% | 6.90% | 10.44% | n.a |
| Return on Equity | -541.06% | 63.00% | 62.52% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 0.00 | 0.00 | 0.00 | n.a |
| Collection Days | 0 | 0 | 0 | n.a |
| Inventory Turnover | 0.00 | 0.00 | 0.00 | n.a |
| Accounts Payable Turnover | 37.66 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 16 | 26 | n.a |
| Total Asset Turnover | 0.00 | 6.19 | 4.80 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.13 | 0.48 | 0.25 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $1,730 | $7,800 | $23,211 | n.a |
| Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
| Additional Ratios | ||||
| Assets to Sales | n.a. | 0.16 | 0.21 | n.a |
| Current Debt/Total Assets | 11% | 32% | 20% | n.a |
| Acid Test | 5.07 | 2.82 | 4.90 | n.a |
| Sales/Net Worth | 0.00 | 9.13 | 5.99 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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