Water Tubes Plumbing
Financial Plan
The following sections will outline important financial information.
7.1 Important Assumptions
The following table details 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 |
7.2 Break-even Analysis
The Break-even Analysis indicates what will be needed in monthly revenue to reach the break-even point.

Break-even Analysis | |
Monthly Revenue Break-even | $11,520 |
Assumptions: | |
Average Percent Variable Cost | 10% |
Estimated Monthly Fixed Cost | $10,368 |
7.3 Projected Profit and Loss
The following table and charts present the projected profit and loss.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $133,858 | $190,752 | $215,330 |
Direct Cost of Sales | $13,386 | $19,075 | $21,533 |
Other Production Expenses | $0 | $0 | $0 |
Total Cost of Sales | $13,386 | $19,075 | $21,533 |
Gross Margin | $120,472 | $171,677 | $193,797 |
Gross Margin % | 90.00% | 90.00% | 90.00% |
Expenses | |||
Payroll | $98,400 | $112,960 | $122,960 |
Sales and Marketing and Other Expenses | $1,800 | $1,800 | $1,800 |
Depreciation | $3,456 | $3,456 | $3,456 |
Insurance/ License/ Bonds | $6,000 | $5,000 | $4,000 |
Rent | $0 | $0 | $0 |
Payroll Taxes | $14,760 | $16,944 | $18,444 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $124,416 | $140,160 | $150,660 |
Profit Before Interest and Taxes | ($3,944) | $31,517 | $43,137 |
EBITDA | ($488) | $34,973 | $46,593 |
Interest Expense | $0 | $0 | $0 |
Taxes Incurred | $0 | $9,455 | $12,941 |
Net Profit | ($3,944) | $22,062 | $30,196 |
Net Profit/Sales | -2.95% | 11.57% | 14.02% |
7.4 Projected Cash Flow
The following chart and table display the projected cash flow.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $133,858 | $190,752 | $215,330 |
Subtotal Cash from Operations | $133,858 | $190,752 | $215,330 |
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 | $133,858 | $190,752 | $215,330 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $98,400 | $112,960 | $122,960 |
Bill Payments | $32,139 | $51,785 | $58,188 |
Subtotal Spent on Operations | $130,539 | $164,745 | $181,148 |
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 | $130,539 | $164,745 | $181,148 |
Net Cash Flow | $3,319 | $26,007 | $34,182 |
Cash Balance | $22,969 | $48,976 | $83,158 |
7.5 Projected Balance Sheet
The following table shows the projected balance sheet.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $22,969 | $48,976 | $83,158 |
Other Current Assets | $0 | $0 | $0 |
Total Current Assets | $22,969 | $48,976 | $83,158 |
Long-term Assets | |||
Long-term Assets | $24,000 | $24,000 | $24,000 |
Accumulated Depreciation | $3,456 | $6,912 | $10,368 |
Total Long-term Assets | $20,544 | $17,088 | $13,632 |
Total Assets | $43,513 | $66,064 | $96,790 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $3,807 | $4,297 | $4,826 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $3,807 | $4,297 | $4,826 |
Long-term Liabilities | $0 | $0 | $0 |
Total Liabilities | $3,807 | $4,297 | $4,826 |
Paid-in Capital | $44,000 | $44,000 | $44,000 |
Retained Earnings | ($350) | ($4,294) | $17,768 |
Earnings | ($3,944) | $22,062 | $30,196 |
Total Capital | $39,706 | $61,768 | $91,964 |
Total Liabilities and Capital | $43,513 | $66,064 | $96,790 |
Net Worth | $39,706 | $61,768 | $91,964 |
7.6 Business Ratios
The company’s projected business ratios are provided in the table below. The final column, Industry Profile, shows significant ratios for the Plumbing, Heating, Air-conditioning industry, as determined by the Standard Industry Classification (SIC) Index code 1711.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 42.50% | 12.88% | 6.60% |
Percent of Total Assets | ||||
Other Current Assets | 0.00% | 0.00% | 0.00% | 29.30% |
Total Current Assets | 52.79% | 74.13% | 85.92% | 84.40% |
Long-term Assets | 47.21% | 25.87% | 14.08% | 15.60% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 8.75% | 6.50% | 4.99% | 47.20% |
Long-term Liabilities | 0.00% | 0.00% | 0.00% | 9.10% |
Total Liabilities | 8.75% | 6.50% | 4.99% | 56.30% |
Net Worth | 91.25% | 93.50% | 95.01% | 43.70% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 90.00% | 90.00% | 90.00% | 26.50% |
Selling, General & Administrative Expenses | 92.95% | 78.43% | 75.98% | 14.60% |
Advertising Expenses | 0.45% | 0.31% | 0.28% | 0.40% |
Profit Before Interest and Taxes | -2.95% | 16.52% | 20.03% | 2.20% |
Main Ratios | ||||
Current | 6.03 | 11.40 | 17.23 | 1.87 |
Quick | 6.03 | 11.40 | 17.23 | 1.47 |
Total Debt to Total Assets | 8.75% | 6.50% | 4.99% | 56.30% |
Pre-tax Return on Net Worth | -9.93% | 51.02% | 46.91% | 6.80% |
Pre-tax Return on Assets | -9.06% | 47.71% | 44.57% | 15.50% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | -2.95% | 11.57% | 14.02% | n.a |
Return on Equity | -9.93% | 35.72% | 32.83% | n.a |
Activity Ratios | ||||
Accounts Payable Turnover | 9.44 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 28 | 28 | n.a |
Total Asset Turnover | 3.08 | 2.89 | 2.22 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.10 | 0.07 | 0.05 | n.a |
Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $19,162 | $44,680 | $78,332 | n.a |
Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.33 | 0.35 | 0.45 | n.a |
Current Debt/Total Assets | 9% | 7% | 5% | n.a |
Acid Test | 6.03 | 11.40 | 17.23 | n.a |
Sales/Net Worth | 3.37 | 3.09 | 2.34 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |