R and R Printing
Financial Plan
R & R Printing’s financial plan is detailed in following sections. Preliminary estimates suggest that we will experience a steady growth in the first year of operation. Income estimates are based, in part, on anticipated revenues from accounts that were secured by Rob Scott in his prior sales position. R & R Printing also anticipates an increase in gross margin and sales volume. Thus, the overall financial plan presents a conservative but realistic depiction of R & R Printing’s financial position.
7.1 Important Assumptions
R & R Printing assumes the following:
- Market growth projections for the printing industry are accurate.
- National economic conditions, which are favorable to the printing industry, will not experience significant decline in the next three years.
- Conditions will remain favorable for service providers and R & R Printing will be able to maintain those relationships.
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 Key Financial Indicators
The following chart indicates R & R Printing’s key financial indicators for the first three years of business. R & R Printing anticipates growth in sales with relatively stable operating expenses. Favorable economic conditions and forecasts of continued growth in the printing market support R & R Printing planned financial success.

7.3 Break-even Analysis
The following table details R & R Printing’s break-even analysis.
Break-even calculations assume a 25% to 30% gross margin. This is a conservative estimate, and it will be improved as strategic relationships develop and the benefits of R & R Printing offerings are realized by customers.

Break-even Analysis | |
Monthly Revenue Break-even | $10,112 |
Assumptions: | |
Average Percent Variable Cost | 75% |
Estimated Monthly Fixed Cost | $2,567 |
7.4 Projected Profit and Loss
R & R Printing’s profit picture improves as operations progress into the second quarter of operation. R & R Printing anticipates improving its gross margin from 25% in year one to 30% in year two. Annual estimates of profit and loss are detailed in the following table.



Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $750,000 | $1,250,000 | $1,500,000 |
Direct Cost of Sales | $559,600 | $875,000 | $1,050,000 |
Other | $0 | $0 | $0 |
Total Cost of Sales | $559,600 | $875,000 | $1,050,000 |
Gross Margin | $190,400 | $375,000 | $450,000 |
Gross Margin % | 25.39% | 30.00% | 30.00% |
Expenses | |||
Payroll | $20,004 | $20,500 | $20,500 |
Marketing/Promotion | $6,000 | $6,000 | $6,000 |
Depreciation | $0 | $0 | $0 |
Leased Equipment | $0 | $0 | $0 |
Insurance | $4,800 | $4,800 | $4,800 |
Payroll Taxes | $0 | $0 | $0 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $30,804 | $31,300 | $31,300 |
Profit Before Interest and Taxes | $159,596 | $343,700 | $418,700 |
EBITDA | $159,596 | $343,700 | $418,700 |
Interest Expense | $4,533 | $3,470 | $2,450 |
Taxes Incurred | $46,519 | $102,069 | $124,875 |
Net Profit | $108,544 | $238,161 | $291,375 |
Net Profit/Sales | 14.47% | 19.05% | 19.43% |
7.5 Projected Cash Flow
Monthly cash flow is shown in the following illustration. Annual cash flow figures are estimated based on collection days included in the table. Annual cash flow for the first year of operation becomes positive in the second quarter of operation.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $0 | $0 | $0 |
Cash from Receivables | $594,600 | $1,146,400 | $1,448,200 |
Subtotal Cash from Operations | $594,600 | $1,146,400 | $1,448,200 |
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 | $37,000 | $0 | $0 |
Subtotal Cash Received | $631,600 | $1,146,400 | $1,448,200 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $20,004 | $20,500 | $20,500 |
Bill Payments | $560,008 | $971,302 | $1,171,951 |
Subtotal Spent on Operations | $580,012 | $991,802 | $1,192,451 |
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 | $10,200 | $10,200 | $10,200 |
Purchase Other Current Assets | $0 | $0 | $0 |
Purchase Long-term Assets | $0 | $0 | $0 |
Dividends | $0 | $0 | $0 |
Subtotal Cash Spent | $590,212 | $1,002,002 | $1,202,651 |
Net Cash Flow | $41,388 | $144,398 | $245,549 |
Cash Balance | $91,388 | $235,785 | $481,335 |
7.6 Projected Balance Sheet
The Projected Balance Sheet is quite solid. We do not project any trouble meeting our debt obligations — as long as we can achieve our specific objectives.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $91,388 | $235,785 | $481,335 |
Accounts Receivable | $155,400 | $259,000 | $310,800 |
Other Current Assets | $0 | $0 | $0 |
Total Current Assets | $246,788 | $494,785 | $792,135 |
Long-term Assets | |||
Long-term Assets | $0 | $0 | $0 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $0 | $0 | $0 |
Total Assets | $246,788 | $494,785 | $792,135 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $61,443 | $81,480 | $97,654 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $61,443 | $81,480 | $97,654 |
Long-term Liabilities | $39,800 | $29,600 | $19,400 |
Total Liabilities | $101,243 | $111,080 | $117,054 |
Paid-in Capital | $52,000 | $52,000 | $52,000 |
Retained Earnings | ($15,000) | $93,544 | $331,705 |
Earnings | $108,544 | $238,161 | $291,375 |
Total Capital | $145,544 | $383,705 | $675,080 |
Total Liabilities and Capital | $246,788 | $494,785 | $792,135 |
Net Worth | $145,544 | $383,705 | $675,080 |
7.7 Business Ratios
The following table details our primary business ratios. Initial analysis indicates that R & R Printing ratios for profitability, risk, and return are financially favorable and will improve greatly in year two of operation. Business ratios for the years of this plan are shown below. Industry profile ratios based on the Standard Industrial Classification (SIC) code 2752, Commercial Printing, Lithographic, are shown for comparison.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 66.67% | 20.00% | 1.00% |
Percent of Total Assets | ||||
Accounts Receivable | 62.97% | 52.35% | 39.24% | 25.80% |
Other Current Assets | 0.00% | 0.00% | 0.00% | 24.00% |
Total Current Assets | 100.00% | 100.00% | 100.00% | 57.90% |
Long-term Assets | 0.00% | 0.00% | 0.00% | 42.10% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 24.90% | 16.47% | 12.33% | 32.20% |
Long-term Liabilities | 16.13% | 5.98% | 2.45% | 25.40% |
Total Liabilities | 41.02% | 22.45% | 14.78% | 57.60% |
Net Worth | 58.98% | 77.55% | 85.22% | 42.40% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 25.39% | 30.00% | 30.00% | 30.00% |
Selling, General & Administrative Expenses | 9.05% | 9.80% | 9.62% | 15.60% |
Advertising Expenses | 0.48% | 0.29% | 0.24% | 0.50% |
Profit Before Interest and Taxes | 21.28% | 27.50% | 27.91% | 2.30% |
Main Ratios | ||||
Current | 4.02 | 6.07 | 8.11 | 1.61 |
Quick | 4.02 | 6.07 | 8.11 | 1.19 |
Total Debt to Total Assets | 41.02% | 22.45% | 14.78% | 57.60% |
Pre-tax Return on Net Worth | 106.54% | 88.67% | 61.66% | 4.20% |
Pre-tax Return on Assets | 62.83% | 68.76% | 52.55% | 10.00% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 14.47% | 19.05% | 19.43% | n.a |
Return on Equity | 74.58% | 62.07% | 43.16% | n.a |
Activity Ratios | ||||
Accounts Receivable Turnover | 4.83 | 4.83 | 4.83 | n.a |
Collection Days | 57 | 61 | 69 | n.a |
Accounts Payable Turnover | 10.11 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 26 | 28 | n.a |
Total Asset Turnover | 3.04 | 2.53 | 1.89 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.70 | 0.29 | 0.17 | n.a |
Current Liab. to Liab. | 0.61 | 0.73 | 0.83 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $185,344 | $413,305 | $694,480 | n.a |
Interest Coverage | 35.21 | 99.05 | 170.90 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.33 | 0.40 | 0.53 | n.a |
Current Debt/Total Assets | 25% | 16% | 12% | n.a |
Acid Test | 1.49 | 2.89 | 4.93 | n.a |
Sales/Net Worth | 5.15 | 3.26 | 2.22 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |