Keith's Sporting Goods will regularly monitor all financial statements because they have a direct correlation with the health of our business. We have forecasted into the future with a steady but moderate growth rate where sales will grow by 2% every month. All sales will be in cash leading to positive cash flows whenever asset acquisition is maintained. Profits will be reinvested into the business in hopes of future product and store expansions. If no appropriate investment opportunities present themselves excess cash will be placed into the market through a respected financial consultant.
Key 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 | 25.42% | 25.00% | 25.42% |
Other | 0 | 0 | 0 |
The following table and chart show our break-even point.
Break-even Analysis | |
Monthly Revenue Break-even | $32,540 |
Assumptions: | |
Average Percent Variable Cost | 60% |
Estimated Monthly Fixed Cost | $13,016 |
Due to working with low overhead, we predict early profits in the life of our business. Depending on the accuracy of our forecasts, we will adjust the amounts spent on marketing and other long-term assets that will add value to our business.
Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $434,552 | $452,802 | $471,316 |
Direct Cost of Sales | $260,731 | $271,681 | $282,790 |
Other | $0 | $0 | $0 |
Total Cost of Sales | $260,731 | $271,681 | $282,790 |
Gross Margin | $173,821 | $181,121 | $188,526 |
Gross Margin % | 40.00% | 40.00% | 40.00% |
Expenses | |||
Payroll | $101,232 | $105,000 | $111,000 |
Sales and Marketing and Other Expenses | $21,600 | $21,600 | $21,600 |
Depreciation | $0 | $0 | $0 |
Utilities | $9,600 | $9,600 | $9,600 |
Rent | $23,760 | $23,760 | $23,760 |
Payroll Taxes | $0 | $0 | $0 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $156,192 | $159,960 | $165,960 |
Profit Before Interest and Taxes | $17,629 | $21,161 | $22,566 |
EBITDA | $17,629 | $21,161 | $22,566 |
Interest Expense | $5,350 | $4,200 | $3,000 |
Taxes Incurred | $3,042 | $4,240 | $4,973 |
Net Profit | $9,236 | $12,721 | $14,593 |
Net Profit/Sales | 2.13% | 2.81% | 3.10% |
As a retailer, we do not sell on credit, but all of our invetory purchases are made on account. Our net cash outflows are largely a result of repaying the initial loan.
Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $434,552 | $452,802 | $471,316 |
Subtotal Cash from Operations | $434,552 | $452,802 | $471,316 |
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 | $434,552 | $452,802 | $471,316 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $101,232 | $105,000 | $111,000 |
Bill Payments | $238,435 | $337,901 | $345,980 |
Subtotal Spent on Operations | $339,667 | $442,901 | $456,980 |
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 | $10,000 | $10,000 |
Subtotal Cash Spent | $351,667 | $464,901 | $478,980 |
Net Cash Flow | $82,885 | ($12,099) | ($7,664) |
Cash Balance | $91,374 | $79,275 | $71,611 |
Among the importance of monitoring liabilities and assets, cash will be of particular importance to our organization. We will monitor this section of the Balance Sheet constantly. Without cash we will be unable to react to market changes or survive through tough economic cycles. Our net worth will improve as we grow and pay off the initial loan.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $91,374 | $79,275 | $71,611 |
Inventory | $26,588 | $27,705 | $28,838 |
Other Current Assets | $0 | $0 | $0 |
Total Current Assets | $117,962 | $106,980 | $100,449 |
Long-term Assets | |||
Long-term Assets | $2,000 | $2,000 | $2,000 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $2,000 | $2,000 | $2,000 |
Total Assets | $119,962 | $108,980 | $102,449 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $29,335 | $27,633 | $28,509 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $29,335 | $27,633 | $28,509 |
Long-term Liabilities | $48,000 | $36,000 | $24,000 |
Total Liabilities | $77,335 | $63,633 | $52,509 |
Paid-in Capital | $40,000 | $40,000 | $40,000 |
Retained Earnings | ($6,610) | ($7,374) | ($4,653) |
Earnings | $9,236 | $12,721 | $14,593 |
Total Capital | $42,626 | $45,347 | $49,940 |
Total Liabilities and Capital | $119,962 | $108,980 | $102,449 |
Net Worth | $42,626 | $45,347 | $49,940 |
The table below contains important business ratios from the sporting goods shops industry (5491), as determined by the Standard Industry Classification (SIC) Index.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 4.20% | 4.09% | 4.20% |
Percent of Total Assets | ||||
Inventory | 22.16% | 25.42% | 28.15% | 40.20% |
Other Current Assets | 0.00% | 0.00% | 0.00% | 24.30% |
Total Current Assets | 98.33% | 98.16% | 98.05% | 81.10% |
Long-term Assets | 1.67% | 1.84% | 1.95% | 18.90% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 24.45% | 25.36% | 27.83% | 44.70% |
Long-term Liabilities | 40.01% | 33.03% | 23.43% | 13.00% |
Total Liabilities | 64.47% | 58.39% | 51.25% | 57.70% |
Net Worth | 35.53% | 41.61% | 48.75% | 42.30% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 40.00% | 40.00% | 40.00% | 31.80% |
Selling, General & Administrative Expenses | 33.60% | 22.50% | 21.21% | 19.00% |
Advertising Expenses | 1.66% | 0.85% | 0.77% | 1.90% |
Profit Before Interest and Taxes | 4.06% | 4.67% | 4.79% | 1.40% |
Main Ratios | ||||
Current | 4.02 | 3.87 | 3.52 | 1.97 |
Quick | 3.11 | 2.87 | 2.51 | 0.75 |
Total Debt to Total Assets | 64.47% | 58.39% | 51.25% | 57.70% |
Pre-tax Return on Net Worth | 28.81% | 37.40% | 39.18% | 3.40% |
Pre-tax Return on Assets | 10.24% | 15.56% | 19.10% | 8.20% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 2.13% | 2.81% | 3.10% | n.a |
Return on Equity | 21.67% | 28.05% | 29.22% | n.a |
Activity Ratios | ||||
Inventory Turnover | 8.89 | 10.01 | 10.00 | n.a |
Accounts Payable Turnover | 9.13 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 31 | 30 | n.a |
Total Asset Turnover | 3.62 | 4.15 | 4.60 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 1.81 | 1.40 | 1.05 | n.a |
Current Liab. to Liab. | 0.38 | 0.43 | 0.54 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $88,626 | $79,347 | $71,940 | n.a |
Interest Coverage | 3.30 | 5.04 | 7.52 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.28 | 0.24 | 0.22 | n.a |
Current Debt/Total Assets | 24% | 25% | 28% | n.a |
Acid Test | 3.11 | 2.87 | 2.51 | n.a |
Sales/Net Worth | 10.19 | 9.99 | 9.44 | n.a |
Dividend Payout | 0.00 | 0.79 | 0.69 | n.a |
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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 | 25.42% | 25.00% | 25.42% |
Other | 0 | 0 | 0 |
Break-even Analysis | |
Monthly Revenue Break-even | $32,540 |
Assumptions: | |
Average Percent Variable Cost | 60% |
Estimated Monthly Fixed Cost | $13,016 |
Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $434,552 | $452,802 | $471,316 |
Direct Cost of Sales | $260,731 | $271,681 | $282,790 |
Other | $0 | $0 | $0 |
Total Cost of Sales | $260,731 | $271,681 | $282,790 |
Gross Margin | $173,821 | $181,121 | $188,526 |
Gross Margin % | 40.00% | 40.00% | 40.00% |
Expenses | |||
Payroll | $101,232 | $105,000 | $111,000 |
Sales and Marketing and Other Expenses | $21,600 | $21,600 | $21,600 |
Depreciation | $0 | $0 | $0 |
Utilities | $9,600 | $9,600 | $9,600 |
Rent | $23,760 | $23,760 | $23,760 |
Payroll Taxes | $0 | $0 | $0 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $156,192 | $159,960 | $165,960 |
Profit Before Interest and Taxes | $17,629 | $21,161 | $22,566 |
EBITDA | $17,629 | $21,161 | $22,566 |
Interest Expense | $5,350 | $4,200 | $3,000 |
Taxes Incurred | $3,042 | $4,240 | $4,973 |
Net Profit | $9,236 | $12,721 | $14,593 |
Net Profit/Sales | 2.13% | 2.81% | 3.10% |
Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $434,552 | $452,802 | $471,316 |
Subtotal Cash from Operations | $434,552 | $452,802 | $471,316 |
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 | $434,552 | $452,802 | $471,316 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $101,232 | $105,000 | $111,000 |
Bill Payments | $238,435 | $337,901 | $345,980 |
Subtotal Spent on Operations | $339,667 | $442,901 | $456,980 |
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 | $10,000 | $10,000 |
Subtotal Cash Spent | $351,667 | $464,901 | $478,980 |
Net Cash Flow | $82,885 | ($12,099) | ($7,664) |
Cash Balance | $91,374 | $79,275 | $71,611 |
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $91,374 | $79,275 | $71,611 |
Inventory | $26,588 | $27,705 | $28,838 |
Other Current Assets | $0 | $0 | $0 |
Total Current Assets | $117,962 | $106,980 | $100,449 |
Long-term Assets | |||
Long-term Assets | $2,000 | $2,000 | $2,000 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $2,000 | $2,000 | $2,000 |
Total Assets | $119,962 | $108,980 | $102,449 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $29,335 | $27,633 | $28,509 |
Current Borrowing | $0 | $0 | $0 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $29,335 | $27,633 | $28,509 |
Long-term Liabilities | $48,000 | $36,000 | $24,000 |
Total Liabilities | $77,335 | $63,633 | $52,509 |
Paid-in Capital | $40,000 | $40,000 | $40,000 |
Retained Earnings | ($6,610) | ($7,374) | ($4,653) |
Earnings | $9,236 | $12,721 | $14,593 |
Total Capital | $42,626 | $45,347 | $49,940 |
Total Liabilities and Capital | $119,962 | $108,980 | $102,449 |
Net Worth | $42,626 | $45,347 | $49,940 |
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 4.20% | 4.09% | 4.20% |
Percent of Total Assets | ||||
Inventory | 22.16% | 25.42% | 28.15% | 40.20% |
Other Current Assets | 0.00% | 0.00% | 0.00% | 24.30% |
Total Current Assets | 98.33% | 98.16% | 98.05% | 81.10% |
Long-term Assets | 1.67% | 1.84% | 1.95% | 18.90% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 24.45% | 25.36% | 27.83% | 44.70% |
Long-term Liabilities | 40.01% | 33.03% | 23.43% | 13.00% |
Total Liabilities | 64.47% | 58.39% | 51.25% | 57.70% |
Net Worth | 35.53% | 41.61% | 48.75% | 42.30% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 40.00% | 40.00% | 40.00% | 31.80% |
Selling, General & Administrative Expenses | 33.60% | 22.50% | 21.21% | 19.00% |
Advertising Expenses | 1.66% | 0.85% | 0.77% | 1.90% |
Profit Before Interest and Taxes | 4.06% | 4.67% | 4.79% | 1.40% |
Main Ratios | ||||
Current | 4.02 | 3.87 | 3.52 | 1.97 |
Quick | 3.11 | 2.87 | 2.51 | 0.75 |
Total Debt to Total Assets | 64.47% | 58.39% | 51.25% | 57.70% |
Pre-tax Return on Net Worth | 28.81% | 37.40% | 39.18% | 3.40% |
Pre-tax Return on Assets | 10.24% | 15.56% | 19.10% | 8.20% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | 2.13% | 2.81% | 3.10% | n.a |
Return on Equity | 21.67% | 28.05% | 29.22% | n.a |
Activity Ratios | ||||
Inventory Turnover | 8.89 | 10.01 | 10.00 | n.a |
Accounts Payable Turnover | 9.13 | 12.17 | 12.17 | n.a |
Payment Days | 27 | 31 | 30 | n.a |
Total Asset Turnover | 3.62 | 4.15 | 4.60 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 1.81 | 1.40 | 1.05 | n.a |
Current Liab. to Liab. | 0.38 | 0.43 | 0.54 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $88,626 | $79,347 | $71,940 | n.a |
Interest Coverage | 3.30 | 5.04 | 7.52 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.28 | 0.24 | 0.22 | n.a |
Current Debt/Total Assets | 24% | 25% | 28% | n.a |
Acid Test | 3.11 | 2.87 | 2.51 | n.a |
Sales/Net Worth | 10.19 | 9.99 | 9.44 | n.a |
Dividend Payout | 0.00 | 0.79 | 0.69 | n.a |
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