Edgar Risk Ventures, Ltd.
Financial Plan
Success Is a Journey, Not a Destination…
The next topics present in our Financial Plan supported by tables and charts.
Important Assumptions
The following financials cover the balance of the year 2001 and carry through year 2003, holding certain assumptions as to the level of activities and numbers of projects to be undertaken. The assumptions for the balance of the current year and well into year 2002 are based on rather definite and reliable data, knowing the nature and potential of projects already identified and ready to be produced. As additional clients and projects appear on the scene, the assumptions become less definite at this time, but certainly the revenue and exposure potential increases incrementally with each added project.
All financials except the ‘Rainbow’s End’ components utilize the most conservative of figures. This is to protect both the legitimacy of expected revenues as well as the credibility of activity. The added assumption of the ‘Rainbow’s End’ factors are utilized only to display possibilities inherent in each project.
| 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 |
Break-even Analysis
The following Break-even Analysis shows what is needed in monthly sales to break even in relation to monthly expenses.
| Break-even Analysis | |
| Monthly Revenue Break-even | $20,479 |
| Assumptions: | |
| Average Percent Variable Cost | 42% |
| Estimated Monthly Fixed Cost | $11,797 |
Projected Profit and Loss
The following table and chart present the projected Profit and Loss.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $264,910 | $475,025 | $641,295 |
| Direct Cost of Sales | $112,304 | $167,153 | $215,316 |
| Other Production Expenses | $0 | $0 | $0 |
| Total Cost of Sales | $112,304 | $167,153 | $215,316 |
| Gross Margin | $152,607 | $307,872 | $425,979 |
| Gross Margin % | 57.61% | 64.81% | 66.42% |
| Expenses | |||
| Payroll | $84,000 | $84,000 | $108,000 |
| Sales and Marketing and Other Expenses | $30,750 | $86,200 | $117,700 |
| Depreciation | $0 | $0 | $0 |
| Leased Equipment | $0 | $2,000 | $5,000 |
| Publications/memberships | $1,620 | $1,620 | $1,620 |
| Insurance | $3,600 | $4,200 | $4,500 |
| Rent | $9,000 | $9,000 | $10,000 |
| Payroll Taxes | $12,600 | $12,600 | $16,200 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $141,570 | $199,620 | $263,020 |
| Profit Before Interest and Taxes | $11,037 | $108,252 | $162,959 |
| EBITDA | $11,037 | $108,252 | $162,959 |
| Interest Expense | $1,313 | $850 | $750 |
| Taxes Incurred | $2,917 | $32,221 | $48,663 |
| Net Profit | $6,807 | $75,181 | $113,546 |
| Net Profit/Sales | 2.57% | 15.83% | 17.71% |
Projected Cash Flow
The following table and chart show the Projected Cash Flow and Cash Balance for Edgar Risk Ventures.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $238,419 | $427,523 | $577,166 |
| Cash from Receivables | $23,779 | $45,351 | $62,427 |
| Subtotal Cash from Operations | $262,198 | $472,874 | $639,593 |
| 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 | $262,198 | $472,874 | $639,593 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $84,000 | $84,000 | $108,000 |
| Bill Payments | $160,883 | $304,104 | $411,209 |
| Subtotal Spent on Operations | $244,883 | $388,104 | $519,209 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $4,000 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $1,000 | $1,000 | $1,000 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $20,000 | $28,000 | $38,000 |
| Dividends | $0 | $50,000 | $60,000 |
| Subtotal Cash Spent | $269,883 | $467,104 | $618,209 |
| Net Cash Flow | ($7,685) | $5,770 | $21,384 |
| Cash Balance | $30,315 | $36,085 | $57,469 |
Projected Balance Sheet
The following table is the Projected Balance Sheet.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $30,315 | $36,085 | $57,469 |
| Accounts Receivable | $2,712 | $4,863 | $6,566 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $33,027 | $40,948 | $64,035 |
| Long-term Assets | |||
| Long-term Assets | $24,500 | $52,500 | $90,500 |
| Accumulated Depreciation | $0 | $0 | $0 |
| Total Long-term Assets | $24,500 | $52,500 | $90,500 |
| Total Assets | $57,527 | $93,448 | $154,535 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $14,220 | $25,960 | $34,500 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $2,000 | $2,000 | $2,000 |
| Subtotal Current Liabilities | $16,220 | $27,960 | $36,500 |
| Long-term Liabilities | $9,000 | $8,000 | $7,000 |
| Total Liabilities | $25,220 | $35,960 | $43,500 |
| Paid-in Capital | $44,000 | $44,000 | $44,000 |
| Retained Earnings | ($18,500) | ($61,693) | ($46,512) |
| Earnings | $6,807 | $75,181 | $113,546 |
| Total Capital | $32,307 | $57,488 | $111,035 |
| Total Liabilities and Capital | $57,527 | $93,448 | $154,535 |
| Net Worth | $32,307 | $57,488 | $111,035 |
Business Ratios
The industry standard business ratios are taken from the music recording industry, Standard Industrial Classification (SIC) code 7922, Theatrical Producers and Services, Excluding Motion Pictures. ERV’s ratios conform to most of the ratios, however there are some differences that must be explained. First of all, ERV will not be a highly leveraged company since it has access to significant amounts of investment capital prior to business launch. Furthermore the company is convinced that due to Mr. Edgar’s past success and well developed “brand image” in the industry and with music listeners in general, the company will be able to leverage this fame into higher initial profits. The company wishes to utilize this by spending a significantly more amount of money on advertising to strengthen its future profits.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | n.a. | 79.32% | 35.00% | 15.20% |
| Percent of Total Assets | ||||
| Accounts Receivable | 4.71% | 5.20% | 4.25% | 5.70% |
| Other Current Assets | 0.00% | 0.00% | 0.00% | 32.50% |
| Total Current Assets | 57.41% | 43.82% | 41.44% | 41.30% |
| Long-term Assets | 42.59% | 56.18% | 58.56% | 58.70% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 28.20% | 29.92% | 23.62% | 34.70% |
| Long-term Liabilities | 15.64% | 8.56% | 4.53% | 27.90% |
| Total Liabilities | 43.84% | 38.48% | 28.15% | 62.60% |
| Net Worth | 56.16% | 61.52% | 71.85% | 37.40% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 57.61% | 64.81% | 66.42% | 0.00% |
| Selling, General & Administrative Expenses | 55.04% | 48.98% | 48.72% | 74.90% |
| Advertising Expenses | 0.00% | 10.53% | 11.70% | 2.90% |
| Profit Before Interest and Taxes | 4.17% | 22.79% | 25.41% | 2.00% |
| Main Ratios | ||||
| Current | 2.04 | 1.46 | 1.75 | 1.29 |
| Quick | 2.04 | 1.46 | 1.75 | 0.85 |
| Total Debt to Total Assets | 43.84% | 38.48% | 28.15% | 62.60% |
| Pre-tax Return on Net Worth | 30.10% | 186.82% | 146.09% | 2.30% |
| Pre-tax Return on Assets | 16.90% | 114.93% | 104.97% | 6.00% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 2.57% | 15.83% | 17.71% | n.a |
| Return on Equity | 21.07% | 130.78% | 102.26% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 9.77 | 9.77 | 9.77 | n.a |
| Collection Days | 57 | 29 | 33 | n.a |
| Accounts Payable Turnover | 12.24 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 23 | 26 | n.a |
| Total Asset Turnover | 4.60 | 5.08 | 4.15 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.78 | 0.63 | 0.39 | n.a |
| Current Liab. to Liab. | 0.64 | 0.78 | 0.84 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $16,807 | $12,988 | $27,535 | n.a |
| Interest Coverage | 8.41 | 127.35 | 217.28 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.22 | 0.20 | 0.24 | n.a |
| Current Debt/Total Assets | 28% | 30% | 24% | n.a |
| Acid Test | 1.87 | 1.29 | 1.57 | n.a |
| Sales/Net Worth | 8.20 | 8.26 | 5.78 | n.a |
| Dividend Payout | 0.00 | 0.67 | 0.53 | n.a |
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