Spanish Resources
Financial Plan
The company plans to raise $300,000 in paid-in capital.
As the following tables indicate, this will provide a substantial working capital reserve. This reserve can be used either to finance unexpected short falls in sales or to exploit new market opportunities as the plan unfolds.
Each of the tables contains additional explanatory materials related to the details of our plan.
7.1 Important Assumptions
In addition to general assumption in the table below, the company has made additional assumption about the state of the ecomony, the tourism industry, and the Internet.
The company assumes the economy remains strong, and in particular that the tourism industry continues to experience moderate growth.
The company assumes that the Internet will continue to expand into mainstream of everyday life and particularly that the Internet is increasingly important to the tourism industry.
The company assumes that significant and increasing demand exists for the company’s services.
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
Plan Month | 1 | 2 | 3 |
Current Interest Rate | 12.00% | 12.00% | 12.00% |
Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
Tax Rate | 25.42% | 25.00% | 25.42% |
Other | 0 | 0 | 0 |
7.2 Break-even Analysis
Note that break-even is expected in the second year of operations.

Break-even Analysis | |
Monthly Units Break-even | 18 |
Monthly Revenue Break-even | $67,711 |
Assumptions: | |
Average Per-Unit Revenue | $3,738.06 |
Average Per-Unit Variable Cost | $1,629.35 |
Estimated Monthly Fixed Cost | $38,197 |
7.3 Projected Profit and Loss
There are several features of the company’s Profit and Loss statement that merit explanation.
First, note the 90% increase in sales between year one and year two and the 25% increase between year two and year three.
The dramatic difference is explained by examining fourth quarter sales numbers in year one. If the fourth quarter numbers in year one were extended for an entire year, the sales growth between that year and year two would be approximately 25%.
Second, the dramatic growth in overall marketing budget (60% from year one to year two) is explained by the company’s strategy of using advertising generated sales leads as the most important source of new clients.
Third, it is worth noting that the increase in profit from year two to year three is much greater then the corresponding increase in sales. This is due to the need to both hire and train personnel ahead of increased sales expected in year three and the need to spend heavily in marketing in year two to achieve those sales.
Fourth, the lack of an advertising and promotion budget for the first quarter in year one is due to the company’s strategy of using reference account in company’s advertisements. The first reference accounts will be established in the first quarter of year one with advertising based on those accounts starting in the second quarter.




Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $751,350 | $1,441,500 | $1,807,550 |
Direct Cost of Sales | $327,500 | $615,000 | $771,000 |
Other | $0 | $0 | $0 |
Total Cost of Sales | $327,500 | $615,000 | $771,000 |
Gross Margin | $423,850 | $826,500 | $1,036,550 |
Gross Margin % | 56.41% | 57.34% | 57.35% |
Expenses | |||
Payroll | $150,750 | $286,500 | $292,700 |
Sales and Marketing and Other Expenses | $250,200 | $406,000 | $470,000 |
Depreciation | $0 | $0 | $0 |
Leased Equipment | $0 | $0 | $0 |
Utilities | $15,000 | $0 | $0 |
Insurance | $1,800 | $0 | $0 |
Rent | $18,000 | $0 | $0 |
Payroll Taxes | $22,613 | $42,975 | $43,905 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $458,363 | $735,475 | $806,605 |
Profit Before Interest and Taxes | ($34,513) | $91,025 | $229,945 |
EBITDA | ($34,513) | $91,025 | $229,945 |
Interest Expense | $12,000 | $12,000 | $12,000 |
Taxes Incurred | $0 | $19,756 | $55,394 |
Net Profit | ($46,513) | $59,269 | $162,551 |
Net Profit/Sales | -6.19% | 4.11% | 8.99% |
7.4 Projected Cash Flow
Note that the company uses a significantly portion of its working capital to manage cash requirements.
Also note that accounts receivable vs. accounts payable is well within manageable limits relative to the company’s monthly cash flow.

Pro Forma Cash Flow | |||
Year 1 | Year 2 | Year 3 | |
Cash Received | |||
Cash from Operations | |||
Cash Sales | $300,540 | $576,600 | $723,020 |
Cash from Receivables | $337,412 | $760,739 | $1,029,284 |
Subtotal Cash from Operations | $637,952 | $1,337,339 | $1,752,304 |
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 | $637,952 | $1,337,339 | $1,752,304 |
Expenditures | Year 1 | Year 2 | Year 3 |
Expenditures from Operations | |||
Cash Spending | $150,750 | $286,500 | $292,700 |
Bill Payments | $625,144 | $1,077,639 | $1,331,212 |
Subtotal Spent on Operations | $775,894 | $1,364,139 | $1,623,912 |
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 | $775,894 | $1,364,139 | $1,623,912 |
Net Cash Flow | ($137,942) | ($26,801) | $128,392 |
Cash Balance | $229,558 | $202,757 | $331,149 |
7.5 Projected Balance Sheet
Due to the $300,000 of paid-in capital and the company’s turn to profitability in the second year, the company’s balance sheet is robust.
Pro Forma Balance Sheet | |||
Year 1 | Year 2 | Year 3 | |
Assets | |||
Current Assets | |||
Cash | $229,558 | $202,757 | $331,149 |
Accounts Receivable | $113,398 | $217,559 | $272,806 |
Other Current Assets | $0 | $0 | $0 |
Total Current Assets | $342,956 | $420,316 | $603,955 |
Long-term Assets | |||
Long-term Assets | $20,000 | $20,000 | $20,000 |
Accumulated Depreciation | $0 | $0 | $0 |
Total Long-term Assets | $20,000 | $20,000 | $20,000 |
Total Assets | $362,956 | $440,316 | $623,955 |
Liabilities and Capital | Year 1 | Year 2 | Year 3 |
Current Liabilities | |||
Accounts Payable | $71,968 | $90,060 | $111,148 |
Current Borrowing | $100,000 | $100,000 | $100,000 |
Other Current Liabilities | $0 | $0 | $0 |
Subtotal Current Liabilities | $171,968 | $190,060 | $211,148 |
Long-term Liabilities | $0 | $0 | $0 |
Total Liabilities | $171,968 | $190,060 | $211,148 |
Paid-in Capital | $300,000 | $300,000 | $300,000 |
Retained Earnings | ($62,500) | ($109,013) | ($49,744) |
Earnings | ($46,513) | $59,269 | $162,551 |
Total Capital | $190,988 | $250,256 | $412,807 |
Total Liabilities and Capital | $362,956 | $440,316 | $623,955 |
Net Worth | $190,988 | $250,256 | $412,807 |
7.6 Business Ratios
The following table outlines some of the more important ratios from the Administrative Management and General Management industry. The final column, Industry Profile, details specific ratios based on the industry as it is classified by the Standard Industry Classification (SIC) code, 8742.
Ratio Analysis | ||||
Year 1 | Year 2 | Year 3 | Industry Profile | |
Sales Growth | 0.00% | 91.85% | 25.39% | 6.98% |
Percent of Total Assets | ||||
Accounts Receivable | 31.24% | 49.41% | 43.72% | 26.80% |
Other Current Assets | 0.00% | 0.00% | 0.00% | 43.95% |
Total Current Assets | 94.49% | 95.46% | 96.79% | 75.76% |
Long-term Assets | 5.51% | 4.54% | 3.21% | 24.24% |
Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
Current Liabilities | 47.38% | 43.16% | 33.84% | 31.78% |
Long-term Liabilities | 0.00% | 0.00% | 0.00% | 17.26% |
Total Liabilities | 47.38% | 43.16% | 33.84% | 49.04% |
Net Worth | 52.62% | 56.84% | 66.16% | 50.96% |
Percent of Sales | ||||
Sales | 100.00% | 100.00% | 100.00% | 100.00% |
Gross Margin | 56.41% | 57.34% | 57.35% | 100.00% |
Selling, General & Administrative Expenses | 62.60% | 53.22% | 48.30% | 85.31% |
Advertising Expenses | 10.94% | 13.87% | 13.28% | 1.02% |
Profit Before Interest and Taxes | -4.59% | 6.31% | 12.72% | 1.90% |
Main Ratios | ||||
Current | 1.99 | 2.21 | 2.86 | 1.88 |
Quick | 1.99 | 2.21 | 2.86 | 1.48 |
Total Debt to Total Assets | 47.38% | 43.16% | 33.84% | 55.78% |
Pre-tax Return on Net Worth | -24.35% | 31.58% | 52.80% | 3.41% |
Pre-tax Return on Assets | -12.81% | 17.95% | 34.93% | 7.72% |
Additional Ratios | Year 1 | Year 2 | Year 3 | |
Net Profit Margin | -6.19% | 4.11% | 8.99% | n.a |
Return on Equity | -24.35% | 23.68% | 39.38% | n.a |
Activity Ratios | ||||
Accounts Receivable Turnover | 3.98 | 3.98 | 3.98 | n.a |
Collection Days | 56 | 70 | 83 | n.a |
Accounts Payable Turnover | 8.99 | 12.17 | 12.17 | n.a |
Payment Days | 29 | 27 | 27 | n.a |
Total Asset Turnover | 2.07 | 3.27 | 2.90 | n.a |
Debt Ratios | ||||
Debt to Net Worth | 0.90 | 0.76 | 0.51 | n.a |
Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
Liquidity Ratios | ||||
Net Working Capital | $170,988 | $230,256 | $392,807 | n.a |
Interest Coverage | -2.88 | 7.59 | 19.16 | n.a |
Additional Ratios | ||||
Assets to Sales | 0.48 | 0.31 | 0.35 | n.a |
Current Debt/Total Assets | 47% | 43% | 34% | n.a |
Acid Test | 1.33 | 1.07 | 1.57 | n.a |
Sales/Net Worth | 3.93 | 5.76 | 4.38 | n.a |
Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |