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Assumptions:
1. In the beginning of year 2 a Loan of 10 million taken to buy the shop for 10 mil, depreciated over 20 years
2. You can play "what-If" game with assumptions about Sales growth, GP %age , and Purchases of inventory as %age of
3. You can also ply "What-If" game with salaries, advertising, and utilities expenses as %age of sales
4. Zero Rent expense in y2 onwards as shop was purchased in y2; zero account recievables as sales are on cash basis
5. Purchases of inventory must replenish CGS plus add to the stocks to support increase in sales
therefore purchases are taken as more than 100 % of CGS as in-put
6. Initially minimum cash balance required was estimated as 2% of sales in y2 onwards
7. Equation: CGS = Beg Inventory + Purchases - Ending Inventory was used to find end inventory
8. Inventory purchased on 30 day's credit, so accounts payable equal last month's Purchases, that is 1/12 of purchases
9. Last month's salaries, advertising, and utilities expense are in respective accrued liabilities payabe
10. Income tax of the last quarter in Payables, that is 1/4 of tax expense in Pay Ables
11. Interest of 2nd 6 months of a year is in Pay Ables, as interest of each 6 month is paid in the 7th month
12. Equation: End RE = Beg RE + NI - Cash Dividends - Stock Dividends was used to find end RE
13. Year one Income statement & balance sheet are the same as you made in the case already for this foot-ware busines
35%
63%
120%
17%
10%
5%
40%
65%
150%
15%
8%
4%
Out-Put
Year 1
Sales
CGS
GP
Year 2
Year 3
5,550,000
7,492,500
10,489,500
2,220,000
3,330,000
2,772,225
4,720,275
3,671,325
6,818,175
120,000
966,240
1,073,600
322,080
6,000
120,000
2,000
37,000
2,646,920
1,273,725
749,250
374,625
###
###
###
500,000
3,025,600
1,573,425
839,160
419,580
6,000
120,000
2,000
500,000
3,460,165
Operating Expenses
Rent
Salaries Expense
Advertising Expense
Utilities Expense
License amortization Expense
Dep Exp fixture
Amortization Org cost
Bad debt expense
Dep Exp Building
683,080
71,861
EBT
754,941
1,694,675
1,740,762
(46,087)
3,358,010
1,482,004
1,876,006
358,211
NI
396,730
(46,087)
562,802
1,313,204
Projected Balance Sheet as of the last day of each year for the next 5
Year 1
Year 2
Year 3
Assets
Cash y2 on wards 2% of S
2,310,967
149,850
209,790
Acc R/As
640,000
480,000
8,000
5,000,000
-
Inventory
Fixture (net)
Org Cost
Pagri
Building (net)
TA
1,194,445
360,000
6,000
###
9,500,000
3,030,108
240,000
4,000
5,000,000
9,000,000
8,438,967
16,210,295
17,483,898
493,333
103,680
115,200
34,560
295,464
1,042,237
-
277,223
106,144
62,438
31,219
840,762
1,317,785
8,624,362
458,916
131,119
69,930
34,965
140,700
705,812
1,541,442
6,989,966
1,042,237
7,000,000
396,730
9,942,147
###
350,643
8,531,408
7,000,000
1,663,847
7,396,730
7,350,643
8,663,847
8,438,967 17,292,790
17,195,255
TL & OE
Acc Payables 1/12 of exp
Salaries Payable 1/12 of exp
Advertising P/able 1/12 of exp
Utilities Payable 1/12 of exp
Income Tax Payable 1/4 of exp
Interest Payable
CL
Long Tem Loan Payable
TL
Share Capital Paid-up
RE (Reserves)
OE
TL&OE
EFN =TA - TL&OE
(1,082,495)
288,642
negative EFN
EFN
Negative EFN means TL & OE is greater than TA required, and if not used otherwise it would add to
and then balance sheet would be balanced; while positive EFN means TA required are greater than
TL & OE, and business would have to raise funds by taking loan or by issuing shares or both
Owners of Small businesses can inject funds as "loan from directors" in the year
when EFN is positive if they want to avoid taking loans
Please note: in this exercise of 5 year, you did financial planning without making cash budget
Periods
Beg Bal
Pmt
interest
1
10,000,000
1,558,200
900,000
2
9,341,800
1,558,200
840,762
3
8,624,362
1,558,200
776,193
4
7,842,355
1,558,200
705,812
5
6,989,966
1,558,200
629,097
6
6,060,863
1,558,200
545,478
7
5,048,141
1,558,200
454,333
8
3,944,274
1,558,200
354,985
9
2,741,059
1,558,200
246,695
10
1,429,554
1,558,200
128,660
In FC-100 CMPD mode enter : - 10 PV ; 0 FV; 10 n; 9 i ; and solve pmt to get 1.558 mil
interest = beg bal *0.09; and loan repaid = pmt - interest;
end bal = beg bal - loan repaid; last number should be zero, it is 14 due to rounding
es as %age of sales
ncrease in sales
nd end inventory
ed to find end RE
15,209,775
5,019,226
10,190,549
50%
70%
175%
10%
5%
2%
Year 5
###
6,844,399
15,970,264
1,825,173
912,587
456,293
6,000
120,000
2,000
500,000
3,822,053
###
2,281,466
1,140,733
456,293
###
###
###
###
500,000
4,506,493
6,368,497
1,174,575
11,463,771
###
809,317
5,193,922
10,654,454
1,558,177
3,196,336
3,635,745
7,458,118
Year 5
456,293
11,174,942
###
8,000,000
19,967,838
24,631,235
669,230
152,098
76,049
38,024
389,544
545,478
1,870,423
5,048,141
998,141
190,122
95,061
38,024
799,084
354,985
2,475,418
2,741,059
6,918,564
7,000,000
5,299,592
5,216,476
###
12,757,710
12,299,592
19,218,156
19,757,710
###
749,682
(342,951)
EFN
negative EFN
ot used otherwise it would add to cash
eans TA required are greater than
r by issuing shares or both
rs" in the year
658,200
717,438
782,007
852,388
929,103
1,012,722
1,103,867
1,203,215
1,311,505
1,429,540
e pmt to get 1.558 mil
14 due to rounding
9,341,800
8,624,362
7,842,355
6,989,966
6,060,863
5,048,141
3,944,274
2,741,059
1,429,554
14