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Part 4

FINANCIAL STUDY

The business needs to finance all of the capitalization and the expenses

that are present in the company. The financial study shows the total projected

cost, the capitalization, source of financing, total sales and expenses, income

statement, balance sheet, cash flow statements, and financial analysis that will

help to operate the business.

Objectives of the Study

1. To make assumption of total project costs.

2. To know the sources of financing.

3. To list-down all realistic financial assumptions.

4. To project the 5-year financial statements.

5. To prove the financial viability of the financial analysis methods.

Total Projected Cost

The business has to compute the total projected cost to sum up all the

equipment, raw materials, supplies, and expenses. It is a statement of financial

investment for project development, implementation and maintenance to

establish the project initiative and make the project fully operational. Projected

cost is the predicted total cost of operation at the time of completion.

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Table 30
Total Projected Cost
INITIAL CAPITAL REQUIREMENT
Capital Outlay
Machine and Equipment 108,144.00
Office Equipment 106,262.00
Furniture and Fixtures 37,584.00
Delivery Equipment 134,188.00
Pre-operating Expense 11,774.00
Uniform 4,375.00
Working Capital
Raw Materials 82,124.00
Packaging 44,304.00
Office Supplies 1,464.75
Rent 3,000.00
Utilities 85,824.99
Salaries and Wages 445,068.00
Sanitary Supplies 2,150.50
Advertising Expense 1,620.00
TOTAL P1,067,883.24

Sources of Financing

Capital must be needed in running a business. Without this, the company

will not function because of lack of finances. This supports all the needs of the

company. The funds will be coming from the shareholder’s personal savings that

came from the past careers. This will serve as the starting budget and will be

used for the whole operation of the business.

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Table 31
Initial Capital Requirement
Shareholders Capital Percentage

Caparas, Matt Roali A. P 150,000 16.66%

Dador, Marlou C. P 150,000 16.66%

De Torres, Jed P 150,000 16.66%

Garil Jr., Ferdinand U. P 150,000 16.66%

Hernandez, Jerome P. P 150,000 16.66%

Metran, Rommel A. P 150,000 16.66%

TOTAL P 900,000 100%

To start a business, it is important that every individual who runs the

business must have investments so the business can run effectively.

The table above shows how much was the initial capital of each

shareholders of the WOWWY Company. Each shareholder invested P 200,000

that is equivalent to 16.66%. This will served as an additional budget for

purchasing the raw materials, machineries that are needed for the production,

paying expenses such as rent, utilities, and the licenses of the business, for

buying the supplies needed in the production, office, and sanitary purposes, and

also for paying the salaries and wages of the employees

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Financial Assumptions

 The beginning capital of the business is P900,000.

 The change of economy will not affect the price of the product. (Pwala pa).

 The income tax rate of the business will be 30% of the net income.

 All of the supplies are utilize twice a year.

 There are 301 operating days in a business year.

 SSS, Phil Health, Pag-ibig, and Withholding Tax Payable are based on the

employee’s salary.

 Selling price is constant for 5 years.

 Supply every year is increased by 5%.

 The net income (loss) is shared by the shareholders equally.

 The rent expense is fixed for 5 years which is ten thousand pesos every

month.

 The unsold product of the company is 10%

 The rate of returns of the company is 145%

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Financial Statement

HEXACOM.
PROJECTED INCOME STATEMENT
FOR THE PERIOD 2019-2023

2019 2020 2021 2022 2023

3,428,976.00 3,600,424.80 3,780,446.04 3,969,468.34 4,167,941.76
1,268,448.54 1,319,291.99 1,343,112.97 1,368,125.00 1,394,387.63
2,160,527.46 2,281,132.81 2,437,333.07 2,601,343.34 2,773,554.13

Salaries Expense 1,065,168.00 1,065,168.00 1,065,168.00 1,065,168.00 1,065,168.00

Pre-operating Expense 11,774.00 - - - -
Rent Expense 50% 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00
Depreciation - Office Equipment 21,252.40 21,252.40 21,252.40 21,252.40 21,252.40
Depreciation - Furniture & Fixtures 7,516.80 7,516.80 7,516.80 7,516.80 7,516.80
Depreciation - Delivery Equipment 26,837.60 26,837.60 26,837.60 26,837.60 26,837.60
Office Supplies Expense 5,859.00 5,859.00 5,859.00 5,859.00 5,859.00
Advertising and Promotion 6,480.00 6,480.00 6,480.00 6,480.00 6,480.00
Sanitary Supplies 8,602.00 8,602.00 8,602.00 8,602.00 8,602.00
Uniform 4,375.00 - - - -
Utilities Expense 50% 171,649.98 171,649.98 171,649.98 171,649.98 171,649.98
Total Operating Expense 1,335,514.78 1,319,365.78 1,319,365.78 1,319,365.78 1,319,365.78

825,012.68 961,767.03 1,117,967.29 1,281,977.56 1,454,188.35

247,503.80 288,530.11 335,390.19 384,593.27 436,256.51
577,508.88 673,236.92 782,577.10 897,384.29 1,017,931.85
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(NAME OF THE COMPANY)

PROJECTED STATEMENT OF FINACIAL POSITION
FOR THE PERIOD ENDED 2019-2023

2019 2020 2021 2022 2023

ASSETS
Current Assets:
Cash 1,896,618.33 2,578,638.48 3,373,934.17 4,284,386.72 5,315,753.97
Inventory 151,646.24 277,734.63 406,551.92 538,234.56 672,925.81
Total Current Assets 2,048,264.57 2,856,373.11 3,780,486.09 4,822,621.28 5,988,679.78

Non-Current Assets:
Machine and Equipment 108,144.00 108,144.00 108,144.00 108,144.00 108,144.00
Less: Accum. Dep. - Machine & Equipment 21,628.80 43,257.60 64,886.40 86,515.20 108,144.00
Net Book Value 86,515.20 64,886.40 43,257.60 21,628.80 -
Office Equipment 106,262.00 106,262.00 106,262.00 106,262.00 106,262.00
Less: Accum. Dep. – Office Equipment 21,252.40 42,504.80 63,757.20 85,009.60 106,262.00
Net Book Value 85,009.60 63,757.20 42,504.80 21,252.40 -
Delivery Equipment 134,188.00 134,188.00 134,188.00 134,188.00 134,188.00
Less: Accum. Dep. – Delivery Equipment 26,837.60 53,675.20 80,512.80 107,350.40 134,188.00
Net Book Value 107,350.40 80,512.80 53,675.20 26,837.60 -
Furniture and Fixtures 37,584.00 37,584.00 37,584.00 37,584.00 37,584.00
Less: Accum. Dep. – Furnitures and Fixtures 7,516.80 15,033.60 22,550.40 30,067.20 37,584.00
Net Book Value 30,067.20 22,550.40 15,033.60 7,516.80 -
Total Non-Current Assets 308,942.40 231,706.80 154,471.20 77,235.60 -

TOTAL ASSETS 2,357,206.97 3,088,079.91 3,934,957.29 4,899,856.88 5,988,679.78

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LIABILITIES
Vat payable 332,194.29 348,804.00 366,244.20 384,556.41 403,784.23

Tax Payable (Income Tax) 247,503.80 288,530.11 335,390.19 384,593.27 436,256.51

TOTAL LIABILITIES 579,698.09 637,334.11 701,634.39 769,149.68 840,040.74

PARTNER’S EQUITY
owner 1 296,251.48 408,457.63 538,887.15 688,451.20 858,106.51
owner 2 296,251.48 408,457.63 538,887.15 688,451.20 858,106.51
owner 3 296,251.48 408,457.63 538,887.15 688,451.20 858,106.51
owner 4 296,251.48 408,457.63 538,887.15 688,451.20 858,106.51
owner 5 296,251.48 408,457.63 538,887.15 688,451.20 858,106.51
owner 6 296,251.48 408,457.63 538,887.15 688,451.20 858,106.51
1,777,508.88 2,450,745.80 3,233,322.90 4,130,707.20 5,148,639.04

TOTAL LIABILITIES & PARTNER’S EQUITY 2,357,206.97 3,088,079.91 3,934,957.29 4,899,856.88 5,988,679.78
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(NAME OF THE COMPANY)

PROJECTED STATEMENT OF CASH FLOW
FOR THE PERIOD 2019-2023

2019 2020 2021 2022 2023

Cash Flows from Operating activities
Cash received from customers 3,796,366.29 3,986,184.60 4,185,493.83 4,394,768.52 4,614,506.95

Purchase of Raw Materials (328,496.00) (344,920.80) (362,166.84) (380,275.18) (399,288.94)

Payment for Manufacturing Overhead (354,865.98) (363,726.78) (373,030.62) (382,799.65) (393,057.14)
Payment for Direct Labor (715,104.00) (715,104.00) (715,104.00) (715,104.00) (715,104.00)
Payment for Operating Expenses (1,257,899.98) (1,257,899.98) (1,257,899.98) (1,257,899.98) (1,257,899.98)
Payment for Pre Operating Expenses (11,774.00) - - - -
Payment for Uniforms (4,375.00) - - - -
Payment for Office Supplies (5,859.00) (5,859.00) (5,859.00) (5,859.00) (5,859.00)
Payment For Input Vat (35,196.00) (36,955.80) (38,803.59) (40,743.77) (42,780.96)
Payment for tax previous year (332,194.29) (348,804.00) (366,244.20) (384,556.41)
Payment for Income Tax for previous year - (247,503.80) (288,530.11) (335,390.19) (384,593.27)
Net cash provided by operating activities 1,082,796.33 682,020.15 795,295.69 910,452.55 1,031,367.25

Cash Flows from Investing Activities

Purchase of Machine and Equipment (108,144.00) - - - -
Purchase of Office Equipment (106,262.00) - - - -
Purchase of Furnitures and Fixtures (37,584.00) - - - -
Purchase for Delivery Equipment (134,188.00) - - - -
Net Cash provided for investing activities (386,178.00) - - - -

Cash Flows from Financing Activities

Cash investment by the partners 1,200,000.00 - - - -
Net Cash provided by financing activities 1,200,000.00 - - - -

Net Cash Flow 1,896,618.33 682,020.15 795,295.69 910,452.55 1,031,367.25

Cash Balance, Beginning - 1,896,618.33 2,578,638.48 3,373,934.17 4,284,386.72
Cash Balance,Ending 1,896,618.33 2,578,638.48 3,373,934.17 4,284,386.72 5,315,753.97
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Note 2: COST OF GOODS SOLD

2019 2020 2021 2022 2023
Materials:
Materials Inventory, Beginning - 32,849.60 34,492.08 36,216.68 38,027.52
Materials Purchases 328,496.00 344,920.80 362,166.84 380,275.18 399,288.94
Materials Inventory, Ending 32,849.60 34,492.08 36,216.68 38,027.52 39,928.89
Materials Used 295,646.40 343,278.32 360,442.24 378,464.35 397,387.57

Direct Labor 715,104.00 715,104.00 715,104.00 715,104.00 715,104.00

Indirect Materials 177,216.00 186,076.80 195,380.64 205,149.67 215,407.16

Utilities Expense 50% 171,649.98 171,649.98 171,649.98 171,649.98 171,649.98
Rent Expense 50% 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00
Depreciation Expense 21,628.80 21,628.80 21,628.80 21,628.80 21,628.80

Total Manufacturing Overhead 376,494.78 385,355.58 394,659.42 404,428.45 414,685.94

COST OF GOODS MANUFACTURED 1,387,245.18 1,443,737.90 1,470,205.66 1,497,996.80 1,527,177.50
Finished Goods Beginning - 118,796.64 243,242.55 370,335.24 500,207.04

COST OF GOODS AVAILABLE FOR SALE 1,387,245.18 1,562,534.54 1,713,448.21 1,868,332.04 2,027,384.54
Finished Goods Ending (Unsold) 118,796.64 243,242.55 370,335.24 500,207.04 632,996.91

COST OF GOODS SOLD 1,268,448.54 1,319,291.99 1,343,112.97 1,368,125.00 1,394,387.63

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Financial Analysis

Internal Rate of Return

Capital Outlay (1,200,000.00)

Net Cash Flow from
Operating Activities 654,744.48
750,472.52
859,812.70
974,619.89
1,095,167.45
58%

The table above explains that 58% was the rate of returns of the company.

Payback Period
Year Amount to Recover Net Cash Flow from Operating Activities Balance Payback Years
Year 1 (1,200,000.00) 654,744.48 (545,255.52) 1.83
Year 2 (545,255.52) 750,472.52 205,217.00
Year 3 205,217.00 859,812.70 1,065,029.70
Year 4 1,065,029.70 974,619.89 2,039,649.60
Year 5 2,039,649.60 1,095,167.45 3,134,817.04
Payback Period 1.83

The table above shows that the payback period of the company was between 1 to 2 years.
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Net Present Value

Net Present Value Rate 8%
Year Discount Factor
(1,200,000.00) - (1,200,000.00)
Operating Activities 654,744.48 1 0.925925926 606,244.89
750,472.52 2 0.85733882 643,409.23
859,812.70 3 0.793832241 682,547.05
974,619.89 4 0.735029853 716,374.72
1,095,167.45 5 0.680583197 745,352.56
2,193,928.44

Break – even Point Analysis

the Break – even Point (BEP) analysis that presents the sales in peso or units, that is required to cover total costs
consisting of both fixed and variable costs to the company.

Fixed costs 251,990.00

Variable costs 2,285,984.00
Break even point 2,537,974.00