Financial Projections

For Jakel Trading’s business, we are planning to make a new clothes that we call as
Chibatik. Chibatik is our new product name which is a cheongsam dress for women and tang
zhuang for men. Chibatik is a Chinese cheongsam with batik designs or Tang Zhuang with
batik designs. We get the inspiration to create Chibatik because this is something new to
JAKEL as JAKEL not yet make the combination of traditional dress. Thus, we are trying to
make something new to JAKEL’s product so that JAKEL can get more customers and can
develop their marketing strategies to their variety product. It would be a good idea to first
consider certain data before we decides to start production of the closet as stated in the
tables below.

On the other hand, the purchasing department can make sure that raw materials,
auxiliary materials and semi-finished products are purchased at more affordable rates,
reducing the variable costs. Together with the sales department, they can also opt to stick
to the high selling price, ensuring that they will turn a profit sooner when they sell amount
of clothes. Lastly, it is the production department’s turn. For them it is about efficiently
handling raw materials. Waste needs to be avoided in order to reduce the variable costs. An
efficient and effective approach will also help with the speed of production, allowing more
clothes to be produced in less time. Of course, other departments are also linked to this
system. For instance, it is the marketing department’s task to offer the clothes in an
attractive way using various channels, including shops, online shops and design magazines.
 FORECASTING

All the calculation below in Ringgit Malaysia (RM) :

Income Statement Assumptions Year 1 Year 2 Year 3 Year 4 Year 5

Revenue 40,000 80,000 100,000 240,000 300,000

Gross margin % 55.0% 55.0% 55.0% 55.0% 55.0%
Cost of sales 18,000 36,000 45,000 108,000 135,000
Gross margin 22,000 44,000 55,000 132,000 165,000
Research and development 5,000 6,000 8,000 17,000 25,000
Sales and marketing 6,000 7,000 8,000 16,000 24,000
General and administrative 5,000 6,000 9,000 17,000 26,000
Operating expenses 16,000 19,000 25,000 50,000 75,000
Depreciation 20.0% 5,000 14,000 11,600 9,680 11,744
Operating income 1,000 11,000 18,400 72,320 78,256
Finance costs 4.0% 600 2,248 1,615 956 487
Income before tax 400 8,752 16,785 71,364 77,769
Income tax expense 20.0% 80 1,750 3,357 14,273 15,554
Net income 320 7,002 13,428 57,091 62,215
Balance sheet Assumptions Opening Year 1 Year 2 Year 3 Year 4 Year 5

Assets
Cash 6,000 4,346 6,145 10,651 47,063 83,464
Accounts receivable 45 7,000 4,932 9,863 12,329 29,589 36,986
Inventory 90 6,000 4,438 8,877 11,096 26,630 33,288
Current assets 19,000 13,716 24,885 34,076 103,282 153,738
Long-term assets 20,000 20,000 56,000 46,400 38,720 46,976
Total assets 39,000 33,716 80,885 80,476 142,002 200,714

Liabilities
Accounts payable 60 3,500 2,959 5,918 7,397 17,753 22,192
Other liabilities 60 3,000 2,742 3,781 4,927 10,723 14,966
Current liabilities 6,500 5,701 9,698 12,324 28,476 37,157
Long-term debt 3 15,000 10,195 40,365 23,902 12,185
Total liabilities 21,500 15,896 50,063 36,226 40,661 37,157

Equity
Capital 10,000 10,000 16,000 16,000 16,000 16,000
Retained earnings 7,500 7,820 14,822 28,250 85,341 147,556
Total equity 17,500 17,820 30,822 44,250 101,341 163,556
Total liabilities and equity 39,000 33,716 80,885 80,476 142,002 200,714

Cash Flow Statement Assumptions Year 1 Year 2 Year 3 Year 4 Year 5

Net income 320 7,002 13,428 57,091 62,215

Add back depreciation 5,000 14,000 11,600 9,680 11,744
Changes in working capital
Accounts receivable 2,068 -4,932 -2,466 -17,260 -7,397
Inventory 1,562 -4,438 -2,219 -15,534 -6,658
Accounts payable -541 2,959 1,479 10,356 4,438
Other liabilities -258 1,039 1,146 5,796 4,243
Cash flows from operating activities 8,151 15,629 22,969 50,128 68,586

Amount paid for long-term assets -5,000 -50,000 -2,000 -2,000 -20,000
Cash flows from investing activities -5,000 -50,000 -2,000 -2,000 -20,000

Proceeds from long-term debt 4 46,000

Proceeds from issue of share capital 6,000
Repayment of long-term debt -4,805 -15,830 -16,463 -11,716 -12,185
Cash flow from financing activities -4,805 36,170 -16,463 -11,716 -12,185

Cash flow -1,654 1,799 4,506 36,412 36,400

Beginning cash balance 6,000 4,346 6,145 10,651 47,063
Ending cash balance 4,346 6,145 10,651 47,063 83,464

Ratios Year 1 Year 2 Year 3 Year 4 Year 5

Profitability (Net income / Revenue) 0.8% 8.8% 13.4% 23.8% 20.7%

Efficiency (Revenue / Assets) 1.19 0.99 1.24 1.69 1.49
Leverage (Liabilities / Assets) 47.1% 61.9% 45.0% 28.6% 18.5%
Operating return on assets (ROA) 3.0% 13.6% 22.9% 50.9% 39.0%
Return on equity (ROE) 1.8% 22.7% 30.3% 56.3% 38.0%
Liquidity (Current assets / Current liabilities) 2.41 2.57 2.76 3.63 4.14
Breakeven revenue 39,273 64,087 69,481 110,247 158,603
Graphs

Graph information
Revenue 40,000 80,000 100,000 240,000 300,000
Net income 320 7,002 13,428 57,091 62,215
Cash balance 4,346 6,145 10,651 47,063 83,464

Free cash 3,151 -34,371 20,969 48,128 48,586

Free cash flow (cumulative) 3,151 -31,220 -10,250 37,878 86,464
Free cash flow year 1 2 3 4 5