Chapter 5

FINANCIAL PLAN

In this chapter the researchers will discuss the General

assumption, source of financing, Income statement, Statement of

Financial Condition(balance sheet), Statement of Changes of Owners

Equity, Cash Flow Statement, Return of Investment, Financial Analysis,

under of financial analysis are Liquidity ratio, Leverage ratio, Activity ratio,

Profitability ratio, and payback period of the business.

THE SOURCE OF FINANCING

PRE-OPERATING COST
Capital Contribution Amount
Galve , Delio G.
400,000.00

Natividad , Demi marie E.

400,000.00

Radam , Emmanuel jerum M. 400,000.00

Soriben , Jerome G. 400,000.00

Tinawac , Gene jude T.
400,000.00

Total 2,000,000.00
General Assumption

A. The financial plan is consists of five year income and expenses

B. The capital of the business is 2,000,000.

C. CHURROSITEA is forecasted to increase the service revenue by

ten percent annually of its operation

D. Five percent increase annually for the cost of sales

E. The net income of the business in progressively increases year by

year of its operation.

F. The salaries expense is increase by two percent annually.

G. And for the utilities expense is increase by two percent also.

H. Promotional expense is assumed to increase by two percent

annually.

I. For the rent expense is also increases by two percent yearly.

J. The petty cash fund is for any purpose to be use.

K. The salvage value of equipment is based on how many lifespan of

the used each year it has an accumulated amount of fit teen

thousand pesos.
Income statement

It is a financial statement that summarizes the revenues, costs and

expenses incurred during a specific period of time, usually a fiscal quarter

or year.

Table 5.1

Statement of Comprehensive Income

In this statement the following financial notes is given below for further

understanding of the financial aspects of income statement.

Statement of Financial Position

This statement reports the assets, liabilities equity of a business at

a specific date. This statement provides information about the nature and

amounts of investments in enterprise resources, obligations to creditors,

and the equity in net resources.

Table 5.2

Statement of Financial Position

1. All expenses paid in cash.

 2. The machinery, vehicle, furniture’s, and equipment purchase at

the 1st year only.

Statement of Changes in Owners’ Equity

In this statement, changes in equity shows the yearly income of

partners as the business grows successful.

 Table 5.3

Statement of Changes of Partner’s Equity

Statement of Cash Flow

This statement presents a detailed summary of all cash inflows and

outflows, or the resources and uses of cash during the period.

Table 5.4

Statement of Cash Flow

Return on Investment

ROI is usually expressed as a percentage and is typically used for

personal financial decisions, to compare a company's profitability or to

compare the efficiency of different investments.

Return on investment formula:

ROI = Net profit after tax/Total Investment*100

ROI is achieved in the 5th year of operation.

2019 2020 2021 2022 2023

Net Income 784,094. 1,013,24 1,268,60 1,552,96 1,869,38

Return on 24 8.79 7.96 1.61 6.16
Investment
=
Total Assets 2,000,00 3,575,86 4,695,61 6,047,05 7,661,96
0.00 3.57 6.31 3.84 5.91

(2018-2019 Formula)

0.39

Net Income 1,013,24 1,268,60 1,552,96 1,869,38

Return on 8.79 7.96 1.61 6.16
Investment
=
3,575,863.57 4,695,616.31 6,047,053.84 7,661,96
5.91

Ave.
Investment
28.34% 27.02% 25.68% 24.40%
Financial notes

Note 1

Note 2
Note 3

Note 4

NO. OF HALF MONT

EMPLOYE RATE/H ANNUAL
EMPLO SSS HDMF PHC MONT HLY
E’S OUR PAY
YEE H PAY

STORE 12,07 24,143

1 961.54 581.20 100.00 175.00 289,726.08
MANAGER 1.92 .84

STORE
8,671. 17,343
SUPERVIS 1 700.00 581.20 100.00 175.00 208,125.60
90 .80
OR
 SALES
AND 8,021. 16,043
1 650.00 581.20 100.00 175.00 192,525.60
MARKETIN 90 .80
G CLERK
6,552. 13,105
CASHIER 2 537.00 581.20 100.00 175.00 314,539.20
90 .80
6,552. 13,105
COOK 1 537.00 581.20 100.00 175.00 157,269.60
90 .80
6,552. 13,105
BARISTA 1 537.00 581.20 100.00 175.00 157,269.60
90 .80
41,84 7,200 12,60 1,319,4
TOTAL 6.40 .00 0.00 55.68

Note 5

Rent Monthly Yearly

Rent 4,000 48,000

Note 6

Utilities Per Month Per Year

Electricity 1,050.00 12,600.00

Water 200.00 2,400.00

Gas( 1 tank is good for 510.00x2=1,020.00 1020x4= 4,080.00

3 moths)

Total 19,080.00

TOTAL 19,080.00
Note 7

5 years depreciation
Straight line
Life of Salvage Annual
Initial cost
asset(years): value(Peso) depreciation
81,034.00 5 15,000.00
year 1 66,034.00
year 2 51,034.00
year 3 36,034.00
year 4 21,034.00
year 5 6,034.00

Note 8

PRE-OPERATING EXPENSE
Rate

BIR Registration 530.00

Mayor`s Permit 1,500.00

Barangay Clearance 500.00

Barangay Permit 150

Sanitary Permit 2,000.00

Business Name Registration 515.001

TOTAL 18,695.00
Financial Analysis

Financial Statements provide into the entity’s current status and lead

to the development of policies and strategies for the future.

TEST LEVEL OF PROFITABILITY

Annual
Gross
profit
ratio
with
trend
analysis
Year1 Year2 Year3 Year4 Year5

Gross 2,619,479. 2,960,135. 3,338,792. 3,759,447. 4,226,506.

profit 30 27 23 06 16

The
gross
profit
indexes
and
ratios
assumin
g 2018
as the
base
year(i.e
100%)
would
be:
Year1 Year2 Year3 Year4 Year5
 Gross
profit
indexes 100 110 121 133 146

Gross
profit
ratio 1.00 1.13 1.27 1.44 1.61

average acid test

ratios

formula Year1 Year2 Year3 Year4 Year5

quick
asset(except
inventory)/current
liabilities

current asset 3,004,397.12 4,116,027.01 5,329,074.61 6,788,902.07 8,528,898.75

current liabilities 336,040.39 434,249.48 543,689.12 665,554.98 801,165.50

8.94 9.48 9.80 10.20 10.65

Ratios

Liquidity Ratio

Liquidity ratios measure the short-term ability of the entity to pay its

maturing obligations and to meet unexpected needs for cash.

 Table 5.5

Current Ratio

CURRENT RATIO
year 2019 2020 2021 2022 2023
CURRENT ASSETS 3,004,397.12 4,116,027.01 5,329,074.61 6,788,902.07 8,528,898.75
CURRENT
LIABILITIES 336,040.39 434,249.48 543,689.12 665,554.98 801,165.50
RATIO 8.940583449 9.47848455 9.801694343 10.20036258 10.64561416

The current ratio indicates the ability to pay current obligations. The

ratio expresses the relationship of current assets to current liabilities. It

represents the amount of current assets available for every peso of current

liability. The higher the current ratio, the more capable the company is of

paying its obligations. A ratio under 1 suggests that the company would be

unable to pay off its obligations if they came due at that point.

Table 5.6

Quick Ratio

QUICK RATIO
year 2019 2020 2021 2022 2023
CURRENT 3,004,397. 4,116,027. 5,329,074. 6,788,902. 8,528,898.
ASSETS 12 01 61 07 75
INVENTORIES
CURRENT
LIABILITIES 336,040.39 434,249.48 543,689.12 665,554.98 801,165.50
RATIO 8.94 9.48 9.80 10.20 10.65
 The quick ratio or acid test ratio measures immediate short-term

liquidity. The ratio represents the amount of quick assets available for every

peso of current liability. If quick ratio is higher, company may keep too much

cash on hand or have a problem collecting its accounts receivable. Higher

quick ratio is needed when the company has difficulty borrowing on short-

term notes. A quick ratio higher than 1:1 indicates that the business can

meet its current financial obligations with the available quick funds on hand.

A quick ratio lower than 1:1 may indicate that the company relies too much

on inventory or other assets to pay its short-term liabilities.

Table 5.7

Return on Partner’s Equity

RETURN ON PARTNER'S EQUITY

year 2019 2020 2021 2022 2023
1,013,248. 1,268,607. 1,552,961. 1,869,386.
NET PROFIT 784,094.24 79 96 61 16
AVERAGE
OWNER'S 2,734,094. 3,647,343. 4,765,950. 6,118,912. 7,738,298.
EQUITY 24 03 99 60 75
RATIO 0.29 0.28 0.27 0.25 0.24

The rate of return on owner’s equity measures profitability of owner’s

investment by revealing how much profit a company generates with the

money shareholders have invested. If a company's current assets do not

exceed its current liabilities, then it may run into trouble paying back

creditors in the short term.

Leverage Ratio

The financial leverage ratios measure the overall debt load of a

company and compare it with the assets or equity. This shows how much

of the company assets belong to the shareholders rather than creditors.

When shareholders own a majority of the assets, the company is said to

be less leveraged. When creditors own a majority of the assets, the

company is considered highly leveraged. All of these measurements are

important for investors to understand how risky the capital structure of a

company and if it is worth investing in.

Table 5.8

Debt Ratio

DEBT RATIO
year 2019 2020 2021 2022 2023
TOTAL
LIABILITIES 336,040.39 434,249.48 543,689.12 665,554.98 801,165.50
TOTAL 3,070,134. 4,081,592. 5,309,640. 6,784,467. 8,539,464.
ASSETS 62 51 11 57 25
0.1094546 0.1063921 0.1023966 0.0980998 0.0938191
RATIO 1 7 06 09 76
A lower debt ratio usually implies a more stable business with the

potential of longevity because a company with lower ratio also has lower

overall debt. Each industry has its own benchmarks for debt, but .5 is

reasonable ratio. This means that

 Table 5.9

Debt to Equity Ratio

DEBT TO EQUITY RATIO

year
2019 2020 2021 2022 2023
TOTAL
LIABILITIES 336,040.39 434,249.48 543,689.12 665,554.98 801,165.50
TOTAL 2,734,094. 3,647,343. 4,765,950. 6,118,912. 7,738,298.
EQUITY 24 03 99 60 75
0.1229073 0.1190591 0.1140777 0.1087701 0.1035325
RATIO 9 29 83 39 1

The debt to equity ratio shows the percentage of company financing

that comes from creditors and investors. A higher debt to equity ratio

indicates that more creditor financing (bank loans) is used than investor

financing (shareholders). A lower debt to equity ratio usually implies a more

financially stable business.

Table 5.10

Equity Ratio

CAPITAL INTENSITY RATIO

year
2019 2020 2021 2022 2023
TOTAL
EQUITY 2,734,094.24 3,647,343.03 4,765,950.99 6,118,912.60 7,738,298.75
TOTAL
ASSETS 3,070,134.62 4,081,592.51 5,309,640.11 6,784,467.57 8,539,464.25
RATIO 0.89 0.89 0.90 0.90 0.91
 The equity ratio is an investment leverage or solvency ratio that

measures the amount of assets that are financed by owners' investments

by comparing the total equity in the company to the total assets. Equity

financing in general is much cheaper than debt financing because of the

interest expenses related to debt financing. Companies with higher equity

ratios should have less financing and debt service costs than companies

with lower ratios.

Payback Period

The length of time required for an investment to recover its initial

outlay in terms of profits or savings.

Table 5.11

Payback Period

Payback
Period
Business name
PAYBACK PERIOD SCHEDULE
Annual Cash Payback
Year Solution
Inflows Period
Year 1 850,128.24 2,000,000.00
1
Year 2 1,064,282.79 850,128.24
Year 3 1,304,641.96 1,149,871.76
Year 4 1,573,995.61 1,064,282.79
1
Year 5 1,875,420.16 85,588.97

85,588.97
0.065603417
1,304,641.96
2.065603417
 Payback period is a financial or capital budgeting ratio that

calculates the number of days required for an investment to produce cash

flows equal to the original investment cost. In other words, it’s the amount

of time it takes an investment to earn enough money to pay for itself or

breakeven. This time-based measurement is particularly important to

management for analyzing risk.