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Running head: APPLE STREAM FINANCIAL ANALYSIS AND FUNDING PLAN
Apple Stream Financial Analysis and Funding Plan
Institution Affiliation
Date
1
APPLE STREAM FINANCIAL ANALYSIS AND FUNDING PLAN
2
Executive Summary
For any business organization to be able to undertake any meaningful project and make
significant gain there is need to come up with a comprehensive financial plan (Cassar, 2009).
This plan takes into consideration the business source of funding and income analysis for a given
number of years. These projections are very critical as they help the investors to know when the
business is expected to break even. It is part of putting together all the information gathered
during feasibility studies and trying to make financial sense out of it.
From the information gathered and market analysis, Apple Stream has determined that it
will be able to break even after the second year in operation and has, therefore, come up with
income statement projections for three years. To make this possible one should identify all the
costs and expenses where the start-up funds will be allocated for the business to commence
(Ahlers et al., 2015). The plan has identified both equity finance and debt financing as the two
sources of project funds. In total, the project is expected to use $2,194,520 for it to commence
business. However, the plan is to have at least $2,500,000 to ensure that any unforeseen costs
and for risk mitigation.
During the first year, the service is projected to make a net loss of $100,970 but this is
expected to improve during the second year where the firm project to make $370,968 in net
profit. This shows how viable this project is if implemented as planned. According to Cassar
(2009), any financial planning is developed with a number of assumptions. In this particular
case, Apple Stream assumes that the economy will remain steady and the business won’t be
affected by other external factors. The plan also assumes that the cost of doing business,
corporate tax, and labor laws remain unchanged for the first three years.
APPLE STREAM FINANCIAL ANALYSIS AND FUNDING PLAN
3
Introduction
This section presents the financial analysis and funding plan for Apple Stream service
with subsections detailing the operational viability, anticipated source of funding, budget, service
sales forecasts, cash flow statement and income projects. Additionally, the report contains a
break-even point which is expected at the end of the second year since the launch of the service.
According to Yescombe (2013), financial analysis is developed in terms of cash flow and sales
that are expected to be made based on the market survey and the initial capital injection which is
expected to come from the firm’s equity investment or from borrowing. For the project to take
off and generate positive net cash flow there is a need for initial investments financing to be
estimated in good time. Capital funding will come from two sources; shareholders equity
investments and borrowing.
The first statement shows the breakdown of how the cash raised by shareholders equity
and borrowing from the bank will be utilized for the service to take off. The projection assumes
that the cost of startup will be evenly spread across the year. Insurance will be the only cost that
will be a period one-off. According to Cassar (2009), creating a budget is the first thing that an
entrepreneur should do is to lay down costs of expected income, expenses and cash needs from
day one. Budget is an essential component of any business plan whether for brand extension or
start-ups.
Startup Costs Schedule
Below is the schedule showing how the funds obtained from the shareholders as well as from
debt finance will be utilized to get the business started.
APPLE STREAM FINANCIAL ANALYSIS AND FUNDING PLAN
4
Required Start-Up Funds
Estimated Monthly Expenses
Monthly
Expenses
$7,000
Item
Number of
Months
12
Director's Salaries
All Other Salaries and
Wages
$10,000
12
Rent
$5,000
12
Advertising
$5,000
12
Expense/Transportation
$500
12
Service
$6,000
12
Other Utilities
$600
12
Insurance
$5,700
1
Taxes Including
Employment Insurance
$600
12
Interest
$1,400
12
Maintenance
$4,500
12
Legal and Other
Professional Fees
$560
12
Miscellaneous
$1,200
12
Total Cash Requirements Expenses: (A)
One -off startup costs
Capital Costs
Furniture, Fixtures, and Equipment
Installation of Fixtures and Equipment
Starting Inventory
Cash Required to Start
Business
$84,000
$120,000
$60,000
$60,000
$6,000
$72,000
$7,200
$5,700
$7,200
$16,800
$54,000
$6,720
$14,400
$514,020
Cash Required
$600,000
$3,000
$1,000,000
Soft Costs
Legal and Other Professional Fees
Licenses and Permits
Advertising and Promotion for Opening
Cash
Miscellaneous
Total One-Time Cash Requirements: (B)
$1,000
$10,000
$56,000
$10,000
$500
$1,680,500
Total Estimated Cash Required to Start Business: (A) + (B)
$2,194,520
APPLE STREAM FINANCIAL ANALYSIS AND FUNDING PLAN
5
Income Statement
Apple Stream service is projected to make sales through customer subscription totaling to
$1,080,000 and $2,000,000 for the first and second year respectively. The difference between the
first and the 2nd year represents 46 percent increase in subscriptions. During the two years, the
audience will be offered a discount during specific months. It is also projected that the cost of
service subscribed will be $248,000. The projection assumes that there will be a growth during
the 2nd year. The cost of service subscribed is projected to grow by 37% to stand at $395,000.
As shown, service will make a net loss of $100,970 during the first year and a net profit of
$370,968 at the end of the second year. Below is the projected income statement for two years.
Pro Forma Income Statement for the first two years
End of
End of
Year 1
Year 2
1. Gross Subscription
1,080,000
2,000,000
2. Less: Discounts
15,000
20,000
A. NET SALES
The cost of content sold:
3. Beginning Inventory
4. Plus: Net Purchases
5. Total Available for Sale
6. Less: Ending Inventory
$1,065,000
$1,980,000
0
273,000
273,000
25,000
25,000
400,000
425,000
30,000
B. COST OF GOODS SOLD
$248,000
$395,000
C. GROSS MARGIN
Less: Variable Expenses
7. Owner's Salary
8. Employee's Wages and Salaries
9. Supplies and Postage
10. Advertising and Promotion
11. Delivery Expense
12. Bad Debt Expense
13. Travel
14. Legal and Accounting Fees
$817,000
$1,585,000
84,000
120,000
42,750
60,000
6,000
6,700
48,000
6,720
96,000
130,000
32,000
56,000
5,000
4,300
40,000
7,000
APPLE STREAM FINANCIAL ANALYSIS AND FUNDING PLAN
15. Vehicle Expense
16. Maintenance Expense
17. Miscellaneous Expenses
D. TOTAL VARIABLE
EXPENSES
6
153,000
42,000
14,400
160,000
31,000
15,000
$583,570
$576,300
Less: Fixed Expenses
18. Rent
19. Utilities (Heat, Light, Power)
20. Telephone
21. Taxes and Licenses
22. Depreciation
23. Interest
24. Insurance
25. Other Fixed Expenses
60,000
18,000
72,000
7,200
60,000
16,800
68,400
12,000
50,000
17,400
68,000
9,000
55,000
15,900
70,000
10,000
E. TOTAL FIXED EXPENSES
$314,400
$295,300
F. TOTAL OPERATING
EXPENSES
$897,970
$871,600
($60,970)
$713,400
$20,000
$342,432
($100,970)
$370,968
G. NET OPERATING PROFIT
(LOSS)
(G = C - F)
H. INCOME TAXES (estimated)
I. NET PROFIT (LOSS) AFTER
INCOME TAX
Cash flow Statement
The cash flow statement is useful in showing the changes in the balance sheet and cash
equivalents that are used in operation and investment activities. According to Yescombe (2013),
the cash flow shows the cash position at the beginning of the year and at the end of every month
during any business financial trading period. The statement will assist the management to
determine its short term business viability and ability to pay its short term liabilities.
APPLE STREAM FINANCIAL ANALYSIS AND FUNDING PLAN
7
Usually, the cash flow is done for one month cycle. The closing balance for one month is
the opening balance for the next month. The opening cash flow balance is used to pay the bills
and liabilities during the current month and acquire new stock. According to Cassar (2009), for
any organization to meet its short term debts and be in a better position to continue in its
operation smoothly, it is necessary that the cash flow should have a positive balance to avoid
accrued expenses which the firm cannot pay at that given time.
Running head: APPLE STREAM FINANCIAL ANALYSIS AND FUNDING PLAN
1
Cash flow forecast
Month1
Starting cash
position
Incoming
Cash sales
Collections from
accounts
receivable
Other cash
receipts
Total
Outgoing
Fixed costs
Administration
Marketing
Operations
Variable costs
Administration
Marketing
Operations
Total
Result
Change during
month
Closing cash
position
Month2
Month3
Month4
Month5
Month6
Month7
Month8
Month9
Month10
Month11
Month12
$45,000
$170,600
$300,499
$434,697
$573,194
$715,990
$863,085
$1,014,479
$1,170,172
$1,330,164
$1,494,455
$155,500
$160,000
$164,500
$169,000
$173,500
$178,000
$182,500
$187,000
$191,500
$196,000
$200,500
Totals
$1,958,000
$0
$0.00
$500.00
$500.00
$500.00
$155,500
$160,000
$164,500
$169,000
$173,500
$178,000
$182,500
$187,000
$191,500
$196,000
$200,500
$26,900
$5,000
$1,000
$20,900
$3,000
$27,101
$5,001
$1,200
$20,900
$3,000
$27,302
$5,002
$1,400
$20,900
$3,000
$27,503
$5,003
$1,600
$20,900
$3,000
$27,704
$5,004
$1,800
$20,900
$3,000
$27,905
$5,005
$2,000
$20,900
$3,000
$28,106
$5,006
$2,200
$20,900
$3,000
$28,307
$5,007
$2,400
$20,900
$3,000
$28,508
$5,008
$2,600
$20,900
$3,000
$28,709
$5,009
$2,800
$20,900
$3,000
$28,910
$5,010
$3,000
$20,900
$3,000
$3,000
$29,900
$3,000
$30,101
$3,000
$30,302
$3,000
$30,503
$3,000
$30,704
$3,000
$30,905
$3,000
$31,106
$3,000
$31,307
$3,000
$31,508
$3,000
$31,709
$3,000
$31,910
$125,600
$129,899
$134,198
$138,497
$142,796
$147,095
$151,394
$155,693
$159,992
$164,291
$168,590
$170,600
$300,499
$434,697
$573,194
$715,990
$863,085
$1,014,479
$1,170,172
$1,330,164
$1,494,455
$1,663,045
$0
$1,958,000
$306,955
$33,500
$340,455
Running head: APPLE STREAM FINANCIAL ANALYSIS AND FUNDING PLAN
1
The pro forma balance sheet also known as balance sheet forecast shows a summary of
the projected transactions, assets that will be acquired at the start of the business or during the
initial stage of operations (Yescombe, 2013). The pro forma balance sheet also shows the
projected liabilities that will be accrued during a specified duration of the operation.
END OF YEAR 1
END OF YEAR 2
$622,500
$121,100
$6,400
$1,010,000
$200,000
$130,000
$45,000
$180,000
$30,000
$230,000
$270,000
$420,000
$1,600,000
$1,373,768
$300,000
$600,000
$500,000
$200,000
$200,000
$450,000
$273,768
$450,000
$76,500
$96,900
$32,600
$5,900
$12,000
$10,000
$16,000
$50,000
$5,900
$15,000
$16,000
$10,000
$2,222,500
$2,383,768
$500,000
$269,900
Balance sheet forecast
Assets
Current assets
Cash
Petty cash
Accounts
receivable
Stock
Short-term
investment
Prepaid
expenses
Long-term
investment
Fixed assets
Land
Buildings
Improvements
Equipment
Furniture
Motor/vehicles
Total assets
Liabilities
Current liabilities
Accounts
payable
Interest payable
Taxes payable
Income tax
Sales tax
Payroll accrual
Long-term
liabilities
APPLE STREAM FINANCIAL ANALYSIS AND FUNDING PLAN
Bank Loan
Total liabilities
Net assets
Owner's equity
Retained earnings
Current year
earnings
Total equity (should equal
net assets)
10
$500,000
$576,500
$1,646,000
$269,900
$366,800
$2,016,968
$2,000,000
$1,646,000
-$354,000
$370,968
$1,646,000
$2,016,968
Break-even Analysis
The breakeven analysis which is the point when Apple Stream will be able to cover all its
expenses and start to make a profit ...