Write a Financial Assumptions for a business plan

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amount of investment required

what the money will be used for

where the money will come from:

summery of the projected income statement

summery of the projected balance sheet

summery of the projected cash flows

breakeven analysis

cost volume profit analysis

major assumption used in the projected financial projection

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Pro Forma Cash Flow (appendix 3) Quarter 1 Beginning Cash Balance Revenues - Rebates - Production - Research and Development - Advertising - Sales Force Expense - Sales Office Expense - Marketing Research - Shipping - Inventory Holding Cost - Excess Capacity Cost - Income Taxes + Interest Income - Interest Charges + Licensing Income - Licensing Fees + Other Income - Other Expenses = Net Operating Cash Flow Fixed Production Capacity = Total Investing Activities Increase in Common Stock + Borrow Conventional Loan - Repay Conventional Loan + Borrow Emergency Loan - Repay Emergency Loan - Deposit 3 Month Certificate + Withdraw 3 Month Certificate = Total Financing Activities Cash Balance, End of Period Quarter 2 Quarter 3 Quarter 4 0 912,000 852,000 1,069,497 Receipts and Disbursements from Operating Activities 0 0 449,700 2,096,450 0 0 0 0 0 0 498,105 1,298,946 0 120,000 0 60,000 0 0 149,899 311,774 0 0 178,579 218,361 0 340,000 236,000 347,000 88,000 0 40,000 40,000 0 0 14,116 41,481 0 0 10,287 0 0 0 105,218 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -88,000 -460,000 -782,503 -221,112 Investing Activities 0 600,000 0 0 0 600,000 0 0 Financing Activities 1,000,000 1,000,000 1,000,000 1,000,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,000,000 1,000,000 1,000,000 1,000,000 912,000 Starting Inventory + Production = Available Inventory 0 0 0 - Cost of Goods Sold = Ending Inventory 0 0 852,000 1,069,497 1,848,384 Cost of Goods Sold 0 0 102,866 0 498,105 1,298,946 0 498,105 1,401,812 0 0 395,239 102,866 1,401,812 0 endix 3) Quarter 5 1,848,384 erating Activities 4,129,500 0 2,441,934 Quarter 6 2,738,520 Quarter 7 7,924,183 Quarter 8 16,152,431 Quarter 9 41,577,998 Quarter 10 118,690,752 Quarter 11 350,579,386 460,237 558,914 407,000 40,000 76,707 6,038 0 0 0 0 0 0 0 0 -3,009,864 12,390,000 0 7,310,100 1,000,000 400,000 899,467 467,000 40,000 111,933 6,038 0 331,279 0 0 0 0 0 0 1,824,183 37,170,000 111,510,000 0 0 21,930,300 65,790,900 1,000,000 1,000,000 400,000 400,000 1,240,020 1,580,573 527,000 587,000 40,000 40,000 147,159 182,385 6,038 6,038 0 0 1,827,052 6,445,106 0 0 0 0 0 0 0 0 0 0 0 0 10,052,431 35,477,998 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 5,000,000 0 0 0 0 0 0 5,000,000 5,000,000 0 0 0 0 0 0 5,000,000 5,000,000 0 0 0 0 0 0 5,000,000 5,000,000 0 0 0 0 0 0 5,000,000 5,000,000 0 0 0 0 0 0 5,000,000 5,000,000 0 0 0 0 0 0 5,000,000 5,000,000 0 0 0 0 0 0 5,000,000 2,738,520 7,924,183 16,152,431 41,577,998 118,690,752 350,579,386 1,046,795,660 0 2,441,934 2,441,934 60,378 7,310,100 7,370,478 301,890 21,930,300 22,232,190 905,670 65,790,900 66,696,570 2,717,010 197,372,700 200,089,710 8,151,030 24,453,090 592,118,100 1,776,354,300 600,269,130 1,800,807,390 2,381,556 60,378 7,186,200 184,278 21,558,600 673,590 64,675,800 2,020,770 194,027,400 6,062,310 582,082,200 1,746,246,600 18,186,930 54,560,790 334,530,000 1,003,590,000 3,010,770,000 0 0 0 197,372,700 592,118,100 1,776,354,300 1,000,000 1,000,000 1,000,000 400,000 400,000 400,000 1,921,126 2,261,679 2,602,232 587,000 587,000 587,000 40,000 40,000 40,000 182,385 182,385 182,385 6,038 6,038 6,038 0 0 0 20,429,999 62,515,412 188,902,385 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 112,590,752 344,479,386 1,040,695,660 Quarter 12 1,046,795,660 9,032,310,000 0 5,329,062,900 1,000,000 400,000 2,942,785 587,000 40,000 182,385 6,038 0 568,194,038 0 0 0 0 0 0 3,129,894,854 1,100,000 1,100,000 5,000,000 0 0 0 0 0 0 5,000,000 3,135,994,854 73,359,270 5,329,062,900 5,402,422,170 5,238,739,800 163,682,370 Pro Forma Income Statement (appendix 1) Quarter 1 Revenues - Rebates - Cost of Goods Sold = Gross Profit Research and Development + Advertising + Sales Force Expense + Sales Office Expense + Marketing Research + Shipping + Inventory Holding Cost + Excess Capacity Cost + Depreciation = Total Expenses Operating Profit Quarter 2 0 0 0 0 0 0 0 0 88,000 0 0 0 0 88,000 Quarter 3 Gross Profit 0 449,700 0 0 0 395,239 0 54,461 Expenses 120,000 0 0 149,899 0 178,579 340,000 236,000 0 40,000 0 14,116 0 10,287 0 105,218 0 25,000 460,000 759,098 Quarter 4 2,096,450 0 1,401,812 694,638 60,000 311,774 218,361 347,000 40,000 41,481 0 0 25,000 1,043,616 -88,000 + Licensing Income - Licensing Fees + Other Income - Other Expenses = Earnings Before Interest and Taxes -460,000 -704,637 -348,979 Miscellaneous Income and Expenses 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -88,000 -460,000 -704,637 -348,979 + Interest Income - Interest Charges = Income Before Taxes 0 0 -88,000 0 0 -460,000 0 0 -704,637 0 0 -348,979 0 0 0 0 0 0 0 0 0 -88,000 0 -460,000 0 -704,637 0 -348,979 -9 -23 -23 -9 - Loss Carry Forward = Taxable Income - Income Taxes = Net Income Earnings per Share Pro Forma Balance Sheet (appendix 2) Quarter 1 Cash + 3 Month Certificate of Deposit + Finished Goods Inventory 912,000 0 0 Quarter 2 Quarter 3 Current Assets 852,000 1,069,497 0 0 0 102,866 Quarter 4 1,848,384 0 0 + Net Fixed Assets = Total Conventional Bank Loan + Emergency Loan + Common Stock + Retained Earnings = Total 0 912,000 0 0 1,000,000 -88,000 912,000 Long Term Assets 600,000 575,000 1,452,000 1,747,363 Debt 0 0 0 0 Equity 2,000,000 3,000,000 -548,000 -1,252,637 1,452,000 1,747,363 550,000 2,398,384 0 0 4,000,000 -1,601,616 2,398,384 ppendix 1) Quarter 5 Quarter 6 Quarter 7 Quarter 8 Quarter 9 Quarter 10 4,129,500 0 2,381,556 1,747,944 12,390,000 0 7,186,200 5,203,800 37,170,000 0 21,558,600 15,611,400 111,510,000 0 64,675,800 46,834,200 334,530,000 0 194,027,400 140,502,600 1,003,590,000 0 582,082,200 421,507,800 3,148,534 460,237 558,914 407,000 40,000 76,707 6,038 0 25,000 4,722,430 1,000,000 400,000 899,467 467,000 40,000 111,933 6,038 0 70,833 2,995,271 1,000,000 400,000 1,240,020 527,000 40,000 147,159 6,038 0 70,833 3,431,050 1,000,000 400,000 1,580,573 587,000 40,000 182,385 6,038 0 70,833 3,866,829 1,000,000 400,000 1,921,126 647,000 40,000 217,611 6,038 0 70,833 4,302,608 1,000,000 400,000 2,261,679 707,000 40,000 252,837 6,038 0 70,833 4,738,387 -2,974,486 2,208,529 12,180,350 42,967,371 136,199,992 416,769,413 0 0 0 0 -2,974,486 0 0 0 0 2,208,529 0 0 0 0 12,180,350 0 0 0 0 42,967,371 0 0 0 0 136,199,992 0 0 0 0 416,769,413 0 0 -2,974,486 0 0 2,208,529 0 0 12,180,350 0 0 42,967,371 0 0 136,199,992 0 0 416,769,413 0 0 0 0 0 0 0 0 0 0 0 0 0 -2,974,486 331,279 1,877,250 1,827,052 10,353,297 6,445,106 36,522,265 20,429,999 115,769,993 62,515,412 354,254,001 -33 24 135 475 1,507 4,495 nses endix 2) Quarter 5 2,738,520 0 60,378 Quarter 6 Quarter 7 Quarter 8 Quarter 9 Quarter 10 11,649,361 0 184,278 33,354,821 0 673,590 101,498,000 0 2,020,770 309,049,566 934,540,612 6,062,310 18,186,930 1,625,000 4,423,898 1,554,167 13,387,806 1,483,333 35,511,744 1,412,500 104,931,270 1,412,500 316,524,376 1,412,500 954,140,042 0 0 0 0 0 0 0 0 0 0 0 0 9,000,000 -4,576,102 4,423,898 9,000,000 -4,652,973 4,347,027 9,000,000 -4,729,844 4,270,156 9,000,000 -4,806,715 4,193,285 9,000,000 -4,806,715 4,193,285 9,000,000 -4,806,715 4,193,285 Quarter 11 Quarter 12 3,010,770,000 0 1,746,246,600 1,264,523,400 9,032,310,000 0 5,238,739,800 3,793,570,200 1,000,000 400,000 2,602,232 767,000 40,000 288,063 6,038 0 70,833 5,174,166 1,000,000 R&D+100w 400,000 2,942,785 340,553 827,000 60,000 40,000 323,289 35,226 6,038 0 70,833 5,609,945 1,259,349,234 3,787,960,255 0 0 0 0 1,259,349,234 0 0 0 0 3,787,960,255 0 0 1,259,349,234 0 0 3,787,960,255 0 0 0 0 188,902,385 1,070,446,849 568,194,038 3,219,766,217 1,394 4,189 Quarter 11 Quarter 12 2,813,850,098 8,454,614,904 54,560,790 163,682,370 1,412,500 2,869,823,388 1,412,500 8,619,709,774 0 0 0 0 9,000,000 -4,806,715 4,193,285 9,000,000 -4,806,715 4,193,285 Financial history The appendix 4 and appendix 5 are income statement and balance sheet of Pro Incorporated for the last five quarters. In the first two quarter, Pro Incorporated mainly allocate their initial funds to develop products and invest in doing the market research. From quarter 3 to quarter 5, Pro Incorporated continued develop new products, enter new markets, and hire company to do the market research. For now, they have four products and access to three markets. Therefore, it is reasonable that Pro Incorporated are not really earning profit at this moment. In addition, the past operating results (appendix7) shows our sales in quarter 4 and quarter 5 have a extremely increasing. Pro Incorporated believe that their revenue will keep increasing and gaining profit in a long term. Financial objective The three-year financial plan is shown in appendix 8. It shows that Pro Incorporated have the potential to earn a big profit in the next three years. At the end of the fourth year, Pro Incorporated predict to realize about 26.73 billion dollars profit for their company. Furthermore, as shown in appendix 1 to 3, which estimate the projected income statement, balance sheet, and cash flow from quarter 5 to quarter 12. By the end of quarter 12, Pro Incorporated will make about 3.2 billions dollars of net income, same as the cash balance in this period. In the quarter 12, Pro Incorporated production will reach 5.3 billions, and the ending inventory will be 163.7 million. Besides that, the break even point in sales units is 11,077 units and 27,277,112.5 dollars in year 2. The number compare to the projected earning and production in year 2, which is 165.2 revenue and the production about 5.3 billion dollars. For this reason, Pro Incorporated will definitely be able to break even and make profit in this period. The company decide to choose stock as their type of investment. Stock is the type of investment that a unit of ownership in a company which is bought and sold on a stock exchange. Pro Incorporated believed that will brings to their investors a larger profit instead of using bond. At the same time, the company decide to set a 5% investment return rate for their investor. For example, in the quarter 12, investors will able to earn at most a 16,098,831 dollars profit for their investment in Pro Incorporated. As they have a big amount of profit, this return can be considerable.
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Running Head: FINANCIAL ASSUMPTIONS

Financial Assumptions
Student’s Name
Institutional Affiliation

1

FINANCIAL ASSUMPTIONS

2
Financial Assumptions

Proper financial assumptions must be followed by correct explanations for each
assumption or decisions made. This will help in getting the confidence of the investors
which will, in turn, earn the business money from the lenders and those interested in
investing. Pro incorporated shows a strong financial position from the projected income
statement and cash flows. Having been incorporated in the last five years, the company has
managed to create new products and penetrate various markets which have earned it three
markets with their four products. From the financial projections; Pro incorporated is
expected to make 3.2 billion dollars of net income at the end of the 12th quarter which is the
same as the cash balance after that period. Moreover, in quarter 12, Pro Incorporated will
reach 5.3 billion, and the ending inventory will be 163.7 million. The company’s selected
investment plan is stock. The choice was based on the fact that stock has high chances of
creating larger profit margins for investors as compared to bonds. In this regard, the rate of
return on their financier’s investment is 5%.
Significant assumptions.
Adherence to the deadline for meeting targets which include acquiring new markets
and developing more products is crucial to the success of the projection. There are quarterly
assumptions which will influence yearly achievements. However, for any business, it is
important to factor in tax rates, interests rates, and personnel burden. In this regard, most
underlying assumptions are;
➢ The economy will be strong and hence will not encounter any regression.
➢ There will be no unforeseen variations in the host nation’s economic policies which
might make pro-Incorporated’s products absolute within a short time frame.

FINANCIAL ASSUMPTIONS

3

Year 1

Year 2

Year 3

Plan: Quarterly

1

2

3

Long term

0.00%

15.00%

14.99%

15.00%

15.00%

15.00%

interest rate
Current interest
rate

Investment amount and usage.
The financial projection posted by Pro incorporated shows that it will require a total
...


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