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A Financial Plan

On
Centrio

Presented to the Faculty of the


Department of Business Administration
University of San Carlos
Cebu City, Philippines

In Partial Fulfillment of the Requirements of the


Course in
CBA FM-FADM – Financial Analysis in Decision Making
(JW436 MC, M,W 12:00PM-1:30PM, 2018-2019)

By:
Chase Ethan M. Co

May 20, 2019

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I. Financial Objectives and Targets
1.1 Type of Ownership
The business is a sole proprietorship. A type of enterprise that is owned and run by one
person and in which there is no legal distinction between the owner and the business
entity.

1.2 Total Project Costs


Item Quantity Price Total

Business Permit 1 3000 3000


Sanitary Permit 1 500 500
Cedula 1 200 200
Barangay Clearance 1 300 300
DTI 1 600 600
BIR 1 550 550
Others 5 200 200
6,150

EQUIPMENTS
Laptop 1 70,000 70,000
Camera 1 40,000 40,000
Lightings 1 20,000 20,000
Tripod 1 5,000 5,000
Battery 5 3,000 15,000
SD Card 4 700 2,800
Monopod 1 7,000 7,000
159,800
OTHERS
Rent 2 1,000 2,000
Journal 1 150 150
Book Keeper 1 1,500 1,500
3,650

TOTAL 169,600

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1.3 Capital Structure/Sources of Financing
All finances and investments is provided by only one owner and is a personal asset. The
components of the capital are found in the Total Project Costs table.
Name of Investor Investment in Pesos
Co, Chase Ethan M. 300,000

TOTAL 300,000

1.4 Investment returns and risks


The amount invested by the company is a huge amount to put it to risk as it’s starting
capital for the business. The company strongly believes that they will render more
services through-out the year.

1.5 Profitability levels


Based on the financial statements the company will be operating in net income for the
next years which means that the business will be profitable. The expected net profit of
the company in the next year is Php 107,964.00.
1.6 Cash Flows
The cash flow for the company is divided into three different categories, operating
activities, investing activities and financing activities. The net cash flow from operating
activities is Php 123,029.7. The next cash flow from the investing activities is Php -
134,500. The next cash flow from the financing activities is Php 247,000. The net
amount of cash and cash-equivalents moving in and out includes net income,
depreciation, acquisition of property and equipment, and the investment from the
owner.
1.7 Survival Expectations
The company plans to sustain the business by offering more services and to venture on
other types of photography services.
1.8 Sustainability expectations
Majority of the starting enterprises have gone through hardships, times when finances
were lean and sales were lower than expected. We must embrace the mission and
continue to work hard and be passionate for our jobs.
II. Statement of Assumptions
1. Income Statement:
2.1.1 Pricing and Costing Method Used
The company will base their prices on how much the consumers will be
willing to pay for the said services. For the service we used competitive
pricing and cost plus pricing for the add-ons.

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2.1.2 Volume trends
Sales and Production Forecast February March April May June July Total
Sales and Projected Events 4 2 2 3 6 7 24
Production Portraits 1 1 1 1 2 2 8
Sales Actual Events 2 3 4 2 4 2 17
Portraits 1 1 - - - - 2

2.1.3 Production Cost/Service costs


 Service Cost includes USBs, CDs, frames, and photo albums
 Labor costs are based on the photographers demands. The 40% of the
total sales would be the labor.
2.1.4 Operating Costs
 For the Salaries and Wages, the company will be paying Php
7000/per month to the employee.
 Company’s depreciation per month is Php 410 which is the total
depreciation of the equipment.
 The rent of the company will be Php 1,000.
 For Power and Utilities expense is Php 500 / per month.
 The company will pay Php 1000 for social media boost.
2.1.5 Financing Costs
Under financing costs the company has the investment/capital the owner
will contribute. Shown below.

Name of Investor Investment in Pesos


Co, Chase Ethan M. 300,000
Total 300,000

2.1.6 Tax assumptions


For taxes and licenses the company has these following: DTI Registration,
Certification Fee, Zoning Fee, Permit Fee, Philhealth, Mayors Permit Fee,
Barangay Clearance and Healthcard. The company already allocated a
budget of 6,500 pesos. Since the company is a Sole Proprietorship type of
business entity, Section 24 of the Tax Code states that the rate of taxable
income of individuals shall be computed according with the established
rate.

Not over P10, 000.00 5%


Over P10, 000.00 but not over P30, 000. 00 P500+10% of the excess P10, 000.00
Over P30, 000.00 but not over P70, 000. 00 P2 500+15% of the excess P30, 000.00
Over P70, 000.00 but not over P140, 000. 00 P8 500+20% of the excess P70, 000.00

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Over P140, 000.00 but not over P250, 000. 00 P22 500+25% of the excess P140, 000.00
Over P250, 000.00 but not over P500, 000. 00 P50 000+30% of the excess P250, 000.00
Over P500, 00.00 P125000+32% of the excess P500, 000.00

2. Balance Sheet:
2.2.1 Accounts Receivable and Cash Collection Policies
The enterprises’ policy is that the customer will give a down payment of 50%
before the shoot/event and will be paying the remaining balance once the
output will be given.

2.2.2 Inventories
Centrio will not be having any inventories since it is a service type of business.

2.2.3 Prepaid Expenses


No prepaid expenses as of now.

2.2.4 Other Current Assets


No current assets.

2.2.5 Accounts Payable and Purchases Payments


Not applicable on the current business plan as the company does not have
interest expense of liabilities.

2.2.6 Accrued Expenses


Not applicable on the current business plan as the company does not have
interest expense.

2.2.7 Other Current Liabilities


The enterprise doesn’t have other current liabilities because they do not incur
any liabilities

2.2.8 Borrowings and Payments


The owner will not have any borrowings from the bank or any funds lending
establishments because they do not incur any liabilities

2.2.9 Capitalization
The owner of the company will be putting in 300,000 PHP as the starting capital.

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2.2.10 Dividends/Drawings
The company has no dividends or drawings.

III. Total Project Costs


3.1 Components
Item Quantity Price Total

Business Permit 1 3000 3000


Sanitary Permit 1 500 500
Cedula 1 200 200
Barangay Clearance 1 300 300
DTI 1 600 600
BIR 1 550 550
Others 5 200 200
6,150

EQUIPMENTS
Laptop 1 70,000 70,000
Camera 1 40,000 40,000
Lightings 1 20,000 20,000
Tripod 1 5,000 5,000
Battery 5 3,000 15,000
SD Card 4 700 2,800
Monopod 1 7,000 7,000
159,800
OTHERS
Rent 2 1,000 2,000
Journal 1 150 150
Book Keeper 1 1,500 1,500
3,650

TOTAL 169,600
Table Total Project Cost Components
Projected Marketing Expenses
Item Price Total
Social Media Boost Post 1000 1000
Collaterals for Digital 800 800
Marketing
Website 1200 1200
Business Cards 600 600
Posters 1000 1000

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Total: 4,600

3.2 Sources of Funds


The total project cost of the enterprise is Php 169,600. The capital of 300,000
that is invested by the owner will be the source of fund that the business will be
using.

IV. Projected Financial Statements


4.1 Projected Income Statement

Figure Projected Income Statement

Centrio
Projected Income Statement
For the year ended December 31, 2019 and 2020

2019 2020 2021


Service Fees/Revenues 165,650.00 278,300.00 313,500.00
Less: Cost of Sales 35,930.00 60,000.00 88,400.00
Gross Income 129,729.00 218,290.00 225,400.00
Less: Operating Expenses
Salaries and Wages 36,000.00 71,000.00 93,000.00
Advertising and Promotions 7,000.00 5,000.00 2,000.00
Depreciation 7,248.00 14,496.00 21,744.00
Rent 3,000.00 6,000.00 9,000.00
Maintenance and Repairs 500.00 0.00 0.00
Power and Utilities 1,200.00 2,400.00 3,600.00
Communication Expenses 5,995.00 11,990.00 17,985.00
Total Expenses 60,943.00 110,886.00 147,329.00
Income Before Income Tax 68,786 107,404 78,071.00
Income Tax 3,526.00 4,984.00 8,130.00
Net Income 65,260.00 102,420.00 69,941.00

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4.2 Projected Cash Flow Statement

Figure Projected Statement of Cash Flows


Centrio
Projected Statement of Cash Flows
For the Year Ended December 31, 2019 and 2020

Cash Flow from Operating Activities 2019 2020 2021


Net Income For the year 65,260.00 102,240.00 69,941.00
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and Amortization 7,248.00 14,496.00 21,744.00
Net Cash Flow from operating activities 72,508.00 116,736.00 91,685.00

Cash Flow from Investing Activities:


Acquisition of property and equipment -134,500 0 0
Net Cash Flow from Investing Activities -134,500 0 0

Cash Flow from Financing Activities


Investment of owner 250,000
(Drawings) by owner -3,000 -6,000 -9,000
Net Cash Flows from Financing Activities 247,000 -6,000 -9,000

Net Increase/(decrease) in cash and cash equivalent 185,895.1 117,029.7 70,365


Add: Cash and cash equivalent, beginning 185,895.1 302,895.1
Cash and cash equivalent, end 185,895.1 302,924.8 373,260.1

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4.3 Projected Balance Sheet

Figure Projected Balance Sheet

Centrio
Projected Balance Sheet
As of December 31, 2019 and 2020

2019 2020 2021


ASSETS
Current Assets
Cash 185,895.1 302,924.8 373,260.1
Total Current Assets 185,895.1 302,924.8 373,260.1

Non-current Assets
Furniture and Equipment 134,500.00 127,252.00 120,050.00
Less: Accumulated Depreciation 7,248.00 14,496.00 21,744.00
Furniture and Equipment – net 127,252 112,756 98,306.00
Total Non-Current Assets 127,252 112,756 98,306
Total Assets 313,147.1 415,680.8 471,566.1
LIABILITIES AND CAPITAL
Capital:
Centrio’s Capital 250,000 313,147.1 415,680.1
Add: Net Income 66,147.10 108,533.70 57,621.00
Sub-total 316,147.10 421,680.8 473,301.1
Less: Drawings 3,000 6,000 9,000.00
Total Owner’s Equity 313,147.1 415,680.8 471,566.1

4.4 Set of Schedules and Charts


Breakdown for Operating Expense

Expenses Projected Actual


Legal Expenses - 6,150.00
Salaries and Wages 150.00 -
Marketing Expense 3,000.00 -
Utilities Expense 200.00 -
Rent Expense 500.00 1,000.00
Other Expense 999.00 2,950.00
Operating Expenses 4,900.00 9,800.00

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Cost Per Unit
Portraits 600
Baby Photography 500
Birthdays 1000
Baptism 1000
Products 800
Other events 2000
USB 350
CD 50
4R hard copy with frame 100
6R hard copy with frame 180
Photo Album 200

V. Financial Evaluation
5.1 Vertical Analysis
Yearly

2019 2020

Gross Profit Ratio 69% 65%


Operating Profit 15% 45%
Margin
Return on Sales 15% 45%
ROE 26.4% 34.7%

Return on Fixed 35.5% 29.7%


Assets

5.2 Financial Ratio Analysis


In the financial ratios, there are other ratios that can not be applied or used
because there are no liabilities presented in the financial statements given or
made by the enterprise.

5.2.1 Liquidity Ratios


Since the company has no current liabilities this ratio is not applicable.

5.2.1.1 Cash Ratio


The cash ratio cannot be made because the business has no
liabilities.

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5.2.1.2 Acid-test ratio
The acid test ratio cannot be solved since the enterprise doesn’t
have any liabilities incurred since the transaction is mainly on cash
to cash basis.

5.2.1.3 Current Ratio


The current ratio cannot be solved because the company has not
incurred liabilities.

5.2.1.4 Collection Period


The collection period cannot also be used since there is no
accounts receivable since we also follow the cash to cash basis in
this, so there will be no asset turnover to be solved for us to
complete the formula for the collection period.

5.2.1.5 Accounts Receivable Turnover (basis: 360 days)


The accounts receivable turn over cannot be solved since there
are no accounts receivable in the transactions made by the
business.

5.2.1.6 Days Sales in Inventories


The day’s sales in inventories can’t be solved since there are no
inventories.

5.2.1.7 Inventory Turnover


The inventory turnover cannot be solved since there are no
inventories recorded in the business.

5.2.1.8 Working Capital Turnover


The working capital turnover cannot be solved or used since the
business isn’t incurring any liabilities

5.2.2 Earnings/Profitability Ratios


5.2.2.1 Gross Profit Ratio
The table above shows that the projected gross profit ratio is 69%
for 2019 and 65% for 2020.

5.2.2.2 Operating Margin Ratio


The table above shows that we have 15% for 2019 and 45% for
2020.

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5.2.2.3 Return on Sales
For the year 2019, we get an operating income of 15% and 45%
for the year 2020.

5.2.2.4 Return on Assets/ROI


The table above shows the ROE for the year 2019 is 26.4% and
34.7% for the year 2020.

5.2.2.5 Return on Equity/Capital


Return on Equity/Capital (Annual)
2019
Projected Actual
Net Income 66,147.10 80,000
Capital 250,000 170,000
26.4% 34.7%

5.2.2.6 Return on Net Working Capital


Return on Capital
2019 2020
Net Income 66,147.10 108,533.70
Capital 250,000 313,147.1
26.4% 34.7%

5.2.2.7 Return on Fixed Assets


Return on Fixed Assets (Annual)
2019 2020
Net Income 66,147.10 108,533.70
Fixed Assets 185,895.1 364,924.8
35.5% 29.7%

5.2.3 Stability Ratios


There are some of the stability ratios that will not be used since the
business didn’t incur any liabilities.

5.2.3.1 Debt-Equity Ratio


The debt-equity ratio cannot be used or solved since the formula
itself needed liabilities and the business didn’t incur or made any
liabilities since it is cash to cash basis.

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5.2.3.2 Times-Interest Earned Ratio
The company cannot solve this ratio because there are no interest
expense involved in the business.
5.2.3.3 ROE vs ROA
The company cannot compare for the ROE vs. ROA since there is
no current liabilities incurred.

5.2.4 Investment Returns Analysis


5.2.4.1 Payback Period
5.2.4.2 NPV

5.2.5 Benchmark with Industry Average


The enterprise cannot compute or find for the benchmark with industry
average because the data does not consist any liabilities.

5.2.6 Du Pont Analysis


The Du Point Analysis cannot be solved because there are no current
liabilities incurred. Knowing that the enterprise will not be borrowing
cash from the bank.

5.2.7 Sensitivity Analysis


-10% 100% 120%
Sales of 2019 90,500 108,800 128,000
Sales of 2020 202,300 261,000 294,700
Sales of 2021 258,400 304,300 320,800

The products with the higher prices have great effects on the cash of the business and are
directly proportional to the standing of the business.

Conclusion and Recommendation

In conclusion the company will be earning for the first year according to projected income
statement. I recommend to spend less in the second year so that the company will be able to
earn more money. The company should still remain not having any liabilities because it is also a
cash to cash basis and this will make it easier for the company to know their income.

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ENDORSMENT SHEET

This Financial Plan on CENTRIO PHOTOGRAPHY submitted by CHASE ETHAN M. CO. In partial
fulfillment of the requirements of the course in CBA FM-FADM – Financial Analysis in Decision
Making has been examined and is enclosed for final submission.

Name of Adviser and Signature

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