Financial Plan
Financial Plan
Introduction
The report provides an analysis of the financial statements and funding plan for the 1st Annual Empowerment Brunch Event. The programs aim to draw all women across social-economic class to engage in brainstorming, network and connect while enjoying entertainment. It provides a numerical analysis of pro-forma financial estimation of revenue streams, projected costs, and net present value till breakeven point. Part of the analysis will delve into assessing budget of assets and liabilities, cost of attaining the capital and anticipated sources of funding for the program. Planning is important, especially when organizing for an important event. Sales forecast projects amount of sales which the firm can plan to breakeven point. Planning is very critical since it enables management of the organization to budget for the event in advance. The report will provide a thorough analysis of the financial statements for better decision making.
Financial Analysis
- Projected costs
| Items | Expected cost |
| Advertisement for the annual event | $500 |
| Renting of tents and offices | $750 |
| Booking venue for the event | $500 |
The project cost will entail funds required to organize events successfully. It requires the cooperation of all stakeholders to ensure all required materials are available for the event to be successful. The management needs to find alternative means of funding project for it to be a success.
- Statement of financial position
| Annual Empowerment Brunch Event. | |||||
| Balance Sheet for the first three years of operation | |||||
| 2019 | 2020 | 2021 | |||
| Assets | |||||
| Current assets | |||||
| Cash and Cash Equivalents | $2,400 | $2,500 | $2,700 | ||
| Accounts receivable, net | $3,000 | $5,000 | $12,000 | ||
| Inventory | $2,500 | $2,100 | $4,200 | ||
| Total current assets | $7,900 | $9,600 | $18,900 | ||
| Fixed Assets | |||||
| Property and equipment, net* | $5,200 | $16,000 | $15,000 | ||
| Furniture | $11,000 | $11,000 | $12,000 | ||
| Total fixed Assets | $16,200 | $27,000 | $27,000 | ||
| Total Assets | $24,100 | $36,600 | $45,900 | ||
| Liabilities and Equity | |||||
| Current liabilities | |||||
| Accounts payable | $6,500 | $5,300 | $9,500 | ||
| Accrued salaries and benefits | $1,000 | $8,500 | $11,500 | ||
| Total current liabilities | $7,500 | $13,800 | $21,000 | ||
| Long-term liabilities | $4,700 | $5,000 | $6,000 | ||
| Total liabilities | $12,200 | $18,800 | $27,000 | ||
| Paid in capital | $2,900 | $13,000 | $14,000 | ||
| Retained Capital | $9,000 | $4,800 | $4,900 | ||
| Total liability and shareholder’s equity | $24,100 | $36,600 | $45,900 | ||
Statement of the financial position states the assets and liabilities of the business operation. It helps management to decision depending on the value of assets available in the organization. It shows the amount paid in by a current investor in the investment opportunity. The owners’ capital in the investment is Clearance Lewis-$1500, Latoya Flanigan – $1000 and Shirley Harvey – $400. According to Berger, Minnis, & Sutherland, (2017) statement of the financial position illustrate the facilities and equipment of an organization at a particular date. Investors, therefore, expect to get the source of finance from philanthropist, bank loan, incubators, and government grants to top up on the available funds to enable them to perform some of their activities.
Pro-forma statement of comprehensive income.
| Annual Empowerment Brunch Event | |||||
| Projected income statement | |||||
| 2019 | 2020 | 2021 | |||
| Revenue | |||||
| Client service revenue | $15,500 | $19,000 | $25,000 | ||
| Provision for bad debts | ($1,550) | ($2,500) | ($1,500) | ||
| Total operating revenue | $13,950 | $16,500 | $23,500 | ||
| Expenses | |||||
| Salaries and wages | $2,000 | $2,000 | $2,500 | ||
| Rent | $500 | $600 | $700 | ||
| Depreciation | $300 | $800 | $700 | ||
| Interest | $700 | $900 | $500 | ||
| Advertisement | $4,000 | $4,500 | $6,400 | ||
| Total Operating expenses | $7,500 | $8,800 | $10,800 | ||
| Operating income (loss) | $6,450 | $7,700 | $12,700 | ||
Net present value
The net present value of the business operation is positive; hence investment is ideal. If NPV is negative the business will not be viable but if it’s positive indicates that business can be invested in it.
Breakeven analysis
Breakeven analysis indicates the price at which the company can set its items so that it can realize a profit as fast as possible. Breakeven point =
Breakeven Point = = 58
The Breakeven units is 58 units.
Source of Finance
The income statement aims to demonstrate profit expected from business operation and projection of amount that will be earned within a financial year and subsequent two years. It analyzes the amount which is likely to earn from the business and forecast of the business operation. The management of the organization can budget their program depending. Income statement indicates expenses which the organization we incur in the process of setting up the program. It outlines profit and loss projection from business operation. The information is very critical since they help to develop a budget of activities in the organization.
Source of funding
Source of finance for investment purposes are obtained through several channels depending on circumstance and prevailing environment. In most case there following are examples of sources of finance which the entrepreneur or investors are can access funding to start or develop business. They indicate sources of funds and how the money is spent in an organization including the expenses incurred during a particular investment time include personal savings, love money, venture capital, angels, business incubators, bank loans, government grants and subsidies (Staniewski, Szopiński, & Awruk, 2016). The fund from those places can be put into an investment program for better performance. Venture capitals provide capitals to business with a good innovative idea. The organization which has access to better financing vehicle can carry out its business operation effectively.
Financial Reports
- Sales Forecast
| Sales forecast Projection. | |||
| Year 1 | Year 2 | Year 3 | |
| Sales forecast | $ 20,000.00 | $ 22,000.00 | $ 24,200.00 |
| Cost of goods sold | $9,000 | $9,900 | $10,890 |
| Growth projection | 10% | ||
| Gross profit | $ 11,000.00 | $ 12,100.00 | $ 13,310.00 |
| Expenses | |||
| Salaries | $2,000 | $2,200 | $2,420 |
| Other salaries | $100 | $110 | $121 |
| Cost of raw material (or Cost of goods sold) | $300 | $330 | $363 |
| Storage fees | $50 | $55 | $61 |
| Distribution (Packing, shipping, etc.) | $100 | $110 | $121 |
| Office stationery | $20 | $22 | $24 |
| Communications (fax, telephone, internet, etc.) | $40 | $44 | $48 |
| Office equipment | $80 | $88 | $96.80 |
| Utilities (water, electrical, heating, etc.) | $60 | $66 | $72.60 |
| Insurance | $100 | $110 | $121 |
| Marketing and advertising | $90 | $99 | $109 |
| Rent or mortgage payments | $75 | $82.50 | $90.75 |
| Selling expenses (brochures, websites, etc.) | $80 | $88 | $97 |
| Car expenses or travel expenses | $200 | $220 | $242 |
| Professional services (accountant, lawyers, etc.) | $400 | $440 | $484 |
| Maintenance (premises and equipment) | $750 | $825 | $908 |
| Other expenses | $100 | $110 | $121 |
| Operating expense | $4,545 | $5,000 | $5,499 |
| Profit before income tax | $ 6,455.00 | $ 7,100.50 | $ 7,810.55 |
| Corporate tax rate | 30% | 30% | 30% |
| Corporate tax | $ 1,936.50 | $ 2,130.15 | $ 2,343.17 |
| Net profit | $ 4,518.50 | $ 4,970.35 | $ 5,467.39 |
Cash flow projection
| CASH FLOW Projection | |||
| FOR THE PERIOD: | |||
| Year | 1 | 2 | 3 |
| INCOME/$ | $ | $ | $ |
| Opening bank balance | |||
| Sales income | $ 20,000.00 | $ 22,000.00 | $ 24,200.00 |
| Other income | $ 100.00 | $ 110.00 | $ 121.00 |
| Growth projection | 10% | 10% | 10% |
| TOTAL INCOME (A) | $ 20,100.00 | $ 22,110.00 | $ 24,321.00 |
| OPERATING EXPENSES/$ | |||
| Your salary | $2,000 | $2,200 | $2,420 |
| Other salaries | $100 | $110 | $121 |
| Cost of raw material (or Cost of goods sold) | $300 | $330 | $363 |
| Storage fees | $50 | $55 | $61 |
| Distribution (Packing, shipping, etc.) | $100 | $110 | $121 |
| Office stationery | $20 | $22 | $24 |
| Communications (fax, telephone, internet, etc.) | $40 | $44 | $48 |
| Office equipment | $80 | $88 | $97 |
| Utilities (water, electrical, heating, etc.) | $60 | $66 | $73 |
| Insurance | $100 | $110 | $121 |
| Marketing and advertising | $90 | $99 | $109 |
| Rent or mortgage payments | $75 | $83 | $91 |
| Selling expenses (brochures, websites, etc.) | $80 | $88 | $97 |
| Car expenses or travel expenses | $200 | $220 | $242 |
| Professional services (accountant, lawyers, etc.) | $400 | $440 | $484 |
| Maintenance (premises and equipment) | $750 | $825 | $908 |
| Loan payments | $200 | $220 | $242 |
| Other expenses | $100 | $110 | $121 |
| TOTAL OPERATING EXPENSES (B) | $4,745 | $5,220 | $5,741 |
| SURPLUS / DEFICIT (A-B) | $ 15,355.00 | $16,891 | $18,580 |
Cash flow projection indicates that activities which are carried out in business operation to enhance performance. The activities undertaken by business are analyzed at this point to determine the flow of events in the organization. The information is very critical since it helps the organization to deal with some issues which affect business operation.
Conclusion
The analysis of the financial statement helps management to decide areas where they need to invest. The ideal business venture is one which has a positive net present value and has a positive projection in sales forecast, cash flow, and income statement. The information helps to make a relevant decision which can help to make ideal investment decisions. Poor decision making during a time of investment is critical in ensuring that all activities are done in with the budget of the organization. The investor need analytical skills in forecasting probability of the growth prospect. It will also enable the organization to perform to manage its business affairs to ensure that all operations are with the budget framework.
References
Berger, P. G., Minnis, M., & Sutherland, A. (2017). Commercial lending concentration and bank expertise: Evidence from borrower financial statements. Journal of Accounting and Economics, 64(2-3), 253-277.
Staniewski, M. W., Szopiński, T., & Awruk, K. (2016). Setting up a business and funding sources. Journal of Business Research, 69(6), 2108-2112.