Water Tubes Plumbing
Financial Plan
The following sections will outline important financial information.
7.1 Important Assumptions
The following table details important financial assumptions.
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 10.00% | 10.00% | 10.00% |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
| Tax Rate | 30.00% | 30.00% | 30.00% |
| Other | 0 | 0 | 0 |
7.2 Break-even Analysis
The Break-even Analysis indicates what will be needed in monthly revenue to reach the break-even point.
| Break-even Analysis | |
| Monthly Revenue Break-even | $11,520 |
| Assumptions: | |
| Average Percent Variable Cost | 10% |
| Estimated Monthly Fixed Cost | $10,368 |
7.3 Projected Profit and Loss
The following table and charts present the projected profit and loss.
| Pro Forma Profit and Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $133,858 | $190,752 | $215,330 |
| Direct Cost of Sales | $13,386 | $19,075 | $21,533 |
| Other Production Expenses | $0 | $0 | $0 |
| Total Cost of Sales | $13,386 | $19,075 | $21,533 |
| Gross Margin | $120,472 | $171,677 | $193,797 |
| Gross Margin % | 90.00% | 90.00% | 90.00% |
| Expenses | |||
| Payroll | $98,400 | $112,960 | $122,960 |
| Sales and Marketing and Other Expenses | $1,800 | $1,800 | $1,800 |
| Depreciation | $3,456 | $3,456 | $3,456 |
| Insurance/ License/ Bonds | $6,000 | $5,000 | $4,000 |
| Rent | $0 | $0 | $0 |
| Payroll Taxes | $14,760 | $16,944 | $18,444 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $124,416 | $140,160 | $150,660 |
| Profit Before Interest and Taxes | ($3,944) | $31,517 | $43,137 |
| EBITDA | ($488) | $34,973 | $46,593 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $0 | $9,455 | $12,941 |
| Net Profit | ($3,944) | $22,062 | $30,196 |
| Net Profit/Sales | -2.95% | 11.57% | 14.02% |
7.4 Projected Cash Flow
The following chart and table display the projected cash flow.
| Pro Forma Cash Flow | |||
| Year 1 | Year 2 | Year 3 | |
| Cash Received | |||
| Cash from Operations | |||
| Cash Sales | $133,858 | $190,752 | $215,330 |
| Subtotal Cash from Operations | $133,858 | $190,752 | $215,330 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| Subtotal Cash Received | $133,858 | $190,752 | $215,330 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $98,400 | $112,960 | $122,960 |
| Bill Payments | $32,139 | $51,785 | $58,188 |
| Subtotal Spent on Operations | $130,539 | $164,745 | $181,148 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $130,539 | $164,745 | $181,148 |
| Net Cash Flow | $3,319 | $26,007 | $34,182 |
| Cash Balance | $22,969 | $48,976 | $83,158 |
7.5 Projected Balance Sheet
The following table shows the projected balance sheet.
| Pro Forma Balance Sheet | |||
| Year 1 | Year 2 | Year 3 | |
| Assets | |||
| Current Assets | |||
| Cash | $22,969 | $48,976 | $83,158 |
| Other Current Assets | $0 | $0 | $0 |
| Total Current Assets | $22,969 | $48,976 | $83,158 |
| Long-term Assets | |||
| Long-term Assets | $24,000 | $24,000 | $24,000 |
| Accumulated Depreciation | $3,456 | $6,912 | $10,368 |
| Total Long-term Assets | $20,544 | $17,088 | $13,632 |
| Total Assets | $43,513 | $66,064 | $96,790 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $3,807 | $4,297 | $4,826 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $3,807 | $4,297 | $4,826 |
| Long-term Liabilities | $0 | $0 | $0 |
| Total Liabilities | $3,807 | $4,297 | $4,826 |
| Paid-in Capital | $44,000 | $44,000 | $44,000 |
| Retained Earnings | ($350) | ($4,294) | $17,768 |
| Earnings | ($3,944) | $22,062 | $30,196 |
| Total Capital | $39,706 | $61,768 | $91,964 |
| Total Liabilities and Capital | $43,513 | $66,064 | $96,790 |
| Net Worth | $39,706 | $61,768 | $91,964 |
7.6 Business Ratios
The company’s projected business ratios are provided in the table below. The final column, Industry Profile, shows significant ratios for the Plumbing, Heating, Air-conditioning industry, as determined by the Standard Industry Classification (SIC) Index code 1711.
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 0.00% | 42.50% | 12.88% | 6.60% |
| Percent of Total Assets | ||||
| Other Current Assets | 0.00% | 0.00% | 0.00% | 29.30% |
| Total Current Assets | 52.79% | 74.13% | 85.92% | 84.40% |
| Long-term Assets | 47.21% | 25.87% | 14.08% | 15.60% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 8.75% | 6.50% | 4.99% | 47.20% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 9.10% |
| Total Liabilities | 8.75% | 6.50% | 4.99% | 56.30% |
| Net Worth | 91.25% | 93.50% | 95.01% | 43.70% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 90.00% | 90.00% | 90.00% | 26.50% |
| Selling, General & Administrative Expenses | 92.95% | 78.43% | 75.98% | 14.60% |
| Advertising Expenses | 0.45% | 0.31% | 0.28% | 0.40% |
| Profit Before Interest and Taxes | -2.95% | 16.52% | 20.03% | 2.20% |
| Main Ratios | ||||
| Current | 6.03 | 11.40 | 17.23 | 1.87 |
| Quick | 6.03 | 11.40 | 17.23 | 1.47 |
| Total Debt to Total Assets | 8.75% | 6.50% | 4.99% | 56.30% |
| Pre-tax Return on Net Worth | -9.93% | 51.02% | 46.91% | 6.80% |
| Pre-tax Return on Assets | -9.06% | 47.71% | 44.57% | 15.50% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | -2.95% | 11.57% | 14.02% | n.a |
| Return on Equity | -9.93% | 35.72% | 32.83% | n.a |
| Activity Ratios | ||||
| Accounts Payable Turnover | 9.44 | 12.17 | 12.17 | n.a |
| Payment Days | 27 | 28 | 28 | n.a |
| Total Asset Turnover | 3.08 | 2.89 | 2.22 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.10 | 0.07 | 0.05 | n.a |
| Current Liab. to Liab. | 1.00 | 1.00 | 1.00 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $19,162 | $44,680 | $78,332 | n.a |
| Interest Coverage | 0.00 | 0.00 | 0.00 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.33 | 0.35 | 0.45 | n.a |
| Current Debt/Total Assets | 9% | 7% | 5% | n.a |
| Acid Test | 6.03 | 11.40 | 17.23 | n.a |
| Sales/Net Worth | 3.37 | 3.09 | 2.34 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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