FINANCIAL PLAN

We want to finance growth mainly through cash flow and equity, but will need a second

short-term loan in the next year to cover our cash flow. The most important factor in our case is

collection days. We can’t push our clients hard on collection days, because they are larger

companies and will normally have marketing authority, not financial authority. Therefore, we

need to develop a permanent systems of receivables financing, using one of the established

accounting systems. In turn, we must intend to ensure that our investment is compatible with

our growth plan, management style, and vision.

6.1 Important Assumptions

General Assumptions
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
The following table details important financial assumptions.

6.2 Break-even Analysis

The Break-even Analysis is shown below.

Break-even Analysis

Monthly Revenue Break-even $20,959

Assumptions:
Average Percent Variable Cost 7%
Estimated Monthly Fixed Cost $19,492
6.3 Projected Profit and Loss

The table and charts illustrate the projected profit and loss.
Pro Forma Profit and Loss

Sales $96,793 $400,397 $489,842

Direct Cost of Sales $6,776 $28,028 $34,289

Other Costs of Goods $0 $0 $0

Total Cost of Sales $6,776 $28,028 $34,289

Gross Margin $90,018 $372,369 $455,553

Gross Margin % 93.00% 93.00% 93.00%

Expenses

Payroll $167,000 $225,200 $229,200

Sales and Marketing and Other Expenses $6,600 $7,200 $7,200

Depreciation $1,800 $1,800 $1,800

Rent $10,450 $11,400 $11,400

Utilities $5,500 $6,000 $6,000

Insurance $5,500 $5,500 $5,500

Payroll Taxes $25,050 $33,780 $34,380

Programming $12,000 $0 $0

Total Operating Expenses $233,900 $290,880 $295,480

Profit Before Interest and Taxes ($143,882) $81,489 $160,073

EBITDA ($142,082) $83,289 $161,873

Interest Expense $9,134 $9,566 $9,943

Taxes Incurred $0 $21,577 $45,039

Net Profit ($153,017) $50,346 $105,091

Net Profit/Sales -158.09% 12.57% 21.45%

 6.4 Projected Cash Flow
The following chart and table show projected cash flow.

Pro Forma Cash Flow

Cash Received

Cash from Operations

Cash Sales $24,198 $100,099 $122,460

Cash from Receivables $46,108 $217,218 $342,905

Subtotal Cash from Operations $70,306 $317,317 $465,366

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 $40,000 $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 $70,306 $357,317 $465,366

Expenditures Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $167,000 $225,200 $229,200

Bill Payments $75,294 $124,114 $152,785

Subtotal Spent on Operations $242,294 $349,314 $381,985

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 $16,227 $16,227 $16,227

Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $0 $0 $0

Subtotal Cash Spent $258,521 $365,541 $398,212

Net Cash Flow ($188,214) ($8,224) $67,154

Cash Balance $25,286 $17,062 $84,215

6.5 Projected Balance Sheet

The following table presents the projected balance sheet.
Pro Forma Balance Sheet
Assets

Current Assets

Cash $25,286 $17,062 $84,215

Accounts Receivable $26,487 $109,566 $134,042

Inventory $1,408 $5,824 $7,126

Other Current Assets $0 $0 $0

Total Current Assets $53,180 $132,452 $225,383

Long-term Assets

Long-term Assets $9,000 $9,000 $9,000

Accumulated Depreciation $1,800 $3,600 $5,400

Total Long-term Assets $7,200 $5,400 $3,600

Total Assets $60,380 $137,852 $228,983

Liabilities and Capital Year 1 Year 2 Year 3

Current Liabilities

Accounts Payable $7,124 $10,477 $12,744

Current Borrowing $0 $0 $0

Other Current Liabilities $0 $0 $0

Subtotal Current Liabilities $7,124 $10,477 $12,744

Long-term Liabilities $83,773 $107,546 $91,319

Total Liabilities $90,897 $118,023 $104,063

Paid-in Capital $145,000 $145,000 $145,000

Retained Earnings ($22,500) ($175,517 ($125,171)

)

Earnings ($153,017 $50,346 $105,091

)

Total Capital ($30,517) $19,829 $124,920

Total Liabilities and Capital $60,380 $137,852 $228,983

Net Worth ($30,517) $19,829 $124,920

6.6 Business Ratios

The following table outlines some of the more important ratios from the ProBuild 3D
software.

Ratio Analysis

Sales Growth 0.00% 313.66% 22.34% 1.51%

Percent of Total Assets

Accounts Receivable 43.87% 79.48% 58.54% 29.71%

Inventory 2.33% 4.23% 3.11% 39.18%

Other Current Assets 0.00% 0.00% 0.00% 19.28%

Total Current Assets 88.08% 96.08% 98.43% 88.17%

Long-term Assets 11.92% 3.92% 1.57% 11.83%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities 11.80% 7.60% 5.57% 43.83%

Long-term Liabilities 138.74% 78.02% 39.88% 9.87%

Total Liabilities 150.54% 85.62% 45.45% 53.70%

Net Worth -50.54% 14.38% 54.55% 46.30%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 93.00% 93.00% 93.00% 24.10%

Selling, General & Administrative Expenses 251.09% 80.43% 71.55% 15.49%

Advertising Expenses 0.00% 0.00% 0.00% 0.58%

Profit Before Interest and Taxes - 20.35% 32.68% 2.35%

148.65%

Main Ratios

Current 7.46 12.64 17.69 1.86

Quick 7.27 12.09 17.13 0.86

Total Debt to Total Assets 150.54% 85.62% 45.45% 5.06%

Pre-tax Return on Net Worth 501.42% 362.71% 120.18% 56.70%

Pre-tax Return on Assets - 52.17% 65.56% 11.68%

253.42%

Additional Ratios Year 1 Year 2 Year 3

Net Profit Margin - 12.57% 21.45% n.a

158.09%
Return on Equity 0.00% 253.90% 84.13% n.a

Activity Ratios

Accounts Receivable Turnover 2.74 2.74 2.74 n.a

Collection Days 54 83 121 n.a

Inventory Turnover 9.55 7.75 5.30 n.a

Accounts Payable Turnover 11.57 12.17 12.17 n.a

Payment Days 27 25 27 n.a

Total Asset Turnover 1.60 2.90 2.14 n.a

Debt Ratios

Debt to Net Worth 0.00 5.95 0.83 n.a

Current Liab. to Liab. 0.08 0.09 0.12 n.a

Liquidity Ratios

Net Working Capital $46,056 $121,975 $212,639 n.a

Interest Coverage -15.75 8.52 16.10 n.a

Additional Ratios

Assets to Sales 0.62 0.34 0.47 n.a

Current Debt/Total Assets 12% 8% 6% n.a

Acid Test 3.55 1.63 6.61 n.a

Sales/Net Worth 0.00 20.19 3.92 n.a

Dividend Payout 0.00 0.00 0.00 n.a