SECTION IV

FINANCIAL STUDY

61

Financial feasibility is a study on whether a project is viable after taking

into consideration its total costs and probable revenues. If the revenues cover the
costs of the project, then the project is visible. Part of the study is to make or
purchase certain materials in the manufacture of its product, acquire or rent/lease
certain machineries and equipment in the production of its goods, issue stocks
or negotiate for a bank loan to increase its working capital and make other
decisions that allow management to make an informed selection on various
alternatives in the conduct of its business. Financial analysis is the conversion of
financial data into useful information for decision making.
This financial section shows the total project cost, notes to project cost,
permit and licenses, operational expenses, raw materials and supplies. It shows
computation of the financial assumptions, financial statement of income, cash
flows and financial position, financial analysis in which covers the current ratio,
debt ratio, total assets turnover, profit margin ratio, the investment analysis for
the return on investment, return on equity and payback. It shows the viability and
profitability of the proposed business.
Table
Caf de Pinoy Project Cost (in Php)
A. fixed Asset
Building and Improvements
Machine and equipment

40,447.00
163,609.00

Furniture and Fixture

84,450.00

Kitchen Tools and Utensils

17,141.00

Total fixed Asset

305,647.00
B. Working capital (1Month)

62

Salary Expense

26,160.00

Rent Expense

15,000.00

Utilities Expense

6,800.00

Office Supply

1882.00

Cleaning Suppy

3,894.00

Statutory Contribution

7,424.00

Advertising expense

3,000.00

Total Working Capital

64,160.00

C. Pre Operating Expense

PFS

4,000.00

Business registration

3,000.00

License & Permits

3,01.00

Total Operating Expense

10,014.00

D. Contingency Fund (5% of A,B,C)

18,991.03

Total Projected Cost

398,811.53
Table 25

Non-Current Assets (in Php)

Building and improvements

40,447.00

Machinery and Equipment

160,309.00

Furniture and Fixture

84,330.00

Kitchen Tools and Utensils

17,141.00
Total

302,227.00

Table
License and Permit (in Php)
License &permit

Fee

Assessor's/Land Tax Clearance

50.00

Health Clearance

50.00

Fire Clearance

50.00

63

Business plates/sticker

300.00

Mayor's Permit

500.00

Sanitary Permmit

184.00

Health card

1,200.00

Garbage Fee

400.00

Fire safety

280.00
Total

3,014.00

The following are the summary of the total annual depreciation of

Machinery and Equipment, Bus, Furniture and Fixtures, Kitchen Tools and
Equipment of Caf de Pinoy.
Table
Summary of Depreciation (in Php)
Particulars

Additional Cost

Machinery and Equipment

163,609.00

18,970.00

84,450.00

16,670.00

17,155.00

1,957.00

Php 265,214.00

37,597.00

Furniture and Fixture

Kitchen Tools and Utensils
Total

Depreciation

Table
Machinery and Equipment (in Php)

64

Qt
y

Coffee Maker

3,299

38,800

38,800

10

1
1

27,490
11,250

27,490
11,250

52,000

1
1
2
1

Espresso
Machine
Refrigerator
Computer
Cake display
Cabinet
Receipt printer
Air-condition
Blender
Gas stove

Unit
Cost

Life
Spa
n

Machinery and
Equipment

Total Cost
3,299

Scrap
Value

Depreciatio
n
590

5
5

350
5,00
0
3,000
2,500

4,898
1,750

52,000

10

10,000

4,200

2,920
23,999
1,501
849

2,920
23,999
3,002
849

5
7
5
5

200
3,500
250
200

544
2,928
550
130

Total

163,609

25,000

18,970

3,380

Table
Furniture and Fixture (in Php)
Furniture and
Fixture

Unit
Cost

Qty

Cabinet
Table and
Chair

Total
Cost

Life
Span

Scrap
Value

Depreciation

2,500

7,500

100

1480

10

7,695

76,950

1,000

15190

Total

84,450

1,100

16670

Table
Cleaning Materials (Php)
Cleaning Materials

Qty

Unit Cost

Total Cost

Trash bin

6 pcs

300

1,800

Soft broom

2 pcs

55

110

Dustpan

2 pcs

50

100

Duster

2 pcs

25

50

Hand liquid soap

10gal

75

750

Dishwashing Liquid

12 gal

77

924

Sponge

24 Pcs

120

65

Rags

8 pcs

40
Total

3,894

Table
Tools and Utensils (Php)
Kitchen Tools and
Utensils

Quantit
y

Unit
Cost

Total
Cost

Life
Span

Scrap
Value

Depreciatio
n

Dinner Plate

4 doz

91

4,368

10

436

Dessert Plate

4 doz

70

3,360

10

336

Cup and saucer

48 pcs.

120

5,760

10

576

Teaspoon

42 pcs.

21

882

175

Cake Server

2 pcs

63

126

10

23

Fork

48 pcs

11

528

105

Coffee Container

2 pcs

38

76

14

Tong

2 pcs

37

74

14

Strainer

2 pcs

132

264

52

Knife

2 pcs

60

120

10

22

Bread knife
Can and bottle
opener
Frying pan

2 pcs

142

284

10

55

1 pc

213

213

41

2 pcs

550

1,100

10

15

109

Total

17,155

93

1,957

Table

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Office Supplies (in Php)

Quantity

Unit Cost

Total Cost

Columnar

12

26

312

Record Book

86

516

Ball pen

36

Receipt Roll

24

18

432

Calculator

55

110

Bond Paper

132

396

Scissor

10

20

Stapler

30

60

Office Supplies

Total

1,882

Table
Building and Improvements (in Php)
Particular

Quantity

Unit cost

Total Cost

8 kg

70

560

Bamboo

500 pcs.

55

27500

Plywood

2 whole

1518

3036

Varnish

10 liters

29.5

855.5

Thinner

2 bottle

27.5

55

Cement

10 pcs.

220

2200

Gravel and sand

24 cubic

220

5280

Coco lumber

10 pcs.

80

800

hollow blocks

20 pcs.

160

2 inches Nail

Total

40,447

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Financial Assumptions
1. The working capital is computed in one month.
2. Contingency fund is 5%of fixed assets, working capital and pre operating
3.
4.
5.
6.
7.

expense.
The salaries projection is 2% increase annually.
The fringe benefitswill increase2% annually.
The freight-in is projected 3 % increase annually.
The office supply is projected 1% increase annually
The advertising expense is projected 1% increase annually. Specifically in

the radio advertisement, flyer and tarpaulin.

8. Raw materials will increase 2% annually.
9. Sales discount is computed 2% of sales revenue.
10. Linen supply will increase 3% annually.
11. Cleaning materials will increase 2% increase annually.
12. Business registration will increase 2% annually
13. Utility is projected 2% increase annually.

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Table 35
Consolidated Statement of Income (In Php)
Sales
Revenue
Sales return
and
allowances

117,760,874

120,116,091

123,719,574

127,431,161

131,254,096

(2,355,217)

(2,402,322)

(2,474,391)

(2,548,623)

(2,625,082)

Total sales

115,405,657

117,713,770

121,245,183

124,882,538

128,629,014

Less Cost of
Sales

Raw Materials

(226,860)

(231,397)

(236,025)

(240,746)

(245,561)

Utility

(81,600)

(83,232)

(84,897)

(86,595)

(88,326)

Freigth in

(12,000)

(12,360)

(12,731)

(13,113)

(13,506)

(89,088)

(90,870)

(92,687)

(94,541)

(96,432)

(409,548)

(417,859)

(426,340)

(434,994)

(443,825)

Statutory
Contribution
Total Cost of
sales
Gross Income

114,996,109

117,295,911

120,818,843

124,447,544

128,185,190

Less
operating
Expense

Salary

(313,920)

(320,198)

(326,602)

(333,134)

(339,797)

Depreciation

(227,498)

(227,498)

(227,498)

(227,498)

(227,498)

(1,882)

(2,258)

(2,710)

(3,252)

(3,903)

(3,894)

(3,933)

(3,972)

(4,012)

(4,052)

(3,000)

(3,060)

(3,121)

(3,184)

(3,247)

(3,014)

(3,014)

(3,014)

(3,014)

(3,014)

(40,447)

(3,000)

(3,030)

(3,060)

(3,091)

(3,122)

(4,000)

(53,461)

(547,194)

(562,992)

(569,978)

(577,185)

(584,633)

(53,461)

114,448,915

116,732,919

120,248,865

123,870,360

127,600,557

(34,334,674)

(35,019,876)

(36,074,659)

(37,161,108)

(38,280,167)

(53,461)

80,114,240

81,713,043

84,174,205

86,709,252

89,320,390

Office
Supplies
Cleaning
Materials
Business
Registration
License
permit
Building and
improvement
s
Advertising
Expense
PFS
Total
Operating
Expense
Income
Before tax
Tax due 30%
Net income

69

Table
Projected Statement of Cash flow (in Php)
PreOperating

2015

2016

2017

2018

2019

OPERATING
ACTIVITIES

Cash inflow

115,405,657

117,713,770

121,245,183

124,882,538

128,629,014

Total Revenue

115,405,657

117,713,770

121,245,183

124,882,538

128,629,014

Total Cash Inflow

Cash outflow

Raw materials

(226,860)

(231,397)

(236,025)

(240,746)

(245,561)

Utility

(81,600)

(83,232)

(84,897)

(86,595)

(88,326)

Freigth in
Statutory
Contribution

(12,000)

(12,360)

(12,731)

(13,113)

(13,506)

(89,088)

(90,870)

(92,687)

(94,541)

(96,432)

Salary

(313,920)

(320,198)

(326,602)

(333,134)

(339,797)

Office Supplies

(1,882)

(2,258)

(2,710)

(3,252)

(3,903)

Cleaning Materials

(3,894)

(3,933)

(3,972)

(4,012)

(4,052)

(3,000)

(3,060)

(3,121)

(3,184)

(3,247)

(3,014)

(3,014)

(3,014)

(3,014)

(3,014)

(40,447)

(3,030)

(3,060)

(3,091)

(3,122)

Business
Registration
License permit
Building and
improvements
Advertising
Expense
PFs
Tax expense
Total cash outflow
Cash flow provided
by operating activity
INVESTING
ACTIVITIES
Cash outflow
Machinery and
Tools
Furniture and
Fixture
Tools and Utensils
Cash flow provided
by investing activity
FINANCING
ACTIVITIES
Cash inflow
Investment
Cash inflow
provided by
financing activity
Net
increase(decrease)i
n cash
Add:cash
beginning
Cash Ending

(3,000)
(4,000)

(34,334,674)

(35,019,876)

(36,074,659)

(37,161,108)

(53,461)

(729,244)

(35,088,027)

(35,788,696)

(36,859,340)

(37,962,068)

(53,461)

114,676,413

82,625,743

85,456,487

88,023,198

90,666,947

(163,609)

--

(84,450)

(17,141)

(265,200)

600,000

600,000

281,340

114,676,413

82,625,743

85,456,487

88,023,198

90,666,947

281,340

114,957,752

197,583,495

283,039,982

371,063,179

281,340

114,957,752

197,583,495

283,039,982

371,063,179

461,730,126

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Table
Projected Statement of Financial Position (Php)

Assets

PreOperatin
g

2015

281,340

114,957,752

281,340

2017

2018

2019

197,583,495

283,039,982

371,063,179

461,730,126

114,957,752

197,583,495

283,039,982

371,063,179

461,730,126

163,609

163,609

163,609

163,609

163,609

163,609

84,450

84,450

84,450

84,450

84,450

84,450

17,141

17,141

17,141

17,141

17,141

17,141

(227,498)

(454,996)

(682,493)

(909,991)

(1,137,489)

265,200

37,702

(189,796)

(417,293)

(644,791)

(872,289)

546,540

114,995,454

197,393,699

282,622,688

370,418,388

460,857,837

Tax Payable

34,334,674

35,019,876

36,074,659

37,161,108

38,280,167

Total Current
Liabilities

34,334,674

35,019,876

36,074,659

37,161,108

38,280,167

CAPITAL

Investment

600,000

546,540

80,660,780

162,373,823

246,548,029

333,257,280

Net Income

(53,461)

80,114,240

81,713,043

84,174,205

86,709,252

89,320,390

Total Capital

546,540

80,660,780

162,373,823

246,548,029

333,257,280

422,577,670

TOTAL
LIABILITIES
AND CAPITAL

546,540

114,995,454

197,393,699

282,622,688

370,418,388

460,857,837

Current
Assets
Cash
Total Current
Assets
Non-Current
Assets
Machinery and
Tools
Furniture and
Fixture
Tools and
Utensil
Accumulated
Depreciation
Total NonCurrent
Assets
TOTAL
ASSETS
LIABILITIES
AND CAPITAL
Current
Liabilities

2016

71

Financial Analysis
Current Assets
Current Liability

Current Ratio =

Current
Assets
Current
Liability

281,339.50

114,957,752.02

197,583,494.55

283,039,981.59

371,063,174.44

34,334,674.42

35,019,875.75

36,074,659.50

37,161,107.87

38,280,167.07

0.01.1

3.28.1

5.48.1

7.62.1

9.69.1

Profit Margin =
Ratio

Net income
Net Sales

Net income

80,114,240

81,713,043.41

84,174,205.

86,709,251

89,320,389.

Net Sales

409,548

417,858.96

426,339.74

434,993.84

443,824.85

20%

20%

21%

21%

22%

Return on Total
Assets

Net income
Total Assets

Net income

80,114,240

81,713,043

84,174,205

86,709,251

89,320,389

Total Assets

114,995,454

197,393,698

282,622,68
8

370,418,388

460,857,837

7%

4%

3%

2%

2%

85,456,487
53,804,628+ 88,023,197

72

Investment Analysis
Return on Investment =

Net income
Investment

Net income

80,114,240

81,713,043

84,174,205

86,709,251

89,320,389

Investment

546,539

80,660,779.

162,373,823

246,548,029

333,257,280

14%

10%

5%

4%

3%

Project cost
Cash flow during Recovery

Payback period =

Project cost

1 MONTH

2 MONTHS

3 MONTHS

4 MONTHS

398,811.53

114,676,412.

82,625,742.53

85,456,487

88,023,197

(398,811.53)

(114,277,601)

(31,651,858)

53,804,628

2 MONTHS +

2 MONTHS + 0.602536817
30 DAYS * 0.60 = 18 DAYS
2 MONTHS AND 18 DAYS
24 HOURS *0.07 = 1 HOUR
60 MINUTES *0.82= 49 MINS
60 SECONDS *0.5= 30 SECONDS

73

The shorter the payback will be, the better the project. Therefore, the
proposed business of Caf de Pinoy can return the investment within 2 months.