CHAPTER IV

FINANCIAL ASPECT

The financial aspect of this feasibility study includes the major assumptions of the of the

business, the total project cost, and the Comparative Statement of Financial Position,

Comprehensive Income, Cash Flows and changes on the Partner’s Equity. Through this, it will

be estimated what to expect from the operation of the business. These financial statements will

also serve as a budgeting tool for the business and can be used as a comparison to the actual

financial statements. Also, this chapter discussed the financial evaluation measures such as

financial ratios, capital budgeting techniques and the break-even analysis.

Sources of Financing of the Project

The business will be funded through the contributions of the owners. The following are

capital investment of each partner:

Name Amount Contributed Type of Partner

Catherine Albuera Php 50,000.00 Capitalist Partner

Bettina Canulo Php 50,000.00 Capitalist Partner

Andreo Mangawang Php 50,000.00 Capitalist Industrial Partner

Katrina Maramag Php 50,000.00 Capitalist Partner

Aeron John Rabuza Php 50,000.00 Capitalist Industrial Partner

TOTAL Php 250,000.00

FINANCIAL ASSUMPTIONS

 All transactions will be on cash basis.

 The rent shall be paid P12, 000 monthly starting January 2019.

 An inflation rate of 6.4% is adopted by the company.

 90% of the cost of goods manufactured in the first year will be sold, 92% in the second

year, 94% in the third year, 96% in the fourth year, 98% in the fifth year, and 100% will

be sold in the succeeding years.

 The pricing policy will be 40% mark-up based on the unit cost of the product.

 1,650 stalks of water lilies per day will be used in producing 1,000 placemat or total of

780,000 stalks per annum (26 days in a month)

 Workers in the pre-operating year will be contractual.

 SSS Premium, PAG-IBIG and PhilHealth premium expenses are the share of the

employers are recorded in the books at the end of each month and paid at the 10 th day

of the following month.

 Fixes assets and equipment are being depreciated using the straight line method and

assume no scrap value at the end of its useful life.

 10 years will be the assumed useful life of the production and office equipment, furniture

and fixtures and the cleaning equipment, 15 years useful life for the delivery truck.

 Spoilage/shrinkage is 2% of the total production every day.

 Income tax rate of 30% of the company’s net taxable income.

 The profit and loss will be share by the partners equally (20% each partner).

 All transactions are VAT inclusive except for the payment of rent.
TOTAL PROJECT COST

PROJECT COST Total Cost

Acquisition of Asset

Purchase of Production Equipment P 19,272.00

Purchase of Delivery Equipment 250,000.00

Purchase of Office Equipment 52,050.00

Purchase of Furniture and Fixtures 6,280.00

Purchase of Office Supplies 1,068.25

Purchase of Cleaning Supplies 647.00

Purchase of Factory Supplies 2,036.00 P 331.353.25

Payment of Operating Expenses

Research and Development Cost P 10,000.00

Licenses and Permits 15,131.00

Maintenance Cost 10,000.00

Initial Salaries Expense 1,358,280.00

Utilities Expense 100,814.40

Advertising Expense 11,762.40

Rent Expense 360,000.00 P 1,865,987.80

TOTAL PROJECT COST P 2,197,341.05