VIII.

Financial Plan
Costing and Pricing

Yield: 60 pcs. per month

Raw Materials Cost APC Quantity per Total Cost
production
ABS 160/kg 72/pound 0.5 pounds 36
Nylon Fabric 93/meter 85/yard 0.5 yards 42.5
Ice pack 40/L 0.042 mL 1000 milliliters 40
Hot glue sticks 70/10 pieces 7/pc 3.6 pieces 25
Sewing thread 89/3 km 0.03/m 10 meters 0.3
Total Production Cost: 8610 Unit Cost 143.5
Mark-Up Price: 405.5 Resellers Price: 549
*Note: Unit Cost is based on the cost of materials in creating the product; it does not
include the labor and expenses. High reselling price and mark-up price is the result of
high unit cost, labor and expenses in creating the product. Estimated income from
each unit is about 150 (not including taxes) when factoring in the unit cost and labor.
A. Start Up Summary

60 pcs- Total
Expenses Cost/pc. Year 1
Qty./Month
ABS (2 wrist pads per
72 2,160 25,920
pound)
Nylon Fabric (2 wrists
85 2,550 30,600
pads per yard)
Ice packs (15x30cm) 40 2,400 28,800
Equipment (Sewing
materials, hot glue and 1,500 1,500 18,000
cutting materials)
Utilities (rent, internet) 4,000 4,000 48,000
Labor 9,000 9,000 108,000
Miscellaneous 1200 1200 14,400
Permit and License 15,311 15,311 15,311
Total   38,121 289,031
Note:
*Total quantity per month is based on the sales projection.
*Labor cost- add up all the salaries of the employees
*ABS (Acrylonitrile butadiene styrene), Nylon fabrics, Ice packs, permit and license, utilities, and
equipment costs are based on their actual cost. Do the research.
*Permit and license includes cost of incorporation, cost of compliance with BIR and cost of getting a
Mayor’s business permit
Formula used:
*Cost/pc multiply to the total qty. per month
*Since every 1 pound of ABS can make 2 wrists pad, total qty. per month divide 2 is equal to 30.
=72 x 30
=2,160
*Since every 1 yard of nylon fabric can make 2 wrists pad, total qty. per month divide 2 is equal to 30.
=85 x 30
=2,550
For year 1:
*Total qty. per month multiply by 12 (except for permits and licenses)
= 2160 x 12
= 25,920
Do the same process to the succeeding data.

ALL ASSUMPTIONS FROM YEARS 2-5 IS BASED ON A 10% INCREASE BASIS FROM THE
PREVIOUS YEARS. STUDIES HAVE SHOW THAT THERE IS AN INCREASE IN DEMAND AND
SUPPLY OF COMPUTER ACCESSORIES EVERY YEAR.
B. Financial Projections

 PROJECTED INCOME STATEMENT FROM YEARS 1-5

  Year 1 Year 2 Year 3 Year 4 Year 5
Revenues 395,280 434,808 478,289 526,118 578,729
Cost of Goods Sold 211,320 232,452 255,697 281,267 309,394
Materials 103,320 113,652 125,017 137,519 151,271
Labor 108,000 118,800 130,680 143,748 158,123
Gross Profit 183,960 202,356 222,592 244,851 269,336
Expenses 77,711 83,951 90,815 98,365 106,671
Utilities Expenses 48,000 52,800 58,080 63,888 70,277
Miscellaneous Expense 14,400 15,840 17,424 19,166 21,083
Permit and Licenses 15,311 15,311 15,311 15,311 15,311
Income before Interest and Taxes 106,249 118,405 131,777 146,485 162,665
Tax 34,000 37,890 42,169 46,875 52,053
Net Income 72,249 80,515 89,608 99,610 110,612
Note:
*Income Statement – is a financial statement that shows you how profitable your business will be within a
given period.
*Revenues from total sales projection table-Year 1 Sales in Peso
*Cost of goods sold from start-up summary table, all the materials cost needed in production of goods like
fabric and labor
*Gross profit is equal to Revenues less Cost of Goods Sold.
*Expenses include all the expenses that are not included in cost of goods sold like utilities,
miscellaneous, expense, and permit and licenses.
*Income before Interest and Taxes = Gross profit - expenses.
*Tax = 32% (tax rate) of Income before Interest and Taxes
E.g. 106,249 x .32 = 34,00
*Net Income = Income before Interest and Tax less Tax
To compute for years 2-5:
*Do the same procedure.
*Cost of goods sold and expenses multiply to the desired percentage you want. In that projection, 10%
increase per year is used to get the amount for years 2-5 (except for permit and licenses).

C. Cash flow
  PROJECTED CASH FLOW FROM YEARS 1-5
  Year 1 Year 2 Year 3 Year 4 Year 5
Beginning Balance 24,010 92,759 169,914 256,316 352,888
Cash Inflows (Income)          
Cash Sales 395,280 434,808 478,289 526,118 578,729
Total Cash Inflows 419,290 527,567 648,203 782,433 931,618
Cash Outflows          
Materials 103,320 113,652 125,017 137,519 151,271
Labor 108,000 118,800 130,680 143,748 158,123
Utilities 48,000 52,800 58,080 63,888 70,277
Miscellaneous 14,400 15,840 17,424 19,166 21,083
Permit And Licenses 15,311 15,311 15,311 15,311 15,311
Owner's Withdrawals 37,500 41,250 45,375 49,913 54,904
Total Cash Outflows 326,531 357,653 391,887 429,545 470,968
Ending Cash Balance 92,759 169,914 256,316 352,888 460,650
Table 3.3 (Financial Projections – Cash Flow)
Note:
*Cash flow – this financial statement shows the flow of cash (inflow and outflow).
*Beginning balance for the year 1 is based on start-up summary total qty., per month. For the years 2-5,
the ending cash balance of the preceding year will be the beginning balance for the current year.
*Cash sales are based on the sales projection table from the total sales in peso per year.
*Total cash inflows = Beginning year + cash sales plus + cash inflows
*Total Cash outflow = Expenses plus Payable and withdrawal. *In that projection, 10% increase per year
is used to get the amount for years 2-5 (except for permit and licenses).
*Owner’s Withdrawal is a projected amount only.
*Ending Cash Balance = Total Cash Inflows - Total Cash Outflows.
E.g. in Year 1
=383,290-287,370
=95,920

D. Projected Balance Sheet

Projected Balance Sheet

   Year 1 Year 2 Year 3 Year 4 Year 5
Assets          
Current Asset          
Cash At Hand 72,249 80,515 89,608 99,610 110,612
Total Current Assets 72,249 80,515 89,608 99,610 110,612
Fixed Assests          
Total Fixed Assets          
Total Assets 72,249 80,515 89,608 99,610 110,612
Liabilities And Equity          
Current Liabilities          
Income Tax Payable 34,000 37,890 42,169 46,875 52,053
Short-Term Payables - - - - -
Total Current Liabilities 34,000 37,890 42,169 46,875 52,053
Total Liabilities 34,000 37,890 42,169 46,875 52,053
Capital 38,121        
Add: Net Profit 72,249 80,515 89,608 99,610 110,612
Less: Drawings 34,000 37,890 42,169 46,875 52,053
Net Capital 38,249 42,625 47,439 52,735 58,559
Total Liabilities And Equity 72,249 80,515 89,608 99,610 110,612

Table 3.4 (Sales Projections – Balanced Sheet)

Note:
*Balanced Sheet – the financial statement that reports a company’s assets, liabilities, and owner’s equity
within a given period.
*Always remember that in the Balance Sheet the Total Assets must be equal to Total Liabilities and
Equity.
*Assets and Liabilities consist of current and noncurrent.
*Current assets are cash and other assets converted to cash within a year while non-current assets are
cash and other assets that will not be realized or converted within a year.
*Current liabilities are liabilities or short-term financial obligations that are due within a year while non-
current liabilities are long-term financial obligations that are due for more than a year.
*Cash at hand is based on Net Income.
*Income tax payable= 32% (tax rate) of Income before interest and taxes.
*Capital is based on the cost per month in the start-up summary table.
*Drawings – total drawings for the period.
*Net Capital = Capital Beginning + Net Profit – Drawings
*Total Liabilities and Equity = Total Liabilities + Net Capital

Source of Capital:
- Small business loans, investment from family and friends, government grants,
and venture capitalists are some sources of capital that the company could get.
Some government-owned organizations assist owners with their businesses by
giving them loans that are lower in rates than most traditional rates. Example
of these organizations include Land Bank of the Philippines, Philippine National
Bank, and BDO Unibank. These organizations offer business loans in the
Philippines for aspiring small business. Investments from family, friends, and
venture capitalists are also a good source of capital as they are close relatives
other than the venture capitalists, which can be hard to find one. This is not
guaranteed but if so, capital money will then be used to fund material, labor,
and expenses in the production and selling of the products. An example of
venture capitalists are the Kickstart Ventures, the Philippines leading Venture
Capital firm, a subsidiary of Globe Telecom, backed by Ayala Corporation and
SingTel.