MONTHLY FINANCIAL STATEMENTS

Scenario Scenario Scenario Scenario Scenario Scenario Scenario

1(M-1) 2(M-1) 3(M-1) 4(M-2) 5(M-2) 6(M-3) 7(M-4)
INCOME STATEMENT 100 100 100 100 100 100 100
I1 Revenue 0 0 50 50 50 50 50
I2 Cost of Goods Sold 100 100 50 50 50 50 50
I3 Gross Margin

I4 Marketing/Sales Expense $0 $0 $0 $0 $0 $0 $0
I5 General and Administrative 0 0 0 0 15 15 15
I6 Research and Development $0 $0 $0 $0 $0 $0 $0

I7 Depreciation 0 0 0 20 20 20 20
I8 Interest Expense 0 0 0 0 1 1 1

I9 Earnings Before Tax 0 0 0 30 14 14 14

I 10 Taxes 0 0 0 0 3 3 3
I 11 Net Income 100 100 50 30 11 11 11

BALANCE SHEET
BS 1 Cash 70 150 150 220 336 417 368
BS 2 Receivables 30 30 30 60 60 60 60
BS 3 Inventory 0 200 150 100 100 50 0
BS 4 Total Current Assets 100 380 330 380 496 527 428

BS 5 Gross Long Term Assets 0 720 720 720 720 720 720
BS 6 Accumulated Depreciation 0 0 0 20 20 40 60
BS 7 Net Long Term Assets 0 720 720 700 700 680 660

BS 8 Total Assets 100 1100 1050 1080 1196 1207 1088

BS 9 Salaries Payable 0 0 0 0 15 15 15
BS 10 Other Accounts Payable $0 $0 $0 $0 $0 $0 $0
BS 11 Short Term Notes Payable $0 $0 $0 $0 $0 $0 $0
BS 12 Total Current Liabilities 0 0 0 0 15 15 15

BS 13 Long Term Notes Payable 0 0 0 0 120 120 0

BS 14 Total Liabilities 0 0 0 0 135 135 15

BS 15 Common and Preferred Stock 0 1000 1000 1000 1000 1000 1000
BS 16 Retained Earnings 100 100 50 80 61 72 73
BS 17 Total Owners Equity 100 1100 1050 1080 1061 1072 1073

BS 18 Total Liabilities and Owners 100 100 1050 1080 1196 1207 1088
Equity

CASH FLOW STATEMENT

I 11 Net Income 100 100 50 30 11 11 11
I7 Depreciation 0 0 0 20 20 20 20
Chg BS 2 Chg in Receivables (30) (30) (30) (30) (30) 0 0
Cng BS 3 Chg in Inventory 0 (200) (150) 50 50 50 50
Chg BS 9+10 Chg in Payables 0 0 0 0 15 0 0
Total Cash Flow from 70 (130) (130) 70 66 81 81
Operations

Chg BS5 Capital Assets Purchased/Sold 0 (720) (720) 0 0 0 0

Total Cash Flow from 0 (720) (720) 0 0 0 0
Investments

Chg BS 11 Chg in Short Term Loans $0 $0 $0 $0 $0 $0 $0

Chg BS 13 Chg in Long Term Loans 0 0 0 0 120 0 (120)
Chg BS 15 Chg in Stock Equity 0 0 0 0 0 0 0
Chg BS 16-I 11 Dividends Paid 0 0 0 0 0 0 (10)
Total Cash Flow from Financing 0 1000 1000 0 0 0 (130)

BS 1 last mth Beginning Period Cash 0 0 0 186 336 417

Period Cash Flow 70 150 150 70 150 81 (49)
Ending Period Cash 70 150 150 70 336 417 368

What will end of month financial statements look like? Assume company was not in existence before month 1.

Assumptions for monthly scenarios:

1. Month 1 Scenario 1:
 a. No expenses, i.e., no cost of goods sold, operating expenses, depreciation, or taxes.
b. Monthly Revenue is $100, (70% paid in cash, 30% is owed by customers to be paid 2 months out).
2. Month 1 Scenario 2:
a. Revenue and expenses are the same as Scenario 1,
b. But now assume that the owner infuses $1,000 of cash into the company as equity at the beginning
of the month.
c. Immediately after, the company purchases $200 of finished goods inventory.
d. At the end of the month the company purchases a computer valued at $720. Depreciation of the
computer is straight line 3 years.
3. Month 1 Scenario 3:
a. Same assumptions as Scenario 2,
b. Except now cost of goods sold (which will come solely from available finished goods inventory
stock), is $50.
c. Still no other operating expenses or taxes.
4. Month 2 Scenario 4:
a. Start with month 1 assumptions and results from Scenario 3 above.
b. For month 2 let’s assume revenue and cost of goods sold stay the same as in month 1, (i.e. revenue
is still 70% cash and 30% receivables are paid 2 months out. Cost of goods sold is still $50).
c. There is still no SG&A or tax expense, but watch out for depreciation!
d. In month 2 no additional inventory or computer purchases are made.
5. ***Month 2 Scenario 5:
a. Start with assumptions and results from Scenario 3 again.
b. Month 2 assumptions are the same as scenario 4 with the following additions:
i. At the beginning of month 2 the company takes out a 3-year loan from a bank of $120 at
10% annual interest rate. One twelfth of the annual interest is paid at the end of each moth
(the monthly portion).
ii. Corporate G&A salary expense is now equal to $15.
iii. However, the salary expense will not be actually paid from the company until following
month.
iv. Taxes for month 2 are now equal to 21.43% of Net Income Before Tax.
1) ***Month 3 Scenario 6:
a. Month 1 assumptions and results are from Scenario 3, and month 2 assumptions and results are
from Scenario 5.
b. There are still no inventory or computer purchases during month 3 and the company is not taking
out another loan.
c. Month 3’s revenue and expenses remain the same as in month 2.
d. Month 3’s salaries will be paid in month 4, and receivables in month 5.
e. Hint: some old receivable(s) not receivable.
2) ***Month 4 Scenario 7:
a. Month 1 assumptions and results are from Scenario 3, month 2 assumptions and results are from
Scenario 5 and month 3 assumptions and results are from Scenario 6.
b. Month 4’s revenue and expenses and capital expenditure assumptions will remain the same as in
month 3.
c. Month 4’s salaries will be paid in month 5 and receivables in month 6.
d. Now assume the company would like to pay the bank back its loan. They ask the bank if this is ok
and the bank agrees. The loan will be paid back in full at the end of the month.
e. Company will also pay the shareholders a $10 dividend at the end of the month.

*** represents the consecutively connected monthly scenarios.