Bauan Technical Integrated High School

Senior High School

Veggie Bread: A Feasibility Study of Vegetable Cookie-Bread in Bauan,
Batangas

A Feasibility Study Proposal

Presented to
The Faculty of the Senior High School
BAUAN TECHNICAL INTEGRATED HIGH SCHOOL
Bauan, Batangangas

In Partial Fulfilment
Of the Requirements for the K to 12
BASIC EDUCATION CURRICULUM
In
Business Enterprise Simulation

By:
KARL JUSTINE M. ALILING
DANA CASANDRA M. ACUÑA
JASMINE C. ARREVALO
CELINE KYLA M. PASTOR

May 2024
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CHAPTER V
Financial Study
The following chapter examines the financial aspects of the proposed

business, Veggies in Bites. A financial feasibility analysis looks at the costs of

starting, running, and maintaining a business; market and economic

feasibility; expected return on investment (ROI); and expected liabilities (The

Fox Group, 2022). This section of the study demonstrates the business'

financial capability and profitability. This section also provided the necessary

information regarding the business' financial costs. Lastly, this chapter

provides business proponents with additional information about business

owners' financial needs and capacities.

Objective of the Study

This study's primary goal was to assess the financial capacity of the

proposed business by examining financial statements, financial ratios, and

financial pre-requisites for the proposed business.

1. To assess and examine the financial results over a five-year period for

the company.

2. To determine the necessary operation projection and evaluate its

effectiveness using ratios and financial assumptions.

3. To ascertain the company's earning performance and its liquidation

money-related issues.

4. To determine the planned business' financial capital.

5. To determine the company's funding sources.

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Initial Capital Requirements

Initial capital, also known as startup capital or seed capital, refers to the

funds required to launch a new business. It encompasses both financial

resources and assets that enable people to kick-start operations. Initial capital

requirements refer to the financial needs of the business in order for it to be

able to establish and operate successfully. The partners in financial studies

determine the amount of capital required to start the proposed business. The

capital contributed by each partner will be used to purchase tools, equipment,

and direct materials for business operations. In addition, the other supplies

needed for the business were purchased with money contributed by each

partner. Each partner agreed that their initial capitalization was Php

500,000.00. The partners contributed to the said initial capitalization. Business

partners will contribute a total of Php 125,000.00 equally.

Source of Financing

The source of financing is a provision of finance for a business to fulfill

its operational requirements. It includes short-term working capital, fixed

assets, and other long-term investments. There are two sources of finance:

internal and external. Internal sources of finance come from inside the

business, whereas external sources of finance come from outside the

business. Internal sources of finance are the money that comes from inside

the organization. An organization can utilize various internal ways, such as

owner's capital, retained profit, and sale of assets. Internal finance can be

considered the cheapest type because an organization will not have to pay

any interest on the money. The partners agreed that their starting capital
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would be Php 500,000.00. The money came from each partner's savings, as

well as the help of their families. The partners have agreed to contribute an

equal amount of Php 125,000.00.

Total Project Cost

Proponents can better understand their financial needs by forecasting

the total project cost. The total project cost includes building construction, land

acquisition, indirect costs, a cost contingency, and project-related and

organizational costs. A well-presented project cost can assist in evaluating

and identifying the assets required for business operations. An asset is a

valuable resource that an individual or corporation owns or controls in the

hope of reaping future benefits. Current assets are any resources a company

can use, convert to cash, or sell within a year. Moreover, a fixed asset is a

long-term tangible asset that a company owns and uses to generate revenue,

and it is not expected to be used or sold within a year.

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Table 5.1
Projected Project Cost
Pre-Operating Expenses
Taxes and Licenses 11,875.00
Fixed Asset
Store Tools and Equipment 16,494.00
Office Furniture and Fixtures 2,195.00
Freehold Improvements 4,998.00
Office Supplies 1,260.00
Working Capital for Three Months
Direct Materials 114,624.00
Labor 72,000.00
Other Expenses:
Indirect Materials 1,695.00
Utilities Expense 14,100.00
Maintenance Expense 2,847.00
SSS, Pag-Ibig, Phil Health 48,558.00
Contribution
Advertising Expense 9,900.00
Salary of the Manager 43,200.00
Total Cash Requirement 295,188.00
Cash on Hand (Contingency Fund) 204,812.00
Total Project Costs 500,000.00
Table 5.1 displays the projected cost of business operations over two

months. The business accumulates Php 204,812.00 in contingency funds.

The funds will be used to cover the business' operating expenses. The

business will use the projected cost of Php 500,000 to cover the first three

months of operations. The proponents believe the business only requires

three months of the annual projected cost to identify sales for the following

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months of operation. This amount will be the business' operating fund for the

entire year.

EMPLOYEE-EMPLOYER
Monthly
Position No. Social Security EC Total Contribution
Salary
ER EE Total ER ER EE Total

Manager 1 14,000 1,377.50 652.50 2,030 10 1,377.50 652.50 2,040

12,000
Worker 2 1,140.00 540.00 1,680 10 1,140.00 540.00 1,690
(each)

Total: 5,390.00 5,420.00

Table 5.2
SSS Contribution

Table 5.3
PhilHealth Contribution
Total Monthly Premium
No of
Position Monthly Salary
Workers Employee Share Employer Share

Manager 1 14,400 720 720

Worker 2 12,000 (each) 600 (each) 600 (each)

Total: 1,920 1,920

Table 5.4
Pag-Ibig Contribution
Percentage of Monthly
Compensation
Position No. Monthly Salary
EE ER

(2%) (2%)

Manager 1 14,400 288 288

Worker 2 12,000 240 (each) 240 (each)

Total: 768 768

Financial Assumption

1. Initial Capital Requirements

The partners will contribute Php 125,000 each to gain the

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business’ initial capital of Php 500,000.

2. Working Days

There will be six (6) days per week, with an average of twenty-four

(24) days per month and eight (8) hours per day of operations.

3. Accounting Reporting Period

The business calendar will be a year-long, beginning on January 1

and ending on December 31.

4. Service Capacity

In the first year of operation, the business will have an annual

product sold capacity of 115,200, and it is assumed that 15% to 20% of

production capacity will increase annually over the next five years.

5. Purchase

The volume of supplies purchased would increase proportionally

with the quantity produced. Based on the new average inflation rate,

the purchase cost is expected to rise by 4.3%.

6. Sales

Many factors can influence an increase or decrease in selling price,

such as a 4.3% annual average inflation rate. New entrants and

changing customer preferences are two factors that may impact

business sales.

7. Labor

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a. The workers' hourly labor rate is Php 500, expected to increase

by 4.3% based on the average inflation rate. Employees will also

receive benefits that may increase their income.

b. The employees will be paid on the 15th and 30th of every

month.

8. Employees Benefits

Employee benefits include SSS, Phil Health, Fringe Benefits, 13th

month pay, holiday bonuses, and one day off.

9. Utilities

Based on the average inflation rate, the utilities are expected to

increase by 4.3% over the next five years.

10. Maintenance Expenses

a. Annual maintenance expenses would be Php 11,388.00.

b. The maintenance expense will increase by 4.3%, which will be

affected by the average inflation rate.

11. Property, Plant, and Equipment

a. For the first five years of operation, a cash basis of acquisition

for equipment is used for any additional machinery purchases.

b. The company will use the straight-line method of depreciation

with no residual value.

12. Advertising Expense

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Considering the promotional period, the advertising expense for the

proposed business' year operation will be Php 39,600. The 4.3%

inflation rate may impact the increase in advertising expenses.

13. Owner’s Equity

a. The partners can withdraw 50% of their shares in operating

expenses. The remaining unwritten shares will remain in the

partner's equity.

b. If the operation is efficient and successful, withdrawal is

permitted.

c. The remaining profits will be shared equally among the business

partners.

14. Income Tax

Income tax expenses will be incurred.

15. Inflation Rate

The financial assumptions were based on the new 4.3% average

inflation rate.

Financial Statement

Financial statements are written records that summarize a company's

financial activities. Government agencies and accountants frequently audit

financial statements for accuracy and for tax, financing, or investment

purposes. The balance sheet, income statement, cash flow statement, and

equity change statement are the primary financial statements for for-profit

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organizations. Nonprofits have a similar but distinct set of financial statements

(Murphy, 2024).

Financial statements and accompanying records contain a wealth of

helpful information about the company's financial position, the success of its

operations, management's policies and strategies, and their implications for

the firm's future performance. It also demonstrates the management's

responsibility for the resources entrusted to it. It is a summary of hundreds of

thousands of transactions derived from historical and current transactions that

must be concise and reliable. The financial statement includes all relevant

financial information about the proposed business that is presented

systematically, summarized, and organized.

Statement of Financial Performance

The Statement of Financial Performance is a complete evaluation of a

company's overall standing in assets, liabilities, equity, expenses, revenue,

and profitability. The company's ability to generate profits and

increase shareholder value over time. It measures how well a company

manages its resources and achieves its financial goals (Romain, 2023).

The Veggies in Bites Statement of Financial Performance will earn Php

38,512.36 in 2024 and increase to Php 520,951.95 in 2028. An increase in

sales indicates positive market acceptance of the newly introduced business.

It means that the company is profitable yearly and can cover its expenses.

The increasing trend of the business' income indicates that its customers

receive the partnership and its product well. It also indicates a positive impact

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on the business. The business performance is a good start for the business'

early stages and may serve as the foundation for the firm's productions in the

coming years.

Table 5.5
Veggies in Bites
Projected Statement of Financial Performance
For the year ended December 2024-2028
2024 2025 2026 2027 2028

Total Sales 2,529,653.76 2,902,271.76 3,329,776.39 3,820,252.45 4,382,975.64

Less: Cost of
Sales 1,737,216.00 1,993,107.92 2,286,692.71 2,623,522.55 3,009,967.42

Gross Profit 792,437.76 909,163.84 1,043,083.68 1,196,729.90 1,373,008.22

Less:
Operating
Expense

Selling
Expense 3,300.00 3,630.00 3,993.00 4,392.30 4,831.53

Licenses
Fees and
Taxes 11,875.00 13,062.50 14,368.75 15,805.63 17,386.19

Indirect
Material 6,780.00 7,458.00 8,203.80 9,024.18 9,926.60

Maintenance
Expense 11,388.00 12,526.80 13,779.48 15,157.43 16,673.17

SSS,
PhilHealth,
Pag-Ibig
Contribution 194,232.00 194,232.00 194,232.00 194,232.00 194,232.00

Depreciation 2,671.80 2,671.80 2,671.80 2,671.80 2,671.80

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Expense
(Equpment)

Book Value
(Equipment) 13,822.20 11,150.40 8,478.60 5,806.80 3,135.00

Depreciation
Expense
(Furniture) 439.00 439.00 439.00 439.00 439.00

Book Value
(Furniture) 1,756.00 1,317.00 878.00 439.00 -

Depreciation
Expense
(Freehold) 999.60 999.60 999.60 999.60 999.60

Book Value
(Freehold) 3,998.40 2,998.80 1,999.20 999.60 -

Utilities
Expense 56,400.00 56,400.00 56,400.00 56,400.00 56,400.00

Labor
Expense 288,000.00 288,000.00 288,000.00 288,000.00 288,000.00

Office
Supplies 5,040.00 5,544.00 6,098.40 6,708.24 7,379.06

Administrative
Expense 172,800.00 172,800.00 172,800.00 172,800.00 172,800.00

Total
Operating
Expense 753,925.40 757,763.70 761,985.83 766,630.17 771,738.95

Net Income
Before Tax 38,512.36 151,400.14 281,097.85 430,099.73 601,269.27

Less: Income
Tax - - 6,219.57 37,524.93 80,317.32

Net Income 38,512.36 151,400.14 274,878.28 392,574.80 520,951.95

Cash Flow Statement

Identifying the business's cash inflow and outflow is critical to

understanding the company's gains and losses. The statement of cash flow

provides information about cash inflows and outflows during an accounting

period, as well as the net cash charge from operating, investing, and financing

activities, in a way that reconciles the beginning and ending cash balance.

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Cash is the "muscle" of all working firms, and cash flow projections

measure future cash availability. By accurately projecting future cash inflows

and outflows, businesses can anticipate potential roadblocks and take

immediate action to avoid them before they become a problem.

The Veggies in Bites 2024-2028 Cash Flow Statement reveals that its

cash flow in 2024 is Php 499,679.58, 2025 is Php 579,490.05, 2026 is Php

721,039.59, 2027 is Php 921,437.39, and 2028 is Php 1,186,023.76. The

statement shows that most of the business's cash is attributed to its

operations. The cash balance at the end of the cash flow statement is used as

a cash line item in the statement of financial position.

Table 5.6
Veggies in Bites
Cash Flow Statement
For the year ended December 2024-2028
2024 2025 2026 2027 2028

Cash Flow from Operating

Activities

Net Income 38,512.36 151,400.14 274,878.28 392,574.80 520,951.95

Add: Non-Cash

Depreciation Expense
(Equipment) 2,671.80 2,671.80 2,671.80 2,671.80 2,671.80

Depreciation Expense
(Furniture) 439.00 439.00 439.00 439.00 439.00

Depreciation Expense (Freehold) 999.60 999.60 999.60 999.60 999.60

Net Cash Provided by

Operating Activities 42,622.76 155,510.54 278,988.68 396,685.20 525,062.35

Cash Flow from Investing

Activities

Acquisition of Fixed Asset 23,687.00 - - - -

Net Cash Provided by Investing

Activities (23,687.00) - - - -

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Cash Flow from Financing

Activities

Initial Investment 500,000.00 - - - -

Withdrawals (137,439.14 (196,287.4 (260,475.9

(19,256.18) (75,700.07) ) 0) 7)

Net Cash Provided by (137,439.14 (196,287.4 (260,475.9

Financing Activities 480,743.82 (75,700.07) ) 0) 7)

Net Increase in Cash 499,679.58 79,810.47 141,549.54 200,397.80 264,586.37

Cash Balance Beginning - 499,679.58 579,490.05 721,039.59 921,437.39

Cash Balance Ending 1,186,023.

499,679.58 579,490.05 721,039.59 921,437.39 76

Statement in Changing Partner’s Equity

The Statement of Partner's Equity is a short financial report listing only

a few different types of transactions affecting the equity accounts. Unlike the

owner's equity report, the partner's equity is only used for partnerships. Thus,

it uses net income, partner contributions, and distributions throughout the year

to calculate the ending capital balance (Shaun et al., 2024).

The statement about changing the partners' equity in the business

shows that the partners are entitled to share a profit of Php 125,000.00 within

the business's first year of operation. In the following years, the partners'

capital is expected to increase. The business partners are constantly open for

withdrawal for personal reasons.

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Table 5.7
Veggies in Bites
Projected Statement of Changes in Partner’s Equity
For the year ended December 2024-2028
2024 2025 2026 2027 2028

Capital, Beginning Balance 125,000.0 148,739.0 183,098.8 232,170.7

0 129,814.05 6 5 0

Add: Share in Operating Income 130,237.9

9,628.09 37,850.04 68,719.57 98,143.70 9

Less: Withdrawal (34,359.78 (49,071.8 (65,118.9

(4,814.04) (18,925.02) ) 5) 9)

Partner 1, Capital Ending Balance 129,814.0 183,098.8 232,170.7 297,289.6

5 148,739.06 5 0 9

Capital, Beginning Balance 125,000.0 148,739.0 183,098.8 232,170.7

0 129,814.05 6 5 0

Add: Share in Operating Income 130,237.9

9,628.09 37,850.04 68,719.57 98,143.70 9

Less: Withdrawal (34,359.78 (49,071.8 (65,118.9

(4,814.04) (18,925.02) ) 5) 9)

Partner 2, Capital Ending Balance 129,814.0 183,098.8 232,170.7 297,289.6

5 148,739.06 5 0 9

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Capital, Beginning Balance 125,000.0 148,739.0 183,098.8 232,170.7

0 129,814.05 6 5 0

Add: Share in Operating Income 130,237.9

9,628.09 37,850.04 68,719.57 98,143.70 9

Less: Withdrawal (34,359.78 (49,071.8 (65,118.9

(4,814.04) (18,925.02) ) 5) 9)

Partner 3, Capital Ending Balance 129,814.0 183,098.8 232,170.7 297,289.6

5 148,739.06 5 0 9

Capital, Beginning Balance 125,000.0 148,739.0 183,098.8 232,170.7

0 129,814.05 6 5 0

Add: Share in Operating Income 130,237.9

9,628.09 37,850.04 68,719.57 98,143.70 9

Less: Withdrawal (34,359.78 (49,071.8 (65,118.9

(4,814.04) (18,925.02) ) 5) 9)

Partner 4, Capital Ending Balance 129,814.0 183,098.8 232,170.7 297,289.6

5 148,739.06 5 0 9

Statement of Financial Position

The Statement of Financial Position is another name for the company's

balance sheet. It reveals what firm owns assets, how much it owes liabilities,

and the value that would be returned to the investors if the business was

liquidated equity. A statement of financial position is prepared at the end of an

accounting period—typically 12 months—and provides a snapshot of the

company's overall financial position at a given time. It is in contrast to other

financial statements, such as an income statement that shows where money

is being spent daily (Amita, 2022).

According to the Veggies in Bites Sheet, the enterprise's assets,

liabilities, and equity balances were Php 519,256.18 in 2024 and will increase

to Php 1,189,158.76 in 2028. The statement below shows that the business

could cover its liability with its assets. It is a good sign that the company will

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be stable and able to perform effectively over the next five years. The

proposed business considers inflation rates to anticipate and prepare for any

changes in raw material prices in the following years.

Table 5.8
Veggies in Bites
Projected Statement of Financial Position
For the year ended December 2024-2028
2024 2025 2026 2027 2028

ASSETS

Current Assets

Cash 499,679.58 579,490.05 721,039.5 921,437.3 1,186,023.

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9 9 76

Total Current Assets 721,039.5 921,437.3 1,186,023.

499,679.58 579,490.05 9 9 76

Non-Current Assets

Store Tools and Equipment 1

6,494.00 13,822.20 11,150.40 8,478.60 5,806.80

Less: Accumulated
Depreciation (Store Tools
and Equipment) 2,671.80 2,671.80 2,671.80 2,671.80 2,671.80

Office Furniture and Fixtures

2,195.00 1,756.00 1,317.00 878.00 439.00

Less: Accumulated
Depreciation (Office
Furniture and Fixtures) 439.00 439.00 439.00 439.00 439.00

Freehold Improvement 4,998.00 3,998.40 2,998.80 1,999.20 999.60

Less: Accumulated
Depreciation (Freehold
Improvement) 999.60 999.60 999.60 999.60 999.60

Total Non-Current Assets 19

,576.60 15,466.20 11,355.80 7,245.40 3,135.00

TOTAL ASSETS 732,395.3 928,682.7 1,189,158.

519,256.18 594,956.25 9 9 76

LIABILITIES & EQUITY

Current Liabilities - - - - -

Total Current Liabilities - - - - -

Partner’s Equity

Partner 1, Capital Ending 183,098.8 232,170.7 297,289.6

129,814.05 148,739.06 5 0 9

Partner 2, Capital Ending 183,098.8 232,170.7 297,289.6

129,814.05 148,739.06 5 0 9

Partner 3, Capital Ending 183,098.8 232,170.7 297,289.6

129,814.05 148,739.06 5 0 9

Partner 4, Capital Ending 183,098.8 232,170.7 297,289.6

129,814.05 148,739.06 5 0 9

Total Partner’s Equity 732,395.3 928,682.7 1,189,158.

519,256.18 594,956.25 9 9 76

TOTAL LIABILITIES & 732,395.3 928,682.7 1,189,158.

EQUITY 519,256.18 594,956.25 9 9 76

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Financial Analysis

Financial analysis evaluates businesses, projects, budgets, and other

finance-related transactions to determine their performance and feasibility. It

is commonly used to determine whether an entity is stable, solvent, liquid, or

profitable enough to justify a monetary investment. Financial analysis is also

used to assess economic trends, establish financial policy, develop long-term

business plans, and identify potential investment opportunities. It is

accomplished through the synthesis of financial figures and data. A financial

analyst will thoroughly review a company's financial statements, including the

income statement, balance sheet, and cash flow statement. Lastly, financial

analysis can be carried out in corporate and investment finance environments.

Financial Ratio

The financial ratios are a perfect quantitative metric used to measure the

company's financial condition. It is a process used to bring out the current

picture of the business and make forecasts related to the future possibilities

for growth and expansion.

These critical financial ratios are beneficial for management decision-

making and stakeholders' understanding. They are easy to interpret and

calculate, making them an essential tool for company evaluation. The

management, investors, and analysts can analyze financial ratios to measure

measures, efficiency, solvency, and financial position (Benerjee, 2024).

A. Liquidity Ratio

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A collection of financial indicators known as liquidity ratios assesses a

debtor's capacity to settle outstanding debts without raising additional

funds. By calculating measures like the current ratio, quick ratio, and

operating cash flow ratio, liquidity ratios assess a company's capacity to

meet debt commitments as well as its margin of safety. The liquidity ratio

impacts both the company's credit rating and credibility.

Current Ratio

The Current Ratio measures a company's ability to pay off its current

debt (liabilities due less than one year) with its current assets. The current

ratio is a number expressed between "0" and above. "Current" usually

reflects about 12 months (Eigner, 2023).

Table 5.9
Current Ratio
Year Current Assets Current Liabilities Current Ratio
2024 499,679.58 - -
2025 579,490.05 - -
2026 721,039.59 - -
2027 921,437.39 - -
2028 1,186,023.76 - -
Table 5.9 shows current assets from the year 2024 to 2028. There will

be no current ratio since there was no current liabilities.

Quick Ratio

The quick ratio is a metric that measures a company's ability to convert

short-term assets into cash quickly. The quick ratio, or the "acid test ratio,"

measures a company's liquidity and financial health. The quick ratio

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measures a company's liquidity by determining how well its current assets

can cover its liabilities. It compares cash and cash equivalents to current

liabilities.

Quick Assets Ratio = Quick Assets

Current Liabilities
Table 5.10
Quick or Acid Test Ratio
Year Cash Quick Assets Current Quick Ratio
Liabilities
2024 499,679.58 499,679.58 - -
2025 579,490.05 579,490.05 - -
2026 721,039.59 721,039.59 - -
2027 921,437.39 921,437.39 - -
2028 1,186,023.76 1,186,023.76 - -
Table 5.10 illustrates the proposed business quick assets ratio. There

will be no quick ratio since there was no current liabilities.

Working Capital

Working capital, also known as Net Working Capital (NWC), is the

difference between a company's current assets (cash, accounts

receivable/unpaid bills from customers, and inventories of raw materials

and finished goods) and current liabilities (debts and accounts payable). It

is a standard metric for assessing an organization's short-term health

(Jason Fernando, 2023).

Working Capital = Current Assets – Current Liabilities

Table 5.11
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Working Capital
Year Current Assets Current Liabilities Working Capital
2024 499,679.58 - -
2025 579,490.05 - -
2026 721,039.59 - -
2027 921,437.39 - -
2028 1,186,023.76 - -
The table shows the current assets from the year 2024 to 2028. There

will be no working capital since there was no current liabilities.

B. Profitability Ratio

Profitability ratios are financial metrics used by analysts and investors

to measure and evaluate the ability of a company to generate income

(profit) relative to revenue, balance sheet assets, operating costs, and

shareholders’ equity during a specific period. They show how well a

company utilizes its assets to produce profit and shareholder value (Tim

Vipond, 2015).

Gross Profit Margin

The term gross profit margin refers to a financial metric analysts use to

assess a company's financial health. Gross profit margin is the profit after

subtracting the cost of goods sold (COGS). A company's gross profit

margin is the money it makes after accounting for the cost of doing

business. This metric is commonly expressed as a percentage of sales

and may also be known as the gross margin ratio (Margaret James, 2024).

Gross Profit Margin = Gross Profit

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Net Sales
Table 5.12
Gross Profit Margin
Year Gross Profit Net Sales Ratio (%)
2024 792,437.76 2,529,653.76 31.33%
2025 909,163.84 2,902,271.76 31.33%
2026 1,043,083.68 3,329,776.39 31.33%
2027 1,196,729.90 3,820,252.45 31.33%
2028 1,373,008.22 4,382,975.64 31.33%
The table 5.12 shows the equality of the ratios in gross profit margin

from the five consecutive years.

Net Profit Margin

The net profit margin calculates how much net income is generated as

a percentage of revenues received. It assists investors in determining

whether a company's management is making a sufficient profit from its

sales and whether operating and overhead costs are being managed. Net

profit margin is also a key indicator of a company's financial health (Chris

Murphy, 2024).

Net Profit Margin = Net Income

Net Sales

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Table 5.13
Net Profit Margin
Year Net Income Net Sales Ratio (%)
2024 38,512.36 2,529,653.76 1.52%
2025 151,400.14 2,902,271.76 5.22%
2026 274,878.28 3,329,776.39 8.26%
2027 392,574.80 3,820,252.45 10.28%
2028 520,951.95 4,382,975.64 11.89%
Table 5.13 displays the net profit margin for an effective five-year

business operation. Starting in 2024 with a 1.52% net profit, it will increase

to 11.89% by 2028. The decrease in net profit margin indicates that the

business operation is inefficient and identifies the business's current state.

Rate of Return on Equity

Return on equity (ROE) is a financial performance metric that divides

net income by shareholders' equity. Because shareholders' equity equals

a company's assets minus its debt, ROE is the return on net assets. It is

viewed as a measure of a company's profitability and efficiency in

generating profits. The higher the ROE, the more effective a company's

management is in generating income and growth from equity financing

(Jason Fernando, 2024).

Rate on Equity = Net Income

Average Partner’s Equity

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Table 5.14
Rate of Return on Equity
Year Net Income Ave. Partners Equity Ratio (%)
2024 38,512.36 129,814.05 29.67%
2025 151,400.14 148,739.06 101.79%
2026 274,878.28 183,098.85 150.13%
2027 392,574.80 232,170.70 169.09%
2028 520,951.95 297,289.69 175.23%
The table shows that the rate of return on equity for the year 2024 is

29.67%, 101.79% for the year 2025, 150.13% for the year 2026, 169.09%

for the year 2027, and 175.23% for the year 2028. The rate of return on

equity is essential to investors because it determines whether or not to

invest in a business.

Solvency Ratio

Solvency ratios, sometimes called leverage ratios, reflect a class of

metrics that map out whether or not an organization’s current and

expected cash flow is sufficient to meet its long-term liabilities. The

calculations help predict the likelihood that a business can pay its bills over

the next year and several years on the short-term and long-term cash

flows alongside short-term and long-term debts (Jared King, 2023).

Debt Ratio

The term debt ratio refers to a financial ratio that measures the

extent of a company’s leverage. The debt ratio is the ratio of total debt to

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total assets, expressed as a decimal or percentage. It is the proportion of a

company’s assets financed by debt (Michael Boyle, 2023).

The formula to get the debt ratio was:

Debt Ratio = Total Liabilities

Total Assets
Table 5.15
Debt Ratio
Year Total Liabilities Total Assets Ratio (%)
2024 - 519,256.18 -
2025 - 594,956.25 -
2026 - 732,395.39 -
2027 - 928,682.79 -
2028 - 1,189,158.76 -
The table demonstrates that the business does not use debt to finance

investment and operating activities, also known as operating expenses.

Equity Ratio

The Equity Ratio is a financial metric that measures the leverage a

company uses. It uses investments in assets and the amount of equity to

determine how well a company manages its debts and funds its asset

requirements (CFI Team, 2015).

To get the equity ratio, the formula was:

Equity Ratio = Total Partner’s Equity

Total Assets

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Table 5.16
Equity Ratio
Year Total Partner’s Total Assets Ratio (%)
Equity
2024 519,256.18 519,256.18 100%
2025 594,956.25 594,956.25 100%
2026 732,395.39 732,395.39 100%
2027 928,682.79 928,682.79 100%
2028 1,189,158.76 1,189,158.76 100%
Table 5.16 shows the equality in equity ratio over five consecutive

years of business operations. It demonstrates that the company has a

solid financial position.

Payback Period

The payback period helps determine how long it takes to recover the

initial costs associated with an investment. This metric is helpful before

making any decisions, especially when an investor needs to make a snap

judgment about an investment venture.

Payback Period = Annual Cash Flow

Cash on Date
Table 5.17
Payback Period
Year Cost of Cash Ending Balance Payback
Investment of Cash Flow Period
2024 500,000.00 499,679.58 320.42 1.0
2025 500,000.00 579,490.05 -79,490.05 0.7

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Payback 1.7
Period
Table 5.17 shows the business' payback period. The payback period

for the business was one year and seven months. It is a good sign that the

company can adequately allocate its resources to ensure efficient and

effective operations.

Generalization

The financial study focuses on the company's ability to generate sales

and conduct daily business operations. Each partner will contribute equally to

meet the business' capital requirements of Php 500,000.00, with a total initial

investment of Php 125,000.00. The financial study also identifies future

expenditures that the business may incur when establishing or operating.

Financial studies are conducted to identify potential sources of capital

for the business, such as loans or savings. Partners can also obtain capital

through borrowed funds or loans from banks or other financial institutions.

Invested funds are those obtained through the contributions of investors. The

Veggies in Bites business proponents plan to start the company with their

savings.

Financial assumptions can be used to forecast business financial flows.

According to the projected statement of financial performance, the business

will earn Php 38,512.36 in 2024 and increase to Php 520,951.95 in 2028. The

balance sheet identifies that the total assets are Php 519,256.18 in 2024 and

will increase to Php 1,189,158.76, the enterprise's assets, liabilities, and

equity balances. The Veggies in Bites 2024-2028 Cash Flow Statement

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shows that the cash flow in 2024 is Php 499,679.58, 2025 is Php 579,490.05,

2026 is Php 721,039.59, 2027 is Php 921,437.39, and 2028 is Php

1,186,023.76.

The financial study can demonstrate the projected liquidity, activity, and

solvency. Financial ratios are used to measure profitability. The financial study

identifies the business' capability from 2024 to 2028. The financial study

enabled the business proponents to forecast their company's financial status

for five years.

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