CHAPTER VI

FINANCIAL STUDY

The success of any business endeavor emanates from

thorough and in-depth study of every aspect of the business.

This encompasses consideration on the aspects of management,

marketing, technicalities, socio-economic, as well financial

matters.

The feasibility of a business idea is manifested by

real demand, competitiveness, competence of the management

and most importantly, a good return on investment. Presented

in this chapter are the projected financial statements as

well as the analytical tools used by the proponents to

evaluate the financial viability of the proposed business.

The concepts and assumptions that underlie the preparation

of these projected financial statements are as follows:

1. The initial capitalization of the proposed business

shall be P2,170,000. This amount may be raised by

availing a loan from banks or to be invested by the

one executing the proposed business. For the purpose

of this study, it was assumed that said amount is to

be invested by the partners equally.

2. Property and equipment have been depreciated using

the straight-line method over the estimated useful

lives as presented in the schedules, assuming no

residual/salvage values.

3. Estimated annual revenue is assumed to increase by

10% annually.

4. Gross margin is assumed at 60% of cost of sales.

5. It was assumed that goods and services to be used in

the business will be purchased from VAT registered

supplier, substantiated with valid documents, thus

can be claimed as input VAT.

6. The salaries including the SSS, Pag Ibig and

Philhealth contributions of General Manager, Sales

Manager, Production Manager, and Operation Manager

are treated as part of the distribution of profit

sharing, hence not considered as expense. The

balance of net income after deducting the same shall

be distributed equally to the partners.

7. Estimated operating expenses like communication and

supplies were assumed to increase equal to the

average rate of inflation on annual basis. Average

inflation rate as of December 2022 is 5.8%

 8. Taxes and licenses include business permit and BIR

annual registration fee which was based on the

prevailing rate as mandated by the local government

code and the tax code.

9. Amounts presented on the financial statements as

well as the schedules and computations are in

Philippine Peso.

Project Cost Summary

Land Php 348,000.00

Building 1,100,000.00

Machinery and equipment 121,299.00

Furniture and fixtures 66,395.00

Kitchen Utensils and Supplies 71,250.00

Working Capital 463,056.00

Total Php 2,170,000.00