Financial Study
A. Key Assumptions 1. Sales Forecast
BIBA Lavandera Laundry Shop is in need in the area. According to supply demand report, 37% of the household demands are not being supplied by JM Laundry Shop, our only competitor within the Robinson’s Homes East. The market is asking for more laundry shop to fulfill their demand of laundry service. From this analysis, sales forecast for the first year will likely be profitable. On the second year BIBA Lavandera is expecting to gain customer loyalty and will get a fair market share because of it’s fast, accurate and quality in service alongside with it’s friendly staff. Sales will increase by 25%. On the following year BIBA Lavandera is expecting to increase their sales because the business has established brand name. It is expected that a share from households that does not patronize laundry service will become BIBA Lavandera’s customer because having their laundry done by BIBA Lavandera is more efficient and practical. BIBA Lavandera will add equipments and hire four workers to reach production volume. Sales are expected to increase yearly by 25%. After three years if sales continuously increase the management will acquire tricycle to offer free pick-up and delivery service for those customers who have not less than five kilos on weekdays.
2.
Materials and supplies are expected to increase by inflation rate yearly. BIBA
Lavandera is purchasing supplies and materials on bulk orders to attain low price. The supplies on hand are good for four months.
3. Operating Expense a. Wages – expense on labor cost remain the same for the first two years then due to increase in sales it is necessary to hire four workers to maintain quality and fast service. b. Depreciation: Building’s useful life – 15 years
Equipment and Machineries useful life – 5 years
c. Promotional Materials – BIBA Lavandera will only use tarpaulin and leafleting for advertising. d. Utilities – Electricity and Water cost will increase accordingly from increase of wash load per month. The building has already installed phone, the enterprise will just maintain it.
4. Tax Expense Tax Expense includes maintaining business permits and income tax of 32%. 5. Price – Price will remain the same.
B. Total Project Cost 1. Fixed Assets – Owner invested her land and building for the business and purchase water tank and machineries such as washer and dryer. And also Purchase of Furniture and Fixtures for the store. a. Land = P 1,100,000.00 b. Building = P 370,000.00 c. Water Tank = P9,999.75 d. Machineries P = P 66,496.00 e. Furniture and Fixtures P = 13,000.00 2. Current Assets – Cash invested by the onwer, Supplies on hand good for the first 3 months and light equipments. a. Cash = P2580,000.00 b. Supplies = P26,780.75 c. Other Equipment = P10,458.75
C. Sources of Project Financing 3. Investment of cash – the owner, Mrs. Jenibe A. Bernil uses her savings to invest P 280,000.00 to start her business. 4. Investment of Asset – the owner, Mrs. Jenibe A. Bernil uses her husband’s and her land and building to start her business.
D. Preparation of Financial Statements
Pre – Operating Transactions 1. Investment a. Investment through cash b. Investment through Building and Land Total Investment 2. Acquisition of Machineries a. 2 Whilpool Topload Washers Model : 4PWTW5905 b. 2 Whirlpool Dryers Model : 4PWED5905 Total: 3. Acquistition of Other Equipments a. 1 Philipps Steam Flat Iron Model: GC 4400 Series b. Ironing Board c. 1 Weighing Scale d. Water Hose (50 ft) e. Calculator f. 4 power regulators Total: 4. Acquisition of Water Tank a. Water Tank b. Free Installation Total: 5. Cost of Renovation a. Labor cost for 6 working days (P 350 x 4 Workers x 6 Days) b. Total cost of materials (Wood, Paint, Paintbrush, Nails, Etc.) Total: Installation of Equipments Installation of Clothes Hanger Painting Plumbing and Sink Installation Comfort Room Scrap Value of Building Add: Renovation Cost Total Value of Building 6. Acquisition of Fire Extinguishers Good for one year a. 2 x 10lbs. Fire Extinguishers for P 2,000.00 / each
P
280,000 1,470,000 P 1,750,000
P
34,498.00 31,998.00 P 66,496.00
P
P
4,600.00 730.00 2,799.75 730.00 200.00 1,399.00 10,458.75
P P
9,999.95 0.00 9,999.95
P
8,400.00 21,600.00
P
30,000.00
P 370,000.00 30,000.00 P 400,000.00
P
4,000.00
7. Acquisition of Furniture and Fixtures a. Table b. Chairs c. Sofa d. Cost of Installtion of Counters and Shelves Total 8. Promotion and Advertisement a. Tarpaulin b. Leafleting Total 9. Acquisition of Supplies Good for One Year Pair of Gloves Hangers (Plastics) Order Slips Delivery Slips Ballpens Mask 1 File Organizer Rack 1 Record Book Plastics for Clothes Bagging 24x40 23x26 24x60 TOTAL 10. Cost of Direct Supplies Cost for Wash Dry Fold per week Cost for Wash Dry Press per week Cost for Handwashing per week Cost of Dry Cleaning per week P P P P P P P P P
P
P
900.00 400.00 2,500.00 9,200.00 13,000.00
P P
1,800.00 600.00 2,400.00
99.50 / 2 pairs 159.50 /12 pcs. 337.50/ 500 sheets 520.00 / 500 sheets 100.00 60.00 / 2 pcs 400.00 75.50
P P P P
2840.00 / 1000 pcs. 2560.00 / 1000 pcs 4265.00 / 1000 pcs. 11,417.00
1449.07 64.19 44.10 283.15 1,840.51 total cost per week 1,840.51 per week X 52 weeks 95,706.52 11,417.00 107,123.00
Direct Supplies
P
Plus Supplies Cost per year
E. Financial Analysis Test of liquidity a. Current Ratio = Current Asset Current Liabilities
Current Ratio
2010 100.76
The test of liquidity show that BIBA Lavandera has the ability to meet currently maturing obligations from existing current assets because from every peso of liability, on the first year, the business has P 100.76 worth of current asset to pay.
Tests of profitability a. Net profit margin = Net income after tax = P 275,735.84 = 0.27 on the 1st year Sales 1,003,443.44 b. Return on owner’s investment = Net income = P 275,735.84 = 0.14 on the 1st yr Stock Equity P 1,925,735.84 The test shows that BIBA Lavandera’s expense is only 27% of the service revenue which means that the business is returning the expense with a remarkable income. The second test shows that J. Bernil’s Investment is returning on a rate of 0.14 or 14% percent of her investments are returning annually.