# Restaurant Five Year Budget Projection

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"Restaurant Five Year Budget Projection"

```					26fa796e-596f-4bcb-9e63-9b3bc44f4f8d.xls, Cash budgeting

Cash budgeting 01

Yes, you have come into the selection group for a job as treasurer for the "river char" holiday camp.
The only hurdle left is to prepare a 3-year cash budget based on the following data :

Profit & Loss statement :
Year 1      Year 2      Year 3
Revenues                                           25,000     26,000       27,000
Operating costs                                    17,500     18,200       18,900
GOP                                                 7,500      7,800         8,100
Depreciation                                        3,000      3,000         3,000
Interest                                              400        400           400
Profit before tax                                   4,100      4,400         4,700
Income tax                                          1,640      1,760         1,880
Net Profit                                          2,460      2,640         2,820

Cash available at the beginning of year 1 : £ 2.500

Changes in working capital :
Accounts receivable                                   500       1,000        1,000
increase   decrease      increase
Inventories                                           200         300          200
increase   decrease      increase
Current liabilities                                 1,000         500        1,000
decrease     increase    decrease

Corporation tax is paid in the year following the book entry

Loans :
In year three the existing loan of 4.000 £ has to be repaid to the bank.

Investments :
As soon as there is enough cash available five new boats are to be purchased. The cost per
boat is £ 1.500.Ignore the depreciation and the change on income tax for this.

Distribution to owners :
They are counting on a fixed amount of £ 2.000 per year.

Note: ignore any changes in inventory
26fa796e-596f-4bcb-9e63-9b3bc44f4f8d.xls, Cash budgeting

Cash budgeting 02

Please prepare a 3-years cash budget based on the following data :

Income statement :
Year 1    Year 2       Year 3

GOP/IBFC/IAUE                                              100,000    120,000     140,000
Depreciation                                                20,000     20,000      25,000
Profit before tax                                           80,000    100,000     115,000
Tax                                                         24,000     30,000      34,500
Net Income                                                  56,000     70,000      80,500

Cash balance B/F is € 5.000

Changes in the current accounts :

Current liabilities                              (2,000) decrease        2,000 increase     (2,000) decrease
Accounts receivables                              2,000 increase        (2,000) decrease     2,000 increase
Inventories                                       1,000 increase        (1,000) decrease     1,000 increase

Corporation Tax :
is to be paid in the following year

Investments :
One major investment of € 250.000 is planned. Of that amount € 150.000 is spent in year 2
and € 100.000 in year 3.

Distribution to owners :
50 % of the net income is paid to owners in the next year.

Use the ajusted net income approach.
26fa796e-596f-4bcb-9e63-9b3bc44f4f8d.xls, Cash budgeting

Cash budgeting 03

Use the 5-year projection of the "Shallot Hotel" and the notes below to produce
a cash budget for the following five years by applying the adjusted net income approach.

THE SHALLOT HOTEL CONDENSED INCOME STATEMENT

2005           2006           2007          2008      2009
Total revenues                                         275,000         288,800       303,200       318,400   334,300
Direct expenses                                        123,800         111,300       114,300       118,200   119,000
Undistributed Operating Expenses                       110,000         101,100       103,100       108,300   113,700
Income before Fixed Charges                              41,200         76,400        85,800        91,900   101,600
Rent, property tax, insurance                            55,000         55,000        55,000        55,000    55,000
Depreciation                                             10,000         10,000         8,000         8,000     7,000
Income before interest                                  (23,800)        11,400        22,800        28,900    39,600

a. Dividends: The owner desires 50% of net income. The dividends are paid on
March 1, of the year following the expense.

b. Corporation tax: a 5 year tax holiday has been granted - tax needs not to be
considered

c. Investments: The kitchen of the Shallot Hotel needs some additional equipment.
This will be purchased in 2006 for 25,000. In 2009 an amount of 50,000 will be
invested into restaurant equipment. The depreciation for these investments

d. Loan: A loan for 20,000 will be taken up per Jan. 1, 2005. The loan will be repaid
on Dec. 31, 2009 and interest of 8% is due at the end of each year.

e. The following working capital movements are to be considered:
2005          2006         2007           2008             2009
Inventories      400          400           400            400              400
increase      increase     increase       increase         increase
Acct. Receivable     1,000         1,000          500            500              500
decrease       decrease     increase       increase         increase
Acct. Payable        600          600           600            600              600
increase      increase     increase       increase         increase

Use the ajusted net income approach.
26fa796e-596f-4bcb-9e63-9b3bc44f4f8d.xls, Cash budgeting

Cash budgeting 04

Ed O'Neill has an offer to operate "The Peg" - a busy bar and bowling center. Ed is
providing you with the estimates for the next three years:

Revenue year 1                  800,000
for the years following add on 5% p.A.
Controllable expenses                75%
Depreciation year 1               80,000
for the years following add on 5% p.A.
Corporation tax                      40%
for simplicity assume that corporation tax is
paid in the same year as expensed.

Working capital:
Acc. receivable will increase by \$3,000 p.A.
Inventories will increase by \$1,000 p.A.
Acc. payable will increase by \$2,000 p.A.

A loan needs to be repaid according to the following schedule:
Year 1                          35,000
Year 2                          40,000
Year 3                          45,000

Ed wants to withdrae \$40,000 in year 1
for the years following add on 5% p.A.

Cash available at beginning year 1                 10,000

Ed wants to bring the kitchen up-to-date if the bar can
produce enough cash. The investment would be:
Phase 1              100,000
Phase 2               80,000
Phase 3               50,000
Only invest if there is sufficient cash available in the
year. More than one renovation phase in a year
would be possible.

Required: Prepare a condensed income statement and a 3-year cash projection (use the adjusted net
income approach)
26fa796e-596f-4bcb-9e63-9b3bc44f4f8d.xls, Cash budgeting

Cash budgeting 05
Use the adjusted net income approach to prepare a 3-year cash forecast for the
Krasnapolsky Hotel, Amsterdam. Use the following data and assumptions:
in thousands of €                                            2010            2011            2012
Total revenues                                                 54,750         57,488          60,362
Direct expenses                                                43,253         42,945          43,455
Income after undistributed exp.                                11,497         14,543          16,907
Rent, property tax insurance                                    7,000          7,000           7,350
Depreciation                                                    1,354          1,255           1,053
Income before interest and tax                                  3,143          6,288           8,504

a. Per 31.12.2009 there is some 6,000,000 loan outstanding. The payment schedule for this is:
Total        of which      of which
in thousands of Dutch Guilders               payment         Interest     principal
Payment 30.9.2010                                  3,720           720        3,000
Payment 30.9.2011                                  3,360           360        3,000
b. Corporation tax rate is 20%. The tax is due for payment per June 30, in the year following the
expense. There is no tax due for 2009.
c. The owners desire to receive 50% of the net income as dividend. The payment for these
is made in March the following year. The payment for the 2009 dividend will be 800,000.
d. A soft renovation of rooms is to be done in the year 2012. The cost will be 2mio guilders
The depreciation for this still needs to be considered. Use full annual depreciation with
a useful life of the renovated rooms of 5 years
e. The cash balance per 31.12.2009 is € 375,000.
f. The following working capital movements are to be considered:
in thousands of €                              2010            2011         2012
Inventories                                          300           200           -
decrease     decrease      decrease
Current liabilities                                  100           300          300
increase      increase     increase
26fa796e-596f-4bcb-9e63-9b3bc44f4f8d.xls, Cash budgeting

Cash budgeting 06
Use the adjusted net income approach to prepare a 3-year cash forecast for the
Bailiff Hotel, Inverness. Use the following data and assumptions:
2010         2011         2012
GOP                                                 95,000       170,000    165,000
Rent, property tax, insurance                       12,000        12,500      13,000
Depreciation                                        16,000        14,200      12,100
Income before interest and tax                      67,000       143,300    139,900

a. On June 30, 2010 a final loan repayment will have to be made to the bank. The amount of
£ 25,000 will cover £5,000 interest and £20,000 repayment of principal.
b. The following investments are planned:
2010            2011          2012
New equipment                    20,000           30,000       30,000
Renovation of rooms                  -            70,000       35,000
Depreciation for these investments has not yet been considered. Assume straight-line, annual
depreciation.The useful life of equipment is 5 years, for the rooms 7 years.
The investments are only to be done if there is sufficient cash available! Should the necessary
cash not be available delay the investment to the next year.
b. Corporation tax rate is 30%. The tax is due for payment per June 30, in the year following the
expense. The tax to be paid in 2010 for 2009 is 15,000.
c. The owners desire to receive 50% of the net income as dividend, but at least £10,000. The
payment for this is made in March the following year. The payment for the 2009 dividend will
be £10,000.
d. The cash balance per 31.12.2009 is £3,000.
f. The following working capital movements are to be considered:
2010            2011          2012
Inventories                                          2,000            1,000        1,000
increase         decrease     decrease
Current liabilities                                  2,000            1,000        1,000
increase         decrease     decrease
Required;
a. an income statement
b. a cash budget using the adjusted net income approach
26fa796e-596f-4bcb-9e63-9b3bc44f4f8d.xls, Cash budgeting

Cash budgeting 01 - result

Year 1     Year 2      Year 3
Revenues                    25,000      26,000      27,000
Operating costs             17,500      18,200      18,900
GOP                          7,500       7,800       8,100
Depreciation                 3,000       3,000       3,000
Interest                       400         400         400
Profit before tax            4,100       4,400       4,700
Income tax                   1,640       1,760       1,880
Net Profit                   2,460       2,640       2,820

Year 1     Year 2      Year 3

Net income                   2,460       2,640       2,820
pay tax                                 (1,640)     (1,760)
Working capital :
A/R increase-/decrease+       (500)      1,000      (1,000)
INV increase-/decrease+       (200)        300        (200)
C.L. increase+/decrease-    (1,000)        500      (1,000)
Loans                                               (4,000)
Distr. to owners            (2,000)     (2,000)     (2,000)
Investments                             (7,500)
Cashflow                     3,400      (1,940)     (2,260)

Beginning cash               2,500       5,900       3,960
Cash at end of year          5,900       3,960       1,700
26fa796e-596f-4bcb-9e63-9b3bc44f4f8d.xls, Cash budgeting

Cash budgeting 02 - result
Year 1       Year 2      Year 3
Sources of cash :
NOP                             56,000        70,000     80,500
Tax                             24,000        30,000     34,500
Depreciaton                     20,000        20,000     25,000
Subtotal                       100,000       120,000    140,000

Working capital movements :
Current liabilities              (2,000)        2,000      (2,000)
Accounts receivables             (2,000)        2,000      (2,000)
Inventories                      (1,000)        1,000      (1,000)
Subtotal                         (5,000)        5,000      (5,000)

Uses of cash :
Corporation tax                          0     24,000     30,000
Investments                              0    150,000    100,000
Paym. to owners                          0     28,000     35,000
Subtotal                                 0    202,000    165,000

Cashflow this period      95,000       (77,000)    (30,000)

Beginning cash balance     5,000       100,000     23,000
Ending cash balance      100,000        23,000     (7,000)
26fa796e-596f-4bcb-9e63-9b3bc44f4f8d.xls, Cash budgeting

Cash budgeting 03 - result

2005       2006       2007        2008        2009
Income before int. & tax        (23,800)    11,400      22,800     28,900      39,600
Interest                         (1,600)    (1,600)     (1,600)     (1,600)    (1,600)
net income                      (25,400)     9,800      21,200     27,300      38,000

Net income                      (25,400)     9,800      21,200     27,300      38,000
Depreciation                     10,000     10,000       8,000      8,000       7,000
Investments                                (25,000)                           (50,000)
Loan                            20,000                                        (20,000)
Inventories                       (400)       (400)       (400)      (400)       (400)
A/Rec.                           1,000       1,000        (500)      (500)       (500)
A/Payable                          600         600         600        600         600
Dividends                                               (4,900)   (10,600)    (13,650)

Cash flow                        5,800      (4,000)     24,000     24,400     (38,950)
Acc. flow                        5,800       1,800      25,800     50,200      11,250
26fa796e-596f-4bcb-9e63-9b3bc44f4f8d.xls, Cash budgeting

Cash budgeting 04 - result

Condensed income statement:
Year 1    Year 2      Year 3
Revenue              800,000    840,000     882,000
Controllable costs   600,000    630,000     661,500
IBFC                 200,000    210,000     220,500
Depreciation          80,000     84,000      88,200
PBT                  120,000    126,000     132,300
Corporation tax       48,000     50,400      52,920
Net income            72,000     75,600      79,380

3-year cash projection:
Sources of cash:
Year 1    Year 2      Year 3
Net income            72,000     75,600      79,380
Depreciation          80,000     84,000      88,200
A/payable increase     2,000      2,000       2,000
154,000    161,600     169,580

Uses of cash:
A/receivable increase         3,000      3,000      3,000
Inventories increase          1,000      1,000      1,000
Loan repayment               35,000     40,000     45,000
Ed's withdrawal              40,000     42,000     44,100
Investments                            100,000    130,000
79,000    186,000    223,100

Net cash flow                           75,000    (24,400)    (53,520)

Cash beginning of period                10,000     85,000     60,600
Cash at end of period                   85,000     60,600      7,080
26fa796e-596f-4bcb-9e63-9b3bc44f4f8d.xls, Cash budgeting

Cash budgeting 05 - result

Condensed income statement:      2010       2011       2012
Income before interest and tax    3,143.0    6,288.0   8,504.0
depreciationof renovation                                400.0
a. Interest expense                 720.0     360.0
Income before tax                 2,423.0   5,928.0    8,104.0
Tax                                 484.6   1,185.6    1,620.8
Net income                        1,938.4   4,742.4    6,483.2

Cash forecast                    2010       2011       2012
d. Cash at beginning of period     375.0      752.0    3,981.2

Cash receipts:
Net income                        1,938.4   4,742.4    6,483.2
decrease in inventories             300.0     200.0
incr. in current liabilities        100.0     300.0      300.0
Total receipts                    4,177.0   7,683.0    9,857.0

Disbursements:
a. Loan repayments                3,000.0   3,000.0
b. Pay tax                            -       484.6    1,185.6
c. Pay dividend                     800.0     969.2    2,371.2
d. Renovation                                          2,000.0
Total disbursements               3,800.0   4,453.8    5,556.8

Cashflow for the year              377.0    3,229.2    4,300.2

Cash balance end of year           752.0    3,981.2     8,281
26fa796e-596f-4bcb-9e63-9b3bc44f4f8d.xls, Cash budgeting

Cash budgeting 06 - result
Adjusted income statement         2010      2011      2012
Income after undistributed exp.    95,000   170,000   165,000
Rent, property tax, insurance      12,000    12,500    13,000
Depreciation                       16,000    14,200    12,100
Depreciation investments            4,000    20,000    31,000
Interest expense                    5,000
Income before interest and tax     58,000   123,300   108,900
Income tax                         17,400    36,990    32,670
Net income                         40,600    86,310    76,230
Cash forecast
Cash balance beginning of year      3,000    16,000    35,800
Sources of cash:
Net income                         40,600    86,310    76,230
Inventories decrease                          1,000     1,000
Current liabilities increase        2,000
80,000   158,500   153,000
Uses of cash
Loan repayment                     20,000
Investments equipment              20,000    30,000    30,000
Investments rooms renovation          -      70,000    35,000
Tax payment                        15,000    17,400    36,990
Dividend payment                   10,000    20,300    43,155
Inventories increase                2,000
Current liabilities decrease                  1,000     1,000
67,000   138,700   146,145
Cashflow for the year              13,000    19,800     6,855
Cash balance at end of year        16,000    35,800    42,655

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