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FINANCIAL ASPECT
This chapter shows and discusses the financial forecast for the proposed
Green Life Garden Caf including the financial assumptions, the investment cost,
the financial statements and the financial analysis. Moreover, this chapter also
industry.
5.1.1.2 Revenue
due to inflation.
5.1.1.3 Expenses
depreciation expense.
after 3 years.
operating expenses.
media.
incurred.
equipment and supplies and for the rental of other supplies needed by the
business. This investment will also be used for the expenses during the
first year of operation. Thus, this will also be used for the rental of the land
Table 14
Investment Cost
Particular Amount
Cash 144,404
Inventory (raw materials) 395,330
Shop Supplies 1,215
Prepaid rent (land) 360,000
Tools 5,720
Machinery & Equipment 148,951
Furniture & Fixture 36,865
Building 1,200,000
Land Improvement (Landscape Expense) 100,000
Business Permits & Licenses 4,215
Advertising Expenses 3,300
Total Investment 2,400,000
section.
Table 15
proposed business.
Table 16
Table 17
Summary of Comparative Statement of Cash Flows
Green Life Garden Caf
Statement of Cash Flow
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Flow from Operating Activities
452,850.28 50,429.53 141,381.94 182,229.37 233,666.85
Cash Flow from Investing Activities
- - - - -
Cash Flow from Financing Activities
(74,716.01) (14,152.37) (17,594.61) (24,832.09) (34,933.76)
Beginning Cash Balance
144,403.74 522,538.01 558,815.18 682,602.50 839,999.79
Ending Cash Balance
522,538.01 558,815.18 682,602.50 839,999.79 1,038,732.87
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Table 18
Projected Statement of Changes in Equity
Less :
Withdrawal 0 74,716.01 14,152.37 17,594.61 24,832.09 34,933.76
Ending
Capital 2,392,485.00 2,691,349.05 2,747,958.52 2,818,336.98 2,917,665.35 3,057,400.40
Balance
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the profitability ratio, the solvency or stability ratio and cash flow
Table 19
Current Ratio Analysis
YEAR Current Assets Current Liabilities Current Ratio
obligations for five years. It indicates that the said project business is
Garden Caf.
Table 20
Debt to Equity Ratio Analysis
YEAR Total Liabilities Total Equity Debt to Equity Ratio
1 76,873.44 2,691,349.05 0.0286
2 44,428.63 2,747,958.52 0.0162
3 46,272.69 2,818,336.98 0.0164
4 49,911.47 2,917,665.35 0.0171
5 55,323.08 3,057,400.40 0.0181
This measures the entitys efficiency in using its assets to earn profits.
Table 21 shows the Rate of Return on Total Assets Analysis of Green Life
Garden Caf.
Table 21
The business has a low return on total assets which indicates that
business, but on the third year, we can see that the return increases and
It indicates the entitys ability effectively utilize its advantage in shaping the
pricing policy.
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Table 22
Rate of Return on Sales Analysis
YEAR NET INCOME REVENUE Net Profit Margin
1 373,580.06 6,323,906.25 0.0591
2 70,761.84 6,618,699.57 0.0107
3 87,973.07 6,927,234.88 0.0127
4 124,160.46 7,250,152.78 0.0171
5 174,668.82 7,588,123.73 0.0230
It shows that the Green Life Garden Caf will have a low rate of return on
sales indicating a decreasing result in net income in the starting years of the
business. It also indicates though that it is still in good condition because after
Table 23
Rate of Return on Investment Analysis
The above table shows that the Green Life Garden Caf will have a low
Rate of Return on Investment indicating on the first 2 years and that partners are
69
to expect low return on their investment in just a short term perspective but could
surely hope for an increasing return as the business operates on longer periods.
The asset turnover ratio calculates the total revenue for every amount of
assets a company owns. It measures the ability of a company to use its assets to
Table 24
Total Asset Turnover Analysis
YEAR Sales Total Assets Asset turnover
1 6,323,906.25 2,768,222.49 2.28446
2 6,618,699.57 2,792,387.15 2.37027
3 6,927,234.88 2,864,609.66 2.41821
4 7,250,152.78 2,967,576.82 2.44312
5 7,588,123.73 3,112,723.48 2.43778
Formula: Asset turnover = revenue/ total assets
It shows that Green Life Garden Caf has increasing total asset
turnover indicating that it is generating higher sales than total assets. The
generate sales.
and the thought process of making the investment decision. This section involves
earnings ratios and various other indicators and factors to determine suitable
investment strategies
70
Table 25
Payback Period Analysis
Payback Period
YEAR Annual Cash Flow Cumulative Total
0 (2,400,000.00)
1 522,538.01 (1,877,461.99)
2 558,815.18 (1,318,646.81)
3 682,602.50 (636,044.31)
4 839,999.79 203,955.48
5 1,038,732.87 1,242,688.35
Payback Period is 3.76 years
that Green Life Garden Caf will recover its investment cost within 3 years and 9
months. It expresses that proposed Green Life Garden Caf is desirable for
investment positions.
The total investment will be obtained from the personal assets of the
prospective partners who will contribute 1,200,000 pesos each. The researcher
assumed that the prospective partners have the capacity to acquire the total
machineries and equipment, furniture and fixtures, supplies and inventories, and
other necessary expenditures in order for Green Life Garden Caf to start its
operation.