Financial Plan Essay Example | Topics and Well Written Essays - 1500 words

Financial Plan - Essay Example T $1,500 $125 $1,500 $125 Electricity $360 $30 $360 $30 Insurance $500 $42 $500 $42 Administrative Cost $900 $75 $900 $75 Depreciation $15,000 $1,250 $12,000 $1,000 Promotional and Marketing Cost $103,000 $8,583 $67,000 $5,583 TOTAL $206,260 $17,188 $293,260 $24,438 Based on above sales projection and cost estimation, total initial start up cost for the first operating year has been estimated at $627510 and this break ups for this initial cost is given below. Initial Start up Cost for first year of Operation TOTAL Capital Expenditure $328,250 Cost Of Goods Sold for the first Year $20,800 Fixed Overheads Expenses for First Year $206,260 Liquid Cash $72,200 Start Up Cost Total for the first years $627,510 Therefore, based on the above required initial cost for the business, the necessary capital will be obtained from the shareholders’ contributions and from the long and short term loans. The following table presents source and cost of different capitals. Source of Capital Invest ment Required For first years $627,510 Capital from Shareholders $313,755 Short Term Loan @ 8% $62,751 Capital From Long term Loan @ 10% $251,004 Income Statement After determining the estimated cost for the different activities like operations, manufacturing, development etc, the projected income statement can be prepared considering estimated sales. Monthly sales forecast has been estimated for the first two years, and the projected income statements have developed on monthly basis for the first years. The following table shows income statement for the first year. Income Statement for First Year    Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Yearly Sales Units 40 45 50 53 60 70 75 77 80 90 92 100 832 Revenue $2,000 $2,250 $2,500 $2,650 3,000 $3,500 $3,750 $3,850 $4,000 $4,500 $4,600 $5,000... For preparing three major financial statements i.e. Income statement, cash flow and balance sheet necessary areas like sales projection, estimated cost, required capital and other investments needed to be determined properly. The following table depicts estimated cost for capital investment required for manufacturing unit and office equipments. Major capital investment includes software development cost for tablet PC and other machineries like computer and tools. For the offices, necessary furniture will also be required that will incur certain amount of cost. Besides, there will be certain fixed overhead that will be incurred in every month. The costs of necessary fixed overheads are given in the table for first two years. Therefore, based on the above required initial cost for the business, the necessary capital will be obtained from the shareholders’ contributions and from the long and short term loans. The following table presents source and cost of different capitals. Aft er determining the estimated cost for the different activities like operations, manufacturing, development etc, the projected income statement can be prepared considering estimated sales. Monthly sales forecast has been estimated for the first two years, and the projected income statements have developed on monthly basis for the first years. The following table shows income statement for the first year. In the first, year of operation, the sales will be expected to very low, and on the other hand, the fixed expenses will higher due to high promotional and marketing, and depreciations.