FS Financial Study

VI.
FINANCIAL STUDY
The financial aspect of the project feasibility study qualifies the results of the marketing,
technical, management, taxation and legal phase of the project study and expresses in peso terms
the possible outcome of operating the project.
Basically, project studies consist of skilful coordination of the various information on all
the factors in the form of financial projections. It covers all the factors that are pertinent to an
intended venture having established the existence of a sample market and the feasibility of the
production facilities to supply this market, the investigation should move on the study of finance
cost.
6.1 MAJOR ASSUMPTIONS
 Sales increased by 5% every year
 Depreciation method used is a straight-line method
 Utilities expense is paid as it comes due
 Estimated market share of the product is 83.45% of the total available market
 Each 40 grams of product cost PHP 40.00
 Maximum product each day to produce is 360 units
 Cost of each product is PHP 20.00
 Estimated required funds is PHP 2,500,000.00 to finance the business
6.2 TOTAL PROJECT COST
Description Cost
Machinery and Equipment 134,702.00
Direct Materials 30,405.00

Direct Labor 6,825.00
Factory Overhead 13,151.15
Total 185,083.15
Table 20. Total Project Cost
6.3 SOURCES OF FINANCING
Partners will use their own individual savings to start and run the business. They will not
loan on banks. All the partners are entitled to share equally in the capital, amounting P 300, 000
pesos, and profits of the business and must contribute equally towards the losses to build the
business. The business will always be financed by the partners only. A business exists to make
profits but those profits can be either withdrawn by the owners of the firm or reinvested to
expand the business. Partnerships carry unlimited liability if the business goes bankrupt, the
owners can be forced to compensate for any unpaid debts of the business from their own pockets.
6.4 PROJECT FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
Net sales 3,256,200
Less: Cost of goods sold (1,200, 000)
Gross income 2,056,200
Other Income 480,000
Total income 2,536,200
Expenses:
Administrative expenses (1,357,136)
Income before tax 2,636,200
Income tax-12% 304,344
Net Income 874,720
SUPPORTING SCHEDULE FOR NET SALES
Sales 3, 628, 800
Sales returns and allowances (360, 000)
Sales discounts (12, 600)
Net sales revenue 3,256,200
SUPPORTING SCHEDULE FOR COST OF GOOD SOLD
Direct materials
Materials inventory, beginning 1, 459, 440
Add: Net purchases 72, 000
Total materials available for use 1,531,440
Less: Materials inventory, ending 960,000
Indirect materials used 72, 000 (1,032,000)
Direct materials used 499,440
Direct labour 327, 600
Factory Overhead
Indirect materials 72, 000
Indirect labour 144,000

Other factory overhead 12,000 228,000
Total manufacturing cost 1,055,040
Add: Work in process, beginning 240, 000
Total goods put in process 1,295,040
Less: Work in process ending (96, 000)
Cost of goods manufactured 1,199,040
Add: Finished goods, beginning 120,960
Total goods available for sale 1,320,000
Less: Finished goods, ending (120, 000)
Cost of goods sold 1,200, 000
SUPPORTING SCHEDULE FOR ADMINISTRATIVE EXPENSES
Officer and staff salaries 567, 600
Depreciation-office furniture 500,000
SSS contribution 44,736
PAG-IBIG contribution 4,800
Office supplies 240, 000
Total 1,357,136
Statement of Financial Position
Pre-Operating Balance Sheet
ASSETS
Cash 597,458
Furniture and Fixtures 26,110
Cleaning Equipment 3,172
Office Equipment 30,015
Machineries and Equipment 65,313
Prepaid Rent Expense 90,000
Direct Labour 218,400
Direct Material 1,459,440
Other Assets 10,092
Total Asset 2,500,000
LIABILITIES & CAPITAL
Regine Corbillon, Capital 500,000
Almira Mendoza, Capital 500,000
Ann Nicole Rondolos, Capital 500,000
Christine Joy Sibayan, Capital 500,000
Jemimah Ross Tadina, Capital 500,000
Total Capital 2,500,000

6.5 FINANCIAL STATEMENT ANALYSIS
LIQUIDITY RATIOS
Current ratio
597,458
=0
0
Chicharong Pamaypay current ratio is 0 which means that it is has no liabilities.
SOLVENCY OR LEVERAGE RATIOS
Debt Ratio
0
=0
597,458
The debt ratio of 0 means that the Kabutehan Partnership has no debt.
PROFITABILITY RATIOS
Gross profit rate
Gross profit 3,628,800

= =1.11
Net sales 3,256,200
This simply shows that the proposed business is efficient since the profit is higher than its
sales.

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VI.

the possible outcome of operating the project.

6.1 MAJOR ASSUMPTIONS

 Sales increased by 5% every year

 Depreciation method used is a straight-line method

 Utilities expense is paid as it comes due

 Each 40 grams of product cost PHP 40.00

 Maximum product each day to produce is 360 units

 Cost of each product is PHP 20.00

 Estimated required funds is PHP 2,500,000.00 to finance the business

6.2 TOTAL PROJECT COST

Machinery and Equipment 134,702.00

Direct Materials 30,405.00

Factory Overhead 13,151.15

Table 20. Total Project Cost

6.3 SOURCES OF FINANCING

6.4 PROJECT FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME

Net sales 3,256,200

Less: Cost of goods sold (1,200, 000)

Gross income 2,056,200

Other Income 480,000

Total income 2,536,200

Income before tax 2,636,200

Income tax-12% 304,344

Net Income 874,720

SUPPORTING SCHEDULE FOR NET SALES

Sales 3, 628, 800

Sales returns and allowances (360, 000)

Sales discounts (12, 600)

Net sales revenue 3,256,200

SUPPORTING SCHEDULE FOR COST OF GOOD SOLD

Materials inventory, beginning 1, 459, 440

Add: Net purchases 72, 000

Total materials available for use 1,531,440

Less: Materials inventory, ending 960,000

Indirect materials used 72, 000 (1,032,000)

Direct materials used 499,440

Direct labour 327, 600

Indirect materials 72, 000

Indirect labour 144,000

Total manufacturing cost 1,055,040

Add: Work in process, beginning 240, 000

Total goods put in process 1,295,040

Less: Work in process ending (96, 000)

Cost of goods manufactured 1,199,040

Add: Finished goods, beginning 120,960

Total goods available for sale 1,320,000

Less: Finished goods, ending (120, 000)

Cost of goods sold 1,200, 000

SUPPORTING SCHEDULE FOR ADMINISTRATIVE EXPENSES

Officer and staff salaries 567, 600

Depreciation-office furniture 500,000

SSS contribution 44,736

PAG-IBIG contribution 4,800

Office supplies 240, 000

Statement of Financial Position

Pre-Operating Balance Sheet

Cleaning Equipment 3,172