50

CHAPTER 4

Financial Study

A. Major Assumptions
1. For the first year of operation, only 9 months instead of 12 will be computed because business
starts in April.
2. Sales are all in cash basis.
3. Production capacity will increase by 10 % annually.
4. Sales price of the product will increase by 1% every year.
5. Purchases of raw material are all in cash basis.
6. The cost of raw material is expected to increase by 2% annually.
7. Salaries and wages of all employees will remain constant for 5 years.
8. Thirteenth month pay and benefits (SSS, Pag-IBIG, PhilHealth) will remain constant but will be
based on employees’ salaries and wages.
9. 40% of rent cost is allocated to Operation while 60% is allocated to Production.
10. Water consumption will remain constant annually.
11. The depreciation method being used is straight line method.
12. Supplies,Kitchen wares Sanitation Expense, Power Consumption, Gas Refill Expense and Fuel
Expense are expected to increase by 2% annually.
13. Packaging and Labeling is expected to increase by 1% annually.
14. Miscellaneous Expense will remain constant annually.
15. Permit and Licenses expense will remain constant unless there will be an increase provided by
the LGU.
16. Net Income after Tax is computed as 20% of Net Income as for the new law.
17. Maintain inventory assumption for 3 days.
 51

B. Total Project Cost

Total Projected Cost

[Link] Plant and Equipment

Tools and Equipment 12,409.00
Furniture and Fixtures 4,945.00
Office Equipment 22,200.00
Leasehold Improvement 45,000.00 84,554.00

[Link] Capital
Raw Materials 79,404.00
Direct Labor 24,180.00
Office Supplies Expense 309.19
Kitchen Wares Expense 623.00
Packaging and Labelling Expense 17,550.00
Sanitation Expense 807.50
Utilities Expense 1,350.00
Rent Expense 15,000.00
Power Consumption 24,139.41
Water Consumption 834.00
Miscellaneous Expense 1,776.75
Salaries and Wages 105,300.00
Employee Benefit 18,162.60 289,436.45

[Link]-Operating Expenses
Permit and Licenses 14,040.00
Promotional Expense 1,000.00 15,040.00

D. Contingencies (5% of A,B,C) 19,451.52

Total Projected Cost 408,481.97

 52

C. Source of Financing
The total project cost of the proposed business is 408,481.97. It will be personally funded by
each proponent from their own money raised from different sources. The cost will be divided
equally among the 3 proponents.

Source of Financing
Investment By each Partners
Mago, Capital 136,160.66

Paday, Capital 136,160.66

Revierta, Capital 136,160.66

_______
Total source of Financing 408,481.97
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D. Financial Statement

TINAPUTO
PROJECTED INCOME STATEMENT
FOR THE YEAR 2022-2026
2022 2023 2024 2025 2026
Sales 1,053,000.00 1,502,280.00 1,607,439.60 1,719,960.37 1,840,357.60

Cost of Sales
Beg Raw Materials 3054.00 3300.46 1913.04 2067.42
Purchases-Raw Materials 241266.00 343494.07 369560.28 401037.55 435332.74
Ending Raw Materials (3,054.00) (3,300.46) (1,913.04) (2,067.42) (4,165.72)
Raw Materials Used 238,212.00 343,247.61 370,947.69 400,883.17 433,234.44
Direct Labor 72,540.00 96,720.00 96,720.00 96,720.00 96,720.00
Employee Benefit-Production 10,720.80 14,294.40 14,294.40 14,294.40 14,294.40
13th Month Pay-Production 6,045.00 8,060.00 8,060.00 8,060.00 8,060.00
Factory Overhead 63,361.19 85,293.69 86,278.77 87,283.00 88,306.76
Total Cost of Sales 390,878.99 547,615.70 576,300.86 607,240.57 640,615.61
Gross Income 662,121.01 954,664.30 1,031,138.74 1,112,719.80 1,199,741.99

Operating Expenses
Rent Expense-Operating 27,000.00 36,000.00 36,000.00 36,000.00 36,000.00
Packaging and Labelling 52,650.00 75,865.14 81,987.46 88,603.84 95,754.17
Water Consumption-Operating 500.40 667.20 667.20 667.20 667.20
Power Consumption-OPerating 38,694.24 52,624.17 53,676.65 54,750.18 55,845.19
Sanitation Expense 2,422.50 3,294.60 3,360.49 3,427.70 3,496.26
Office Supplies Expense 1,236.75 1,681.98 1,715.62 1,749.93 1,784.93
Miscellaneous Expense 7,107.00 8,964.28 9,128.79 9,296.58 9,467.73
Promotional Expense 1,000.00
Permits and Licenses 14,040.00 12,790.00 12,790.00 14,040.00 12,790.00
Salaries and Wages 315,900.00 421,200.00 421,200.00 421,200.00 421,200.00
Employee Benefit-Operation 43,767.00 58,356.00 58,356.00 58,356.00 58,356.00
13th Month Pay-Operation 26,325.00 35,100.00 35,100.00 35,100.00 35,100.00
Deprecation-Furniture and Fixtures -Operation 340.50 454.00 454.00 454.00 454.00
Depreciation-Office Equipment 3,262.50 4,350.00 4,350.00 4,350.00 4,350.00
Deprecation-Leasehold Improvement 4,050.00 5,400.00 5,400.00 5,400.00 5,400.00
Total Operating Expense 538,295.89 716,747.37 724,186.20 733,395.44 740,665.48
Net Income Before Tax 123,825.12 237,916.94 306,952.53 379,324.36 459,076.51
Income Tax 24,765.02 47,583.39 61,390.51 75,864.87 91,815.30
Net Income After Tax 99,060.10 190,333.55 245,562.03 303,459.49 367,261.21
 54

TINAPUTO
PROJECTED CASH FLOW
FOR THE YEAR 2022-2026
Cash Inflow Pre-Operating Expenses 2022 2023 2024 2025 2026
Cash Receive from Sales 1,053,000.00 1,502,280.00 1,607,439.60 1,719,960.37 1,840,357.60
Partner's Investment 408,481.97

Cash Outflow
Tools and Equipment 12,409.00
Furniture and Fixtures 4,945.00
Office Equipment 22,200.00
Leasehold Improvement 45,000.00
Raw Materials-Purchases 241,266.00 343,494.07 369,560.28 401,037.55 435,332.74
Direct Labor 72,540.00 96,720.00 96,720.00 96,720.00 96,720.00
Factory Overhead 58,831.59 78,685.55 79,670.80 80,675.21 81,699.15
Rent Expense-Operating 27,000.00 36,000.00 36,000.00 36,000.00 36,000.00
Water Consumption-Operating 500.40 667.20 667.20 667.20 667.20
Power Consumption-Operating 38,694.24 52,624.17 53,676.65 54,750.18 55,845.19
Packaging and Labelling 52,650.00 75,865.14 81,987.46 88,603.84 95,754.17
Sanitation Expense 2,617.50 3,364.80 3,365.80 3,433.11 3,501.77
Office Supplies Expense 1,523.25 1,785.12 1,723.41 1,757.88 1,793.04
Miscellaneous Expense 7,107.00 8,964.28 9,128.79 9,296.58 9,467.73
Promotional Expense 1,000.00
Permits and Licenses 14,040.00 12,790.00 12,790.00 14,040.00 12,790.00
Salaries and Wages 315,900.00 421,200.00 421,200.00 421,200.00 421,200.00
Employee Benefit-Production 10,720.80 14,294.40 14,294.40 14,294.40 14,294.40
Employee Benefit-Operation 43,767.00 58,356.00 58,356.00 58,356.00 58,356.00
13th Month Pay-Production 6,045.00 8,060.00 8,060.00 8,060.00 8,060.00
13th Month Pay-Operation 26,325.00 35,100.00 35,100.00 35,100.00 35,100.00
Income Tax Expense 24,765.02 47,583.39 61,390.51 75,864.87
Partnership Withdrawal
Total Cash Outflow 84,554.00 920,527.78 1,272,735.75 1,329,884.17 1,385,382.47 1,442,446.27
Net Cash Inflows 323,927.97 132,472.22 229,544.25 277,555.43 334,577.90 397,911.33
Add: Cash Balance, Beg 0 323,927.97 456,400.19 685,944.44 963,499.88 1,298,077.78
Cash Balance, End 323,927.97 456,400.19 685,944.44 963,499.88 1,298,077.78 1,695,989.11
 55

TINAPUTO
PROJECTED STATEMENT OF CHANGES IN PARTNER'S EQUITY
FOR THE YEAR 2022-2026
2022 Mago, Orlan Paday, Jerome Revierta, Mark Total
Beginning Capital
Initial Investment 136,160.66 136,160.66 136,160.66 408,481.97
Add: Profit 33,020.03 33,020.03 33,020.03 99,060.10
Less:Withdrawal - - - -
Ending Capital 169,180.69 169,180.69 169,180.69 507,542.07

2023 Mago, Orlan Paday, Jerome Revierta, Mark Total

Beginning Capital 169,180.69 169,180.69 169,180.69 507,542.07
Initial Investment - - - -
Add: Profit 63,444.52 63,444.52 63,444.52 190,333.55
Less:Withdrawal - - - -
Ending Capital 232,625.20 232,625.20 232,625.20 697,875.61

2024 Mago, Orlan Paday, Jerome Revierta, Mark Total

Beginning Capital 232,625.20 232,625.20 232,625.20 697,875.61
Initial Investment - - - -
Add: Profit 81,854.01 81,854.01 81,854.01 245,562.03
Less:Withdrawal - - - -
Ending Capital 314,479.21 314,479.21 314,479.21 943,437.64

2025 Mago, Orlan Paday, Jerome Revierta, Mark Total

Beginning Capital 314,479.21 314,479.21 314,479.21 943,437.64
Initial Investment - - - -
Add: Profit 101,153.16 101,153.16 101,153.16 303,459.49
Less:Withdrawal - - - -
Ending Capital 415,632.38 415,632.38 415,632.38 1,246,897.13

2026 Mago, Orlan Paday, Jerome Revierta, Mark Total

Beginning Capital 415,632.38 415,632.38 415,632.38 1,246,897.13
Initial Investment - - - -
Add: Profit 122,420.40 122,420.40 122,420.40 367,261.21
Less:Withdrawal - - - -
Ending Capital 538,052.78 538,052.78 538,052.78 1,614,158.34
 56

TINAPUTO
PROJECTED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR 2022-2026
Assets 2022 2023 2024 2025 2026
Current Assets
Cash 456,400.19 685,944.44 963,499.88 1,298,077.78 1,695,989.11
Inventory 3054.00 3300.46 1913.04 2067.42 4165.72
Kitchen Waires Supplies 433.00 441.66 450.49 459.50 468.69
Office Supplies 286.50 389.64 397.43 405.38 413.49
Sanitation Supplies 195.00 265.20 270.50 275.91 281.43
Total Current Asset 460,368.69 690,341.40 966,531.35 1,301,286.00 1,701,318.44

Non Current Assets

Tools and Equipment 12,409.00 12,409.00 12,409.00 12,409.00 12,409.00
Accumulated Depreciation (1,861.35) (4,343.15) (6,824.95) (9,306.75) (11,788.55)
Furniture and Fixtures 4,945.00 4,945.00 4,945.00 4,945.00 4,945.00
Accumulated Depreciation (741.75) (1,730.75) (2,719.75) (3,708.75) (4,697.75)
Office Equpment 22,200.00 22,200.00 22,200.00 22,200.00 22,200.00
Accumulated Depreciation (3,262.50) (7,612.50) (11,962.50) (16,312.50) (20,662.50)
Leasehold Improvement 45,000.00 45,000.00 45,000.00 45,000.00 45,000.00
Accumulated Depreciation (6,750.00) (15,750.00) (24,750.00) (33,750.00) (42,750.00)
Total Non Current Asset 71,938.40 55,117.60 38,296.80 21,476.00 4,655.20

Total Assets 532,307.09 745,459.00 1,004,828.15 1,322,762.00 1,705,973.64

Liabilities and Equity

Current Liability
Income Tax Payable 24,765.02 47,583.39 61,390.51 75,864.87 91,815.30

Partnership Equity
Capital Balance, Beg 408,481.97 507,542.07 697,875.61 943,437.64 1,246,897.13
Net Income 99,060.10 190,333.55 245,562.03 303,459.49 367,261.21
Partnership Withdrawal - - - - -
Capital Balance, End 507,542.07 697,875.61 943,437.64 1,246,897.13 1,614,158.34
Total Liability and Equity 532,307.09 745,459.00 1,004,828.15 1,322,762.00 1,705,973.64
 57

FINANCIAL ANALYSIS
Current Ratio
FORMULA: CURRENT ASSET / CURRENT LIABILITY
Formula
Current Assets Current Liailities Ratio
Current Assets 2022 456,400.19 24,765.02 18.43 18.43:1
Current Liabilities 2023 685,944.44 47,583.39 14.42 14.42:1
2024 963,499.88 61,390.51 15.69 15.69:1
2025 1,298,077.78 75,864.87 17.11 17.11:1
2026 1,695,989.11 91,815.30 18.47 18.47:1

The Current Ratio shows the business’s capacity to cover its short-term debts. The ratio results
indicate that the business has high liquidity for the first five (5) years.

Return on Investment
Formula Year Net Income After Tax
Average Net Income 2022 99,060.10
Average Net Investment 2023 190,333.55
2024 245,562.03
2025 245,562.03
2026 303,459.49
Total Net Income 1,083,977.19
Divide 4.75
Average Net Income 228,205.72
408,481.97

55.87%

The organization’s Return on Investment indicates its average profitability over a certain period
of time, and in our case we can conclude that the proposed feasibility study is feasible.
 58

Payback Period

Formula Year Net Cash Flow

Net
Investment 2022 132,472.22
Average Cash Flow 2023 229,544.25
2024 277,555.43
2025 277,555.43
2026 334,577.90
Total Inflows 1,251,705.24
Divide 4.75
263516.8931

408,481.97
263516.8931
1.550116826 1 year
6.60140191 6 months
15.63644966 16 days

The company’s payback period indicates the time that the partner’s investment can be
recovered for a particular period of time.

Net Profit Margin

Formula Year Net Income Sales Ratio

Net Income 2022 99,060.10 1,053,000.00 9.41%
Sales 2023 190,333.55 1,502,280.00 12.67%
2024 245,562.03 1,607,439.60 15.28%
2025 303,459.49 1,719,960.37 17.64%
2026 367,261.21 1,840,357.60 19.96%

The company’s profit margin indicates the volatility of the company’s net income in relation its
sales. Our profit margin increase as our sale increases in relation to the increase in sales considering the
change in expenses.