RSS

Source and Use of Funds

21 Mar

7.1 Source and Use of Funds

Total start-up costs are estimated to be $363,000.  The majority of the costs are associated with the restaurant equipment, inventory and furniture and furnishings for the dining room.  Total costs for these items are reported to be $110,500.  The costs are associated with build out and renovation of the restaurant to provide updated plumbing and creating additional space in the dining area by removing a non-supporting wall:  $50,000.  Additional startup expenses are in the form of working capital and contingency $182,500.

 

Jeff and Betty Wright will contribute $174, 000 and are requesting an additional $189,000 in the form of a bank loan. The loan is expected to be a fully amortizing 5-year term note secured by UCC filings on all furniture fixtures and equipment.

 

Table 7.1           Source and Use of Funds

Source and Use of Funds  
Sources of Funds  
Owners’ and other investments  $174,000
Bank loans  $189,000
Other loans  $            –
Total Source of Funds  $363,000
   
Use of Funds  
Buildings/real estate  $            –
Leasehold improvements  $ 50,000
Capital equipment  $110,500
Location/administration expenses  $ 14,800
Opening inventory  $            –
Advertising/promotional expenses  $    4,000
Other expenses  $    1,200
Contingency fund  $ 10,000
Working capital  $172,500
Total Use of Funds  $363,000

 

7.2  Projected Cash Flow

The statement of cash flow shows the incoming and outgoing cash of the business.

 

 

Table 7.2 Pro Forma Cash Flow

Pro Forma Cash Flow Year 1 Year 2 Year 3
Cash Received      
Cash from Operations $148,101 $30,995 $11,402
Cash Sales $1,028,422 $1,161,443 $1,235,835
Cash from Receivables $0 $0  
Subtotal Cash from Operations $1,176,523 $1,192,438 $1,247,237
Additional Cash Received $189,000    
Sales Tax      
Owners Investment $174,000    
Subtotal Cash Received $1,539,523 $1,192,438 $1,247,237
Expenditures      
Expenditures from Operations $765,113 $414,176 $426,602
Cash Spent $710,176 $731,481 $753,426
Bills Paid      
Subtotal Spent on Operations $1,475,289 $1,145,658 $1,180,028
Additional Cash Spent      
Sales Tax      
Loan Payment $33,240 $35,378 $37,654
Subtotal Additional Cash Spent $33,240 $35,378 $37,654
Subtotal Expenditures $1,508,529 $1,181,036 $1,217,681
Net Cash Flow $30,994 $11,402 $29,556
Cash Balance $30,994 $42,397 $71,953

 

7.3  Projected Balance Sheet

 

Table 7.3 Pro Forma Balance Sheet

Pro Forma Balance Sheet Year 1 Year 2 Year 3
Assets      
Current Assets      
Cash $63,000 $66,150 $71,111
Accounts Receivable $25,000 $26,250 $28,219
Inventory $14,000 $14,700 $15,803
Other Current Assets $129,500 $135,975 $146,173
Total Current Assets $231,500 $243,075 $261,306
Long Term Assets      
Long Term Assets $144,500 $151,725 $163,104
Accumulated Depreciation $0 $0 $0
Total Long-Term Assets $268,500 $281,925 $303,069
Total Assets $500,000 $525,000 $564,375
Liabilities and Capital      
Current Liabilities      
Accounts Payable $29,000 $30,450 $32,734
Current Borrowing $1,500 $1,575 $1,693
Other Current Liabilities $28,500 $29,925 $32,169
Subtotal Current Liabilities $59,000 $66,596 $0
Long Term Liabilities $189,000 $198,450 $213,334
Total Liabilities $277,000 $290,850 $312,664
Paid In / Invested Capital $223,000 $234,150 $251,711
Retained Earnings      
Earnings      
Total Capital $223,000 $234,150 $251,711
Total Liabilities and Capital $500,000 $525,000 $564,375
Net Worth $223,000 $234,150 $251,711

 

7.4 Projected Profit and Loss

The profit and loss demonstrate modest increases in revenues over the three expected years with adjustments for inflation.

 

 

Table 7.5.1          Pro Forma Profit and Loss

Pro Forma Profit and Loss Year 1 Year 2 Year 3
Income      
Sales $1,028,422 $1,161,443 $1,235,835
Cost of Goods Sold ($402,113) ($414,176) ($426,602)
Gross Profit $626,309 $747,267 $809,234
Expenses      
Accounting / Legal $12,000 $12,360 $12,731
Bad Debts $25,711 $26,482 $27,276
Shrinkage $90,000 $92,700 $95,481
Credit Card Fees $20,568 $21,185 $21,821
Insurance $75,000 $77,250 $79,568
Miscellaneous $44,112 $45,435 $46,798
Payroll Taxes $0 $0 $0
Permits and Licenses $7,356 $7,577 $7,804
Rent $68,000 $70,040 $72,141
Salaries $12,341 $12,711 $13,093
Wages $269,987 $323,057 $340,027
Total Expenses $625,075 $688,798 $716,739
Net Profit $1,234 $58,469 $92,494

 

 

 

7.5 Break-Even Analysis

Total fixed costs associated with the restaurant are $669,186 and represent the annual expenses. The variable cost (overhead) is estimated to be $4.51 per meal.  Based on the assumption of $11.37 as the average meal price, the breakeven revenue then is $1,108,970 or 97,535 meals (units). This is further depicted in the Table Below and the Graph that follow:

 

Table 7.5.1Break-Even Analysis

Net

Units

  Net

Revenue

Fixed

Cost

Variable Cost Total

Cost

Total

Profit

  Fixed Cost: $669,186.01        
  Variable Cost: $4.51        
  Number of Units: 13,934        
  Avg. Unit Price: $11.37        
             
0   $0 $669,186 $0 $669,186 -$669,186
13,934   $158,424 $669,186 $62,826 $732,012 -$573,588
27,867   $316,849 $669,186 $125,653 $794,839 -$477,990
41,801   $475,273 $669,186 $188,479 $857,665 -$382,392
55,734   $633,697 $669,186 $251,306 $920,492 -$286,794
69,668   $792,122 $669,186 $314,132 $983,318 -$191,196
83,601   $950,546 $669,186 $376,958 $1,046,144 -$95,598
97,535   $1,108,970 $669,186 $439,785 $1,108,971 $0
111,468   $1,267,395 $669,186 $502,611 $1,171,797 $95,598
125,402   $1,425,819 $669,186 $565,438 $1,234,624 $191,196
139,335   $1,584,243 $669,186 $628,264 $1,297,450 $286,793
153,269   $1,742,668 $669,186 $691,090 $1,360,276 $382,391
167,202   $1,901,092 $669,186 $753,917 $1,423,103 $477,989
181,136   $2,059,517 $669,186 $816,743 $1,485,929 $573,587
195,070   $2,217,941 $669,186 $879,570 $1,548,756 $669,185
209,003   $2,376,365 $669,186 $942,396 $1,611,582 $764,783
222,937   $2,534,790 $669,186 $1,005,222 $1,674,408 $860,381

 

 

 

 

 

 

 

7.6  Business Ratios

 

Table 7.6           Ratio Analysis

Ratio Analysis Year 1 Year 2 Year 3 Industry Profile
Financial Ratios        
Quick Ratio 1.49 1.49 1.49 1.06
Current Ratio 3.92 3.92 3.92 1.46
Current Liabilities to Net Worth 0.26 0.26 0.26 0.40
Current Liabilities to Inventory 4.21 4.21 4.21 5.85
Total Liabilities to Net Worth 1.24 1.24 1.24 1.24
Fixed Assets to Net Worth 1.20 1.20 1.20 1.11
Collection Period        
Inventory Turnover 28.7 28.2 27.0 29.44
Assets to Sales 48.6% 45.2% 45.7% 49.1%
Working Capital to Sales 16.8% 15.6% 15.8% 14.0%
Accounts Payable to Sales 2.8% 2.6% 2.6% 2.8%
Return on Sales 0.1% 5.0% 7.5% 1.0%
Return on Assets 0.2% 11.1% 16.4% 2.1%
Return on Equity 0.6% 25.0% 36.7% 4.7%
Interest Coverage 0.8 7.6 15.5 1.66
Income Statement        
Gross Sales 100.0% 100.0% 100.0% 100.0%
Gross Profit 60.9% 64.3% 65.5% 56.0%
Operating Income 0.1% 5.0% 7.5% 2.1%
Net Profit After Tax        
Balance Sheet        
Cash 12.6% 12.6% 12.6% 12.6%
Accounts Receivable 5.0% 5.0% 5.0% 5.0%
Inventory 2.8% 2.8% 2.8% 3.0%
Total Current Assets 46.3% 46.3% 46.3% 49.5%
Total Fixed Assets 28.9% 28.9% 28.9% 25.7%
Other Non-Current Assets 24.8% 24.8% 24.8% 24.8%
Total Assets 100.0% 100.0% 100.0% 100.0%
Accounts Payable 5.8% 5.8% 5.8% 5.8%
Total Current Liabilities 0.0% 0.0% 0.0% 17.6%
Total Long-Term Liabilities 37.8% 37.8% 37.8% 37.8%
Net Worth 44.6% 44.6% 44.6% 44.6%

 

  • Risks and Assumptions

Meal Price range from $8.00 – $15.00

Average lunch price:  8.79

Average dinner price: 13.74

The restaurant is located in the West Roads Shopping Center and is comprised of 3,400 square feet

The dining room will be comprised of 20 tables with a seating capacity of 86 seats and 40 available parking spaces to meet the needs of the customers.

The restaurant will employ 19 employees

$860,000 -1,200,000 revenue targets; Industry average for casual restaurant average of $860,000.

Annual 3% increase for inflation and 5% annual increase in revenues

Year 2 Assumes Catering Business in Place.  Assumes 4 parties monthly @ $15 per plate and $50 persons.  Catering will escalate to 8 parties monthly in month 20 and then 10 parties monthly thereafter.   Also assumes additional increase in staffing (4 persons to be hired at 6 hours @ $8.00 per hour.

 

 
Leave a comment

Posted by on March 21, 2018 in academic writing, Academic Writing

 

Tags:

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

 
%d bloggers like this: