Financial Aspect Introduction Financial study quantifies and expresses in peso terms, the results of the other aspect

like marketing, technical, management and the other aspects. This study is done to determine and evaluate the projects capital requirements, possible sources of financing including the terms and conditions, forecast of operating revenue, costs and expenses and the effect of inflation on the financial situation and results of operations. The basic projected financial statements that are usually included in the financial study are the statement of financial position, statement of comprehensive income, and the statement of cash flows. Inclusion of these statements in the financial study assists in the evaluation of the results of financial projections as to profitability, liquidity and solvency of the project and its ability to withstand difficulties. According to Valix (2007), Statement of Financial performance shows the income of the entity for a given period of time. The performance of the entity is primarily measured in terms of the level of income earned by the entity through the effective and efficient utilization of resources. The projected income statement as presented

Financial Aspect
shows the forecasted income, expenses, gains, losses and net income or loss recognized during the period. A statement of Financial Position is defined further by Valix is a formal statement showing the financial position of an entity as of a particular date. The projected balance sheet presents three elements of

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financial position, namely assets, liabilities, and equity. The statement of cash flows is a component of financial statement summarizing the operating, investing, and financing activities of an entity. It provides information about the cash receipt and cash payments of an entity during a period. The following shows the financing requirements of the project proposal. It includes source of funds, projected pre-operating comprehensive income, statement of financial position and cash flow.

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Financing Requirement A. Sources of Funds Shop n Go-most Wanted will have 48.62:51.38 debt to equity financing which is broken down as follows: Structure Percentage Debt Equity Total 26,500,000.00 28,000,000.00 54,500,000.00 48.62% 51.38% 100% Amount

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As agreed by the proponents, the proposed business will operate as Stock Corporation having an authorized number of shares to issue 2 million wherein the incorporators will subscribed and pay the amount of 4million each. The business will also acquire an interest bearing loan amounting to 27.5 million to fund its expenditures which will pay an interest of 3.9% per annum (based on the average inflation rate as of January 2012). The loan will be payable in equal annual instalments within 10 years. Payment is due every end of December starting 2013.

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B. Projected Pre-operating Statement of Comprehensive Income Shop n Go-most Wanted Projected Pre-operating Comprehensive Income For the period ended December 31, 2013 Sales Less: CGS Gross Profit Delivery Income Interest Income Total Revenue Less: Operating Expense Salaries and Wages Fringe Benefit Advertising Depreciation Supplies Utilities Taxes and Licenses Organizational Cost Repairs and maintenance Interest expense Total Expense Net income (loss) before tax Less: Income Tax (30%) Net income after tax 35,000 583,250 204,205 -

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1,033,500 1,855,955 (1,855,955) (1,855,955)

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C. Projected Pre-operating Statement of Financial Position Shop n Go-most wanted Projected Pre-Operating of Financial Position As of December 31, 2013

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Assets Current Cash and cash equivalent Prepaid insurance Supplies Inventories Total current asset Non current Land Building Furniture and Fixture Equipment and machineries Total noncurrent asset Total asset Liabilities and equity Liabilities: Current liabilities Pag-ibig SSS/ PhilHealth Premium Noncurrent liabilities Stock holders equity Share capital Accumulated profits Total Liabilities and Equity 28,000,000 (1,855,955) 52,644,045 26,500,000 16,687,890 17,250,000 33,088 757,800 34,728,778 52,644,045 423,997 100,000 2,270 17,389,000 17,915,267

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D. Projected Pre-operating Statement of Cash Flow Shop n Go-most wanted Projected Pre-Operating of Cash Flow As of December 31, 2013 Operating cash flow Operating cash inflows: Revenue Interest income Total operating cash inflow Operating cash outflow: Organizational expense Taxes and licences Prepaid insurance Purchases of supplies Advertising expenses Utilities expenses Payment of Interest Inventories Others Repairs and maintenance Fringe benefit Bank charges Payment of salaries SSS, Philhealth remittance Withholding tax remittance Income tax payment Total operating cash outflow Net operating cash flow 204,205 100,000 2,270 35,000 583,250 -

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1,033,500 17,389,000 19,347,225 (19,347,225)

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Investing cash flow Investing cash inflow: Investing cash outflow: Land Building Furniture and fixture Equipment and machineries Total investing cash outflow Net investing cash flow Financing cash flow Financing cash inflow: Equity Debt Financing cash outflow: Payment of principal Dividend Paid Net financing cash flow Net cash flow Add: cash beginning Cash balance, end -

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16,687,890 17,250,000 33,088 757,800 34,728,778 (34,728,778)

28,000,000 26,500,000

54,500,000 423,997 423,997

E. Summary of Pre-operating Expenditures Shareholder's Equity Equity Debt Current Asset Inventories Supplies Insurance Total Current Asset Non Current Asset

28,000,000 26,500,000 54,500,000 17,389,000 2,270 100,000 17,491,270

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Land Building Equipments and Machineries Furniture and Fixtures Total Non Current Asset Expenses Utilities Organizational Cost Interest Expense Advertisement Total Expenditure Cash and Cash Equivalent 16,687,890 17,250,000 757,800 33,088 34,728,778 583,250 204,205 1,072,500 35,000 1,855,955

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54,076,003 423,997

Major Assumptions Major assumptions are necessary to formulate projections based on the financial aspects of a future business. These assumptions will serve as a guide in determining estimates and projections of future expenses and revenues of the projects. The estimated amounts that will be presented in the financial aspect will be rounded off to the nearest peso. However the application of the approximation requires outmost care and professional judgement because it needs to be realistic, consistent and workable throughout the analysis to show the near accurate projections. A. Current asset 1. Cash

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A checking deposit account will be

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maintained at Banco de Oro (BDO) for the deposit of all daily cash receipt at the end of the month and use imprest system. A petty cash fund account will also be set to Php 20,000 so that any greater than 500 peso disbursement will be made to check issuance. It is assumed that the total amount of petty cash allotted will be disbursed every year. 2. Unused supplies The ending balance of unused supplies will be equal to 20% of the sum of the beginning balance of office supplies and all purchases made during the current year. On the other hand 80 % will be expenses. 3. Inventories Inventories will be bought from the supplies with lowest bid for the price. The company will have an authorized supplier but can still buy from others if it is out of stock or with lesser cost. The company will be purchasing if the ending inventory is 20%.

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Noncurrent assets 1. Building The assumption is that will be depreciated

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over its estimated useful life of 50 years using the strait line method. Meanwhile the building will be built by a construction firm with an estimated cost of 31,084,500. 2. Equipment and machineries The equipment and machineries to be used together with the estimated useful life are presented bellow Straight line method will also be used for the depreciation. 10% of the cost will be the basis for the salvage value. The assets are as follows:

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Table 5.1. Summary of Equipment and Machineries
Machineries & Equipments Items Electric generator Telephone Air conditioner Security camera LCD monitor Computer set Emergency lights Fire extinguisher Fire alarm Mop wringer Cash register Refrigerator Digital messenger Motor vehicle Point of Sale Electronic Billboard Total

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Useful life Total cost Residual value Depreciation 25 years 68,000 6,800 2,448 5 years 25 years 10 years 5 years 5 years 7 years 7 years 7 years 5 years 25 years 10 years 10 years 25 years 25 years 15 years 1,099.50 27945 990 3950 31600 675 1,900 1,974 1790 156000 15876 36000 260000 50000 100000 757800 109.95 2,794.5 99 395 3160 67.5 190 197.4 179 15600 1587.6 3600 26000 5000 10000 197.91 1006.02 89.1 711 5,688 86.79 244.29 253.8 322.2 5616 1428.84 3240 9360 1800 6000 38492

3. Furniture and Fixtures Table 5.2 will show the furniture and fixtures to be used with their estimated useful life. Ten percent of

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the cost will be used for the computation of salvage value. The assets are as follows:

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Table 5.2. Summary of Furniture and Fixture

A. Furniture & fixtures Useful life Total cost Residual value Wall clock Trash bin Grocery carts Grocery stand Headset Office table Filing cabinet Office chair Total 5 years 8 years 10 years 10 years 5 years 15 years 15 years 5 years 598 600 10000 12000 1000 2300 5000 1590 33,088 59.8 60 1000 1200 100 230 500 159 107.64 67.5 900 1080 180 138 300 286.20 3059.34 Depreciation

B. Liabilities a. Current liabilities 1. SSS, Pagibig and withholding tax These payables are based on the salaries and wages of the employees. The SSS, philhealth , and pagibig deducted

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this month it will be payable the following month. As regards to the tax payable it will be withheld for the period of time to be paid every on or before April 15 2. Current portion of long term debt This is equivalent to the principal to be paid in instalments basis to the bank for the following year. b. Noncurrent liabilities This will include the portion of the bank loan which is not due within the current operating year or the succeeding period. c. stock holders equity The incorporators will contribute a capital in terms of money amounting to Php 8,000,000 each. Since there are seven incorporators which will invest, the amount will total to PHp 56,000,000. The investor will contribute additional investment after 5 years of the operation to

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evaluate whether the proposed business profitable but there will be no capital withdrawal for the 1st 5 year of operation. The business will also have an authorized capital stock equivalent to 2 million shares having a 100 par value. As part of the policy, the investor will be given 20% cash dividend based on the net income every year

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C. revenues The proponents assume that the sales will increase by according to the projected demand of the following years and the following years, the estimated spending by 25%. It is estimate that 3 customers per day will avail of the delivery and demand will increase by 60% in the next year as known to the public. Delivery will be computed by the no. Of customers a year multiplied the minimum purchase and delivery cost set by the company. Other revenues would include interest income that will be computed based on the cash in bank balance last year multiplied by the interest rate of Banco de Oro for deposit amounting to 4,000,000 and above. The interest rate amounted to .875%. D. Operating expenses a. 13th month pay This incentive will be given as a fringe benefit to employees every end of the year. The 13th month pay will be equivalent to the monthly salaries of the3 employees. However, the 13th month pay will not be equal to the monthly salary of the employee if they entered at the middle of the year, the computation will be based on the total

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accumulated income for the whole year and will be divided by 12 months. That would be basis of the fringe benefit that will expense. b. supplies expense It is assumed that 80 % of all the supplies (sum of the beginning supplies and all current year purchases) will be expense every year while 20% will be the ending inventory. c. interest expense For the computation of the interest expense, it is assumed that the inflation rate will be used. The inflation rate used was 3.9% which was based on the average inflation rate computed as of January 2012. d. repairs and maintenance expense Repairs and maintenance expenses will be incurred to prolong the life of the building and to ensure the full capacity of the property plant and equipment. As a company policy, there would be no cost to be incurred during the 1st year of operation gradually increased by .086% in the succeeding years based on the book value of the building. The percentage was computed based on the average inflation rate of 3.9% divide by the estimated useful life of the building which is 50 years.

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e. Depreciation expense Straight line method will be used for computing the

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depreciation expense of noncurrent asset and building. In line with this, salvage value will be provide which is based on 10 % of the historical or acquisition cost of the asset f. Insurance expense The basis for computing insurance expense will be the straight line amortization. The insurance of the building

will be applicable for 5 years. g. Bank charges It is assumed that the bank charges will cost the business 200 per month that would include all the charges that is required to be paid at the bank. h. Income tax expense The income tax expense to be declared will be based on how much income will be earned by the proposed business after deducting all the expenses from the gross profit. The income tax expense to be reported will be 30% of the total operating income.