Final Chocolate Assignment
- 1. Input Section: Inflows Sales Cash 20% Credit Card 60% Fee: 4% On Credit 20% Cost of Goods Sold % of sales 66% Sales 2011 2012 Total Sales 325000 400000 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Seasonality(2011 & 2012) 4% 28% 10% 2% 13% 6% 2% 2% 2% 10% 4% 17% Sales (2010) 25000 7500 32000 Wages Emp #1 Emp #2 Hourly Rate 15 10 Hours/Month 144 108 Benefits 25% 18% Outflows Materials (COGS) 60% Safety Stock 500 Advertising 500 400 300 300 Telephone/Internet 150 Meals/Entertainment 200 Insurance - content 250 Vehicle Lease 200 Vehicle Insurance 100 Vehicle Maintenance 200 Legal and Accounting 100 Bank Charges 45 Office Supplies 100 Miscellaneous 350 Drawings 1000 Amortization Schedule Rent 12 1000 Capital Assets 2% Improvements 28000 Improvements 2% Chamber of Commerce 360 Van 2% Candy Makers Assoc. 450 Safety Net (Contingency Amount) 2000 Line of Credit 100000 Interest 4% Family Loan 9000 Interest 6% Cassandra MacDonald Section #2 Prepared For: Barbara Rice December 3rd, 2010
- 2. Cash Flow Statement Forecast For the Year Ending December 31, 2011 Month Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Totals Seasonality 4% 28% 10% 2% 13% 6% 2% 2% 2% 10% 4% 17% 100% Sales Based On Seasonality 13000 91000 32500 6500 42250 19500 6500 6500 6500 32500 13000 55250 325000 Inflows Cash (20%) 2600 18200 6500 1300 8450 3900 1300 1300 1300 6500 2600 11050 65000 Credit Card Sales (60%) 7800 54600 19500 3900 25350 11700 3900 3900 3900 19500 7800 33150 195000 Credit Sales Collections (20%) 6400 2600 18200 6500 1300 8450 3900 1300 1300 1300 6500 2600 60350 One Month Later 0 Family Loan 9000 9000 Total Inflows 25800 75400 44200 11700 35100 24050 9100 6500 6500 27300 16900 46800 329350 0 Outflows (Operational) 0 Merchandise Received 0 Merchandise Payments 66% 60060 21450 4290 27885 12870 4290 4290 4290 21450 8580 36465 10560 216480 Credit Cards Costs 4% 312 2184 780 156 1014 468 156 156 156 780 312 1326 7800 Advertising 500 400 300 300 1500 Bank Charges 45 45 45 45 45 45 45 45 45 45 45 45 540 Candy Makers Assoc. 450 450 Chamber of Commerce 360 360 Drawings 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000 Improvements 28000 28000 Insurance - content 250 250 250 250 250 250 250 250 250 250 250 250 3000 Legal and Accounting 100 100 100 100 100 100 100 100 100 100 100 100 1200 Meals/Entertainment 200 200 200 200 200 200 200 200 200 200 200 200 2400 Miscellaneous 350 350 350 350 350 350 350 350 350 350 350 350 4200 Office Supplies 100 100 100 100 100 100 100 100 100 100 100 100 1200 Rent 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000 Telephone/Internet 150 150 150 150 150 150 150 150 150 150 150 150 1800 Vehicle Insurance 100 100 100 100 100 100 100 100 100 100 100 100 1200 Vehicle Lease 200 200 200 200 200 200 200 200 200 200 200 200 2400 Vehicle Maintenance 200 200 200 200 200 200 200 200 200 200 200 200 2400 Employee 1 2160 2160 2160 2160 2160 2160 2160 2160 2160 2160 2160 2160 25920 Benefits 540 540 540 540 540 540 540 540 540 540 540 540 6480 Employee 2 1080 1080 2160 Benefits 194 194 388.8 Total Outflows (Operational) 67267 31703 12739 34436 20729 11153 39201 10841 28001 16055 43172 18581 331330 Other Outflows Family Loan Interest Expense 270 270 540 Family Principal Payment 3000 3000 Line of Credit Paid Back 40467 0 0 0 0 0 0 0 17126 5938 32230 95760 Interest on Line of Credit 135 0 0 0 0 0 0 0 57 20 107 319 Total Other Outflows 0 40602 0 0 0 270 0 0 0 17183 5958 35607 59017 Total Outflows 67267 72305 12739 34436 20729 11423 39201 10841 28001 33238 49130 54188 433498 Reconciliation Section Beginning Cash 3000 2000 5095 36555 13819 28190 40817 10716 6375 2000 2000 2000 Plus Total Inflows 25800 75400 44200 11700 35100 24050 9100 6500 6500 27300 16900 46800 Less Total Outflows 67267 72305 12739 34436 20729 11423 39201 10841 28001 33238 49130 54188 Ending Cash Before Borrowing -38467 5095 36555 13819 28190 40817 10716 6375 -15126 -3938 -30230 -5388 Contingency Amount 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 Line of Credit borrowed 40467 0 0 0 0 0 0 0 17126 5938 32230 7388 Ending Cash 2000 5095 36555 13819 28190 40817 10716 6375 2000 2000 2000 2000 Cassandra MacDonald Section #2 Prepared For: Barbara Rice December 3rd, 2010
- 3. Proforma Income Statement The Chocolate Store For Year Ending December 21, 2011 Chocolate Store SME Sales 325000 100% 100% Less: Cost of Sales 214500 66% 55.2% Gross Profit 110500 34% 45% Operating Expenses Advertising 1500 0.5% 1.0% Bank Charges 540 0.2% 1.6% Candy Makers 450 0.1% Chamber of Commerce 360 0.1% Credit Card Fee (4%) 7800 2.4% Depreciation 10560 3.2% 2.3% Insurance - content 3000 0.9% 0.5% Meals/Entertainment 2400 0.7% Miscellaneous 4200 1.3% Office Supplies 1200 0.4% Professional Fees (legal & accting) 1200 0.4% Rent 12000 3.7% 7.9% Salary - benefits (FT) 6480 2.0% Salary - benefits (PT) 388.8 0.1% 3.0% Salary (FT) 25920 8.0% Salary (PT) 2160 0.7% Telephone/Internet 1800 0.6% 1.5% Vehicle - car lease 2400 0.7% 0.8% Vehicle - Insurance (both) 1200 0.4% Vehicle - Maintenance (both) 2400 0.7% Subtotal of Operating Expenses 87959 Net Profit Before Interest 22541 Interest Expenses Interest (Family Loan) 540 Interest (Line of Credit) 319 Total Interest Expense 859 Net Profit After Interest 21682 Depreciation Orig Capital Value 21,000 Add Leasehold 28000 Add Van 9,000 Total 58,000 Less This Year's Depreciation 10560 Previous Depreciation 6000 41440 Cassandra MacDonald Section #2 Prepared For: Barbara Rice December 3rd, 2010
- 4. Proforma Proforma Balance Sheet As of December 31, 2011 Assets Liabilities Current Assets Current Liabilities Cash on Hand 2000 Family Loan Owed in 2012 3000 Accounts Receivable 11050 Accounts Payable Inventory On Hand * 10280 Line of Credit Payable 7388 Total Current Assets 23330 Total Current Liabilities 10388 Long Term Assets Net Capital Items 15000 Long Term Liabilities Van added (Jan 2011) 8000 Family Loan (2013) 3000 Leasehold (July 2011) 3000 Total LT Liabilities 3000 Less: Deprec 10560 Total Liabilities 13388 Ending Net Capital Item Value 41440 Equity Beginning Equity 32700 Total Assets 64770 Add Profit / Less Losses 21682 Less Drawings 12000 Add Van 9000 Ending Equity 51382 Total Liabilities and Equity 64770 Inventory On Hand Beginning Inventory 8300 Plus Received 216480 Less Sold 214500 Equals Ending Inventory 10280 Cassandra MacDonald Prepared For: Barbara Rice December 3rd, 2010
- 5. Financial Notes Cash Flow Forecast Balance Sheet Sales Based On Seasonality Accounts Receivable 3000 Cash (20%) Family Loan Owed in 2012 3000 Credit Card Sales (60%) Credit Sales Collections (20%) Merchandise Payments 66% Rent: 1000 Employees: 2160 1080 Benefits: 540 194.4 Income Statement Chocolate Store SME 55.2% Less This Year's Deprec 10560 Wages and Benefits 3% Cassandra MacDonald Section #2 Prepared For: Barbara Rice December 3rd, 2010
- 6. Ratios and Analysis Chocolate Store SME Industry Benchmarks Difference Current ratio 2.2 Current ratio 1.3 -0.9 Debt to equity ratio 0.3 Debt to equity ratio 6.1 5.8 Interest coverage ratio 1.6 Interest coverage ratio 3 1.4 Debt ratio 0.2 Debt ratio 0.9 0.7 Revenue to equity ratio 6.3 Revenue to equity ratio 14 7.5 Revenue to closing inventory ratio 32 Revenue to closing inventory ratio 12 -19.4 Current debt to equity (%) 20 Current debt to equity (%) 251 230.4 Net profit to equity (%) 42 Net profit to equity (%) 44 1.9 Net fixed assets to equity (%) 126 Net fixed assets to equity (%) 328 201.8 Gross margin (%) 34 Gross margin (%) 43 9.0 Return on total assets (%) 36 Return on total assets (%) 9.4 -26.2 Collection period for AR (days) 12 Collection period for AR(days) 9.8 -2.6 Analysis Liquidity: -The chocolate store is less liqid than the industry. There is $2.25 of liabilities for every $1 of asstes. Where as industry is $1.30 diff of 0.90 Suzie's average collection period is higher than the indstry which could indicate she is trouble paying off debts and or bills if she is relying on payments from consumers. Revenue to closing revenue is significantly higher than the industry, indicating that Susie is holding on to inventory for way too long. Profitibility: Susie's debt to equity ratio is higher than the industry by 5.8. She does only have two loans at rates; line of credit 4% and family loan 6% Susies return on total assets in comparison to the industry is greater by 26.2% Also COGS is 66% of total sales, spending an extravagent amount on buying goods Debt: - Debt to ratio for the chocolate is comparison to the industry states that the chocolate store is in condition in relation to debt. Considering the fact that Susie wants to increase her sales to 400,000 next year her debt will increase substantially. Susies borrowing is increasing a lot towards the end of the year as well, this could be increasing her debt soon. Other Comments: Susie only has 12,000 in drawings, this is not enough money to live off Wages and Benefits percents is higher than the industry . Improvement Susie wants add to the chocolate store would harm her revenues and increase property taxes. Susie wishes to change to corporate sales, increasing her sales to 400,000 but such an action will increase such things as adversting, wages, etc. Cassandra MacDonald Prepared For: Barbara Rice December 3rd, 2010
- 7. Recommendations For this analysis I would recommend that Susie; 1) Consider having two part time employees, instead of one full time and one part time because she is already paying more than the industry average in wages and benefits and she is not bringing in enough money a year to support herself nevermind have a full time employee. Her FT employee makes 26,920 dollars a year when she is only bringing 12,000 in drawing in a year 2) Consider paying off the family loan and just stick with the line of credit because the line of credit is only 4% and the family loan is 6%, why pay more in interest to your family when you could take out a larger loan and gain some credit? 3) I think that Susie should look into new suppliers, because the fact that she spends 66% which is 214,500 on COGS when she is only bringing in 325,000. She could shop around for some potentially cheaper prices. It is better to look than insist on paying such high prices on goods. 4) Susie should reconsider before she makes improvements because she has only been open for three years and is not taking much revenues home with her at the end of the year. It would be more benefital to change locations and save money and make sure her company is stable enough before she decides to spend MORE money on the Chocolate Company. 5) The fact that Susie runs a Chocolate store makes it questionable to whether or not she will be able to write off her vehicle expenses as a business expense. She should look into this more because if these expenses do end up coming out of her pocket (total vehicle expenses $6000) she will only end up taking $6,000 a year home with her and the business would be in potentially bad financial situation if sales do not increase or expenses to not decrese substantially Cassandra MacDonald Section #2 Prepared For: Barbara Rice December 3rd, 2010