CHAPTER VI
FINANCIAL STUDY
The success of any business endeavor emanates from
thorough and in-depth study of every aspect of the business.
This encompasses consideration on the aspects of management,
marketing, technicalities, socio-economic, as well financial
matters.
The feasibility of a business idea is manifested by
real demand, competitiveness, competence of the management
and most importantly, a good return on investment. Presented
in this chapter are the projected financial statements as
well as the analytical tools used by the proponents to
evaluate the financial viability of the proposed business.
The concepts and assumptions that underlie the preparation
of these projected financial statements are as follows:
1. The initial capitalization of the proposed business
shall be P2,170,000. This amount may be raised by
availing a loan from banks or to be invested by the
one executing the proposed business. For the purpose
of this study, it was assumed that said amount is to
be invested by the partners equally.
2. Property and equipment have been depreciated using
the straight-line method over the estimated useful
lives as presented in the schedules, assuming no
residual/salvage values.
3. Estimated annual revenue is assumed to increase by
10% annually.
4. Gross margin is assumed at 60% of cost of sales.
5. It was assumed that goods and services to be used in
the business will be purchased from VAT registered
supplier, substantiated with valid documents, thus
can be claimed as input VAT.
6. The salaries including the SSS, Pag Ibig and
Philhealth contributions of General Manager, Sales
Manager, Production Manager, and Operation Manager
are treated as part of the distribution of profit
sharing, hence not considered as expense. The
balance of net income after deducting the same shall
be distributed equally to the partners.
7. Estimated operating expenses like communication and
supplies were assumed to increase equal to the
average rate of inflation on annual basis. Average
inflation rate as of December 2022 is 5.8%
8. Taxes and licenses include business permit and BIR
annual registration fee which was based on the
prevailing rate as mandated by the local government
code and the tax code.
9. Amounts presented on the financial statements as
well as the schedules and computations are in
Philippine Peso.
Project Cost Summary
Land Php 348,000.00
Building 1,100,000.00
Machinery and equipment 121,299.00
Furniture and fixtures 66,395.00
Kitchen Utensils and Supplies 71,250.00
Working Capital 463,056.00
Total Php 2,170,000.00
