INTRODUCTION

COVID-19 had an effect practically on every facet of life. In March of 2020, the
virus had infected more than one hundred (100) nations, causing declaration of global
pandemic by the World Health Organization. Lockdowns, harsh travel restrictions and
“social distancing” measures soon followed. Unsurprisingly, the events industry was
among those most severely impacted by the pandemic. Private occasions like weddings
and birthdays have been hampered by the restrictions put in place as a result of it.
Nevertheless, seeing this challenge as an opportunity is a great start to have a new
business venture.
the proponent decided to come up with the idea of providing services under this
industry which is new to the eyes of the market, can spark their interest upon seeing the
array of services offered and can tickle their imagination of what could happen if they
avail the services without compromising the health of the clients through providing a
safe space for them to enjoy.
The proponent specifically would like to deliver enjoyment to kids through social
interaction that these services can give because whatever kids experience during their
childhood have direct impact on their character development thru the establishment of
Little toes: Mobile Playground and Inflatables.
The proposed establishment of Little Toes: Mobile Playground and Inflatables
provides rental of mobile playground and inflatables within the province of Batangas. It
may be rented out for parties and events.

VISION

Little Toes: Mobile Playground and Inflatables aims to be a leader in providing a

wide range of services for kiddie parties in Batangas by the year 2025.

MISSION

Little Toes: Mobile Playground and Inflatables is committed to provide quality

service to every engagement with utmost prudence to bring fun and memorable

experience to the clients.

LOGO
 A well designed logo should be easily recognizable and induce positive

emotions towards the company (Pittard, Ewing & Jevons, 2007). In this endeavour,

colour as one of the element of logo plays a significant role (Seimiene & Kamarauskaite,

2014). The color orange was chosen to be the main color of the logo as it suggests

cheerfulness and friendliness. It signifies a brand that is light-hearted and not too

serious, but still confident. It is also usually used in dealing with kids’ products and

foods. Moreover, toes in the logo represents the kids that this proposed business

caters.

TARGET MARKET

The target market of the proposed Little Toes: Mobile Playground and Inflatables

will be composed mainly of the households located anywhere in Batangas who are

willing to provide their kids joyous experience through renting set of toys and inflatables.

EXISTING COMPETITORS

Searching in different social media sites, there were less than ten (10)

businesses in the province of Batangas which offer similar services. All of them only

either provide rental of mobile playground or inflatables and not both. This fact gives the

proposed business an edge from the rest of its potential competitors. Other entertainers

or event suppliers like magicians, clowns and the likes can also be considered as

competitors.

SUPPLIERS
 There are various physical stores in Metro Manila which offers wide array of toys.

Likewise, online shops like Shopee, Lazada and Amazon are great platforms to dive

into for different and eye-catching toys.

PACKAGING AND PRICING

The goal of the pricing strategy is to establish how much the business can

charge its customer. The going rate pricing is the company's preferred pricing strategy.

Business uses going rate pricing, which involves setting the price of the product in

accordance with the market's current prices, in particular those competitors, and may

sometimes charge more or less depending on the value of the product or services being

offered.
 Figure 2: Chuckle Package

“Little Toes: Mobile Playground and Inflatables” has five (5) packages. Figure 2

shows the Chuckle Package. This is offered for P7,000.00 for six (6) hour use and

includes mini inflatable bouncer, caterpillar tunnel, railcar, climber, slide with basketball

hoop, seesaw, two (2) animal bouncers, ball pit, play fence and mats and shoe racks.

This requires an area of 5.2 meters by 4.7 meters.

Figure 3: Wiggle Package

Figure 3 shows the Wiggle Package. This is offered also for P7,000.00 for six (6)

hour use and includes crocodile inflatable bouncer, giant connect 4, dual swing,

basketball duo, giant blocks, two (2) ride on cars, two (2) animal bouncers, play fence

and mats and shoe racks. This requires an area of 5.2 meters by 4.7 meters.
 Figure 4: Tickle Package

Figure 4 shows the Tickle Package. This is offered for P8,000.00 for six (6) hour

use and includes donut inflatable bouncer with ball pit, playhouse, picnic bench, slide,

seesaw, two (2) bouncing animals, kitchen, market stall, cake shop, push cart, play

fence and mats and shoe racks. This requires an area of 5.2 meters by 4.7 meters.
 Figure 5: Delight Package

Figure 5 shows the Delight Package. This is offered for P10,000.00 for six (6)

hour use and includes mini inflatable bouncer, caterpillar tunnel, dual swing, giant

connect 4, giant blocks, rail car, climber, slide with basketball hoop, seesaw, two (2)

animal bouncers, ball pit, play fence and mats and shoe racks. This requires an area of

7.5 meters by 4.7 meters.

 Figure 6: List of Inflatables

Figure 6 shows the list of inflatables ready for six (6) hour dry-use and its

corresponding dimension. Inflatables available are the following: mini inflatable bouncer,

donut inflatable bouncer, crocodile inflatable bouncer, dinosaur inflatable pool and

obstacle course inflatable pool.

Every package has one or two persons ready to assemble the mobile playground

and to assist and keep an eye on the kids while playing to ensure their safety. Further,

prices mentioned above are exclusive of the transportation fees which rates depend on

the distance from where the units are located.

PROMOTION
 The proposed business will use Facebook as its market place as almost all

Filipinos are users of the said social media. All events booked will be posted online to

encourage its target market to avail the services. It will also take advantage the

Facebook Advertising Services such as boosted posts. Boosted posts are ads ones

create from existing posts on Facebook Page. Boosting a post can help the business

get more messages, video views, leads or calls. Through this, “Little Toes: Mobile

Playground and Inflatables may also reach new people who are likely interested in its

page or business, but don't currently follow it.

SWOT ANALYSIS: STRENGTHS

Low Risk. Starting a business from home entails little risk-- financially and

beyond. Overhead costs will be minimal, limited to computers, business phones or

personal cell phones and other applicable materials, like internet connection. Also,

there is no need for a sizeable expenditure on office rental or office purchases. It can

save time and money of the proprietor.

Basically an Online Business. The flexibility of online businesses can be

translated into flexible location and time of doing business. Unlike traditional businesses

where someone has to be present in the store at all times, online businesses allow

someone to run the company from anywhere, anytime. Thus, online businesses give

that work-life balance. In addition, it does not restrict someone to do something else.

The sole proprietor can have more than one occupation.

Generally a One-Man Business. Efficiency is improved by the owner's personal

interests. Since the owner does not need to consult anyone, decision-making is swift.
His/her employees get to know him/her personally, which boosts employee motivation.

A friendly relationship with customers offers a feedback mechanism that can serve to

aid in maximizing customer satisfaction.

First in the market. “Little Toes: Mobile Playground and Inflatables” would have

been the first of its kind in Batangas Province. That means service provided is unique

and new to the market. This proposed business likewise addresses the threat against

health brought by the Covid-19 as it offers exclusive use of the mobile playground and

inflatables. It can lessen the possibility of transmission of the said virus.

SWOT ANALYSIS: WEAKNESS

Celebrations/ Events usually happen only on weekends. Though having all days

in a week booked is the goal, it cannot be denied that Filipinos have a habit of

celebrating and throwing parties on weekends due to many reasons, e.g. availability of

their guests. This has a great impact on the business because it basically limits the

operation.

SWOT ANALYSIS: OPPORTUNITIES

 Easing COVID-19 restrictions. As demand begins to pick up again, many firms

will understandably anticipate an increase in activity over the coming months and

beyond.

Numerous event affiliation available. With numerous event affiliation available in

the market, the proposed business will not have a hard time in reaching its target

market.

Business Expansion. A possibility of expansion of business on neighboring

provinces may arise resulting to growth of the business and product’s profitability. New

branches can be opened to other areas for further expansion.

SWOT ANALYSIS: THREAT

Fraud and Data Concerns. Online dishonesty undermines consumers' trust in the

internet marketing industry as a whole.

Economic crisis. When economic crisis arises especially on supply and demand

area of the product and the income of the consumers, the profitability of the business

may be affected due to the factors that might affect the purchasing power of the market.

OPERATIONS

Operations plan assesses the details of how one will deliver a product or service.

It entails a flow chart of how products and services evolve and move through

businesses to physically reach the market. (Wolfe, 2012)

ACQUISITION OF MATERIALS
 The success of this service business depends on the selection of appropriate

materials it can offer. The following are the things to consider in completing the set of

toys:

Durability. Durability makes things more economical. Cheaper, less

sturdy products are inherently more prone to breaking, which means that

maintenance or replacement costs can quickly ramp up, ultimately making

them more expensive.

Safety. All toys must be checked and bought after hard scrutiny of

the design to avoid purchasing toys with design defect. When a product is

created with potential risk, a design flaw occurs. This might occur, for

instance, if a product was made with a sharp edge and no safeguards or if

lead paint was used in the construction of a child's toy.

Distinctiveness. This helps in maintaining your collection hard for

competitors to imitate. This may be a challenge because it requires a lot of

effort and research to find a good and reliable toy supplier. In addition,

clients are always looking for a new product or concept that is not readily

available in the market. Hence, that is another reason to look for distinct

toys.

Price. Cost and benefit analysis must be measured. Getting an item

at a low price does not guarantee an income. However, item at a high

price does not also automatically a good buy because it might be hard to

market. Judgement and experience of the owner will take charge of this.
 Toys can be purchased anywhere. It can be in a physical store or in an online

store as long as it satisfies the things mentioned above. Table 1 shows the list of toys

and its corresponding unit price to start the proposed business.

Description Quantity Unit Price Total Cost

Mini Inflatable Bouncer 1 12,000.00 12,000.00

Caterpillar Tunnel 1 3,000.00 3,000.00

Railcar 1 2,000.00 2,000.00

Climber 1 3,000.00 3,000.00

Slide with Basketball Hoop 1 3,000.00 3,000.00

Seesaw 1 2,500.00 2,500.00

Animal Bouncers 2 200.00 400.00

Ball pit 1 5,000.00 5,000.00

Playfence 1 5,000.00 5,000.00

Mats 1 3,000.00 3,000.00

Shoe Rack 1 500.00 500.00

Crocodile Inflatable Bouncer 1 12,000.00 12,000.00

Giant Connect 4 1 10,000.00 10,000.00

Dual Swing 1 5,000.00 5,000.00

Basketball Duo 1 8,000.00 8,000.00

Giant Blocks 1 2,000.00 2,000.00

Ride on Cars 2 7,500.00 15,000.00

Donut Inflatable Bouncer with Ball pit 1 20,000.00 20,000.00

Play house 1 9,000.00 9,000.00

Picnic Bench 1 5,000.00 5,000.00

Slide with Basketball Hoop 1 6,000.00 6,000.00

Kitchen 1 7,000.00 7,000.00

Market Stall 1 7,000.00 7,000.00

Cake Shop 1 7,000.00 7,000.00

Push Cart 1 500.00 500.00

Dinosaur Inflatable Pool 1 12,000.00 12,000.00

Obstacle Course Inflatable Pool 1 17,500.00 17,500.00

Total 182,400.00

LOCATION

The proposed business does not require a big space to have it started as it is

designed as a home-based business. The proponent just specified Batangas province

as her target location as it is her hometown. What is more important is the location
where the toys will be used as assembling the mobile playground requires minimum

space. This must be communicated first to the clients before finalizing the contract.

ONLINE SET-UP

The main social media platform that will be used is Facebook. First, Facebook

Business Page must be created. According to Anderson, 2022, the following are the

steps on how to create one:

1. Log into the personal Facebook account and create a business page.

2. Add Facebook profile picture and cover photo.

3. Connect the Facebook business page to Viber.

4. Create a username.

5. Add the business information.

6. Create a first post.

7. Invite followers.

Likewise, setting up automated responses is essential. Automated responses in

Meta Business Suite let the owner manage his/her business’s messages across

Facebook and Instagram. This feature can help one stay organized, reach more

potential customers and build strong relationships with people who interact with his/her

business’s Facebook Page and Instagram account.

OVERHEAD COST

The best part of this proposed business is its low overhead cost. A smart phone,

strong internet connection and disinfecting materials are enough. Two assistants or staff
are also needed to get the business going. To transport the toys to the venue, there are

two ways depending on the capital investment available. Buying a brand new or

second-hand utility van is the first option while the second option is the least expensive

but not the most convenient, hiring a van or any other transportation means.

Description Monthly Rate

Telecommunication Plan 699.00

Advertising Expense 2,000.00

Repair and Maintenance Cost 1,000.00

Staff Cost 17,400.00

Monthly Overhead Cost 21,099.00

PROCESS FLOW

The business process for renting goes as follows:

1. With all the promotion and advertising done, queries through call, text or online,

must come in.

2. The owner must be attentive enough to answer all the queries thrown by his/her

possible client.

3. Once client agrees, Terms and Conditions will be filled in with necessary

information and signed by him/her. See Appendix A.

4. A day before the event, get in touch with the client and give assurance that the

business has been booked for his/her event.

5. With the help of the staff, prepare the toys to be transported. Have it cleaned and

sanitized before loading it inside the vehicle. All disinfecting materials like alcohol

and anti-bacterial fog machine must also be readied.

 6. On the day of the event, make sure to arrive one (1) hour before the event proper

to give time for assembling the mobile playground and/or inflatables and for the

onsite disinfection of the toys.

7. Afterwards, collect the remaining balance due from the client.

8. Take all the toys back to home office and make sure no toy is left behind.

9. After usage, clean and disinfect the toys.

10. The staff is expected to remit the collection to the owner right away.

11. THE MANAGEMENT TEAM

One key cornerstone of a business is the way it is handled. This chapter discusses what

form of business ownership the company would have as well as showing the initial

contribution needed. It would also include the type of organizational structure to be

used, the number of manpower that would be needed and the job specification. In

addition, it would also include the job description, the compensation of each personnel

along with all needed legal requirements of the business.

Form of Business Operation

One important factor to be considered is how a business should be structured

and formulated. After reviewing all the information available and gathered, the

proponents come up with the decision of choosing sole proprietorship as the best form

of business ownership for this kind of business. A sole proprietorship is a type of

business organization in which one person owns and operates the whole enterprise.

The owner of the company is referred to as the "sole proprietor" and is the single owner
of all the company's assets and earnings (Ballada, 2009). Additionally, he or she is

personally responsible for any debts and losses the company may suffer.

The process of registering a sole proprietorship for business is not too difficult

since it is the simplest type of business in the Philippines. Sole proprietorships are also

the easiest to run since they do not have the same formalities and regulations that

corporations and partnerships have, such as board meetings, board elections, share

capital, etc. 

The sole proprietor just needs to register his/her name with the Department of

Trade and Industry (DTI) and obtains any necessary regional licenses and permissions

because the law recognizes the owner and the business as one and the same entity.

Here’s a step-by-step process for registering a sole proprietorship in the

Philippines:

1. Register a business name with DTI to acquire a DTI Certificate of Registration;

2. Register with the Barangay Office where the business is going to be located to

acquire a Barangay Certificate of Business Registration;

3. Register with the Mayor’s Office to acquire a Mayor’s Permit; and

4. Register with the Bureau of Internal Revenue (BIR) to acquire a Certificate of

Registration.  

ORGANIZATIONAL STRUCTURE
 Organization structure is the framework that defines the boundaries of the formal

organization and within which the organization operates (Ghillyer, 2009). It is defined

typically as hierarchical arrangement of lines of authority, communications,

rights and duties of an organization. Organizational structure determines how the roles,

power and responsibilities are assigned, controlled, and coordinated, and

how information flows between the different levels of management.

The line structure, the simplest form of organization is adopted by the proponent.

In a line structure, the subordinates are directly responsible to their superiors, and the

superiors are in charge of giving orders to their subordinates. There is a direct way of

responsibility from the manager to his subordinates.

Owner/ General Manager

Staff 1 Staff 2

Figure 7: Organizational Structure

Figure 7 shows the organizational chart of Little Toes: Mobile Playground and

Inflatables depicting the structure of the organization with its rank. The chart shows the

composition of the organization: the owner/manager and two staff. General Manager is

the one who has the complete power and responsibility to perform control and

administration purposes. While the workers below would follow the tasks assigned and

given to them responsibly.

MANPOWER REQUIREMENTS

A business needs human resource in order to accomplish specified work loads of

organizations. And personnel of various qualities and quantities must be recruited and

made available at appropriate times (Iñigo, 2009). Thus, people in an organization are

the greatest asset a firm can have. In order for an effective and efficient operation,

people involved must be valuable.

JOB DESCRIPTION

Job descriptions are usually essential for managing people in organizations. A

job description is defined as a broad, general, and written statement of a specific job,

based on findings on job specification. It generally includes duties, purpose,

responsibilities, scope, and working conditions of a job. (WebFinance, 2012).

General Manager

 Responsible for managing, controlling and supervising the over-all flow of the

business operations

 Responsible for decision-making regarding the day-to-day operation of the

organization and recruitment of manpower

 Formulates and implements the company policies and objectives that should be

complied with

 Monitors and supervises of the production process

  In charge of the inspection of the products

 In charge of negotiation with retailers, suppliers and consumers

 Responsible for external and internal communication of the business

 Prepares and maintains the complete list of transactions and financial statements

of the firm

Staff

 Prepare and disinfect the toys needed before use

 Drives the toy packages to the event place

 Responsible for assisting the kids during playtime

 Collect and clean the toys after use

 Obliged to comply with all the policies and regulations established

Job Specification

A job specification is a statement of employee characteristics and qualifications

required for satisfactory performance of defined duties and tasks comprising a specific

job or function. It is derived from job analysis. It is also defined as the written skills,

abilities, or attributes necessary for the success of a venture’s operation. (Ghillyer,

2009).

General Manager

 Must have a pleasing personality

 Must be a effective decision-maker

  Has sufficient knowledge in handling and managing business operations

 Must be physically and mentally fit for the position

 Must be hardworking, efficient and with good moral character

 Must be good at interacting and socializing with all the different kinds of people

 Capable of preparing reliable financial and business reports

 Must be a computer literate

Staff

 It can either be a male or female

 Must have a pleasing personality

 Must be with a good moral character

 Must be fast, efficient and effective on his/her job

 Has a driver’s license

 Must be physically and mentally fit.

IMPLEMENTATION SCHEDULE AND

RISKS ASSOCIATED WITH THE VENTURE

Terms and conditions make it clear what should happen in each specific

circumstance. They set out the key commercial terms you are offering to your clients

and helps the contractual parties to understand their duties, rights, roles and

responsibilities. That being said, “Little Toes: Mobile Playground and Inflatables”

devices its own terms and conditions which state that:

 1. Reservation fee is required and deductible on total package rate. It is non-

refundable, non-transferable and forfeited if booking is cancelled.

2. Transportation fee to be shouldered by the client.

3. Payment of balance is due upon setup.

4. Mode of payment may be in cash, Gcash, Paymaya or bank transfer.

5. Maximum duration- Mobile Playground is six (6) hours.

6. Any changes concerning the date, venue and time should be made at least

one (1) week before the event date. May be rebooked one time, only on

available dates on the same year.

7. The mobile playground will be set up one (1) hour before the event proper.

8. The chosen package must be paid in full regardless if all toys or inflatables

are unused due to limited space.

9. Once set up, the mobile playground can no longer be transferred to another

area unless for unexpected rain in an outdoor setup.

10. Crew meal/s must be provided.

11. All safety rules must be adhered to.

12. The client may be liable to any damage caused by misuse of the playground

toys and inflatables or due to violation of the safety rules.

13. Little Toes: Mobile Playground and Inflatables will not be held liable for any

accident or injury that may occur during the active playtime.

To ensure owner, employees and clients do not injure themselves, Little Toes”

Mobile Playground and Inflatables crafted its own safety rules as well. These are posted
right in front of the playground’s entrance. See Appendix B. Safety rules are the

following:

1. Adult supervision is a must.

2. All toys should only be sued within the fenced playground.

3. Socks are required.

4. Wearing of eyeglasses is not advised.

5. No pointed/ sharp objects including jewelry.

6. Take turns. No rough play.

7. Observe the maximum capacity of the inflatables, no overcrowding.

8. Food and drinks are not allowed.

THE FINANCIAL PLAN

This financial plan is one of the aspects of business that are significant and must

be considered. It is important in identifying the profitability, liquidity and solvency of the

business midst all the complexities and economic challenges. This part composes the

form of financial capability and performance of the firm. In this specific study, it helps the

proponents to present the overall financial feasibility of the study through the pertinent

facts and data gathered and estimated. Practical and realistic assumption must be

observed and used in determining the financial performance of the business.

TOTAL PROJECTED COST

 Total project costs are allowable direct and indirect costs incurred by the

business to carry out the operation of the firm. Table 3 shows the total projected cost of

Little Toes: Mobile Playground and Inflatables for the period of two months.

Total Non-Current Assets

Property and Equipment 192,400.00
Working Capital for A Month
Monthly Overhead Cost 42,198.00
Pre-Operating Expenses
Taxes and Licenses 2,000.00 2,000.00
Cash Requirements 236,598.00
Cash Contingencies 10,000.00
Total Project Cost 246,598.00

Table 3: Total Projected Cost

INITIAL CAPITAL REQUIREMENTS

Little Toes: Mobile Playground and Inflatables require sufficient initial

capitalization to start up and support the first two months of the business. Considering

all the aspects given, the initial capital of the business for two months is P246,598.00.

This is the initial capital needed if all the toys enumerated previously are acquired.

Thus, this amount is not really fixed. It can go less or more depending on the decision

and capacity of the owner. The proponent also not include the vehicle to be used for it is

upon the discretion of the owner.

SOURCES OF FINANCING
 Financing is an act of providing funds for business activities, making purchases

or investing. Financial institutions and banks are in the business of financing as they

provide capital to businesses, consumers and investors to help them achieve their

goals.

The initial contribution of sole proprietor would come from his/her personal funds.

Another choice that he/she may elect and choose as another source of capital

whenever there is a need is to borrow from financial institutions and other banks.

FINANCIAL ASSUMPTIONS

The following assumptions were used by the proponent in the computation

analysis of financial performance and position of the business.

1. The business would start its operation in 2023.

2. Sales

a. Number of events to get booked on the first year of operation would be at 70

and would increase by twenty percent (20%) every after year.

b. Selling price to consumers would be 98.63% above cost.

c. Cash sales would be 100% of gross sales.

d. Average selling price would be the basis of computing projected sales.

3. No additional investment would be made to acquire another property and

equipment.

4. Expenses
 a. There would be two (2) staff with labor rate P435.00.

b. Advertising expense and repair and maintenance cost were estimated to

remain the same.

5. Depreciation method

a. Straight line method of depreciation would be used throughout the study.

b. The toys lodged under Property and Equipment would have a three- year

useful life with zero salvage value.

6. There will be no income tax expense since the business is under the Barangay

Micro Business Enterprises Law.

7. Capital is sourced through personal funding of the proprietor.

a. VAT is allowed at 12%.

b. There would be no withholding taxes.

c. Thirteenth month pay will be presented to the workers depending on their

salary allocation.

d. Fees and licenses are strictly based on the assessment given by the Office of

City Treasurer.

FINANCIAL STATEMENTS

The financial statements are the means by which the information accumulated

and processed in the financial accounting is periodically communicated to the user.

Without accounting information embodied in the financial statements users may not be

able to arrive at sound economic decision (Ballada, 2009).

 The objective of a financial statement is to provide information about the financial

position, financial performance, and cash flows of an entity that is useful to a wide range

of users in making economic decisions.

The financial statements represent the success of its operations, the policies and

strategies of management, insight into its future performance.

PROJECTED STATEMENT OF FINANCIAL PERFORMANCE

An income statement is a formal statement showing the performance of the

enterprise for a given period of time. It summarizes the revenues earned and expenses

incurred for such a period of time. Table 4 shows the projected statement of financial

performance for the first three years of operation of the proposed business.

Year 1 Year 2 Year 3

Revenue 560,000.00 672,000.00 806,400.00
Less: Cost of Service
Depreciation Expense 64,133.33 64,133.33 64,133.33
Overhead Cost 253,188.00 253,188.00 253,188.00
Gross Income 242,678.67 354,678.67 489,078.67
Less: Taxes and Licenses 2,000.00 500.00 500.00
Net Income 240,678.67 354,178.67 488,578.67

Table 4: Projected Statement of Financial Performance

PROJECTED STATEMENT OF CASH FLOW

The statement of cash flows provides information about the cash receipts and

cash payments of an entity during a period. It is a formal statement that classifies each
receipt and cash payments into operating, investing and financing activities. Table 5

shows its projected statement of cash for the first three years of operation.

Year 1 Year 2 Year 3

Cash on Hand, Beginning 10,000.00 314,812.00 733,124.00
Add: Gross Income 240,678.67 354,178.67 488,578.67
Depreciation Expense 64,133.33 64,133.33 64,133.33
Cash on Hand, Ending 314,812.00 733,124.00 1,285,836.00

Table 5: Projected Statement of Cash Flow

PROJECTED STATEMENT OF FINANCIAL POSITION

A balance sheet is a formal statement showing the financial position of an entity

for a particular date. The balance sheet represents three elements of financial position,

namely assets, liabilities and equity. Investors, creditors and other statement users

analyze the balance sheet to evaluate such factors as liquidity, solvency, financial

structure and capacity for adaptation. Table 6 shows its projected statement of financial

position for the first three years of operation.

Year 1 Year 2 Year 3

Assets
Cash 314,812.00 733,124.00 1,285,836.00
Property & Equipment, Net 128,266.67 64,133.33 -
Total Assets 443,078.67 797,257.33 1,285,836.00

Liability -
X, Capital 443,078.67 797,257.33 1,285,836.00
Total Liability and Capital 443,078.67 797,257.33 1,285,836.00
 Table 5: Projected Statement of Financial Position

GROSS PROFIT MARGIN

Gross Profit Margin shows the relationship between sales and the cost of

products sold, measures the ability of a company both to control costs and inventories

or manufacturing of products and to pass along price increases through.

Gross Profit Gross Profit

=
Margin Net Sales

Gross Profit Net Sales Gross Profit Margin

Year 1 242,678.67 560,000.00 43.34%
Year 2 354,678.67 672,000.00 52.78%
Year 3 489,078.67 806,400.00 60.65%

Table 7: Gross Profit Margin

The table shows that the gross profit ratio is stable with an average of 52.25%

which is a positive sign that the business is doing well in terms of finances and

capability.

OPERATING PROFIT MARGIN

The operating profit margin is a measure of overall operating efficiency and

incorporates all of the expenses associated with ordinary or normal business activities.
 Operating Profit Net Income
=
Margin Net Sales

Net Income Net Sales Operating Profit Margin

Year 1 240,678.67 560,000.00 42.98%
Year 2 354,178.67 672,000.00 52.71%
Year 3 488,578.67 806,400.00 60.59%

Table 8: Operating Profit Margin

The table exhibits an increase in ratio in each year which is favorable because it

indicates the ability of the company to control its operating expenses while sharply

increasing sales.

BREAK-EVEN POINT ANALYSIS

Break-even point is the level of sales volume where total revenues and total

expenses are equal, neither profit nor loss will result. Break-even sales of the proposed

business are as follows:

Fixed Cost Cont. Margin % Break Even Sales

Year 1 316,321.33 100% 316,887.20
Year 2 316,321.33 100% 316,792.75
Year 3 316,321.33 100% 316,714.08

Table 9: Break-Even Sales

 As presented in Table 9, almost all of the costs associated in running the

business are categorized as fixed. Therefore, break-even sales is nearly the same

amount of fixed costs.

MARGIN OF SAFETY

Margin of safety measures the potential effect of the risk that sales will fall short

on planned levels. This is the excess of actual sales over break-even sales which

indicates the amount by which sales would decrease before losses are incurred.

Projected Break-Even Margin of

Sales Sales Safety
Year 1 560,000.00 316,887.20 243,112.80
Year 2 672,000.00 316,792.75 355,207.25
Year 3 806,400.00 316,714.08 489,685.92

Table 10: Margin of Safety

The table shows the margin of safety ratio of the business for three years. An

increase in ratio indicates the capability of the company’s sales to cover the expenses

incurred and is far from break-even sales.

Payback Period

Payback Period is a method that does not consider time value of money. This

refers to the length of time or number of years it would take to recover an investment.
 Annual Cash
Cost of Payback
Inflow from Balance
Investment Period
Operating Activity
Year 1 246,598.00 304,812.00 - 0.81
Year 2 418,312.00
Year 3 552,712.00

Table 11: Payback Period

The table shows the payback period the proprietor may collect his/her initial

investment. Within almost ten months, he/she will receive back his/her capital which

means that the company is doing well in maximizing the resources.