Question

Appendix 1: Include a projected cash-flow statement for years one through three. Search the internet and industry websites for approximate revenues / expenses. Show beginning / ending cash balances for each of the first three years … starting with $1 million start-up capital. Include additional appendices if warranted.

​​​​ YEAR 1​​ YEAR 2 ​​ YEAR 3

Starting Cash​​​$1,000,000​​$ 930,000​​$ 955,000

Gross Revenues​​$ 400,000​​$ 450,000​​$ 550,000

Less Cost of Goods Sold​$ 200,000​​$ 225,000​​$ 275,000

Operating Profit​​​$ 200,000​​$ 225,000​​$ 275,000

Less Fixed Costs:

Wages​​​$ 100,000​​$ 100,000​​$ 125,000

​Leaseholds/Equipment​$ 75,000​​$ 10,000​​$ 10,000

Rent​​​$ 60,000​​$ 60,000​​$ 60,000

Line-of-Credit/Interest​$ 0​​$ 0​​$ 0

Fees & Insurance​$ 5,000​​$ 5,000​​$ 5,000

​Promotion​​$ 30,000​​$ 25,000​​$ 25,000

​Total Fixed Costs​$ 270,000​​$ 200,000​​$ 225,000

Net Profit (Loss)​​($ 70,000)​​$ 25,000​​$ 50,000

Interest (e.g. $500k x2%)​$ 10,000​​$ 10,000​​$ 10,000

Ending Cash​​​$ 940,000​​$ 965,000​​$1,015,000

Interest Income is an optional income stream if assets are not otherwise being fully utilized.

For purposes of this exercise disregard corporate income tax and asset depreciation.

Assume investors will retain all funds in the company for the first three years.

Answer 1

PARTICULARS	YEAR 1	YEAR 2	YEAR 3
Starting Cash(OPENING CASH)	1,000,000	940,000	975,000
Gross Revenues	400,000	450,000	550,000
Less Cost of Goods Sold​	200,000	225,000	275,000
Operating Profit​​​$	200,000	225,000	275,000
LESS OTHER EXPENSES
SALARIES AND WAGES(SEMI FIXED EXPENSE)	100,000	100,000	125,000
Less Fixed Costs:
Leaseholds/Equipment	10,000	10,000	10,000
Rent	60,000	60,000	60,000
Line-of-Credit/Interest	0	0	0
Fees & Insurance	5,000	5,000	5,000
Promotion	25,000	25,000	25,000
Total Fixed Costs	100,000	100,000	100,000
LESS OTHER EXPENSES	70000	0	0
Net Profit (Loss)	(70,000)	25,000	50,000
§Interest (e.g. $500k x2%)​	10,000	10,000	10,000
Ending Cash(CLOSING CASHI)	940,000	975,000	1,035,000

THE CORRECTED CASH FLOW STATEMENT IS SHOWN ABOVE, FOR YOUR EASIER UNDERSTANDING THE CHANGE IS HIGHLIGHTED WITH DIFFERENT COLOUR.

NOTE 1 the closing balance is always equal to the opening balance next year, as there is no transaction between them.

NOTE 2 the fixed expense remain fixed for a particular period of time hence the figure have been altered

NOTE 3 the wages have been classified as semi-fixed cost remain fixed for a particular limit and then increases

note alternate assumption will give alternate figures hanse answer will change

If you have any query please free to ask in comment box.