Question

Answer all the questions below
I have select a business topic which is based on cycling retail shop we sell bicycles in following shop and do repairing as well so thats the business which i have select below are the questions which have to be answered in regards to cycling business

Financial Plan Format
1. Project cost

2. Financing plan and loan requirements

3. Security for loan

4. Profit and loss statement

5. Cash flow statement

6. Balance sheet

7. Loan repayment schedule

8. Break-even point (BEP)

9. Return on investment (ROI)

10. Financial analysis

Answer 1

The answers for the following topics related to the cycling business are as follows-

1. Project cost - Project cost is the total funds needed to complete the project or work that consists of a direct cost and indirect cost. The project costs are any expenditure made or estimated to be made to complete the project.

For cycling business project costs may be the following-

Fixed cost - Shop rent, electricity charges, Insurance etc.

Variable costs - Purchase of bicycles, salary and wages of staff etc.

2. Financing plan and loan requirement - For starting a business there may be a need of taking loan for which a financing plan can be made. For e.g. let suppose the following funds are required to start the business-

Purchase of bicycles - $500000

Advance and security deposit of rented shop - $20000

Working capital - $50000

Machinery and equipment - $80000

Total funds required = $650000

Suppose you have 150000 in your hand so the loan required from the outsiders would be $500000.

3. Security for Loan - Loan can be taken on the stock value as well as on the value of fixed assets. The loan type can be mortgage loan which will be available on fixed asset or cash credit limit which will be available on value of stock.

4. Profit and Loss account - The following is the projected profit and loss account with assumed figures-

Particulars	Amount
Sales	1200000
Direct costs	675000
Gross Margin	525000
Salary and Wages	150000
Sales and Marketing expenses	75000
Utilities	7500
Rent	24000
Depreciation	800
Total operating expenses	257300
Profit before Interest and Taxes	267700
Interest	37500
Profit before Taxes	230200
Taxes paid	57550
Profit after Tax	172650

5. Cash flow statement - Following is the projected cash floe statement with assumed figures-

Particulars	Amount
Cash sales	840000
Operating costs	652610
Repayment of Loan	50000
Purchase of Fixed Assets	22000
Net cash Flow	115390
Add - opening cash introduced	15000
Closing cash balance	130390

6. Balance Sheet - Following is the projected Balance sheet with assumed figures-

Assets	Amount
Current Assets
Accounts receivable	360000
Stock	150000
Cash	130390
Total Current Assets	640390
Long-term Assets
Net Fixed Assets	54000
Total Assets	694390
Liabilities	Amount
Current Liabilities
Accounts payables	240000
Current borrowings	129650
Total current Liabilities	369650
Long-term liabilities	152090
Retained Earnings	172650
Total Liabilities	694390

7. Loan rapayment schedule - Let suppose we take a loan of $500000 for 10 year at 11% interest rate, the schedule of repayment will be as follows-

No. of years	Principal payment	Interest payment
1	₹ 29,900.71	₹ 55,000.00
2	₹ 33,189.79	₹ 51,710.92
3	₹ 36,840.67	₹ 48,060.04
4	₹ 40,893.14	₹ 44,007.57
5	₹ 45,391.39	₹ 39,509.33
6	₹ 50,384.44	₹ 34,516.27
7	₹ 55,926.73	₹ 28,973.98
8	₹ 62,078.67	₹ 22,822.04
9	₹ 68,907.32	₹ 15,993.39
10	₹ 76,487.13	₹ 8,413.58

8. Break even point in units = Fixed cost / Contribution margin

= 50000 / (sales price - variable cost per unit)

= 50000 / (8000 - 4000)

= 12.5

9. Return on Investment = Net profit / Total Assets

= 172650 / 694390

= 24.86%

10. Financial analysis

Gross margin ratio = Gross margin / Net sales

= 525000/1200000

= 43.75

PBIT ratio = PBIT/Net sales

= 267700/1200000

= 22.31

PAT ratio = PAT/Net sales

= 172650/1200000

= 14.39

Current ratio = Current assets/current liabilities

= 640390/369650

= 1.73

Quick ratio = Liquid Assets/Current liabilities

= 490390/369650

= 1.33

Asset turnover ratio = Net sales/Total assets

= 1200000/640390

= 1.73

Fixed Asset t/o ratio = Net sales/fixed assets

= 1200000/54000

= 22.22

Inventory t/o ratio = Net sales/closing stock

= 1200000/150000

= 8