Question

prepare a 3-year pro forma income statement and pro forma balance sheet, including expected cash flows and all associated assumptions.

Company: Bishrom (Nepali eyewear brand) outsources all the manufacturing in china.

Please assume all the data. you can make a fake statement.

Subject: Entrepreneurial finance

Answer 1

Income Statement of Bishrom				All Amounts in $
Particulars	Year-1	Year-2	Year-2	Assumption
Income
Revenue from Sales	200.00	220.00	242.00	Sales in 1st Year assumed 200 and growth of 10%
Other Income	10.00	11.00	12.10	Other Income assumed in 1st Year 10 and growth of 10%
Total Revenue(A)	210.00	231.00	254.10
Expenses
Salaries and wages	50.00	53.00	56.18	Sales and wages assumed in 1st year as 50 and inflation of 6%
Depreciation	10.00	9.00	8.10	Depreciation assumed 10% of Written down value
Interest			2.50	Interest on borrowing assumed @5%
Manufacturing Cots	75.00	77.25	79.57	Manufacturing cost assumed in 1st year as 75 and inflation of 3%
Other Expenses	5.00	5.10	5.20	Other expenses assumed in 1st year as 5 and inflation of 2%
Total Expenses(B)	140.00	144.35	151.55
Profit before Tax C=(A-B)	70.00	86.65	102.55
Tax @30%(D)	21.00	26.00	30.77	Tax rate assumed @30% flat
Profit After Tax E=E-D	49.00	60.66	71.79
Balance Sheet of Bishrom
Liabilities	Year-1	Year-2	Year-2
Equity Capital	100.00	100.00	100.00	Equity issued in 1st Year for 100
Profits	49.00	109.66	181.44
Loans and Borrowings		50.00		Loans borrowed in 2nd year for 50 with interest @5% and repaid in second year 1st day
Short term payable	6.50	6.77	7.05	5% of total of Salaries and wages, Manufacturing cost and other expenses assumed payable at year end
Total	155.50	266.42	288.49
Assets
Fixed Assets	90.00	81.00	72.90	1st year fixed assets worth of 100 purchased
Trade Receivable	20.00	22.00	24.20	10% of total sales on credit basis
Cash and Bank balance	45.50	163.42	191.39	Closing balance of cash kept in bank
Total	155.50	266.42	288.49
Cash Flow Statement of Bishrom
Particulars	Year-1	Year-2	Year-2
Cash flows from Operation
Net profit before taxes	70.00	86.65	102.55
Add:
Depreciation	10.00	9.00	8.10
Interest Expenses	-	-	2.50
Increase in Payable	6.50	0.27	0.28
(Increase) in Trade Receivable	-20.00	-2.00	-2.20
Cash flow before taxes	66.50	93.92	111.23
Less: Taxes Paid	21.00	26.00	30.77
Net Cash flow from operation (A)	45.50	67.92	80.47
Cash flow from Investing Activities
Purchase of Fixed Assets	-100.00	-	-
Net Cash flow from Investing (B)	-100.00	-	-
Cash flow from Financial Activities
Proceeds from issue of shares	100.00
From Long term loan		50.00
Repayment of Loan			-50.00
Interest expenses			-2.50
Net Cash flow from Financing (C)	100.00	50.00	-52.50
Cash flow during the year(A+B+C)	45.50	117.92	27.97
Opening Cash balance	-	45.50	163.42
Closing Cash Balance	45.50	163.42	191.39