Question

the financial plan is one of the parts of a business plan, prepare a financial plan of a cow farm including the following instructions:

A. Actual income statements and balance sheets.

For an existing business, prepare income statements and balance sheets for the current year and for the prior 2 years.

B. Pro forma income statements.

Using sales forecasts and the accompanying production or operations costs, prepare proforma income statements for at least the first 3 years.

C. Pro forma balance sheets.

Prepare pro forma balance sheets semiannually in the first year and at the end of each of the first 3 years of operation.

D. Pro forma cash flow analysis.

Project cash flows monthly for the first year of operation and quarterly for at least the next2 years. Detail the amount and timing of expected cash inflows and outflows. Determine the need for and timing of additional financing and indicate peak requirements for working capital.

Indicate how necessary additional financing is to be obtained, such as through equity financing, bank loans, or short-term lines of credit from banks, on what terms, and how it is to be repaid. Remember that these numbers are based on cash, not accrual, accounting.

E. Breakeven chart.

Calculate breakeven and prepare a chart that shows when breakeven will be reached and any stepwise changes in breakeven that may occur.

Discuss the breakeven shown for your venture and whether it will be easy or difficult to attain, including a discussion of the size of breakeven sales volume relative to projected total sales, the size of gross margins and price sensitivity, and how the breakeven point might be lowered in case the venture falls short of sales projections.

Answer 1

A Actual Income Statement and balance sheet of Cow farm Business of Current year and previous 2 years Assumptions Below are the information assumed to build the financial of 1st 3 years Sales of Milk Year 1 - 500000, Year 2 - 600000, Year 3 - 700000 Cost of food to cows Year 1 - 100000, Year 2- 150000, Year 3- 200000 Live stock of Cow - Year 1 - 10, Year 2-13, Year -16 Cost of purchasing each cow is 10000 Life of each cow assumed at 5 years Cost of cow shelter =2000000 with life of 25 years assumed Salary of the maintainance staff - 5000 per month Income Statement Items Sales of Milk Cattle food cost Depreciation of Livestock Salary to maintainence Depreciation of shelter Total Cost Profit Year 1 Year 2 Year 3 500000 600000 700000 100000 150000 200000 20000 26000 32000 60000 60000 60000 80000 80000 80000 260000 316000 372000 240000 284000 328000 340000 390000 440000 Balance sheet Liabilities Capital Year 1 Year 2 Year 3 Assets 2340000 2644000 2998000 Live stock of cow Less: Depreciation Net cost Cow shelter Less: Depreciation Not cost of shelter Year 1 Year 2 Year 3 100000 130000 160000 20000 26000 32000 80000 104000 128000 2000000 1920000 1840000 80000 80000 80000 1920000 1840000 1760000 Cash Balance 340000 700000 1110000 23400002644000 2998000) 2340000 2644000 2998000 Note: Assumed all the expenses are paid in cash, hence no liabilities in the balance sheet has been planned B. Performa Income statement for 1st 3 years Below are the projected Assumption Sales to grow each year by 20% based on the latest available number Maintainence staff cost - one extra staff would be required due to growth in business. Till current year 1 staff from next year 2 staff at cost of 60000 each per year is planned. Cattle feeding cost 30% of Sales Live stock to be purchased 3 each year @ 10000 for next 2 year and for Year 6 10 cow to be purchased Projected P&L Items Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Sales of Milk 500000 600000 700000 840000 1008000 1209600 Cattle food cost 100000 150000 200000 252000 302400 362880 Depreciation of Livestock 20000 26000 32000 38000 44000 44000 Salary to maintainence 60000 60000 60000 120000 120000 120000 Depreciation of shelter 80000 80000 80000 80000 80000 80000 Total Cost 260000 316000 372000 490000 546400 606880 Profit 240000 284000 328000 350000 461600 602720 468000 585600 726720 Liabilities Capital Year 4 Year 5 Year 6 Assets 3400000 391960014486320 Live stock of cow Less: Depreciation Net cost Cow shelter Less: Depreciation Not cost of shelter Year 4 Year 5 Year 6 190000 220000 220000 38000 44000 44000 152000 176000 176000 1760000 1700000 1640000 60000 60000 60000 1700000 1640000 1580000 Cash Balance 1548000 2103600 2730320 3400000 3919600] 4486320 3400000 3919600 4486320 D Cashflow analysis Items Net profit Add Dep Cash flow from Operating activities Year 1 Year 2 Year 3 240000 284000 328000 100000 106000 112000 340000 390000 440000 100000 30000 30000 Cash flow from Investing activities Puchase of cow Purchase of land Cash flow from Investing activities 2000000 2100000 30000 30000 Cash flow from financing activity Infuse of capital Net Cashflow 2000000 240000 360000 410000 The company is having positive cashflow from the year 1 onwards and also the company is making profit from Year 1 resulting in higher expected future growth