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8.2 Financial Statement Analysis

We began by entering in our sales projections that we had arrived at earlier in Section 5.7, 5.8 and 5.9 into the modules. Thus we startwith our sales projections of $1,455,925, $1,528,721 and $1,605,157 respectively. As you know from our sales forecasting sectionsthere are three possible economic scenarios that we considered when looking at sales forecasting - the slow market, the good or normalmarket and the great market. We decied to to go with the good or normal market condition numbers in our financial modules since itpresented the middle of the road approach towards projections which we felf was appropriate.

Compensation Forecast:

In our compensation forecast, we are saying that both owners Jack and Carmen will take only 0.50% of sales as their starting salariesfor the simple reason that we believe that for A Taste of Tuscany to grow and develop into a mature business, we will both have to make this financial sacrifice in the first three years of the business. We both have decent personal balance sheets and hence don't want toput any more undue pressure on the business by extracting any more cash from it than we need to.

The great advantage of reducing cash flow expenses to ourselves is of course that it leaves us with more money to pay to our staffand that is where our compensation dollars will be going - paying our operations, production, administrative, sales & marketing and otherstaff expenses. The total compensation expense for A Taste of Tuscany is projected to be $365k, $384k and $405k in 2009, 2010 and 2011respectively.

Capital Contributions:

The capital contributions into A Taste of Tuscany are $133k from each of us in 2009. In the event we find that business is not pickingup as much as we are projecting, we anticipate that each of us will have may have to add more to our existing capital in the business.Thus the total contributions to the business in 2009, the first year of business, will be $266k.

Loan & Interest Expense Summary:

We will be taking out fully amortizing loan where we will be paying back both principal and interest on the loan every month. We haveanticipated that a loan in the amount of $186k at 8% interest for 7 years should do the job for us and we are projecting that we willbe putting in for this loan at the outset.

As we keep paying this loan down, we anticipate that the at the end of each year we will have the following projected principal balance outstanding - $165k, $142k and $118k for 2009, 2010 and 2011 respectively.

Fixed Asset & Depreciation Summary:

The fixed assets that we have entered in for 2009 includes the total cost of purchasing the business, along with all the other fixed capital equipment like cookers, coolers etc that we will need to run the business for the next three years. We don't anticipate addingto our existing fixed asset infrastracture unless one of the piecs of equipment goes bad - even in that instant, our product warrantiesshould be enough to cover the contingencies.

Purchases, Inventory & Cost of Goods Sold:

In this section we simply enter in the cost of goods sold for each year along with the changes in inventory if any. The projectedcost of goods sold constitute the wholesale goods and beverages that we have to purchase to produce the foods and drinksthat we sell to our patrons. We are estimating this to be $509k, $519k and $529k respectively. The inventory that we are projectionfor each of the three years is a steady $20k - we are certain that this number will fluctuate a bit each year, but there is no way forus to gauge that with any accuracy in this business plan.

Accounts Recievable Summary:

In the full service restaurant business there is very little of accouns recievable since our patrons typically pay for their mealsright after they consume them, as such we are estimating that the projected accounts recievables for A Taste of Tuscany willbe 0.25% of the annual sales.

Accounts Payable Summary:

We at A Taste for Tuscany are looking to pay for all the goods we purchase in cash or within 7 days of the purchase of the goodsat most and as such we believe that our accounts payables too will be very insignificant - thus we are projecting our accounts payable to be 0.20% of all sales.

Security Deposit:

A security Deposit in the amount of $20k is what we anticipate paying our landlord and that security deposit will of courseremain with the landlord for the duration of the three years that are being projected here.

Quick Links:

  1. Go to the Corresponding Template section for this industry.
  2. Go to the Corresponding Questionnaire section for this industry.

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