CHAPTER VI-FINANCIAL STUDY

1. Introduction
2. Financial Assumptions
3. Schedule 1 - Total Project Cost
4. Schedule 2 - Partners' Contribution
5. Projected Profit and Loss Statement
6. Projected Statement of of Partners' Equity
7. Projected Balance Sheet
8. Projected Statement of Cash Flows
9. Other Supporting Schedules
10. Financial Statement Analysis
 PEN AND PAPER
Project Cost

Fixed Investment:
Furniture and Fixtures P 19,461.00
Store Equipment and Machineries 15,000.00
Rent Deposit 20,280.00
Leasehold Improvements 44,500.00 P 99,241.00

Pre-Operating Expenses:
Permits, Taxes & Licenses P 5,373.00
Advertising Expenses 40,000.00
Communication Expense 1,299.00
Trainings and Seminars Expenses 5,200.00 51,872.00

Working Capital
Prepaid Rent P 10,140.00
Prepaid Insurance 12,500.00
Supplies Inventory 319,825.00
Cash 206,422.00 548,887.00 -
TOTAL PROJECT COSTS P 700,000.00 548,887.00
700,000.00
-
119,112.90
SOURCE OF FUNDS:
Personal Savings P 400,000.00
PAG-IBIG provident fund 300,000.00
TOTAL P 700,000.00
Schedule 2-Partners' Capital Contribution
A 1,000.00
B 1,000.00
C 1,000.00
D 1,000.00
E 1,000.00
F 1,000.00
G 1,000.00
H 1,000.00
I 1,000.00
J 1,000.00
Total 10,000.00
PEN AND PAPER
FINANCIAL ASSUMPTIONS

1 The rate per square meter in Mega Centrum Building where the proponent's store w
be housed is P169.00 @ 60 square meters. Hence, rent expense is P10,140/mo.
Required by lessor to pay rent deposit for two months @P 10,140 per month VAT inc
The said advance payment is for security purpose by the lessor. It can be refunded
end of the lease term provided that the rented space is still in good condition.

2 The lessee will burden the remodelling / improvements of the the rented space.
The expense is treated as an outright expense.

3 Store Equipment and Machineries includes the Point of Sale (POS) equipment. Break
of the POS Package is as follows:

PARTICULARS UNIT COST

POINT OF SALE (POS) Hardwar P
POS Software (Thunderbolt Smart POS Atom
Monthly Fee
Total Cost P

Sched. "A"

QTY PARTICULARS
1 Dual Care 4gb ram 160 gb hdd ü
1 Monitor 17" ü
1 cash drawer ü
1 dot matrix ü
1 keyboard ü
1 mousse ü
1 barcode scanner with stand ü
50 rolls journal baper ü
2 ribbon cartridge ü
Total P

5 The Straight Line Method of depreciation is adapted.

QTY PARTICULARS UNIT COST

FURNITURES AND FIXTURES
(In Pesos)

1 Exhaust fan
1 Office Table
2 Industrial Fan
2 Guest Chair with Armrest
 1 Signage
Total

STORE EQUIPMENT AND MACHINERIES:

1 Monitor 17"
1 cash drawer
1 dot matrix
1 keyboard
1 mouse
1 barcode scanner with stand
Total

Communication Expenses includes:

PLDT Monthly P1,299 fixed rateP

Rent Expense
> Monthly rate of P10,140 P
> Projection: An increase of 10% every 2 years.

Repairs & Maintenance

POS Monthly Fee P450
Painting of store premises every 3 years including

refurbishing of wood shelves

Permits, Licences and Taxes

Mayor's Permit Fee P
Sanitary Fee
Occupational Fee
Garbage Fee
Business Plate
Mayor's Clearance
Medical Fee
Police Clearance
Fire Fund Fee
Community Tax Certificate
Barangay Clearance
BIR Annual Registration Fee
BIR Documentary Stamps in Leasing a Spa
Accredited Pinting Press for Ors
 DTI Business Name Registration (Municipal
DTI Documentary Stamps
Total P

Projection:
> 10% increase after 2 years

Advertising Expenses:

Social Media Marketing (FB, Instagram, etc

Mobile Marketing
Fliering
Store designs & window displays
Media Mention
Printing and giving coupons and discounts
Games, contests & raffles, sponsorship &
Feedback, Satisfaction survey from phone c

PROJECTED ADVERTISING EXPENSE

> An increase of 10% per year for three years.

> On the 4th and 5th year, the proponent will decreas
advertising expenses by 30%.

Communication Expenses:

> PLDT per month is P1,299 constant for 5 years.

Salaries Expenses:
No. of JOB POSITION PER MO.
employees
2 Cashier 1,750.00
2 Sales Associate 2,000.00
1 Manager 5,000.00

Total 8,750.00

Projections:
>Majority of the hired employees are working student
> Increase will be given on the 6th year.

Utilities Expenses:
Meralco P
Water
 P
Projections:
> increase by 10% yearly due to inflation

Interest Payable / Interest Expense

The proponent borrowed P300,000 from their Providen

Fund with an interest of 3.5% annually payable in 5 ye
(300,000x 3.5%=P10,500 per year); installment payme
P60,000 a year plus interest of P10,500.

Supplies Expense

2 Thermal Sticker P
5 rolly issyzone POS thermal receipt paper
1 Inkrite toner
4 scotch tape
5 ballpen-
2 log book
1 transh can
30 garbage bags
1 portable cleaning mop
1 brooms and dustpan
1 alcohol
3 lysol disinfectant
10 tisue paper
10 powder soaps
Total

Projections:
> these supplies are replenish monthly
> increase by 10% yearly due to inflation

Sales:
Projections:
> sales : 30% increase of costumers for the second year; 40% increase for the third
> Initial Project Costs is P700,000.00 which includes fixed investment, pre-operatin
> All initial outlays will be paid in cash.
>Cost of Good sold is 80% of total goods available for sale for the first year
>Ending Inventory: 20% of purchases for the first year; 2nd and third year decrease
> Population of Students in Bangued
Multiply by Estimated % Market Share based from
probability of visiting new store, source of store awareness
and place of purchase (74%x.553x.6x.6)
 Products: variable overhead: (sch. A)
Writing Instruments 32%
Paper Based Products 36%
School Essentials (computer
supplies, art painting
materials, etc) 32%
100%

variable expenses: (sch. B)

Writing Instruments 32%
Paper Based Products 36%
School Essentials (computer
supplies, art painting
materials, etc) 32%
total variable expenses

Materials- Variable OH (see Sch. A)

Variable opex (see Sch. B) *
Total Variable cost/UNIT
Mark-UP based on VC
MARK-UP
TOTAL SELLING PRICE ( Total VC/ unit+Mar
Note:
FORMULA FOR VARIABLE COST PRICING
SP = VARIABLE COST (MARKUP % X VARIABLE COST)

A
SP 49.52
VARIABLE COST & EXP. 38.09
CM per unit 11.43
CMR 23.08%
SALES MIX RATIO 1
SALES MIX RATIO 0.3333
total fixed cost

Note:
To get the break-even per peso and per unit:
ALTERNATIVE 1:

A B
CM/ unit 11.43 13.19
X sales mix ratio 1 1
 composite CM 11.43 13.19
SALES MIX RATIO 1 1
SALES MIX RATIO 0.5000 0.3333
total fixed cost

Sch. C
Formula:
No. of sales = total fixed cost / composite contribution Margin

= Total fixed cost 193,981

Composite Contribution Margi 35.27

COMPOSITE SALE IN UNITS 5,499.97 sales composite in units

SALES MIX
PRODUCTS NO. OF SALES IN UNITS RATIO
A 5,500 1
B 5,500 1
C 5,500 1
16,500

ALTERNATIVE 2: A B
SELLING PRICE 49.52 57.17

x mix ratio 1 1

composite sales price 49.52 57.17

Formula:
Composite Contribution
Margin Ratio (CMR)= Composite Contribution Margin
Composite Sales Price

= 35.27
152.83

CMR= 23.08% ROUNDED - OFF

Mixed Breakeven Sales (P) =

No. of sales to breakeven in units =

PROOF: 5,499.74
peso 5500
sales 840,548 100%
variable costs 646,567 76.92%
cm 193,981 23.08%
FIXED COST 193,981
NET INCOME 0

BES IN PESOS 840,547.58 (FC/CMR)

BES IN UNITS 5499.89 (FC/CM)
OR 5500 UNITS ROUNDED-OFF
Proof Algebraic equation

BREAK-EVEN SALES IN QTY = 152.83Q = 117.56Q+1939811+0

152.83Q-117.56Q=193981
35.27Q= 193981
35.27 35.27
BES IN UNITS = 5499.88658916927 OR 5500 UNITS
proponent's store will
is P10,140/mo.
0 per month VAT inclusive.
It can be refunded at the
ood condition.

e rented space.

S) equipment. Breakdown

UNIT COST
15,000.00 (Sched "A")
-
-
15,000.00

ü
ü
ü
ü
ü
ü
ü
ü
ü
15,000.00

Salvage Value
Useful Life
UNIT COST TOTAL COST (10%)

1,395.00 1,395.00 139.50 5

2,500.00 2,500.00 250.00 5
2,195.00 4,390.00 439.00 5
1,088.00 2,176.00 217.60 5
 9,000.00 9,000.00 900.00 10
16,178.00 19,461.00 1,046.10

1,800.00 1,800.00 180.00 5

2,599.00 2,599.00 259.90 5
6,551.00 6,551.00 655.10 5
500.00 500.00 50.00 5
250.00 250.00 25.00 5
3,300.00 3,300.00 330.00 5
15,000.00 15,000.00 1,500.00

2019 2020 2021 2022

15,588.00 15,588.00 15,588.00 15,588.00

10,140.00 10,140.00 11,154.00 11,154.00

every 2 years.

2019 2020 2021 2022

5,400.00 5,400.00 5,400.00 5,400.00
3 years including

- - 12,000.00 -
5,400.00 5,400.00 17,400.00 5,400.00

2019 2020 2021

600.00
100.00
400.00
750.00
150.00
200.00
600.00
100.00
185.00
36.00
100.00
500.00
22.00
1,100.00
 500.00
30.00
5,373.00 5,373.00 5,373.00 5,910.30

JAN FEB
10,000.00 monthly 10,000.00 10,000.00
2,000.00 monthly 2,000.00 2,000.00
1,000.00 2nd quarter
6,000.00 quarterly
2,000.00 may- once a year
6,000.00 every 4 months
8,000.00 semi-annual
5,000.00 monthly 5,000.00 5,000.00
40,000.00 - 17,000.00 17,000.00

2019 2020
three years.

oponent will decrease the 267,000.00 293,700.00

2019 2020

ant for 5 years. 15,588.00 15,588.00

2019 2020
TOTAL SALARIES

3,500.00
4,000.00
5,000.00

12,500.00 150,000.00 150,000.00

are working students

2019 2020
3,000.00
500.00
 3,500.00 3,500 3,850

2019 2020

0 from their Providend 10,500.00 10,500.00

ually payable in 5 years
); installment payment of

2019 2020
677.50 3,345 3,679
170.00
900.00
100.00
100.00
50.00
278.00
39.00
350.00
150.00
80.00
250.00
100.00
100.00
3,344.50

ncrease for the third year; 50% for the 4th year & 5th year.
tment, pre-operating expenses and working capital.

e first year
third year decrease to 15% of total goods available for sale; 4th and 5th year - 10% of total goods
15,506.00

0.14
2170.84 or 2,170 students
AVE. QTY WEIGHTED [Link] COST
5,070.00 19.49 98,814.30
5,550.00 24.86 137,973.00

4,985.00 16.57 82,601.45

15,605.00 60.92 319,388.75

5,070.00 18.60 94,322.56

5,550.00 19.12 106,112.88

4,985.00 18.92 94,322.56

294,758.00

VARIABLE COST PRICING

A B C
19.49 24.86 16.57
18.60 19.12 18.92
38.09 43.98 35.49
0.30 0.30 0.30
11.43 13.19 10.65
49.52 57.17 46.14

B C
57.17 46.14
43.98 35.49
13.19 10.65
23.08% 23.08%
1 1 3
0.3333 0.3333
193,981

composite
Contribution
C Margin
10.65
1
 10.65 35.27
1
0.1667
193,981

es composite in units

BEP IN UNITS SELLING PRICE BREAK-EVEN PES0

5,500 49.52 272,371.25
5,500 57.17 314,451.54
5,500 46.14 253,761.46
16,500 152.83 840,584.25

C total
46.14 152.83

COMPOSITE SALES
46.14 152.83 PRICE

UNDED - OFF

TOTAL FC 193,981 840,548.00

COMPOSITE CMR 23.08%

mixed bes in pesos 840,548 5,499.738

composite sales price 152.83
 per unit
152.83
117.56
35.27

UNDED-OFF

5500 UNITS
Possible Financial Assumption
1. The calendar year period will be used.
2. Year 20__ is the start of business operations.
3. Income will increase by ____% annually.
4. Expense will increase by ____% annually.
5. The straight-line method of depreciation will be used.
6. No receivables at the end of the year.
[Link] accounts payable at the end of the year.
8. No supplies are left for the year. Supplies are expensed outright.
9. Profit and loss sharing will be _____.

DEPRECIATION EXPENSE

2019 2020 2021 2022 2023

251.10 251.10 251.10 251.10 251.10

450.00 450.00 450.00 450.00 450.00
790.20 790.20 790.20 790.20 790.20
391.68 391.68 391.68 391.68 391.68
 810.00 810.00 810.00 810.00 810.00
2,692.98 2,692.98 2,692.98 2,692.98 2,692.98

324.00 324.00 324.00 324.00 324.00

467.82 467.82 467.82 467.82 467.82
1,179.18 1,179.18 1,179.18 1,179.18 1,179.18
90.00 90.00 90.00 90.00 90.00
45.00 45.00 45.00 45.00 45.00
594.00 594.00 594.00 594.00 594.00
2,700.00 2,700.00 2,700.00 2,700.00 2,700.00

2023

15,588.00

12,269.40

2023
5,400.00

-
5,400.00

2022 2023
 5,910.30 6,501.33

MARCH APRIL MAY JUNE JULY

10,000.00 ### 10,000.00 10,000.00 10,000.00
2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
1,000.00 1,000.00 1,000.00
6,000.00 6,000.00
2,000.00
6,000.00
8,000.00
5,000.00 5,000.00 5,000.00 5,000.00 5,000.00
23,000.00 ### 20,000.00 32,000.00 17,000.00

2021 2022 2023

323,070.00 ### 158,304.30

2021 2022 2023

15,588.00 15,588.00 15,588.00

2021 2022 2023

150,000.00 ### 150,000.00

2021 2022 2023

 4,235 4,659 5,124

2021 2022 2023

10,500.00 ### 10,500.00

2021 2022 2023

3,679 4,047 4,452

- 10% of total goods for sale

 products
A
B
C

1.00
1
1.00 1.00 composite CM
 ACCUMULATED DEPRECIATION

2019 2020 2021 2022 2023

1,143.90 892.80 641.70 390.60 139.50

2,050.00 1,600.00 1,150.00 700.00 250.00
3,599.80 2,809.60 2,019.40 1,229.20 439.00
1,784.32 1,392.64 1,000.96 609.28 217.60
 8,190.00 7,380.00 6,570.00 5,760.00 4,950.00
16,768.02 14,075.04 11,382.06 8,689.08 5,996.10

1,476.00 1,152.00 828.00 504.00 180.00

2,131.18 1,663.36 1,195.54 727.72 259.90
5,371.82 4,192.64 3,013.46 1,834.28 655.10
410.00 320.00 230.00 140.00 50.00
205.00 160.00 115.00 70.00 25.00
2,706.00 2,112.00 1,518.00 924.00 330.00
12,300.00 9,600.00 6,900.00 4,200.00 1,500.00
 AUG SEPT OCT NOV DEC
10,000.00 10,000.00 10,000.00 10,000.00 10,000.00
2,000.00 2,000.00 2,000.00 2,000.00 2,000.00

6,000.00 6,000.00

6,000.00 6,000.00
8,000.00
5,000.00 5,000.00 5,000.00 5,000.00 5,000.00
23,000.00 23,000.00 17,000.00 17,000.00 37,000.00
 No. of sales = total fixed cost

No. of sales

NO. OF SALESSALES MIX R BEP IN UNITS selling price break even point in pesos
#DIV/0! 1 #DIV/0! 49.52 #DIV/0!
#DIV/0! 1 #DIV/0! 57.17 #DIV/0!
#DIV/0! 1 #DIV/0! 46.14 #DIV/0!
#DIV/0! #DIV/0! #DIV/0!

SALES
VCE ALTERNATIVE 2: A
CM sp 49.52
x mix ratio 1

composite sales 49.52227179

2024 2025 2026 2027 2028

- - - - -
- - - - -
- - - - -
- - - - -
4,140.00 3,330.00 2,520.00 1,710.00 900.00
4,140.00 3,330.00 2,520.00 1,710.00 900.00

150.00 15.00 1.50 0.15 0.01

 TOTAL
###
24,000.00
3,000.00
24,000.00
2,000.00
18,000.00
16,000.00
60,000.00
###
sales = total fixed cost / composite contribution Margin

193,981
0.00

#DIV/0! sales composite in units

even point in pesos

B C total
57.17 46.14
1 1

57.1732692 46.138658575727 152.83 COMPOSITE SALES PRICE

PEN AND PAPER
Projected Proit and Loss Statement
For the Five Years Ended December 31, 2023
(In Philippine Peso)

Sales
Sales
Cost of Goods Sold
Beginning Inventory
Add: Net Purchases
Total Goods Available for Sale
Less Ending Inventory
Total Cost of Goods Sold
Gross Profit

Operating Expenses
Salaries and Wages
Interest Expense
Depreciation Expense - Furniture & Fixtures
Depreciation Expense - Store Equipment & Machineries
Communication Expense
Insurance Expense
Permits, Taxes & Licenses
Repairs and Maintenance Expense
Supplies Expense
Utilities Expenses
Rent Expense
Advertising and Promotional Expense
Total Operating Expenses

Net Income (Net Loss)

ROI

FIXED COSTS:
Variable mftg oh
VARIABLE EXPENSES
Total variable costs
TOTAL COSTS

Note: It is assumed that Pen and Paper is operating at 5,996 units.

Sales
ANALYSIS:
Break-even point:
fixed cost
contribution margin percentage
break-even sales
BREAK EVEN IN UNITS (BREAK EVEN
SALES/ AVE. SELLING PRICE)

Payback pd
initial investment
net cash returns:
2019
2020
2021 (700k -334134-205344)/ 700K
2022
2023

Free Cash Flow:

Cash provided by operating activities
Less: Expenditures in furniture and fixtures
Expenditures in store equipment
Expenditures in leasehold improvement
Expenditures in rent deposit
Free Cash Flow
Note:
This describes the cash remaining from operations after adjustments for capital expenditures. The
cash for expansion.
2019 2020 2021 2022 2023

916,369 1,191,279 1,667,791 2,501,686 3,752,530

0 63,878 71,862 97,972 96,990

319,388.75 415,205 581,288 871,931 1,307,897
319,388.75 479,083 653,150 969,904 1,404,887
63,877.75 71,862 97,972 96,990 140,489
255,511 407,221 555,177 872,913 1,264,399
660,858 784,059 1,112,614 1,628,773 2,488,131

150,000 150,000 150,000 150,000 150,000

10,500 10,500 10,500 10,500 10,500
2,693 2,693 2,693 2,693 2,693
2,700 2,700 2,700 2,700 2,700
15,588 15,588 15,588 15,588 15,588
12,500 12,500 12,500 12,500 12,500
5,373 5,373 5,910 5,910 6,501
5,400 5,400 17,400 5,400 5,400
3,345 3,679 3,679 4,047 4,452
3,500 3,850 4,235 4,659 5,124
10,140 10,140 11,154 11,154 12,269
267,000 293,700 323,070 226,149 158,304
488,738 516,123 559,429 451,300 386,032

172,119 267,936 553,184 1,177,473 2,102,099

19% 22% 33% 47% 56%

193,981 193,981 193,981 193,981 193,981

319,389 415,205 581,288 871,931 1,307,897
294,758 322,142 365,448 257,319 192,051
614,146 737,347 946,736 1,129,250 1,499,948
808,127 931,328 1,140,717 1,323,231 1,693,929

5,996
152.83 916,369 100.00%
 193,981
23.08%
840,472
5,500 (ROUNDED-OFF)

700,000

YEARS
1.00 334,134
1.00 205,344
0.24

2.24 years 539,478

or 2 years and 2 mo.
2,019 2,020 2,021 2,022 2,023
334,134 205,344 532,467 1,183,849 2,063,994
19,461
15,000
44,500
20,280
234,893 205,344 532,467 1,183,849 2,063,994

ents for capital expenditures. The store can use its excess
 HORIZONTAL ANALYSIS
2019 (based year) 2,020 2,021 2,020 2,021 2019 (based

100.00% 130% 182.00% 273% 410%

100.00%
100.00% 130% 182.00% 273% 410%
100.00% 150% 204.50% 304% 440%
100.00% 113% 153.37% 152% 220%
100.00% 159% 217.28% 342% 495%
100.00% 119% 168.36% 246% 377%

100.00% 100% 100% 100% 100%

100.00% 100% 100% 100% 100%
100.00% 100% 100% 100% 100%
100.00% 100% 100% 100% 100%
100.00% 100% 100% 100% 100%
100.00% 100% 100% 100% 100%
100.00% 100% 110% 110% 121%
100.00% 100% 322% 100% 100%
100.00% 110% 110% 121% 133%
100.00% 110% 121% 133% 146%
100.00% 100% 110% 110% 121%
100.00% 110% 121% 85% 59%
100.00% 106% 114% 92% 79%

analysis:
Due to the strategic location and massive advertisement,
Pen & Paper is able to penetrate the market.
There are high demand in the supplies and only one supplier in the area.
Profit in the first and second year are minimal. Only on the third year it
starting to rise up and on the 4th and 5th year, profit continues to soar.
 VERTICAL ANALYSIS
2019 (based year)
2,020 2,021 2,020 2,021

100.00% 100.00% 100.00% 100.00% 100.00%

27.88% 34.18% 33.29% 34.89% 33.69%

72.12% 65.82% 66.71% 65.11% 66.31%

16.37% 12.59% 8.99% 6.00% 4.00%

1.15% 0.88% 0.63% 0.42% 0.28%
0.29% 0.23% 0.16% 0.11% 0.07%
0.29% 0.23% 0.16% 0.11% 0.07%
1.70% 1.31% 0.93% 0.62% 0.42%
1.36% 1.05% 0.75% 0.50% 0.33%
0.59% 0.45% 0.35% 0.24% 0.17%
0.59% 0.45% 1.04% 0.22% 0.14%
0.36% 0.31% 0.22% 0.16% 0.12%
0.38% 0.32% 0.25% 0.19% 0.14%
1.11% 0.85% 0.67% 0.45% 0.33%
29.14% 24.65% 19.37% 9.04% 4.22%
53.33% 43.33% 33.54% 18.04% 10.29%

18.78% 22.49% 33.17% 47.07% 56.02%

Analysis:
The bulk of the expenses are due to the ff:
salaries & wages and advertising expenses.
ROI - Is gradually increasing. As the students
awareness of the newly opened store, the
probability to be visited by the students and
to make their purchase is also high.
Payback Period - it takes 2 years and 2 months to recover
the investment of the proponent.
ABC
Projected Statement of Owner's Equity
As of December 31 2017 to 2021
(In Pesos)

2,019 2,020 2,021

Owner's Equity
Capital 400,000 527,619 795,555
Net Income (Net Loss) 172,119 267,936 553,184
Leasehold improvement (44,500.00)
Additonal Investment
Withdrawals
Total Owner's Equity 527,619 795,555 ###
 2,022 2,023

1,348,739 2,526,212
1,177,473 2,102,099

2,526,212 4,628,312
RATIOS:
1. LIQUIDITY RATIOS:
> Quick Assets Ratio
> Acid Test Ratio
 ABC
Projected Balance Sheet
As of December 31 2019 to 2023
(In Pesos)

2019 2020

Assets
Current Assets:
Cash 874,893 1,020,237
Supplies Inventory 63,878 71,862.47
Total Current Assets 938,771 ###

Non-current Assets:
Store Equipment & Machineries (net) 16,768 14,075
Furniture & Fixtures (net) 12,300 9,600
Net Book Value 29,068 23,675
Other Assets:
R 20,280 20,280
Total Non-Current Assets 49,348 43,955
Total Assets 988,119 1,136,055

Liabilities
Current Liability:
Loans Payable (1year) 60,000 -
Salaries Payable 150,000 150,000
Interest Payable 10,500 10,500
Short-term liabilities 220,500 160,500
Long-term Liability
Loans Payable (long- term) 240,000 180,000
Total Non- Current Liabilities 240,000 180,000
Total Liabilities 460,500 340,500

Owner's Equity
Capital 400,000 527,619
Net Income (Net Loss) 127,619 267,936
Additonal Investment
Withdrawals
Total Owner's Equity 527,619 795,555

Total Liabilities and Owner's Equity 988,119 1,136,055

-
 RATIOS:
2021 2022 2023 CURRENT RATIO
CURRENT ASSETS
CURRENT LIAB.
2019 2020
1,492,705 2,616,553 4,620,547
97,972 96,990 140,489
1,590,677 2,713,544 4,761,036 4.26 6.80
Analysis:
Pen and Paper is very liquid. It has th
11,382 8,689 5,996
6,900 4,200 1,500 Acid Test Ratio = Quick Assets/Curren
18,282 12,889 7,496
Analysis:
20,280 20,280 20,280 2019 2020
38,562 33,169 27,776 3.97 6.36
1,629,239 2,746,713 4,788,812 Analysis:
This ratio of Pen and Paper for acid

Inventory Turnover:
- - - ITO = COGS/AVE. INVTY
150,000 150,000 150,000
10,500 10,500 10,500 2019 2020
160,500 160,500 160,500

120,000 60,000 - 255,511 407,221

120,000 60,000 - 63,878 135,740
280,500 220,500 160,500 2 2

31,939 67,870

795,555 1,348,739 2,526,213 8 6

553,184 1,177,473 2,102,099
Rule: The turnover of inventory for this bu
of the school days.
1,348,739 2,526,213 4,628,312 - 45 60

1,629,239 2,746,713 4,788,812 These days are very impt to know wh

 RATIOS:
1. LIQUIDITY RATIOS:
> Quick Assets Ratio
> Acid Test Ratio

2. Activity Ratios
> Inventory Turnover
2021 2022 2023 >Days Inventory

3. solvency ratios
9.91 16.91 29.66 > Debt-equity Ratio

very liquid. It has the ability to pay its current obiligations

Quick Assets/Current Liab. > Equity Ratio

2021 2022 2023

9.30 16.30 28.79 > Debt ratio

Pen and Paper for acid test vouches that it is liquid since its current assets can pay its current liabilities.

DAYS IN INVTY 360

inventory turnover

2021 2022 2023

555,177 872,913 1,264,399 cost of goods sold

169,835 194,963 237,479 invty
2 2 2 average

84,917 97,481 118,740 ave. invty.

7 9 11 Inventory turnover

of inventory for this business is fluctuating. It can be due to the peak and slack season

55 40 34 days in invty

ery impt to know when to replenish the supplies and avoiding the " no stock"
 2019 2020 2021 2022
total debt/total equity ### 340,500 280,500 220,500
### 795,555 ### 2,526,213
0.87 0.43 0.21 0.09

total equity/total assets ### 795,555 ### 2,526,213

### ### ### 2,746,713
0.53 0.70 0.83 0.92

total debt/total assets ### 340,500 280,500 220,500

### ### ### 2,746,713
s current liabilities. 0.47 0.30 0.17 0.08

4. RETURN ON SALES 2019 2020 2021 2022

Net income/sales
### 267,936 553,184 1,177,473
### ### ### 2,501,686

0.19 0.22 0.33 0.47

 2023 Analysis:
160,500 total debt Pen and Paper started with a large liability but as the ye
4,628,312 total equity
0.03

4,628,312 total equity

4,788,812 total assets
0.97
This means as the years pass by the company is able to use its own money to finance the busine
160,500
4,788,812
0.03

2023

2,102,099
3,752,530

0.56 the profit started minimally and it improves in the succeeding years.
ge liability but as the years pass by, it gradually decreases. It is a good sign for the liquidity and so

oney to finance the business and only a small portion of liability remained on the 5th year.

ucceeding years.
or the liquidity and solvency of the company.
PEN AND PAPER
Projected Statement of Cash Flows
For the Five Years Ended December 31, 2023

2019

Cash flows from operating activities:

Net Income (Net loss) 172,119
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense - furniture & fixtures 2,693
Depreciation expense - store equipment & machineries 2,700
Increase(decrease) in interest payable 10,500
Increase(decrease) in inventory (63,878)
Increase (decrease) in salaries payable 150,000
Increase(decrease) in current loans 60,000
Net Cash provided (used) by operating activities 334,134
Cash flows from investing activities:
Payment of leasehold improvements (44,500)
Payment of rent deposit (20,280)
Purchase of furniture and Fixtures (19,461)
Purchase of store equipment and machineries (15,000)
Net Cash provided (used) by investing activities (99,241)
Cash flows from financing activities:
Investment by owner 400,000
Long-term Loans 240,000
Net Cash provided (used) by financing activities 640,000
Net increase(decrease) in cash 874,893
Cash at beginning of period 0
Cash at end of period 874,893
2020 2021 2022 2023

127,619.20
267,936 553,184 1,177,473 2,102,099

2,693 2,693 2,693 2,693

2,700 2,700 2,700 2,700 (29,068.02)
- - - -
(7,985) (26,110) 982 (43,498)
- - - -
(60,000) - - -
205,344 532,467 1,183,849 2,063,994

(29,068.02)

0 0 0 0

0
(60,000) (60,000) (60,000) (60,000)
(60,000) (60,000) (60,000) (60,000)
145,344 472,467 1,123,849 2,003,994
874,893 1,020,237 1,492,705 2,616,553
1,020,237 1,492,705 2,616,553 4,620,547