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Chapter 5 Financial Feasibility

This document summarizes the key elements of a financial feasibility study for a business partnership. The objectives of the study are to determine profitability, returns on investment, and liquidity. Major assumptions are outlined, such as rent and salary expenses increasing at set rates. Supporting schedules include a sales projection table forecasting revenue and unit production over 5 years, with unit prices increasing 5% annually. The financial feasibility study aims to evaluate the partnership's ability to be profitable and meet financial obligations.

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Angela Shaine Garcia
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259 views3 pages

Chapter 5 Financial Feasibility

This document summarizes the key elements of a financial feasibility study for a business partnership. The objectives of the study are to determine profitability, returns on investment, and liquidity. Major assumptions are outlined, such as rent and salary expenses increasing at set rates. Supporting schedules include a sales projection table forecasting revenue and unit production over 5 years, with unit prices increasing 5% annually. The financial feasibility study aims to evaluate the partnership's ability to be profitable and meet financial obligations.

Uploaded by

Angela Shaine Garcia
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 5 Financial Feasibility

Introduction

A financial study is very essential in starting and running a business because this

will serve as tool in assessing the company’s projects, budgets and other financial-

related matter in order to determine the company’s performance, profitability and

sustainability. Financial study can help to evaluate whether a project is viable after

taking into consideration its total costs and probable revenues. This will include the

objectives, major assumptions, total project cost, source in financing the project and

also the financial statement which focus on the income statement, balance

sheet and cash flow statement. Definitely, financial study is truly needed in able to

determine the current situation and measurement of efficiency–of the company’s

success or failure.

5.1Objectives

PROFITABILITY. To determine if the business plan is possibly beneficial. Profitable

means the ability of a business to earn a profit.

RETURN. To bring completion to the expectations of the investors concerning to the

return of their investment.

LIQUIDITY. To meet both short and long-term obligations of the partnership. The

company can meet their financial obligations with the liquid assets available to them.
5.2 Major Assumptions

 Rent Expense will be constant throughout the years based on the contract.

This contract has duration of five years.

 Net income will be distributed and divided equally to partners.

 Employees’ 13th month pay will be given to every 1st week of December.

 Salaries will be inflated by 5% every 2 years of continuous service of the

employee.

 Government Regulatory Benefits are remitted every 2nd week of each

month.

 Store supplies inventory is equal to 5% at the end of each year.

 Pre-Operating Renovation Cost is only for the first year.

 Utilities increase by ___%, based on the increase in production.

 Depreciation Expense for Machineries and Equipment is constant for the

next five years and is computed using the straight line method.

5.3SUPPORTING SCHEDULES
5.3.1Schedule of Sales Projection

UNIT
PRICE PROJECTED
VOLUME OF UNIT PRICE NET OF CASH PROJECTE
YEAR DEMAND PRODUCTION W/ VAT VAT INFLOW SALES
2015 484,800.00 72,720.00 38.08 34.00 2,769,177.60 2,472,480.00
2016 497,340.00 74,601.00 39.98 35.70 2,982,846.38 2,663,255.70
2017 509,880.00 76,482.00 41.98 37.49 3,210,959.10 2,866,927.77
2018 522,420.00 78,363.00 44.08 39.36 3,454,425.98 3,084,308.91
2019 534,960.00 80,244.00 46.29 41.33 3,714,212.14 3,316,260.84

VOLUME OF PRODUCTION SHOULD BE AT LEAST 15% OF THE DEMAND


UNIT PRICE INCREASES BY 5% DUE TO AVERAGE INFLATION RATE

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