Statement of Major Financial Assumptions

Valid and realistic assumptions must be made and stated in order to provide a definite and specific
basis for financial projections.
The financial section of our business plan is presented in the following order:
1.

key assumptions,

2.

total investment cost,

3.

financing plan,

4.

projected financial statements for the first 12-month period, short-term, and for the next 3
years,

5. statement of liquidation as of end of October 2014, and

6.

financial ratios and sensitivity analyses with interpretations.

Lists and schedules supporting the financial statements are also included in the presentation
(equipment, tools and supplies list, schedule for capital requirements, as well as the projected
productions and sales schedules).
The following are the major assumptions made in preparing the projected financial statements:
1. The companys fiscal year starts June of the current year and ends May of the following
year. However, the short-term operation of the company will run from June to October,
2014.
2. Monthly production volume of the firm is equal to its estimated sales volume, and therefore
there are no provisions for inventory items at the end of each month.
3. Unit product cost of the product mix is computed using full costing method.
4. Unit selling price of the sales mix is determined by adding a mark-up of 35% based on full
cost.
5. Estimated useful life of the equipment is three (3) years and 100% of the depreciation is
allocated to production.
6. Equipment could be sold at the end of 5 months at 80% of its book value for liquidation
purposes.
7. Selling price is expected to increase by 5% annually, while cost of sales and certain
expenses are estimated to increase 3.8% based on 2013 inflation rate.
FA 1

8. Provision for business permit was incorporated in the financial statements with the
assumption that the business venture will be continued after the short-term operations.
9. All purchases and expenses are paid in cash within the period, and therefore no accruals,
except for utilities.
10. All products will be sold only on cash basis.
11. All partners share in the profits and losses equally.
12. Operations of the company will not be affected by the close of the semester since the same
can be easily transferred to the new site.
13. Rent expense of P3,000 per month will be only included in the long-term financial
statements starting November 2014.
14. The partners are expected to withdraw their share in the companys net income after tax
amounting to P90,000, P117,000, and P130,500 for year 1, year 2, and year 3, respectively
to augment their meager allowances.
15. For purposes of analyzing financial statements, the proponents assume a cost of capital of
20% equivalent to the average interest rates and discounts granted by local banks on
medium term loans.
ABC Partnership
Financing Plan - Source of Funds
June 2014
PARTNER'S NAME

INITIAL CAPITAL CONTRIBUTION

Partner 1
Partner 2
Partner 3
Partner 4
Partner 5
Partner 6
Partner 7
Partner 8
Partner 9
Total

1,900.00
1,900.00
1,900.00
1,900.00
1,900.00
1,900.00
1,900.00
1,900.00
1,900.00
17,100.00 *

* The excess amount of the Initial Capital Contribution over the computed Total
Investment Requirement amounting to P400.40 shall be used as petty cash and/or
change fund.
FA 2