financial resources to more than adequately cover the loan repayment. A Mortgage Debenture over the business is being offered as collateral along with the Directors personal guarantees. 9.2 Annual Profit Budget The projected profit for the first year of operation is $109,869, with the second year projected at $131,175. These projections have been based on the Annual Profit Budget (copy attached). Financial Highlights over the 2-year period are summarised in the figures below. Figure 4 Year 1 financial highlights Figure 5 Year 2 financial highlights Gross Margin is calculated at 71% for Year 1 and 71.5% for Year 2. Net Profit Margin (Before Tax) is calculated at 20.5%. for Year 1 and 22.6% for Year 2. The business is quite profitable and margins are sustainable over the medium to longer term. 9.3 Cash Flow Forecast The Cash Flow Forecast projects a very healthy cash surplus on trading for each month with the end-of-year from operations’ calculated at $105,847 and an ending cash balance of ‘cash $145,657. Brendan has negotiated very favourable credit terms of 30 days from all suppliers for the first 12 months, although in most cases these arrangements are not in writing. If all suppliers reduced their terms to 7 days cash flow for two trading months, the peak cash shortfall would be approximately $1,200 for about 2 months. Brendan and Margaret have significant liquid assets to call upon should this eventuate. On the figures provided and the arrangements negotiated, the business has a strong and positive cash flow. Figure 6 below shows the projected cash-flow by quarter. Figure 6 Projected cash flow by quarter
financial resources to more than adequately cover the loan repayment. A Mortgage Debenture over the business is being offered as collateral along with the Directors personal guarantees. 9.2 Annual Profit Budget The projected profit for the first year of operation is $109,869, with the second year projected at $131,175. These projections have been based on the Annual Profit Budget (copy attached). Financial Highlights over the 2-year period are summarised in the figures below. Figure 4 Year 1 financial highlights Figure 5 Year 2 financial highlights Gross Margin is calculated at 71% for Year 1 and 71.5% for Year 2. Net Profit Margin (Before Tax) is calculated at 20.5%. for Year 1 and 22.6% for Year 2. The business is quite profitable and margins are sustainable over the medium to longer term. 9.3 Cash Flow Forecast The Cash Flow Forecast projects a very healthy cash surplus on trading for each month with the end-of-year ‘cash from operations’ calculated at $105,847 and an ending cash balance of $145,657. Brendan has negotiated very favourable credit terms of 30 days from all suppliers for the first 12 months, although in most cases these arrangements are not in writing. If all suppliers reduced their terms to 7 days cash flow for two trading months, the peak cash shortfall would be approximately $1,200 for about 2 months. Brendan and Margaret have significant liquid assets to call upon should this eventuate. On the figures provided and the arrangements negotiated, the business has a strong and positive cash flow. Figure 6 below shows the projected cash-flow by quarter. Figure 6 Projected cash flow by quarter
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