Chapter V

Financial Aspect

In starting and running a business, financial aspect is something very essential to

assess. This aspect considers many things including start-up capital, expenses,

revenues, inventors income and disbursement. The analysis was made to determine

the financial conditions and assumptions of the project.

87
Financial Assumption

1. The initial capital of Php4,900,000.00 will be funded by (7) incorporators, each

contributing Php700,000.00.
2. The company is authorized to issue 700,000 shares. There will be 7 stockholders; each

will subscribe 3500 shares with par value of Php200.

3. Straight line method was used for computing depreciation.
4. Selling price was computed based on Product cost plus the markup price.
5. 5% of the production requirement of direct materials will be the ending inventory
6. Income tax rate is 30%.
7. The total finish goods inventory is 10% of the total annual production; the remaining

90% will be sold.

8. 10% will be the working process, ending.
9. Utilities expense: water Php2,000.00 per month, electricity Php7,000.00 per month,

telephone Php1,300 per month, with the total of Php10,300.00 per month.
The rent building is Php150,000 annually.
10. Production and office Equipments, furniture and fixtures and the delivery vehicle has a

useful life of 10 years and has 10% depreciation value.

11. On the 5th year of operation, 20% of the net income after tax was declared as dividends

by the incorporators.
12. Miscellaneous expense is Php15,000.00 and will increase 10% every 5 years
13. Advertising expense is Php15,500.00 and will increase by 5% every 5 years.
14. Direct labor increase will be based on the sales/production.
15. The pre-operating expense of Php20,000.00 was treated as an outright expense.
16. The operation will be Cash Basis.

Pre-Operating Expense 20,000.00

Property, Plant, and Equipment
Factory, Tools and Equipment 18,655.47
Office Equipment 8,688.00
Delivery Equipment 3,958.14
Furniture and Fixtures 7,674.70
Total Property 38,976.31
Rental Building 150,000.00
Working Capital Annually
Salaries
Direct Labor 499,837.44
Selling and Admin 1,353,588.48 1,853,425.92
Fringe Benefits

88
 Production 23,376.27
Selling and Admin 128,715.88 152,092.15
Utilities
Sources of Financing - Investment of
Electricity
Incorporation.
Production (75%) 63,000.00
Selling and Admin (25%) 21,000.00 84,000.00
Share of Par
Incorporators
Water Total
Stocks Value
Production (60%) 14,400.00
Guiao, Jean Marie G. 3,500.00 200 700,000.00
Selling and Admin (40%) 9,600.00 24,000.00
Macababat, Hydielyn R. 3,500.00 200 700,000.00
Telephone 15,600.00
Mendoza, Jessica L. 3,500.00 200 700,000.00
Miscellaneous Expense 15,000.00
Caldo,
OfficeMary Mae C. 3,500.00 200 700,000.00
Supplies 10,000.00
Ilagan, JansenSupplies
Production C. 3,500.00
4,453.55 200 700,000.00
Dejano, Ariel B.
Advertising Expense 3,500.00
15,000.00 200 700,000.00
60,053.55
Garcia, Jaycelle Capital
Total Working G. 3,500.00 200 700,000.00
TOTAL
Total Project Cost 24,500.00 4,900,000.00
2,382,547.93
Scentimental Fragrance Corporation
Total Projected Cost

For the year 2016-2018

Scentimental Fragrance Corporation

Sources of Financing
For the year 2016-2018

89
Scentimental Fragrance Corporation
Projected Balance Sheet
For the year 2016-2018

90
ASSET 2016 2017 2018
CURRENT ASSETS
4,154,174.7
4,626,921.79 5,359,551.45
Cash 0
Supplies- Factory overhead 23,376.27 96,900.23 39,275.06
Inventories:
Raw Materials Inventory, Ending 101,628.21 93,181.62 112,552.57
Work in Process, Ending 139,578.95 153,536.84 184,244.21
Finished Goods Inventory, Ending 265,200.00 153,536.84 381,888.00
4,683,958.1
5,124,077.32 6,077,511.29
Total Current Assets 3

Non-Current Assets
Plants, Property and Equipment
Machineries and Equipment, Net 167,899.22 149,243.76 130,588.29
Furniture and Fixtures 69,072.30 61,397.60 53,722.90
Office Equipment 75,692.00 67,004.00 58,316.00
Delivery Van 35,623.22 31,665.09 27,706.95
Total Non-Current Assets 348,286.75 309,310.44 270,334.14

5,032,244.8
5,433,387.76 6,347,845.43
TOTAL ASSET 8

LIABILITIES AND EQUITY

0 0 0
Liabilities 0 0 0
TOTAL LIABILITIES

SHAREHOLDER'S EQUITY

4,900,000.0
5,032,244.88 5,640,824.95
Shareholders Capital, Beginning 0
Add: Share in Net Income 132,244.88 401,142.88 707,020.48
5,032,244.8
5,433,387.76 6,347,845.43
Shareholders Capital, Ending 8

Total Liabilities and Shareholders 5,032,244.8

5,433,387.76 6,347,845.43
Equity 8
Scentimental Fragrance Corporation
Projected Cash Flow
91
 For the year 2016-2018

CASH FLOW
2016 2017 2018
Net Cash Sales 4,207,500.00 5,049,000.00 6,058,800.00
Incorporators Contribution 4,900,000.00
Total Cash Flows (inflow) 9,107,500.00 5,049,000.00 6,058,800.00
Cash Outflows
Raw Material 2,032,564.25 1,762,004.17 2,157,869.77
Salaries and Wages- Direct Labor 499,837.44 599,454.00 719,344.80
Salaries and Wages- Selling and Admin 1,353,588.48 1,353,588.48 1,353,588.48
Fringe Benefit/13th Month- Direct Labor 23,376.27 23,376.27 23,376.27
Fringe Benefit/13th Month- Selling and
Admin 128,715.88 128,715.88 128,715.88
Manufacturing Overhead- Sticker 114,750.00 137,700.00 165,240.00
Utilities Expense- Production 77,400.00 140,342.19 215,872.81
Manufacturing Overhead- Rent 150,000.00 150,000.00 150,000.00
Advertising Expense 15,000.00 15,000.00 15,000.00
Telephone 15,600.00 15,600.00 15,600.00
Office Supplies 10,000.00 10,000.00 10,000.00
Production Supplies 4,453.55 4,453.55 4,453.55
Miscellaneous Expense 15,000.00 15,000.00 15,000.00
Utilities Expense- Selling and Admin 30,600.00 30,600.00 30,600.00
Production Equipment 186,554.69
Office Equipment 84,380.00
Furnitures and Fixtures 76,747.00
Delivery Vehicle 39,581.36
Taxes, Licenses and Permits 18,500.00 18,500.00 18,500.00
Pre-Operating Expense 20,000.00
Income Tax Payable 56,676.38 171,918.38 303,008.78
TOTAL CASH FLOWS(outflow) 4,953,325.30 4,576,252.92 5,326,170.33

Net Cash Flows 4,154,174.70 472,747.08 732,629.67

Cash Balance, Beginning - 4,154,174.70 4,626,921.79
Cash Balance, Ending 4,154,174.70 4,626,921.79 5,359,551.45

Scentimental Fragrance Corporation

Projected Income Statement

92
 For the year 2016-2018
2016 2017 2018
5,049,000.0
Sales 4,207,500.00 0 6,058,800.00
2,864,160.0
Less Cost of Goods Sold 2,386,800.00 0 3,436,992.00
2,184,840.0
Gross Profit on Sales 1,820,700.00 0 2,621,808.00
Less Selling and Administrative 1,593,278.7
Expense 1,593,278.75 5 1,593,278.75
Pre-Operating Expense 20,000.00
Licenses and Permits 18,500.00 18,500.00 18,500.00
Net Income Before Tax 188,921.25 573,061.25 1,010,029.25
Less Income Tax (30%) 56,676.38 171,918.38 303,008.78
Net Income 132,244.88 401,142.88 707,020.48

Scentimental Fragrance Corporation

STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
For the year 2016-2018

2016 2017 2018

Stockholder's (Common Stocks), 4,900,000.0 5,135,963.4 5,640,824.9
Beginning 0 8 5
Add: Net Income 235,963.48 504,861.48 810,739.08
5,135,963.4 5,640,824.9 6,451,564.0
Stockholder's (Common Stocks), Ending 8 5 3

93
 Schedule 1
Scentimental Fragrances Corporation
Sales Budget
For the year 2016-2018

2016 2017 2018

UNITS SOLD 76,500.00 91,800.00 110,160.00

SELLING PPRICE 55.00 55.00 55.00

TOTAL 4,207,500.00 5,049,000.00 6,058,800.00

Schedule 2
Scentimental Fragrances Corporation
Budgeted Sales
For the year 2016-2018

2016 2017 2018

BUDGET SALES 4,207,500.00 5,049,000.00 6,058,800.00
ADD: DESIRED EI (10%) 420,750.00 408,000.00 489,600.00
TOTAL REQUIREMENT 4,628,250.00 5,457,000.00 6,548,400.00
LESS: BI - 420,750.00 408,000.00
REQUIRED
4,628,250.00 5,877,750.00 6,956,400.00
PRODUCTION

94
 Schedule 3
Scentimental Fragrances Corporation
Material Production Requirement
For the year 2016-2018

2016 2017 2018

PRODUCTION REQUIREMENTS 85,00

(in Pieces) 0 102,000 122,400

95
 Quality Price. Annual Requirements
MINT - AWAY

Perfume 1,020,00 1,224,00

10 0.195 850,000
Alcohol 0 0
Citronella Oil 0.25 2.670 21,250 25,500 30,600
Peppermint Oil 0.1 2.670 8,500 10,200 12,240
Fragrance Oil 2 1.680 170,000 204,000 244,800
Sticker 1 5.000 85,000 102,000 122,400
13.00
1 85,000 102,000 122,400
Bottle 0
TOTAL

mL/piece Annual
Price
S.N.R. s Requirements

Perfume 1,020,00 1,224,00

10 0.195 850,000
Alcohol 0 0
Lemon Grass
0.25 2.667 21,250 25,500 30,600
Oil
Fragrance Oil 0.75 1.680 63,750 76,500 91,800
Lavender Oil 0.1 0.640 8,500 10,200 12,240
Sticker 1 5.000 85,000 102,000 122,400
13.00
1 85,000 102,000 122,400
Bottle 0
TOTAL

96
Bite Me Not mL/pieces Price Annual Requirements

Perfume Alcohol 10 0.20 850,000 1,020,000 1,224,000

Lemon Grass
2 2.67 170,000 204,000 244,800
Oil
Lavender Oil 1 2.67 85,000 102,000 122,400
Citronella Oil 0.5 0.64 42,500 51,000 61,200
Peppermint Oil 0.5 0.64 42,500 51,000 61,200
Sticker 1 5.00 85,000 102,000 122,400
Bottle 1 13.00 85,000 102,000 122,400
TOTAL

97
 Schedule 4
Scentimental Fragrances Corporation
Raw Material Ending Inventory
For the year 2016-2018

MINT
-AWAY

Perfume Citronella Peppermint Fragrance

Sticker Bottle
Alcohol Oil Oil Oil
Quantity 425,000 10,625 4,250 85,000 42,500 42,500
Unit Cost 0.195 2.670 2.670 1.680 5.000 13.000
Ending
82,875 28,369 11,348 142,800 212,500 552,500
Inventory

S.N.R.

Perfume Lemon Fragrance Lavender

Sticker Bottle
Alcohol Grass Oil Oil Oil
42,50
Quantity 425,000 10,625 31,875 4,250 42,500
0
13.00
Unit Cost 0.195 2.667 1.680 0.640 5.000
0
Ending 212,500.0 552,5
82,875.00 28,333.33 53,550.00 2,720.00
Inventory 0 00.00

Bite Me
Not

Lemon
Perfume Lavend Citronel Peppermi Sticke
Grass Bottle
Alcohol er Oil la Oil nt Oil r
Oil
Quantity 425,000 85,000 42,500 21,250 21,250 42,500 42,500
Unit Cost 0.195 2.667 2.667 0.640 0.640 5.000 13.000
Ending
212,50 552,50
Inventor 82,875 226,667 113,333 13,600 13,600
0 0
y 98
 Schedule 5
Scentimental Fragrances Corporation
Manufacturing Overhead Budget
For the year 2016-2018

MANUFACTURING OVERHEAD
BUDGET
2016 2017 2018
Manufactured Overhead
Depreciation- Machineries 18,655.47 18,655.47 18,655.47
Sticker 114,750.00 137,700.00 165,240.00
Rent 150,000.00 150,000.00 150,000.00
Utilities Expense 77,400.00 140,342.19 215,872.81

Total Fixed Manufacturing

360,805.47 561,253.13 673,503.75
Expense

2016 2017 2018

MANUFACTURED Overhead excess
Schedule
Sticker 8,415.46 34,884.08 14,139.02
Rent 10,285.56 42,636.10 17,281.03
Utilities Expense
4,675.25 19,380.05 7,855.01
TOTAL EXCESS 23,376.27 96,900.23 39,275.06

99
 Schedule 6
Scentimental Fragrances Corporation
Projected Purchase Budget
For the year 2016-2018

PURCHASE BUDGET

Production Requirements 76,500.00 91,800.00 110,160.00

Add: Desired Ending Inventory 8,500.00 10,200.00 12,240.00
Total Requirement 85,000.00 102,000.00 122,400.00
Less: Beginning Inventory 8500 10,200.00
Purchases Budget in Units 85,000.00 93,500.00 112,200.00
x Budgeted Unit Cost 32 32 32
Purchases Budget in Pesos 2,720,000.00 2,992,000.00 3,590,400.00

100
 Schedule 6
Scentimental Fragrances Corporation
Cost of Goods Sold
For the year 2016-2018

COST OF GOODS SOLD

2016 2017 2018

Raw Material Inventory, Beginning 101,628.21 93,181.62
Add: Purchases 2,032,564.25 1,762,004.17 2,157,869.77
Total Merchandise Available for Used 2,032,564.25 1,863,632.38 2,251,051.39
Less: Raw Material Inventory, Ending 101,628.21 93,181.62 112,552.57
Raw Material Used 1,930,936.04 1,770,450.76 2,138,498.82
Direct Labor 499,837.44 599,454.00 719,344.80
Manufacturing Overhead 360,805.47 561,253.13 673,503.75
Total Manufacturing Cost 2,791,578.95 2,931,157.89 3,531,347.37
Add: Work-in process, beginning - 139,578.95 153,536.84
Total Cost of Goods in process 2,791,578.95 3,070,736.84 3,684,884.21
Less: Work-in process, ending 139,578.95 153,536.84 184,244.21
Total Cost of Goods Manufactured 2,652,000.00 2,917,200.00 3,500,640.00
Add: Finished Goods Inventory,
- 265,200.00 318,240.00
Beginning
Cost of Goods Sold Available for Sale 2,652,000.00 3,182,400.00 3,818,880.00
Less: Finished Goods Inventory,
265,200.00 318,240.00 381,888.00
Ending
Cost of Goods Sold 2,386,800.00 2,864,160.00 3,436,992.00

Inventories

Raw Materials Inventory, Ending 101,628.21 93,181.62 112,552.57

139,578. 153,536. 184,244.
Work-in process, Ending 95 84 21
265,200. 318,240. 381,888.
Finished Goods Inventory, Ending 00 00 00

101
 Schedule 7
Scentimental Fragrances Corporation
Depreciation Table
For the year 2016-2018

Production
Equipment Useful
(Machineries) Quantity Unit Cost Total Life Depreciation

Stainless Steel Perfume

Mixing Machine 1 31,015.23 31,015.23 10 3,101.52
Extracting Machine (Oil
55,586.36 55,586.36
extracting machine) 1 10 5,558.64
Perfume Filling
45,863.20 45,863.20
Machine 1 10 4,586.32
Stainless Steel Storage
39,500.65 39,500.65
Tanks 1 10 3,950.07
Manual Perfume
14,589.25 14,589.25
Capping Machine 1 10 1,458.93
TOTAL 186,554.69 18,655.47

Production Supplies Quantity Unit Cost Total

Beaker 2 220 440
Syringe 1Box 725 725
Laboratory Gowns 4 170 680
Stainless Steel Measuring Cups 1Set 928.55 928.55
Face Masks 6Packs 240 1,440.00
Rubber Gloves 1Box 190 190
Stirring Rod 1 50 50
TOTAL 4,453.55

102
Furniture and Quantit Useful Depreciatio
Fixture y Unit Cost Total Life n
10,000.0 10,000.0
Conference Table 1
0 0 10 1,000.00
18,000.0
Cabinet 3 6,000.00
0 10 1,800.00
Office Table 3 2,750.00 8,250.00 10 825.00
Steel Table 1 6,500.00 6,500.00 10 650.00
Office Chair 3 2,499.00 7,497.00 10 749.70
Sofa 1 9,000.00 9,000.00 10 900.00
17,500.0
Swivel Chair 7 2,500.00
0 10 1,750.00
76,747.0
TOTAL
0 7,674.70

Useful
Office Equipment Quantity Unit Cost Total Depreciation
Life
Aircon 3 15,000.00 45,000.00 10 4,500.00
Electric Fan 2 865 1,730.00 10 173.00
Fax Machine 1 1,000.00 1,000.00 10 100.00
Printer 1 4,500.00 4,500.00 10 450.00
Computer 2 10,000.00 20,000.00 10 2,000.00
Projector 1 2,600.00 2,600.00 10 260.00
Telephone 1 2,550.00 2,550.00 10 255.00
Photo Copying and Fax
1 4,500.00 4,500.00 10 450.00
Machine
Water Dispensers 1 2,500.00 2,500.00 10 500.00
TOTAL 84,380.00 8,688.00

Quantit Useful Depreciatio

DELIVERY VEHICLE y Unit Cost Total Life n
Motorcycle for 39,581.3 39,581.3
1
delivery 6 6 10 3958.136
39,581.3
TOTAL 6 3958.136

103
 Financial Ratios and Analysis

Scentimental Fragrance Corporation

1. Profitability Ratio- used to assess a business's ability to generate earnings

compared to its expenses and other relevant costs incurred during a specific
2016 2017 2018
Net Income 132,244.88 401,142.88 707,020.48
Divided by: Net Sales 4,207,500.00 5,049,000.00 6,058,800.00

Probability Ratio 0.03 0.08 0.12

period of time.

2016 2017 2018

Net Income 132,244.88 401,142.88 707,020.48
Divided by: Total Equity 5,032,244.88 5,433,387.76 6,347,845.43

Rate Return on Shareholders Equity 0.03 0.07 0.11

0.03:1 0.07:1 0.11:1

As stated above the figures that the profit margin ratios of Scentimental

Fragrance Corporation determine if adequate profits are being generated during the 3

years of operation. The company has 0.03:1, 0.08:1 and 0.12:1 profitability ratio that

shows that the corporation has stable profit for every peso of its net sales.

2. Return on Shareholders Equity

104
 As stated above the figures that the return on shareholders Equity of

Scentimental Fragrance Corporation increase each year. It means that the

company is gaining profits that makes the business profitable.

3. Average Net Income

Net Income After Tax 1,240,408.23

Divided by: Projected period 3
Average Income per year 413,469.41

4. Rate of Return on Sales- calculates how efficiently a company is at generating

profits from its revenue

2016 2017 2018

Net Income 132,244.88 401,142.88 707,020.48
Divided by: Net Sales 4,207,500.00 5,049,000.00 6,058,800.00
Rate of Return on Sales 3% 8% 12%

As stated above the figures that the rate of return on sales of Scentimental

Fragrance Corporation increases. The rate of return on sales is 3%, 8% and 12%

cumulatively It means that the company is gaining profits that makes the business

viable and feasible.

105