8/13/2019 Financial 1004

1/6

77

CHAPTER V

FINANCIAL ASPECT

Financial aspect is the most important part of feasibility study, which needs

a critical analysis. The primary objective of every entrepreneur for investing

his/her capital is to gain profit. This chapter will give them benefits of forecasting

the success of the business.

Objectives

The main objective of this chapter is to evaluate the output of the

operation thru the use of financial ratios. These ratios will determine the financial

standing of the business. After determining the financial standing, the proponent

could conclude the advisable starting number of buses to acquire. Moreover, the

proponents could conclude if the business is feasible or not.

Major Assumptions

The proponents used the following assumptions:

1. The fare revenue is based on the supply. It will not increase for the reason

that the demand will not increase for it is correlated with the supply. It will

only increase after five years when the number of bus units increase. And

also the history of the provision of fare hike for at least five years.

2. The proponents provide two weeks allowance on the sales forecast due to

the non-uniformity of point of origin.

3. Salaries will not increase or decrease since the business is newly

established, there will be no promotions and retirement.

8/13/2019 Financial 1004

2/6

78

4. The proponents computed for the average commission of Bus drivers and

conductors. 1000.00 for the driver and 848.00 for the conductor.

5. The proponents used the straight line method in computing the

depreciation of fixed assets. It is computed by subtracting the salvage

value which is 10% of the investment cost from the investment cost then

divided by the life remaining years.

6. For operation expenses, gasoline and oil will increase 2% yearly. Utilities

expense will increase 3% yearly.

7.Repairs and maintenance includes twice a week car wash, minor repairs

and the use of spare parts.

8. For administrative expenses, office supplies will increase 5% yearly.

Utilities expense will increase by 3% yearly.

9. The yearly withdrawal of the partners is base on the personal needs and

necessities.

10.The registration and insurance expense of the brand new bus units will run

up to 3 years according to Land transportation Office. So there will be no

any registration and Insurance expense for the next 3 years of operation.

8/13/2019 Financial 1004

3/6

79

Table 5-1

Sales Forecast

STARTING 10 UNITS

YEAR UNITS SALES

LESS ALLOWANCE

FOR DECEMBER

SALES

TOTAL SALES

2014 10 P 85612800 P 3,841,600 P 81771200

2015 10 85612800 3,841,600 81771200

2016 10 85612800 3,841,600 81771200

2017 10 85612800 3,841,600 81771200

2018 10 85612800 3,841,600 81771200

This table shows the sales forecast of the proposed business. The

proponents computed for total sales by deducting the allowance for December

sales to the whole year sales. The two weeks sales for the month of December

are deducted because of the non-uniformity of point of origin.

8/13/2019 Financial 1004

4/6

80

Capital Formation

The partners of South Trans Bus Company have a total sharing of

Php49,000,000 capital to fund the business. Income that will be generated shall

be divided according to the percentage of their share and the nature of their

liability to the business. The partners will give an equal amount of contribution for

the initial capital formation. Below is the list of partners and their percentage of

contribution for the business equity

Jasper John Abunyawan 14.28% P7000000.00

Melody Araza

14.28%

P7000000.00

Reyman Delgado 14.28% P7000000.00

John Ronald Kevin Galeon 14.28% P7000000.00

Darlene Guelas 14.28% P7000000.00

Edzel Jose 14.28% P7000000.00

LeovinLicop 14.28% P7000000.00

Total Contribution 100% P49000000.00

.

Start-Up Capital

This is simply how much cash the South Trans Bus Company needs to

start the business and keep it running until it is self sustaining. The capital funds

(cash or access to cash) one to two years span of time should be enough.

8/13/2019 Financial 1004

5/6

81

Working Capital

The excess in start-up capital shall be considered as the working capital of

South Trans Bus Company. The excess shall be allotted to other operating

express of the business.

Sources of Financing

The partners contributions to the business capital are stated as follow:

A. Mr. Edzel M. Jose considered being a General Partner in the business so

he contributed Php7,000,000 from the salary at his present job in SAN

MIGUEL CORP. (BMEG) and personal savings.

B. Ms. Melody A. Araza contributed Php7,000,000 from an inherited land

which she mortgaged.

C. Ms. Darlene B. Guelas contributed Php7,000,000 from her separation pay

and her personal savings.

D.Mr. Jasper John D. Abunyawan contributed a capital that summed up to

Php7,000,000 after selling his luxury car.

E. Mr. Reyman F. Delgado invested Php7,000,000 to the business. He

owned a manufacturing firm of processed meat in the vicinity of Novaliches,

Quezon City.

F. Mr. John Ronald Kevin B. Galeon contributed amounting to

Php7,000,000 after he mortgaged his house and lot at Tagaytay.

G.Mr. Leovin M. Licop wit h a Php7,000,000 contribution from his income in

his restaurant business.

8/13/2019 Financial 1004

6/6