Assignment 4: Business Plan--Final

Financial Plan

Start Up Capital

Fizzy Beverage Company requires enough capital to sufficiently meet its overhead costs plus operating expenses such as production costs, equipment costs, employee salary, utilities, and administrative expenses. In order to cover these costs, the business requires at least $195,240, out of which equity capital investment is $45,240 and loan capital is $150,000. The key components of equity capital are: contribution by Melinda Cates, glass bottles, metal caps, cardboard cartons, and ingredients which stand at $40,000, $3,000, $300, $500, and $600, respectively. The total loan capital comprises of loan from family and friends of $20,000 payable after 2 years at an annual interest rate of 5 percent and a 2.5 percent interest bank loan of $130,000 to be repaid after 60 months (see table 1). The initial capital will be used to acquire necessary capital equipment for operational services and to cater for marketing services for the first four months of business operations as shown in table 2.

Table 1: Sources of Funds

Table 2: Start Up Expenses during the Year 2020-2021

Financial Plan Assumptions

The projected financial statements for Fizzy Beverages for the next 5 years are based on several assumptions including that:

· The company will produce two types of drinks

· The company will sell 55% of its products on credit

· The business will take 30 days to collect debts due to credit sales

· Fizzy will spend $3,000 per year on each full time employee’s benefit.

· The company will spend $2,500 per year as employee benefit for each part time worker

· The company’s health insurance expense will increase by 4.00% per annum

· Employees’ salary-both salaried and hourly workers-will increase by 3% per year.

· Fizzy beverages will set aside 15% of each employee’s wages for payroll taxes

· The business will have an initial cash balance of $16,500

· The company will pay an annual tax rate of 25%

· The company’s interest bearing accounts are expected to accrue at 1%.

Breakeven Analysis

The business breakeven analysis takes into account all running costs such as costs incurred for operational activities including employee wages, utility costs, telephone services, office supplies, and postage and shipping costs. In light of this, the company will spend significant amount of money as fixed expenses. Because of huge amount of fixed cost, the company will have to set high sales level targets above breakeven point level to earn profits. The business’ average break even estimates per month during the financial year ending February, 2021 will be $31,084.

Table 3: Fizzy’s Monthly Breakeven average for 2020-2021