About Financial Forecast

Atlanta serves as the home headquarters for Clean Janitorial. Small to medium-sized commercial office spaces are the company's primary focus. The company will launch with two full-time employees and one part-time employee under the sole proprietorship form of ownership. The company's main goals are to offer premium cleaning services at competitive rates, to dominate the cleaning industry in Atlanta, and to deliver exceptional customer service. The company's goal is to be a top provider of superior cleaning services that are also reasonably priced. The formulation of a financial statement is crucial in enabling a lender to determine the financial soundness of the business startup and make decision of the loan amount that the lender may offer to the business. The critical issue with the preparation of the financial statements is the accuracy of the experiences and income that the business is projecting to earn. The financial statements that ought to be prepared in light of the startup business include the startup budget, startup costs worksheet, pro forma balance sheet, pro forma profit and loss statement and the source of funds and use statements. The preparation of the financial statement that ought to be prepared by a startup business needs to include the income statement, balance sheet, cash flow statement, break-even analysis, ration analysis with comparison to industry standards, amount requested for the business start up, the purpose and use of funds cash out schedule and the timetable for implementing plan and launching the business.

Part A: Key assumptions

The general assumption is that the current interest rates for the first three years of operation will be a constant of 10%. Additionally, the long term interest rate for the first three years will match the current interest rate, that is, 10% constant for the three years. The tax rate is also assumed to stand at 18% within the three years of operation.

Part B: Financial Statements

Income statement

Income statement for the janitor services business











































First Year

Second Month

Third month

Time period

Jan

Feb

March

April

May

June

July

August

Sept

Oct

Nov

Dec

1st Quarter

2nd quarter

3rd Quarter

4th Quarter

1st Quarter

2nd quarter

3rd Quarter

4th Quarter

Opening inventory

10,000







































Purchases (direct materials)



100

200

300

500

500

500

500

500

500

500

500

1500

1500

1500

1500

1500

1500

1500

1500

wages



5,000

5,000

5,000

5,000

5,000

5,000

5,000

5,000

5,000

5,000

5,000

25,000

25000

25000

25000

25,000

25000

25000

25000

Advertising and marketing



4000

500

500

500

500

500

500

500

500

500

500

500

2000

2000

2000

2000

2000

2000

2000

Insurance



150

150

150

150

150

150

150

150

150

150

150

150

500

500

500

500

500

500

500

Office expenses



200

500

500

500

500

500

500

500

500

500

500

500

2000

2000

2000

2000

2000

2000

2000

Rent



5000

500

500

500

500

500

500

500

500

500

500

500

2000

2000

2000

2000

2000

2000

2000

Information system and website



5000























5000







5000





Travel



4000

500

500

500

500

500

500

500

500

500

500

500

2000

2000

2000

2000

2000

2000

2000

Utilities



4000

500

500

500

500

500

500

500

500

500

500

500

2000

2000

2000

2000

2000

2000

2000



Balance Sheet

Project Balance Sheet

Clean Janitors Company



Projected



Opening ($)

1st year ($)

Second year ($)

Third year ($)

Assets









Current Assets









Cash

500

3733

11925

20584

Inventory

1500

988

988

988

Accounts receivable

0

2248

2248

2248

Total current assets

2000

6970

15162

23821











Fixed Assets









Equipment

4200

4200

4200

4200

Vehicle

6000

6000

6000

6000

Leasehold

750

750

750

750

Less depreciation

0

(2190)

(4380)

(6570)

Total fixed assets

10950

8760

6570

4380











Total assets

12950

15730

21732

28201











Liabilities and equity









Current portion of long term debt

763

829

900

900

Total current liabilities

763

829

900

900











Long term debt









Bank loan

3768

2939

2038

1138

Total long term debts

3768

2939

2038

1138











Position of equity









Equity

1295

1295

1295

1295

SPA

7122

7122

7122

7122

7122Retained earnings

0

3544

10375

17744











Total Liabilities and Equity

12950

15730

21732

28201



Cash flow statement

Clean Janitors Company

Cash Flow Statement



Jan

Feb

March

April

May

June

July

August

Sept

Oct

Nov

Dec

1st Quarter

2nd quarter

3rd Quarter

4th Quarter

1st Quarter

2nd quarter

3rd Quarter

4th Quarter

Cash in revenue

4594

4594

6045

6528

6045

5803

4594

4064

6026

5550

6000

6000

15000

15000

15000

15000

18000

18000

18000

18000

SPA & loan and Equity

12950

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

Cash out

10950

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

Gross margin

3905

3905

5138

5549

5138

4932

3905

3454

5122

4743

6126

6371

58246

58246

58246

58246

58246

58246

58246

58246

Total Cash out

16389

4439

5610

6165

5910

5083

4652

4360

5359

5074

6190

5359

18000

18000

18000

18000

18000

18000

18000

18000

Net cash flow

(224)

154

(10)

217

279

792

304

(137)

78

639

528

1101

4500

4500

4500

4500

5000

5000

5000

500



Break even analysis

The break even sales that are likely to be recorded with the first three of operation are $61832, $69804 and $76397 for year 1, 2 and 3 respectively. In percentages, the break even sales are 90%, 81% and 87% for year 1, 2 and 3 respectively, thus, indicating that it is little high. The financial projections to be earned by the business affirm the soundness of the business decision to be implemented by Clean Janitors Company.

Ratio analysis

The current ratios for the first, second and third years of operation are 8.4%, 16.8% and 26.5%. The return on investment for the business is 42%, 57% and 39% for first, second and third years respectively. The debt to equity ratios are 0.3. 0.15, 0.08 for first, second and third years respectively. The debt to asset ratios for the first second and third years is 0.2, 0.15 and 0.06 respectively. Therefore, the net profit margin on sales for the first, second and third years of operation are 5.2%, 8.5% and 8.4%. The ratios are good for the business, an indicator of positivity and plan for growth in the business with the net margin on sales being little low.

Loan Investment Proposal

The amount that is requested for the business startup is $10,000. The purpose of the funds to set up a physical office in Atlanta where its target market is in existence. The specific activities that are to be realized by the funds include marketing, staff remuneration, office furniture, computers, files, establishment of a management information system and a website and networking. The operational costs of the business within the first six months are also integrated in the amount that has been requested from the lender. Generally, the repayment schedule is based on the cash flow and the breakeven point acts as the major guide for the repayment of the full loan amount to the lender. Below is the timetable for the implementing the business plan and launching of the business. The loan investment proposal has to contain the accurate entry of the financial statement to the lender to affirm the soundness of the business proposal and the practicality of the business idea that is suggested to be implemented by the proprietor.

Activity

2017

2018



October

November

December

January

February

March

April

May

June

Development of business concept



















Preparation of financial statements



















Registration of the business



















Identification of physical office premises



















Seeking of credit from lenders



















Approaching of business clients and entering into janitor services contracts



















Identification of suppliers and award of tenders



















Distribution of marketing materials





















Launching of the business



















Business continuity and implementation of the business objectives





















Discussion

The revenue that the business projects to earn within the first three years are $65878, $80417 and $87643 for year one, two and three respectively. The revenue is set to be earned through the provision of cleaning services to the small to medium size commercial office spaces. The distinctive service that the business intends to offer its client base is the provision of ecofriendly cleaning and detergents services that would enable the clients achieve an eco-star rating. The expenses that the business incurs include the wages to the proprietor, salary to the full time staff, wages to the two part time staff, rent, utilities, suppliers, advertising, insurance depreciation and bank charges. The cash in, as demonstrated in the financial statements are driven from the revenue owing to the service that is offered to the clients, SPA, commercial loans, cash equity. The annual principal payment of $7640 per year would enable the business to break even by the second year of operation for the firm. During the first year of operation, there is need to invest in lesser depreciating assets. Such would mean that the business needs to prefer hiring of transport services, thus, the significance of lack of vehicles in the segment of income statement particular, and instead factoring the transport costs in the office expenses. The loan that is requested by the business which is to the tune of $10,000 almost matches the equity value that is requested by the Clean Janitors Business which has the value of $12950.

Conclusion

The financial statement of the business is crucial in monitoring the progress that is being undertaken by a business to meet its objectives. The statements also enable a lender to examine the business strategy of a form and determine the financial soundness of the business. Therefore, the success of Clean Janitors Company is based on the ability of the management to adhere to the expenditures that has been projected in the statements and ensuring that loans of $10,000 that has been requested is payable within the first years of operation. Therefore, the break even needs to be realized within the second year of business.