Making financial statement and identifying income and profit.

1. FINANCIAL
PLANNING

2. START UP COSTS
The start-up capital- is the amount of money that is
needed to buy the facilities and equipment, to register
and license the business and get the necessary
certificates.
Working capital- includes the costs of raw materials,
packaging, staff training, product promotion etc. that
have to be made before the business begins to generate
income from sales of the product.
The start-up capital and initial working capital- are
calculated to determine whether the entrepreneur's
savings (known as the owner’s equity) will be sufficient
to start the business without a loan.
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3. EXAMPLE OF START-UP COSTS FOR BURGER
PRODUCTION
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4. INCOME(SALES REVENUE) AND
PROFIT
From the market survey, the estimated market size and
share enable you to calculate the expected sales. The
gross profit is the difference between expected income
and the total operating costs over the first year, including
any loan and repayments.
INCOME is therefore calculated as follows:
INCOME = Selling price per unit x number of units sold
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5. PROFIT
Once expenses like overhead costs are
subtracted, you are left with the
company’s net sales revenue. When the
net sales revenue exceeds the expenses
during a given time period, the resulting
number represents the company’s
PROFIT.
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6. EXAMPLE
If, for instance, 8Goodies Bakery sold 100
cupcakes priced at P5.00 each in October, so
his gross sales revenue for that month would
be P500.00. He would then subtract his costs
(ingredients, labor, rent, etc.); if the costs were
P100.00, his net sales revenue would be
P400.00.
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7. Defining a Company’s Profits
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Profit margins help establish how well a
certain product or service performs, or how
much money it makes for the company. The
percentage figure gauges how many cents
the business makes for every peso in sales,
while accounting for the costs involved. In
essence, higher profit margins indicate that a
company is doing better than when their
profit margins are lower.

8. Calculating Profit
Margins
8
Profit margins can be calculated using a company’s gross,
net or operating profit. Most reflect net profit margins,
which pinpoint the percentage of sales that are actual
profit.
This divides the net income by total sales revenue. The net
profit margin can be factored into operating costs, costs of
goods and services sold and taxes. So, if a company’s
yearly net income was P25,000.00 and the net sales were
P50,000.00 the net profit margin would be 0.5% percent

9. Additional Example Profit Calculations
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Here’s another example. In 2019, Dos Kiddos Food Business
brought in P10,000,000.00 in sales. It cost the company
P7,500,000.00 to manufacture the products, plus P1,500,000.00 in
operating costs.
Dos Kiddos Food Business had a net profit margin of 10%. This
means that 10 percent of the company’s total sales revenue was
profit.

10. FINANCIAL PLANNING
If the Gross Profit indicates that the proposed
business is likely to be successful, it is then
necessary to repeat the calculation of monthly
gross profit for one to five years.
- This will then show whether there is sufficient
cash available to operate the business without the
need for further loans.
- This is know as a cashflow forecast.
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11. Example of CASHFLOW forecast for
Burger
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12. Instructions: Compute the forecasts of your home-based business 12
months monthly net income, one-year profit and profit margin. Use the given
template as your guide. Explain briefly if your computation can sustain the
business operations.
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