Professional Documents
Culture Documents
CHAPTER VII
FINANCIAL ASPECT
When starting a business, the biggest factor that determines its success is
its capital. There are many reasons to understand and evaluate the financial
FINANCIAL ASSUMPTIONS
statements:
Operations
proponents set inflation rate as a basis for the future increase of amounts of
commodities. The information regarding the inflation rate of the Philippines for
the past five (5) years are gathered from National Statistics Office which is an
average of 3.78%
F i n a n c i a l A s s u m p t i o n s | 109
Sales
1. The selling price of the proposed product will increase annually by 4% starting in
term will be n/30 for credit sales with discount of 5% if payment is made within 7
days.
3. There will be no sales returns.
4. Sales are made in cash and credit, 80% and 20% respectively.
Accounts Receivable
Indirect Materials
1. Compensation will be paid during the 15 th and 30th day of the month.
2. All regular employees shall be given 13 th month pay every December 15 each
year which is equivalent to 1/12 of the total basic salary earned within the year.
3. Salaries shall 50% direct labor and 50% selling expense.
1. All tools, supplies, equipment, furniture and fixtures for production shall be
purchased in cash.
2. All tools, supplies, equipment, furniture and fixtures shall not have a salvage
value.
3. The tools as capital assets shall be depreciated by its useful life of 3 years.
4. Production supplies shall be included in the production cost and their cost of
while depreciation for furniture and fixtures shall be fully allocated to general and
administrative.
Motorcycle
1. All office property and equipment, and office furniture and fixtures shall be
year and shall have a useful life of five (5) years with no salvage value.
3. Interest for motorcycle shall be 10% for three years, payable every month.
4. Interest for the office property and equipment, and furniture and fixtures shall be
Office Supplies
Cleaning Supplies
Utilities
expense.
5. Electricity, water and fuel expenses shall increase by 3.78% every year.
Leasehold Improvements
Rent
1. The lease term for the lease agreement shall be five (5) years, and renewed
Advertising expense
Employee Benefits
1. SSS, Philhealth, and Pag-ibig fund contributions that are withheld during the
factory overhead at 20%, General and Administration Expense at 30% and 50%
to selling expense.
2. Repairs and maintenance shall increase by 5% every year.
Accounts Payable
production business.
F i n a n c i a l A s s u m p t i o n s | 114
Income Tax
1. On the account that the company is a sole proprietorship, the implementer shall
Financing
1. The Php 84,600.00 of the business projected cost will be provided by the owner
remaining balance.