CHAPTER 5

FINANCIAL FEASIBILITY

The best way to determine if a potential venture or business is financially feasible is

to conduct analysis of expected results. In this way, a venture or a company through the
financial aspect of their feasibility study, can measure their marketing, technical, legal aspect,
management and taxation in terms of peso the possible outcome of their operations.
The projection shows the detailed parts of the financial study, such as the statement
of assumptions, the probable sources of funds if capital is not enough to account the
business, details of various amount contained in the projected financial statements and its
analysis in a whole. All assumptions were explained and shown clearly in the study.
The project studies consist of information that is coordinated in all aspect in terms of
the financial side. It comprises all the factors that are required to an intended venture having
established the assertion of a sample market and the feasibility of the production facilities to
supply this market, the investigation should move on the study of finance cost. What remains
is to study the result of the market and technical studies.
5 .1 Project Cost
The total cost for establishing Yema De Cabelo amounts to P1,500, 000. The total
project cost further classified into the following categories.

Yema De Cabelo

Initial Project Cost

A.

Property

and

Equipment
Office and Shop Equipment

91,697.49
62

Kitchen and Dining Utensils

Furniture's and Fixtures

16,694.75
86,501.00

Sub-total
194,893.24
B.Current Asset-Initial
Kitchen
and
Sanitary
Supplies
Office Supplies
Food Supplies
Advertising and promotion
Prepaid Rent (3 months)
Sub-total

3,673.00
398.00
36,653.00
3,750.00
7,500.00
51,576.00

C. Cash Initial Working

30632.76

Capital
D. Leasehold

82,500.00

Improvements
TOTAL INITIAL PROJECT

360,000.00

COST
5.2 Source of Financing Capitalization
Capitalization
Capital is very essential in starting up a business. It is the first thing needed to
make the plans come into reality. Ideas would be wasted if not being supported by
sufficient capital. To gain big return, you need to risk everything. The higher the
risk, the higher the return. Investing in a business by means of capital enables the
business to perform it day to day operation. Yema de Cabelo will basically need
property and equipment like tables and chairs, kitchen equipment, and also the
location of the sweetshop. The business needs not only money but also an
industrial capitalist that contributes in the business in terms of labor.
The proponents calculated first the things needed in operating the business
like materials, equipment, furniture and fixtures, as well as, the labor costs for the

63

manpower. They estimate that in order to establish the business, the owners will
be required to invest capital of Php 360,000.
Partners
Calvin Lloyd de Guzman

Capital
Php 120,000

Lovely Ann Tan

Php 120,000

Bernadette Tuazon

Php 120,000

Sources of Capital
Personal Savings
Bank Loans
Personal Savings
Trust Fund
Bank Loans
Sale of Property
Inheritance
from
Parent

5.3 Major Assumption

1. The proponents will have an initial capital of Php 360,000.00.
2. The initial capital will be provided equally by the partners.
3. The projected financial statement will cover three years.
4. The capital contributions are from partner's personal savings, trust fund, bank
loans and payments from their investments.
5.3.1 Income Statement Assumption
1. Projected sales are expected to increase by 15% annually based on the
information gathered from entities of the same nature of business.
2. Kitchen and Sanitary supplies P3,673.00, Office Supplies P398.00 and Food
Supplies P36,653.00 will increase by 5% per year.
3. The monthly salary of each personnel range from P8,900-9400 and they are
entitled to fringe benefits every year.
4. Straight line method of depreciation is assumed in the computation of depreciation
expense.

64

5. Repair and Maintenance expense for fixed capital will be P500.00 during 2016 and
will increase by 5% per year.
6. Utilities Expense will have 6% increase based on the nature of the business and
the used of equipments.
7. Permits and licenses for the initial year of operation will amount to P4, 130.00 with
an increase of 5% annually.
8. Salaries and wages, rent expense and repairs & maintenance are projected to
increase 5% annually.
9. Yema de Cabelo will be taxed at 30%
10. Net Income of the business are to be divided equally between partners. The
same apply to losses.
5.3.2 Balance Sheet Assumption
1. All purchases will be bought on cash basis.
2. Partners will allow equal withdrawal of 60% of the net income after tax for each
year.
5.4 Projected Financial Statement
5.4.1 Projected Income Statement

YEMA DE CABELO
PROJECTED INCOME STATEMENT

Sales
of Goods sold

Notes

2016

2017

2018

3,865,680.00

4,445,532.00

5,112,361.80

2,191,332.00

2,533,953.24

2,914,046.23
65

1,674,348.00 1,911,578.76

2,198,315.5

3
4

4,130.00
30,000.00
3,750.00
81,716.00

4,336.50
30,000.00
3,000.00
93,667.96

4,553.33
30,000.00
3,000.00
106,759.98

12,533.36

12,533.36

12,533.36

3,810.44

3,810.44

3,810.44

14,558.88

14,558.88

14,588.88

27,500.00

27,500.00

27,500.00

7
7
7
7
7

847,920.00
70,660.00
54,324.00
8,400.00
8,400.00
500.00
3,673.00
398.00
36,653.00
1,208,926.68

890,040.00
74,170.00
58,300.80
9,450.00
8,400.00
525.00
3,856.65
417.90
38,485.65
1,273,053.14

933,096.00
77,758.00
60,508.80
9,450.00
8,400.00
551.00
4,049.48
438.80
40,409.93
1,337,408.0

465,421.32

638,525.62

860,907.57

sion for Income Tax (30%)

139,626.40

191,557.69

258,272.27

ncome after Income Tax

325,794.92

446,967.93

602,635.30

73%

74%

l Income

: Operating Expenses
Permits and Licenses
Rent Expense
Advertising and Promotion
Utilities expense
Depreciation Expense-Office and
Shop Equipment
Depreciation Expense- Kitchen and
Dining Utensils
Depreciation Expense- Furniture
and Fixtures
Depreciation Expense- Leasehold
Improvement
Salaries and Wages
13th Month Pay
SSS and ECC Contribution
Philhealth Contribution
Pag-ibig
Repairs and Maintenance Expense
Kitchen and Sanitary Supplies
Office Supplies
Food Supplies
Total Operating Expenses
ncome before Income Tax

ual Rate of Increase

66

5.4.2 Projected Changes in Partners Capital

YEMA DE CABELO
Changes in Partners Capital
Partner's Capital
De Guzman, Capital
Tan, Capital
Tuazon, Capital
Total Partners Capital, beginning
Add: Net Income from operation
De Guzman, Capital
Tan, Capital
Tuazon, Capital
Total Net Income from operation
Less: Withdrawals (60% of NI)
De Guzman, Capital
Tan, Capital
Tuazon, Capital
Total Withdrawals
Partner's Capital
De Guzman, Capital
Tan, Capital
Tuazon, Capital
Total Partners Capital, ending

2016

2017

2018

120000
120,000
120,000
360,000.00

163439.33
163439.33
163439.33
490,317.99

223,035.05
223,035.05
223,035.05
669,105.15

108,598.31
108,598.31
108,598.31
325,794.93

148,989.31
148,989.31
148,989.31
446,967.93

200,878.43
200,878.43
200,878.43
602,635.29

65,158.98
65,158.98
65,158.98
195,476.94

89,393.59
89,393.59
89,393.59
268,180.77

120,527.06
120,527.06
120,527.06
361,581.18

163,439.33
163,439.33
163439.33
490,317.99

223,035.05
223,035.05
223,035.05
669,105.15

303,386.42
303386.42
303386.42
910,159.26

YEMA DE CABELO
STATEMENT OF FINANCIAL POSITION
Pre2016
operating
Current Assets
Cash on hand
Inventory
Prepaid Rent
Advertising and Promotion
Kitchen and Sanitary Supplies
Office Supplies
Food Supplies
Total Current Assets
Non-Current Assets
Office and Shop Equipment

30632.76

2017

7,500.00
3,750.00
3,673.00
398.00
36,653.00
82,607

544591.64
22,174.00
7,500.00
3,750.00
3,673.00
398.00
36,653.00
618,740

861664.49
23,282.70
7,500.00
3,000.00
3,856.65
417.90
38,485.65
938,207

91,697.49

91,697.49

91,697.49
69

Accumulated Depreciation- Office and Shop

Equipment
Kitchen and Dining Utensils
Accumulated Depreciation- Kitchen and
Dining Utensils
Furniture and Fixtures
Accumulated Depreciation- Furniture and
Fixtures
Leasehold Improvements
Accumulated Depreciation- Leasehold
Improvements
Total Non-Current Assets
Total
Assets

16,694.75

86,501.00

82,500.00

277,393.24
360,000

Annual Rate of Increase

(25,066.72)

16,694.75

16,694.75

(3,810.44)

(7,620.88)

86,501.00

86,501.00

(14,558.88)

(29,117.76)

82,500.00

82,500.00

(27,500.00)

(55,000.00)

218,990.5
6

160,587.88

837,730

1,098,795

198,260.83
139,626.40
6,725.00
1,400.00
1,400.00
347,412

227,999.95
191,557.69
7,220.00
1,512.50
1,400.00
429,690

120,000.00
120,000.00
120,000.00

163,439.33
163,439.33
163,439.33

223,035.05
223,035.05
223,035.05

360,000.00

490,317.99

669,105.15

360,000

837,730

1,098,795

42.97%

76%

Liabilities and Equity

Current Liabilities
VAT Payable
Income Tax Payable
SSS Contribution Payable
Philhealth Contribution Payable
Pag-ibig Contribution Payable
Total Liabilities

Partners' Equity
Calvin Lloyd De Guzman's Capital
Lovely Ann Tan's Capital
Bernadette Tuazon's Capital
Total
Equity
Total Liabilities & Equity

(12,533.36)

70

5.4.4 Projected Cash Flow

Yema de Cabelo

OPERATING ACTIVITIES

Projected Cash Flow

Preoperating

Net Income after Income Tax

Depreciation Expense-Office and Restaurant
Equipment
Depreciation Expense- Kitchen and Dining
Utensils
Depreciation Expense- Furniture and Fixtures
Depreciation Expense- Leasehold Improvement
(Inc) Dec in Prepaid Rent
(Inc) Dec in Kitchen and Sanitary Supplies
(Inc) Dec in Office Supplies
(Inc) Dec in Food Supplies
(Inc) Dec) in Inventories
Inc (Dec) in VAT Payable
Inc (Dec) in Income Tax Payable
Inc (Dec) in SSS Contribution Payable
Inc (Dec) in Philhealth Contribution Payable
Inc (Dec) in Pag-ibig Contrution Payable
Net Cash Provided (Used) by Operating
Activities
INVESTING ACTIVITIES
Office and Restaurant Equipment
Kitchen and Dining Utensils
Furniture and Fixtures
Advertising and Promotion
Leasehold Improvements
Net Cash Provided (Used) by Investing
Activities

-7500.00
-3673.00
-398.00
-36653.00

2016

2017

2018

325,794.92

446,967.93

602,635.30

12533.36

12533.36

12533.36

3810.44

3810.44

3810.44

14558.88
27500.00
0.00
0.00
0.00
-22174.00

14558.88
27500.00
0.00
-183.65
-19.90
-1832.65
-1108.70

14558.88
27500.00
0.00
-192.83
-20.90
-1924.98
-1164.14

198260.83
139,626.40
6,725.00
1400.00
1400.00

29739.12
51,931.29
495.00
112.50
0.00

34199.99
66,714.58
275.00
62.50
0.00

584,503.62

758,987.20

-48,224.00 709,435.83

-91697.49
-16694.75
-86501.00
-3750.00
-82500.00

0.00
0.00
0.00
0.00
0.00

0.00
0.00
0.00
750.00
0.00

0.00

-281,143.24

0.00

750.00

0.00

-268180.77
-268,180.77

-361581.18
-361,581.18

FINANCING ACTIVITIES
Owner's Contribution
360000.00
Owner's Drawings (60 % of Net Income)
-195476.95
Net Cash Provided (Used) by Financing 360,000.00 -195,476.95

0.00
0.00
0.00

71

Activities
NET CASH INCREASE (DECREASE)
CASH BEGINNING BALANCE

30,632.76 513,958.88

317,072.85

397,406.02

30,632.76
544,591.64

544,591.64
861,664.49

861,664.49
1,259,070.51

5.5 NOTES TO FINANCIAL STATEMENTS

CASH ENDING BALANCE

NOTE 1: SALES & COST OF GOODS SOLD

Qty
Sol
d
per
day

No.
of
day

Qty Sold

Selling

per year

Price

SALES

Qty Sold

Uni

per year

Cos

per
year

Products

(a)

(b)

Yema cake

20

312

Yema balls

20

Yema Spread

(c = a x

(c = a x

(d)

(e = c x d)

6240

72.00

449,280.00

6240

41.

312

6240

10.00

62,400.00

6240

5.9

20

312

6240

176.00

1,098,240.00

6240

100

Yema Sundae

30

312

9360

35.00

327,600.00

9360

19.

Yema Leche Flan

20

312

6240

42.00

262,080.00

6240

23.

Yema Pizza

20

312

6240

45.00

280,800.00

6240

25.

French Fries

20

312

6240

27.00

168,480.00

6240

15.

Onion Rings

20

312

6240

43.00

268,320.00

6240

24.

20

312

6240

50.00

312,000.00

6240

28.

Yema Doughnut

20

312

6240

30.00

187,200.00

6240

16.

Coke in Can

20

312

6240

46.00

287,040.00

6240

26.

nestea- iced tea

20

312

6240

13.00

81,120.00

6240

6.9

pineapple juice

20

312

6240

13.00

81,120.00

6240

7.2

Mashed
Potatoes

TOTAL

b)

b)

3,865,680.00

72

(f)

Promotional Tools

2016

2017

2018

Php 600

Php 600

Php 600

Before the grand opening (5 @ Php

750

Annual (2 @ 300)

600

600

600

1,800

1,800

1,800

Php

Php

Php

3,750

3,000

3,000

Signage (new design per year)

Tarpaulin

150)
Flyers-150 pcs per day, twice a month (150 x Php
0.50)
Total Advertising and Promotion
NOTE 2: PERMITS AND LICENSES
MUNICIPAL LICENSES
Business Permit
Sticker/Plate Business
Sanitary Permit
Barangay Clearance
CTC
Garbage Fee
SEC REGISTRATION

1000.00
250.00
250.00
300.00
500.00
300.00
500.00

(Articles of Partnership)
DTI REGISTRATION

500.00

(Business Name)
BIR REGISTRATION (TIN)
Registration Fee
Certification fee
Documentary Stamp Tax
TOTAL

500.00
15.00
15.00

Php 2,600.00

Php 530.00
Php 4,130

NOTE 3: ADVERTISING AND PROMOTION

73

NOTE 4: UTILITIES EXPENSE

Electricity Consumption
Daily
Year
2016
2017
2018

Monthly

expense

(26 days)
190.24
208.58
213.76

Annual electric

4,946.33
5,243.11
5,557.70

59,356.00
62,917.36
66,692.40

Water Consumption
Year
2016
2017
2018

Daily
15.52
16.41
17.39

Monthly

Annual Water

403.50
426.65
452. 25

Expense
4,830.00
5,119.80
5,426.99

Telecommunication consumption
74

Year

Daily

Monthly

Annual
Telecommunication

2016
2017
2018

13.56
14.37
15.23

Expense
4,230.00
4,483.80
4,752.83

352.50
373.65
396.07

LPG Consumption
Year

No. Of tank

Price per

Daily

Monthly

Annual LPG

2016
2017
2018

per month
2
3
4

tank
554.17
881.13
1,245.33

42.63
67.78
95.79

1,108.33
1,762.25
2,490.65

expense
13,300.00
21,147.00
29,887.76

TOTAL UTILITIES
Year
2016
2017
2018

Daily
261.91
300.22
342.18

Monthly
6,809.67
7,805.66
8,896.67

Annual
81,716.00
93,667.96
106,759.98

NOTE 5: DEPRECIATION EXPENSE

Office and Shop Equipment
Equipment

Quantit

Unit Cost

Total Cost

y
OFFICE
PC
Printer
SHOP
EQUIPMENT
40' LED TV
Speaker
Freezer
Refrigerator
Blender
Water

Usefu

Salvage

Annual

l
Life

value (per
unit)

Depreciation

1
1

12,999.75
3,245.25

12,999.75
3,245.25

7
5

1,345.00
236.25

1,664.96
601.80

1
2
1
1
1
1

17,500.99
2,720.25
13,599.00
12,652.00
949.50
899.00

17,500.99
5,440.50
13,599.00
12,652.00
949.50
899.00

8
8
7
7
5
5

3,990.00
220.00
1,360.00
1,265.00
95.00
90.00

1,688.87
625.06
1,748.43
1,626.71
170.90
161.80
75

Dispenser
Gas stove

1,075.25

2,150.50

107.50

387.10

burner)
Microwave

2,261.00

2,261.00

226.00

290.71

Oven
Ice cream

20,000.00

20,000.00

2,165.00

3,567.00

(double

maker
TOTAL

91,697.49

12,533.36

Kitchen and Dining Utensils

Utensils

Quantity

Unit

Total

Cost

Cost

Life

Salvage

Annual

Value

Depreciatio

(per

n
28

Strainer

60.00

120.00

unit)
4

Measuring cup

115.00/set

115.00

10

21

(set)
Grater

52.00

52.00

16

Frying Pan

899.00

1,798.00

140

303.6

Chopping Board

112.75

338.25

84.56

Kitchen Knives

2299.00/set

2299.00

45

563.5

(set)
Tong

75.00

150.00

34

4 dozen

299.00/dozen

1196.00

12

287

each
3

119.75

359.25

84.56

Bowl

45

33.25

1496.25

317.81

Plate

60

29.50

1770.00

397.5

Basin

50.00

100.00

22.5

Pitcher

15

139.75

2096.25

505.31

Casserole

344.75

1034.25

254.06

Peeler

45.75

91.50

21.37

Soup Ladle

149.75

299.50

95.83

Glass (6 pcs/set)

10

119.75/set

1197.50

286.87

Steamer

459.00

459.00

46

82.6

Spoon and Fork

Spatula

76

Can Opener

119.75

239.50

56.87

Goblet

20

30.00

600.00

135

Scissor

45.75

91.50

28.5

Serving Tray

99.00

792.00

184

Total

PhP 16694.75

Annual Depreciation=

PhP 3810.44

Unit Cost SalvageValue

Quantity
Useful Life

Furniture and Fixtures

Furniture and

Price

Fixtures

Quanti

Total Costs

ty

Lif

Salvage

Annual

Value (per

Depreciation

Rectangular

2,499.00

14,994.00

year)
350

1,611.75

Table
Small Round

1,199.00

4,796.00

150

524.50

Table
Big Round

4,399.00

8,798.00

450

987.25

Table
Office Table
Stand Fan

1,000.00
700.00

1
1

1,000.00
700.00

6
4

100
60

150.00
160.00

32
2

12,768.00
8,798.00

4
8

30
400

2,952.00
999.75

(Office)
Chairs
L-Shaped Sofa

399.00
4,399.00

Set
Kitchen Table
Chandelier
Air

1,999.00
3,049.00
9,950.00

1
2
2

1,999.00
6,098.00
19,900.00

6
10
6

150
230
600

308.17
563.80
3,116.67

conditioner
Circular Light
Pin Light
Fluorescent

400
200
350

6
16
3

2,400.00
3,200.00
1,050.00

2
2
2

20
10
0

1,140.00
1,520.00
525.00

Light
TOTAL

86,501.00

14,558.88

77

Leasehold Improvements
Building Renovation

Php

25,000

Building design concept

Paint
Materials for decoration
Plumbing and Tiles
Electrical
Labor
Total

Php
Php
Php
Php
Php
Php
Php

5,000
10,000
15,500
15,000
3,000
9,000
82500.00

Life: 3 years
Annual depreciation = P 27,500.00

78

For the Year 2016

Employee

Status
Rate per visit (P/visit)
Rate per day (P/day)
Rate per hour (P/hr)
No. of visits per month
No. of hours per day
No. of days per month
Gross Salary

Employer's Share
SSS and ECC
Philhealth
Pag-ibig
Sub-total
Employee's Share
SSS
Philhealth
Pag-ibig
Sub-total
Total Contributions

Cashier
1

Kitche
n
Stewar
d2
Single

Servic
e
Crew1

Servic
e
Crew2

Servic
e
Crew3

Securit
y
Guard

Accounta
nt

Single

Kitche
n
Stewar
d1
Single

Single

Single

Single

Single

Single
1,500.00

330.00
41.25

340.00
42.50

340.00
42.50

330.00
41.25

330.00
41.25

330.00
41.25

330.00
41.25

Monthly
Total

Annual
Total

1
8
26.00

8
26.00

8
26.00

8
26.00

8
26.00

8
26.00

8
26.00

8,580.0
0

8,840.0
0

8,840.0
0

8,580.0
0

8,580.0
0

8,580.0
0

8,580.0
0

1,500.00

62,080.0
0

744,960.0
0

636.20
100.00
100.00
836.20

673.00
100.00
100.00
873.00

673.00
100.00
100.00
873.00

636.20
100.00
100.00
836.20

636.20
100.00
100.00
836.20

636.20
100.00
100.00
836.20

636.20
100.00
100.00
836.20

4,527.00
700.00
700.00
5,927.00

54,324.00
8,400.00
8,400.00
71,124.00

308.80
100.00
100.00
508.80
1,345.0
0

327.00
100.00
100.00
527.00
1,400.0
0

327.00
100.00
100.00
527.00
1,400.0
0

308.80
100.00
100.00
508.80
1,345.0
0

308.80
100.00
100.00
508.80
1,345.0
0

308.80
100.00
100.00
508.80
1,345.0
0

308.80
100.00
100.00
508.80
1,345.0
0

2,198.00
700.00
700.00
3,598.00
9,525.00

26,376.00
8,400.00
8,400.00
43,176.00
114,300.0
0

79

Net pay or take home

pay
For the Year 2017

Employee
Status
Rate per visit (P/visit)
Rate per day (P/day)
Rate per hour (P/hr)
No. of visits per month
No. of hours per day
No. of days per month
Gross Salary
Employer's Share
SSS and ECC
Philhealth
Pag-ibig
Sub-total
Employee's Share
SSS
Philhealth
Pag-ibig
Sub-total
Total Contributions

8,071.2
0

8,313.0
0

8,313.0
0

Single

Kitchen
Stewar
d1
Single

Kitchen
Stewar
d2
Single

340.50
43.13

377.00
45.00

377.00
45.00

Cashier
1

8,071.2
0

8,071.2
0

8,071.2
0

8,071.2
0

Service
Crew1

Service
Crew2

Service
Crew3

Single

Single

Single

Securit
y
Guard
Single

340.00
43.13

340.00
43.13

340.00
43.13

340.00
43.13

1,500.00

58,482.0
0

701,784.0
0

Accounta
nt

Monthly
Total

Annual
Total

1,500.00

65,317.0
0

783,804.0
0

Single
1,500.00

1
8
26.00
8,853.0
0

8
26.00
9,802.0
0

8
26.00
9,802.0
0

8
26.00
8,840.0
0

8
26.00
8,840.0
0

8
26.00
8,840.0
0

8
26.00
8,840.0
0

673.00
112.50
100.00
885.50

746.70
112.50
100.00
959.20

746.70
112.50
100.00
959.20

673.00
112.50
100.00
885.50

673.00
112.50
100.00
885.50

673.00
112.50
100.00
885.50

673.00
112.50
100.00
885.50

4,858.40
787.50
700.00
6,345.90

58,300.80
9,450.00
8,400.00
76,150.80

327.00
100.00
100.00
527.00
1,412.5
0

363.30
112.50
100.00
575.80
1,535.0
0

363.30
112.50
100.00
575.80
1,535.0
0

327.00
100.00
100.00
527.00
1,412.5
0

327.00
100.00
100.00
527.00
1,412.5
0

327.00
100.00
100.00
527.00
1,412.5
0

327.00
100.00
100.00
527.00
1,412.5
0

2,361.60
725.00
700.00
3,786.60
10,132.5
0

28,339.20
8,700.00
8,400.00
45,439.20
121,590.0
0

80

Net pay Employee

or take home
pay
Status

Cashier
Kitchen 8,313.0
Service8,313.0
Service8,313.0
Service
Security
Accountan 58,971.1
Monthly
8,326.0 Kitchen
9,226.2 9,226.2
8,313.0
1,500.00
Steward
1 0Steward 20 Crew10 Crew20 Crew30
Guard
t
0 1
0
0 Total
Single
Single
Single
Single
Single
Single
Single
Single

Rate per visit (P/visit)

Rate per day (P/day) 360.50
385.00
Rate per hour (P/hr)
43.13
45.00
No. of visits per month
No. of hours per day
8.00
8.00
No. of days per month 26.00
26.00
Gross Salary
9,373.00 10,010.00

Annual
738,364.8
0Total

1,500.00
385.00
45.00

360.50
43.13

360.50
43.13

360.50
43.13

360.50
43.13
1.00

8.00
8.00
8.00
8.00
8.00
26.00
26.00
26.00
26.00
26.00
10,010.00 9,373.00 9,373.00 9,373.00 9,373.00 1,500.00 68,385.00 820,620.00
3,940.10

Employer's Share
SSS and ECC
Philhealth
Pag-ibig
Sub-total

709.80
112.50
100.00
922.30

746.70
112.50
100.00
959.20

746.70
112.50
100.00
959.20

709.80
112.50
100.00
922.30

709.80
112.50
100.00
922.30

709.80
112.50
100.00
922.30

709.80
112.50
100.00
922.30

5,042.40 60,508.80
787.50
9,450.00
700.00
8,400.00
6,529.90 78,358.80

Employee's Share
SSS
Philhealth
Pag-ibig
Sub-total

345.20
112.50
100.00
557.70

363.30
112.50
100.00
575.80

363.30
112.50
100.00
575.80

345.20
112.50
100.00
557.70

345.20
112.50
100.00
557.70

345.20
112.50
100.00
557.70

345.20
112.50
100.00
557.70

2,452.60 29,431.20
787.50
9,450.00
700.00
8,400.00
3,940.10 47,281.20

10,470.00 125,640.00

Total Contributions

1,480.00 1,535.00

1,535.00

1,480.00 1,480.00 1,480.00 1,480.00

Net pay or take home pay8,815.30 9,434.20

9,434.20

8,815.30 8,815.30 8,815.30 8,815.30 1,500.00 64,444.90 773,338.80

For the year 2018

81

2016
For
Remittan
ce
SSS and
ECC
Philhealth
Pag-ibig
Total

2017
For
Remittan
ce
SSS and
ECC
Philhealth
Pag-ibig
Total

2018
For
Remittan
ce
SSS and
ECC
Philhealth
Pag-ibig
Total

945.
00
200.
00
200.
00
1,34
5.00

1,00
0.00
200.
00
200.
00
1,40
0.00

1,00
0.00
200.
00
200.
00
1,40
0.00

945.
00
200.
00
200.
00
1,34
5.00

945.
00
200.
00
200.
00
1,34
5.00

945.
00
200.
00
200.
00
1,34
5.00

945.
00
200.
00
200.
00
1,34
5.00

1,00
0.00
212.
50
200.
00
1,41
2.50

1,110 1,110
.00
.00
225. 225.
00
00
200. 200.
00
00
1,53 1,53
5.00 5.00

1,00
0.00
212.
50
200.
00
1,41
2.50

1,00
0.00
212.
50
200.
00
1,41
2.50

1,00
0.00
212.
50
200.
00
1,41
2.50

1,00
0.00
212.
50
200.
00
1,41
2.50

1,05
5.00
225.
00
200.
00
1,48
0.00

1,110 1,110
.00
.00
225. 225.
00
00
200. 200.
00
00
1,53 1,53
5.00 5.00

1,05
5.00
225.
00
200.
00
1,48
0.00

1,05
5.00
225.
00
200.
00
1,48
0.00

1,05
5.00
225.
00
200.
00
1,48
0.00

1,05
5.00
225.
00
200.
00
1,48
0.00

Mont
hly

Annua
l

6,725.
00
1,400.
00
1,400.
00
9,525.
00

80,700
.00
16,800
.00
16,800
.00
114,30
0.00

7,220.
00
1,512.
50
1,400.
00
10,13
2.50

86,640
.00
18,150
.00
16,800
.00
121,59
0.00

7,495.
00
1,575.
00
1,400.
00
10,47
0.00

89,940
.00
18,900
.00
16,800
.00
125,64
0.00

5.5 Financial Ratio Analysis

Financial ratios are the principal tool use in analyzing the financial aspect of a
company. It helps to determine the liquidity of a company. Included also in this section
82

the way a firm finances its assets. How the company financed the purchase of its
assets. The effectiveness of a firms manager in utilizing its assets to generate sales
will also tackle in this part. As well as the returns on the investments that will help the
owners to know if the business they put up to is doing well is included in this section. It
will help to determine the strengths and weaknesses of a company against competitors
in the same industry.
5.5.1 Liquidity Ratio
Liquidity ratios are used to determine if the firm will be able to pay its bill on time.
These ratios measure the ability of a firm to pay off its liabilities using its available
sources.

Current Ratio
Current Ratio =

Year

2016
2017
2018

Current Assets
Current Liabilities

Current Asset

(A)
618,740.00
938,207.00
1,338,916.00

Current Liabilities

(B)
347,412.00
429,690.00
530,942.00

Current Ratio

(C=A/B)
1.78 times
2.18 times
2.52 times

The current ratio of Yema de Cabelo from year 2016-2018 shows that the
firm will be able to pay its obligations. In 2016, the firm had Php 1.78 in current assets
for every peso it owed in short-term debt. For the year 2017 and 2018, the firm had PhP
2.18 and Php 2.52 respectively in current assets to pay its every peso owed.

Acid-Test or Quick Ratio

Quick Ratio=

Current AssetsInventories
Current Liabilities

83

Year
2016
2017
2018

Quick Asset
(A)
596,566.00
914,924.30
1,314,469.16

Current
Liabilities
(B)
347,412.00
429,690.00
530,942.00

Quick Ratio
(C=A/B)
1.72 times
2.13 times
2.48 times

Acid-test or quick ratio tells that the company will be able to meet its shortterm obligations using its most liquid assets. It shows that the firm will be able to pay its
debt even considering the inventories not very liquid at all.
5.5.2 Capital Structure Ratios
Capital structure ratios refer to the way a firm finances its assets using a
combination of debt and equity.

Debt Ratio
Debt Ratio=

Year

2016
2017
2018

Total Liabilities
Total Assets

Total
Liabilities
(A)
347,412.00
429,690.00
530,942.00

Total Asset

Debt Ratio
(C=A/B)

(B)
837,730.00
1,098,795.00
1,441,101.00

0.41
0.39
0.37

It measures the percentage of the firms assets that were financed using the
combination of short and long-term liabilities. In 2016, 41% of the firms assets were
financed with debt. In 2017 and 2018, 39% and 37% respectively of the firms assets
were financed with debt.
5.5.3 Asset Management Efficiency Ratios

84

To measure on how effective the management has been using its assets to
generate sales, assets management efficiency ratios are used. It also helps to measure
the success of the firm in managing its inventory and total assets in generating sales.

Total Asset Turnover Ratio

Total Asset Turnover Ratio=

Year
2016
2017
2018

Net Sales
Total Assets

Net Sales

Total Assets

(A)
3,865,680.00
4,445,532.00
5,112,362.00

(B)
837,730.00
1,098,795.00
1,441,101.00

Total Assets Turnover

Ratio
(C=A/B)
4.61
4.05
3.55

The table shows that the firm is using its assets efficiently for it generates
about PhP 4.61 to PhP 3.55 in sales from 2016-2018 per peso of assets.

Inventory Turnover
Inventory Turnover=

Cost of Goods Sold

Inventories

Cost of Goods
Year
2016
2017
2018

Sold
(A)
2,191,332.00
2,533,953.00
2,914,046.00

Inventories
(B)
22,174.00
23,283.00
24,447.00

Inventory Turnover
(C=A/B)
98.82 times
108.83 times
119.20 times

In inventory turnover ratio, the length of time the inventories are held before
being sold can be determined. The firm turned its inventories 98.82 times in 2016,
108.83 times in 2017, and 119.20 times in 2018.
5.5.4 Profitability Ratio
Has the firm earned sufficient returns on its investments? To answer this
question, profitability ratio is used. In order to know that the firm sufficiently earning
85

profits, some other analyst turns to two measures the firms profit margins and the
firms rates of return on investments.

Gross Profit Margin

Gross Profit Margin=

Year
2016
2017
2018

Gross Profit
Net Sales

Gross Profit
(A)
1,674,348.00
1,911,579.00
2,198,316.00

Net Sales
(B)
3,865,680.00
4,445,532.00
5,112,362.00

Gross Profit Margin

(C=A/B)
0.43
0.43
0.43

It only indicates that the firm earns 43% profit margin on every peso of
revenue it collects from 2016 up to 2018.

Operating Profit Margin

Operating Profit Ma rgin=

Year
2016
2017
2018

Net Operating
Income (A)
465,421.32
638,525.62
860,907.57

Net Operating IncomeEBIT

Sales

Net Sales
(B)
3,865,680.00
4,445,532.00
5,112,362.00

Operating Profit Margin

(C=A/B)
0.12
0.14
0.17

Operating profit margin tells managers how much profit they generated from
each peso of sales after accounting for both cost of goods sold and operating expenses.
The table indicates that the managers of Yema de Cabelo are improving in managing
the firms cost of goods sold and operating expenses for it increases from 12% in 2016
up to 17% in 2018.

Net Profit Margin

86

Net Profit Margin=

Year
2016
2017
2018

Net Income
Sales

Net Profit

Net Sales

Net Profit Margin

(A)
325,794.92
446,967.93
602,635.30

(B)
3,865,680.00
4,445,532.00
5,112,362.00

(C=A/B)
0.08
0.10
0.12

On the other hand, net profit margin shows how much profit they generated for
every peso of sales after deducting all the expenses of the firm. The firm keeps .08 in
profits for ever peso of sales after deducting all the expenses incurred by the firm in
2016, .10 in 2017 and .12 in 2018.

Operating Return on Assets

Operating Return on Assets=

Net Operating IncomeEBIT

Total Assets

Net Profit
Year

2016
2017
2018

from

Total Asset

operations
(A)
465,421.32
638,525.62
860,907.57

(B)
837,730.00
1,098,795.00
1,441,101.00

Operating Return on
Asset
(C=A/B)
0.56
0.58
0.60

It takes into account both managements success in controlling expenses and

its efficient use of assets to produce firm sales. The firm generated .56 of operating
profits for every peso of its invested assets in 2016. And it continuously increases
through years.

Return on Equity

87

Returnon Equity=

Year
2016
2017
2018

Net Income
Common Equity

Net Profit

Common Equity (B)

Return on Equity

(A)
325,794.92
446,967.93
602,635.30

(B)
490,317.99
669,105.15
910,159 .26

(C=A/B)
0.66
0.67
0.66

The return on equity is the earnings available for distribution to the firms
partners. In 2016, the return on equity is 66%. After a year it goes up to 67%. Later on,
for the year 2018, the return on equity becomes 66%. It shows that the owners of the
firm continuously receive return on their equity.
5.5.5 Break Even Point
BEP ( Peso )=

Year

2016
2017
2018

Operating Expenses
Gross Profit Percentage

Operating

Gross Profit

expense
(A)
1,208,926.68
1,273,053.14
1,337,408.00

BEP in Pesos (C=A/D)

Percentage
0.43
0.43
0.43

2,811,457.40
2,960,588.70
3,110,251.16

Yema de Cabelo, in order to cover up all the expenses and to break even or to
have a profit of 0, must have sales in peso indicated in the table.

5.5.6 Payback Period

Payback period=

Net Cost of Investment

Annual Net Cash Inflows

88

Net
Yea

Income

Depreciatio
n (B)

(A)

201

325,794.9

6
201

2
446,967.9

7
201

3
602,635.3

58,402.68
58,402.68
58,402.68

Net Cash
Inflows
(C=A+B)
384,197.6
0
505,370.6

Net Cost
of
Investmen
t

Paybac
k
Period

360,000

Remaining
Balance

.94

1
661,037.9
8

The table tells that it will take .94 years to return the initial cost of investment
of Yema de Cabelo worth Yema de Cabelo PhP 360,000.
5.5.7 Net Present Value

Column1

Total Present Value

Less: Cost Of
Investment
Net Present Value
Present Value of
Future Cash
Divide by Cost Of
Investment
Profitable Index

Net Cash
Inflows

Present Value
Factor (12%)

Net Present
Value

384,197.60
505,370.61
661,037.98

0.893
0.797
0.712

343,088.46
402,780.38
470,659.04
1,216,527.8
7
360,000
856,527.87
1,216,528
360,000
3.379244083

The average market interest rate is used for the present value factor. A
positive amount of net present value would signify a profitable or feasible
project. The data indicates profitability in putting up a sweet shop food
business.
89