BSBFIN601
Assessment Manual
BSBFIN601
Manage organisational finances
Submission details
Candidate Name Student ID No. Assessor name Assessment Date/s Objective of assessments
We are committed to your learning by providing a training and assessment framework that ensures the knowledge gained through training is translated into practice in your work in the workplace with consistent and competent work performance. The purpose of the assessment process is to assess your ability:
to apply skills and knowledge using written and demonstration activities that apply to tasks and activities of a workplace.
to translate your learning into your work performance in a workplace through demonstration.
to actively, correctly and consistently apply skills and knowledge for work in a workplace.
The assessment process
The assessment process is known as competency-based assessment. This means that evidence of your current skills and knowledge will be measured against national standards, not against the learning you have undertaken either recently or in the past. Some of the assessment will be concerned with how you apply your skills and knowledge in a workplace, and some in the training room as required by each unit. The assessment tasks have been designed to enable you to demonstrate skills and knowledge application and produce the critical evidence to successfully demonstrate competency at the required standard.
Your assessor will ensure that you are ready for assessment and will explain the assessment process. Your assessment tasks will outline the evidence to be collected and how it will be collected, for example; a written activity, case study, or demonstration and observation. The assessor will also have determined if you have any special needs to be considered during assessment. Changes can be made to the way assessment is undertaken to account for special needs and this is called making Reasonable Adjustment provided to you in the assessment guide provided to you separately.
Assessment guide
Your assessment guide that is provided to you will explain the following. Please refer to assessment guide for the following information before commencing your written work and demonstration:
Your responsibilities during the assessment.
Assessor responsibilities during the conduct of assessment.
Your rights to appeal if the assessment outcome appears as Not Yet Competent for one or more assessment tasks.
The process to apply if you already possess the knowledge and skills to be able to demonstrate competence in this unit.
The formats and structure of the written assessment work for submission.
The length, breath and the quantity of your written work, plagiarism collusion, cheating and how to use references for sources of information.
how to achieve a satisfactory outcome against the criteria for each type of assessment task.
Application of reasonable adjustments where necessary.
Requirements for demonstration, performance for practical assessment tasks and activities.
Your assessment performance with commitment, consistency, clarity, capacity, capability, correctness and completeness.
Assessment methods
This manual has three assessment tasks. Assessment methods for this unit of competency include:
Written questioning
Project work (includes role-plays)
Role-play (includes written project work)
Instructions
Each assessment task provides you with assessment information that includes answers to what, why, how, when, in what condition, what materials, resources and equipment to use and evidence requirements.
Read the applicable information and if unsure seek clarification from your assessor.
Before and during assessment demonstration and interacting with others, ensure you follow simulated workplace policies and procedures.
Ensure you follow hygiene procedures, social distancing rules and ethics before, during and after assessment tasks and activities.
Undertake your preparation activities and demonstration activities as specified and directed by your assessor.
In any situation during the assessment, if you find that you are unable to perform due to any condition (health or safety), stop your work and inform the assessor of the condition.
Ensure you are obligated with your rights as a candidate and respects the rights of your assessor during the assessment performance.
For interactive and role-play activities, organise role-play settings and individuals for role-play in collaboration with assessor and training mates.
Submit your written work when it becomes due and avoid the requirements of extensions.
Use provided self-assessment checklists by checking as you progress in assessment to ensure you do not miss anything that may lead to unsatisfactory outcomes.
Submission specifications
Fill your submission details in the front page and attach any additional documents and any other evidence as specified and required by your assessor.
Follow the institution submission requirements of assessment. I.e., electronic submission (LMS) or hard copy submission or as specified by your assessor for differing assessment situations.
ASSESSMENT GUIDELINES FOR WRITTEN TASK
QUESTION TYPE HOW LONG YOUR ANSWER MUST BE (LENGTH OF ANSWER)
Define Length approximately 4 typed lines = 50 words, or 5 lines of handwritten text for each question.
Identify Write dot points of the number of items to identify according to the question.
Outline Summarise in a line or set of lines the required number of items or develop appropriate meaningful answer according to the question but not in detail.
Identify and briefly describe Identify in dot points and provide a description of each with minimum of 4 typed lines = 50 words, or 5 lines of handwritten text for each question.
Describe Provide description with minimum 8 typed lines = 100 150 words, or 10 15 lines of handwritten text or appropriately describe to provide a meaningful answer with consistent knowledge application in length according to the question.
Explain Explain the procedure with minimum 8 typed lines = 100 150 words, or 10 15 lines of handwritten text or appropriately explain to provide a meaningful answer with consistent knowledge application in length according to the question.
Distinguish / differentiate Distinguish means recognise or treat (someone or something) as different. Todifferentiateis to show or find thedifferencebetween things which are compared. It simply means that they are not thesame, but does not qualify them as being unique and possibly not related.
Length approximately 4 8 typed lines = 50 100 words, or 5 - 10 lines of handwritten text for each question.
ASSESSMENT TASK 1
Written Questioning
You are required to read the following assessment information, requirements and instructions before commencing. This task is about written questioning for you to provide written answers as evidence of your knowledge application. Ensure you follow the terms and conditions applied in undertaking written task during the assessment as specified and facilitated by your assessor.Assessment Information Description
1 Assessment method Written questioning
2 Assessment type Summative
3 Assessment description
(What?) This assessment task is a written task for which you are required to provide written answer solutions to the questions demonstrating your knowledge required to undertake budgeting, financial forecasting and reporting.
Read the following information related to your assessment to prepare and perform to provide evidence of your knowledge.
4 Purpose (objective) of the assessment
(Why?) To gather evidence of your ability to apply knowledge consistently to undertake budgeting, financial forecasting and reporting.
5 Assessment Instructions
(How?)
Read the theoretical component of the of learner workbook.
Conduct research and review literature relevant to the unit
Provide answer solutions to each question using your own words. Note: do not just copy past the answers from other materials.
You may refer to learning materials and other sources of information as agreed by your assessor.
You may word-process your answers using MS Word /Mac document.
The assessment is due for completion on the date/s and time/s. specified by your assessor.
Any variations to this arrangement must be approved in writing by your assessor.
Submit your work with any required evidence attached.
See the specifications below for details of submission requirements.
Read the following requirements for this assessment completion:
6 Assessment date/s and timing/s
(When?) This assessment will be conducted according to training delivery session plan. Assessor will specify the timings of assessment and submission of evidence. Time allowed for the assessment is 3 hours within 20 hours of training delivery of the week 2.
7 Specifications
(What structure, format and demonstration)
Write answer solutions to all the questions using word-processed document.
Provide specified length and numbers mentioned in each question.
Submit the answers with a cover page that includes your name, student ID, unit name/code, date of submission and assessor name.
If separate word-process document is used for your responses, include header (unit name/code) and footer (page no. student name and ID).
8 Assessment context
(where and in what condition) Assessment is conducted in the training room and safe environment where you are required to provide answer solutions to the questions in a word-processed document with evidence that demonstrates consistent knowledge application.
9 Required resources
(What resources, equipment, tools and materials) Assessment task with instruction and assessment information
Learner workbook and other training handouts if or as allowed by your assessor.
Computer with Internet access.
Word-process software (MS Word/Mac).
Workspace, table, chair and stationery.
10 Evidence requirements/
(What assessor is looking for) To complete the unit requirements safely and effectively, you must prove application of knowledge consistently relevant to vocational contexts for the following areas:
Your Task Write answers (Knowledge Application)
Assessor can decide whether to have this as written or oral questioning. If the assessor use verbal questioning method, the assessor must write student responses using dot points as a minimum on the students responses (Not recommended as is a time consuming method as one candidate will respond while other candidates are watching and waiting, but assessor is free to decide).
The following is a set of knowledge-based questions. Read the text section introduction in the learner workbook, refer to training undertaken and provide your answer solutions to the following questions using your own words to demonstrate your consistent knowledge application.
Note: If hand written answers are allowed by the assessor considering reasonable adjustments or any special consideration, you need to use the enter key of the keyboard to expand the answer space. For example, 2 3 questions in a page to allow sufficient space , print a hard copy and write answers.
Questions (Ensure you answer all the following questions using the length guidelines above)
# Note: Write/type your answers in the space below the question. If questions are answered verbally, the assessor must write answers in the sections provided below.
The space below does not indicate the size of the answer length. Follow above guidelines and keep typing and the space will expand. If answers are recorded separate to this document, they must be attached at the back of this document. This column is for assessor to mark
Satisfactory
Answer
Mouse click editable box
1 Define the term financial plans using your own words. Yes No
Answer 2 Describe what is a financial management and what decisions you make in financial management. Satisfactory
answer
Yes No
Answer 3 Explain the importance of financial planning for an organisation. Satisfactory
answer
Yes No
Answer 4 Describe processes to establish and review profits and losses from financial statements. Satisfactory
answer
Yes No
Answer 5 Describe the requirements for financial probity. (approx. 100 words).
Satisfactory
answer
Yes No
Answer 6 Identify and briefly describe at least five principles of accounting and financial systems. Satisfactory
answer
Yes No
Answer 7 Identify and outline key functions of financial management software. Satisfactory
answer
Yes No
Answer 8 Identify and briefly describe key components of a financial budget. Satisfactory
answer
Yes No
Answer 9 Legislation and conventions relevant to financial management in organisation
Satisfactory
answer
Yes No
Answer 10 Describe the following Australian Tax Office (ATO) requirements for (Approx. 200 words each):
Goods and Services Tax,
Company Tax,
Pay As You Go (PAYG).
Satisfactory
answer
Yes No
Answer ---End of written task---
ASSESSMENT TASK 2 CASE STUDY
Establish budgets and allocate funds
You are required to read the following assessment information, requirements and instructions before commencing. This task has simulated workplace reference. Ensure you access the simulated workplace resources (planning documents, policies and procedures etc.), equipment, applicable legislation, regulation, standards and code of conduct during the assessment as specified and facilitated by your assessor.
Assessment Information Description
1 Assessment Method Case study (simulated workplace)
2 Assessment Type Summative
3 Assessment Description
(What?) This assessment task is a case study for you to consult with stakeholders to undertake budgeting, financial forecasting and reporting.
You are required to analyse the case scenario and provide written solutions to task activities by demonstrating applicable foundation skills and knowledge. You must also provide performance solutions to specific role-play activities relevant to case study in role-plays as agreed by your assessor. You must read the following information related to your assessment to prepare and perform in order to provide evidence of your skills and knowledge related to the unit of competency.
4 Purpose (objective) of the Assessment
(Why?) To gather evidence of your ability to apply skills and knowledge consistently to undertake budgeting, financial forecasting and reporting.
5 Assessment Instructions
(How?)
Review the skills application section/s of the learner workbook.
Read the task performance requirements and foundation skills application for each task activity.
Conduct research and review literature relevant to the unit
Provide solutions to each written and performance activity using skills and knowledge and demonstrating your foundation skills.
Note: Use word-process document for written activities to provide written evidence as specified in the task. you may use MS Word /Mac document for your written evidence.
This task requires you to play roles. As specified and agreed by your assessor, role-play the relevant activities demonstrating relevant skills.
The assessment is due on the date specified by your assessor.
Any variations to this arrangement must be approved in writing by your assessor.
Submit your work with any required evidence attached.
See the specifications below for details of submission requirements.
Continue to read the following assessment requirements:
6 Assessment Date/s and Timing/s
(When?)
This assessment will be conducted according to training delivery session plan.
Assessor will specify the timings for assessment and evidence submission date/s and timing/s.
Time allowed for the assessment completion is 4 hours within 20 hours of training delivery of the week 4.
7 Specifications
(What structure, format and demonstration) Provide written solutions to all the case study activities and questions using word-processed document. You may use this MS Word /Mac document for your answering. Provide specified length and numbers mentioned in each written activity.
For role-play activities, play the role as specified by your assessor demonstrating foundation skills and knowledge application while being observed by your assessor.
Submit the written activities with a cover page that includes your name, student ID, unit name unit code, date of submission and assessor name. Include header (unit name/code) and footer (page number, student name and student ID number)
8 Assessment Context
(Where and in what condition) Assessment is conducted in the training room simulated and safe environment where you must perform consistently applying skills and knowledge.
You must also provide written solutions to the activities in a word-processed document with evidence that demonstrates consistent skills and knowledge application in various conditions specified in the assessment task.
Assessed in a simulated off-the-job situation that reflects the real workplace.
9 Required Resources
(What resources, equipment, tools and materials) Assessment task with instruction and assessment information
Learner workbook and other training handouts.
Access to simulated workplace business equipment and resources
Access to simulated workplace policies and procedures
Computer with Internet access, word-process software (MS Word/Mac).
Workspace, table/s, chair/s and stationery as required.
Case study and/or real workplace scenario
Access to relevant legislation, regulations, standards and code of practice
Specified timing for assessment
10 Evidence Requirements
(What assessor is looking for) To complete the unit requirements safely and effectively, you must demonstrate consistence performance and provide evidence of your ability to manage finances for at least one organisation or work area.
In the course of the above, the candidate must:
review previous financial statements
prepare, implement and revise a budget that:
contribute to financial bids and estimates
communicate with other people, including:
analyse effectiveness of existing financial management approaches.
Case study (Skills and Knowledge Application)
Using the simulated workplace and the scenario in the appendix or your own workplace referring to the scenario in the appendix as agreed by your assessor, provide solutions to consult with stakeholders to develop, implement and evaluate corporate social responsibility policy in the workplace.
Whatever the workplace you select, the policies and procedure manual of simulated workplace must be used as the policies and procedures of the workplace to undertake the following task. In case you select your own workplace or any other workplace you have access to information, provide a brief description of the workplace such as the industry, operation, personnel and teams.
Your role
You work as the manager for the simulated workplace with responsibility for ensuring an organisation is positioned to allocate and manage resources to achieve the required outputs for the business unit. It includes contributing to reviewing financial information, analysing financial risks, preparing a budget and reporting on financial activity.
Your Task
Complete the following workplace activities demonstrating skills and knowledge to undertake budgeting, financial forecasting and reporting:
Access simulated workplace business plan and policies and procedures and use the relevant policies and procedures to undertake this task.
Read the case study in appendix and review simulated workplace financial statements and assess reasons for profit or loss and write down the reasons in dot points.
Analyse cash flow trends and critical dates of ups and downs of cash flows.
Conduct research, identify and briefly describe:
statutory requirements for compliance and liabilities for tax
your analysis if at least three types of existing software and its suitability for financial management for the simulated workplace.
Using Microsoft Excel, develop a profit and loss budget for the next period using the from previous financial data and ensure your:
budget is according to compliance requirements,
organisational requirements and
statutory requirements.
Write an email to managers and supervisors and explain in your email:
the budget for them to understand,
financial delegations and
how to confirm there are no opportunities for misappropriation of funds.
Provide financial recommendations
statutory financial reporting requirements
complying with due diligence.
Review simulated workplace profit and loss statements, cash flows and ageing summaries and revise, where required.
Conduct an audit trial of simulated workplace financial statements and identify discrepancies between agreed and actual allocations.
Identify significant issues in statements and prioritise for review and decision making.
Evaluate financial management processes of simulated workplace and write a half page summary of its effectiveness.
---End of case study task activities ---
SELF-ASSESSMENT CHECKLIST
Note: The following checklist is for you to confirm your work completion as well as performance and demonstration of skills. Ensure you carefully check and tick as completed and performed before submitting written evidence and while demonstrating skills during performing the task.
Assessment Task Activity Completed
Case Study Yes No
1 Access simulated workplace business plan and policies and procedures and use the relevant policies and procedures to undertake this task. 2 Read the case study in appendix and review simulated workplace financial statements and assess reasons for profit or loss and write down the reasons in dot points. 3 Analyse cash flow trends and critical dates of ups and downs of cash flows. 4 Conduct research, identify and briefly describe:
your analysis if at least three types of existing software and its suitability for financial management for the simulated workplace.
5 Using Microsoft Excel, develop a profit and loss budget for the next period using the from previous financial data and ensure your:
budget is according to compliance requirements,
organisational requirements and
statutory requirements.
6 Write an email to managers and supervisors and explain in your email:
the budget for them to understand,
financial delegations and
how to confirm there are no opportunities for misappropriation of funds.
Provide financial recommendations
statutory financial reporting requirements
complying with due diligence.
7 Review simulated workplace profit and loss statements, cash flows and ageing summaries and revise, where required. 8 Conduct an audit trial of simulated workplace financial statements and identify discrepancies between agreed and actual allocations. 9 Identify significant issues in statements and prioritise for review and decision making. 10 Evaluate financial management processes of simulated workplace and write a half page summary of its effectiveness.
ASSESSMENT TASK 3 ROLE-PLAY (includes project work)
Review and communicate financial management approaches
You are required to read the following assessment information, requirements and instructions before commencing. This task has simulated workplace reference. Ensure you access the simulated workplace resources (planning documents, policies and procedures etc.), equipment, applicable legislation, regulation, standards and code of conduct during the assessment as specified and facilitated by your assessor.
Assessment Information Description
1 Assessment Method Role-play
2 Assessment Type Summative
3 Assessment Description
(What?) This assessment task is a project based on a case study to undertake budgeting, financial forecasting and reporting.
You are required to undertake the project by applying foundation skills and providing solutions to task activities demonstrating the application of skills and knowledge. You must also provide written solutions to task activities. You must read the following information related to your assessment to prepare and perform in order to provide evidence of your skills and knowledge related to the unit of competency.
4 Purpose (objective) of the Assessment
(Why?) To gather evidence of your ability to apply skills and knowledge consistently to undertake budgeting, financial forecasting and reporting.
5 Assessment Instructions
(How?)
Review the skills application section/s of the learner workbook.
Read the task performance requirements and foundation skills application for each task activity.
Conduct research and review literature relevant to the unit
Provide solutions to each written and performance activity using skills and knowledge and demonstrating your foundation skills.
Note: Use word-process document for written activities to provide written evidence as specified in the task. you may use MS Word /Mac document for your written evidence.
This task requires you to play roles. As specified and agreed by your assessor, role-play the relevant activities demonstrating relevant skills.
The assessment is due on the date specified by your assessor.
Any variations to this arrangement must be approved in writing by your assessor.
Submit your work with any required evidence attached.
See the specifications below for details of submission requirements.
Continue to read the following assessment requirements:
6 Assessment Date/s and Timing/s
(When?) This assessment will be conducted according to training delivery session plan.
Assessor will specify the timings for assessment and evidence submission date/s and timing/s.
Time allowed for the assessment completion is 4 hours within 20 hours of training delivery of the week 4.
7 Specifications
(What structure, format and demonstration) Provide written solutions to all the project activities using word-processed document. You may use this MS Word /Mac document for your answering. Provide specified length and numbers mentioned in each written activity.
For role-play activities, play the role as specified by your assessor demonstrating foundation skills and knowledge application while being observed by your assessor.
Submit the written activities with a cover page that includes your name, student ID, unit name, unit code, date of submission and assessor name. Include header (unit name/code) and footer (page number, student name and student ID number).
8 Assessment Context
(where and in what condition) Assessment is conducted in the training room and safe environment where you must perform applying skills and knowledge. You must also provide written solutions to the activities in a word-processed document with evidence that demonstrates consistent skills and knowledge application in various conditions specified in the assessment task. (Assessed in a simulated off-the-job situation that reflects the real workplace).
9 Required Resources
(What resources, equipment, tools and materials) Assessment task with instruction and assessment information
Learner workbook and other training handouts.
Access to simulated workplace and resources
Computer with Internet access, word-process software (MS Word/Mac).
Workspace, table, chair and stationery as required.
Case study and/or real workplace scenario
Access to relevant legislation, regulations, standards and code of practice
Business equipment and resources.
Specified timing for assessment.
10 Evidence Requirements
(What assessor is looking for) To complete the unit requirements safely and effectively, you must demonstrate consistence performance and provide evidence of your ability to manage finances for at least one organisation or work area.
In the course of the above, the candidate must:
review previous financial statements
prepare, implement and revise a budget that:
contribute to financial bids and estimates
communicate with other people,
analyse effectiveness of existing financial management approaches, including:
reviewing financial management software
managing risks of misappropriation of funds
ensuring systems are in place to record all transactions
maintaining audit trail
complying with due diligence.
Role-play (Skills and Knowledge Application)
This role-play assessment is an alternative to assess that allows you to engage with your learning in more concrete ways. This task is more than application of theory and a hands-on task for you to apply what you have learned in a real workplace or simulated workplace environment with application of your skills and knowledge through performance in a role-play.
Your role
You work as the manager for the simulated workplace with responsibility for ensuring an organisation is positioned to allocate and manage resources to achieve the required outputs for the business unit. It includes contributing to reviewing financial information, analysing financial risks, preparing a budget and reporting on financial activity.
Situation
You have undertaken an audit trial and reviewed previous financial statements, financial data and cash flow trends of the simulated workplace. You identified some discrepancies of financial management approaches and the possibility of risks of misappropriation of funds. You decided to address your findings at a meeting with managers and supervisors of a work area.
Your Task
Complete the following workplace activities demonstrating skills and knowledge to undertake budgeting, financial forecasting and reporting:
A - Preparation project work
Access simulated workplace business plan and policies and procedures and use the relevant policies and procedures to undertake this task.
Choose one financial statement of simulated workplace.
Organise the role-play settings including one manager (your assessor), two supervisors (two fellow trainees) as agreed and facilitated by your assessor.
Play your role as the manager explaining and receiving feedback from others the following.
B - Role-play
Explain about your audit trial and your analysis of effectiveness of existing financial management approaches and highlight your review of financial management software for better management of finances in the organisation.
Outline issues identified in your review of previous financial statements and audit trial initiated by you and possibility of risks of misappropriation of funds.
Explain how to meet compliance with due diligence, statutory and financial reporting requirements with everyones contribution to the financial management of the workplace.
Explain systems to record all transactions and how reporting on financial activity and making recommendations take place.
explain managers and supervisors the key elements of relevant budgets for them to understand.
How to contribute to financial bids and estimates.
---End of role-play activities---
SELF-ASSESSMENT CHECKLIST
Note: The following checklist is for you to confirm your work completion as well as performance and demonstration of skills. Ensure you carefully check and tick as completed and performed before submitting written evidence and while demonstrating skills during performing the task.
Assessment Task Activity Completed
Role-play - Preparation work Yes No
1 Access simulated workplace business plan and policies and procedures and use the relevant policies and procedures to undertake this task. 2 Choose one financial statement of simulated workplace. 3 Organise the role-play settings including one manager (your assessor), two supervisors (two fellow trainees) as agreed and facilitated by your assessor. 4 Play your role as the manager explaining and receiving feedback from others the following. Role-play 5 Explain about your audit trial and your analysis of effectiveness of existing financial management approaches and highlight your review of financial management software for better management of finances in the organisation. 6 Outline issues identified in your review of previous financial statements and audit trial initiated by you. 7 Explain how to meet compliance with due diligence, statutory and financial reporting requirements with everyones contribution to the financial management of the workplace. 8 Explain systems to record all transactions and how reporting on financial activity and making recommendations take place. 9 explain managers and supervisors the key elements of relevant budgets for them to understand. 10 How to contribute to financial bids and estimates.
Appendix
Case Study (Simulated Workplace)
Australian Constructions
Australian Constructions is a small construction company formed from the merger of Australian Constructions Painting & General Construction and West General Contractors. The company has successfully operated in the Melbourne area for the past ten years working on both small and large scale construction, repair, and alteration projects focusing onresidential contracting. With the business boom that is occurring in our local area and the desire to improve overall profit margins, the company is planning to shift its target market from residential clients to the larger commercial customers. This business plan will lay out our goals and tasks to make this transition successfuland create enough market share tosucceed in this highly competitive market.
The CompanyMelbourne based Australian Constructions began in 1985 when Mr. James Australian Constructions began his own company, Australian Constructions Painting and General Construction. In 1993 the original company was merged with another small scale local company, West General Contractors and the company began to bid successfully for larger scale projects. As part of its growth and altered focus, FCC is planning on changing its charter from a limited liability company to a class C corporation registered in Victoria. This will allow FCC greater access to investment funds to fuel its growth.
ServicesAustralian Constructions offers comprehensive services designed allow the company to do whatever it takes to finish a project. Some of these services include; design work, remodelling and alterations, permitting, site preparation, carpentry, cement foundations, painting, and plumbing and utilities installation. In addition, skills Australian Constructions lacks can be subcontracted.
The MarketThe Melbourne area is booming at this moment, overall business growthduring the past seven years has averaged approximately 9.5% and is expected to continue for at least the next four years. This makes for a very attractive market for Australian Constructions Commercial Contractors.
We will be concentrating on the customers that will provide us with the greatest margin, in other words those clients desiring office building construction. This is the fastest growing segment of commercial clients requiring our services. The other categories that we will serve include the restaurant segment, the special facilities segment, and all other potential commercial clients.
Financial ConsiderationsAustralian Constructions has only a small amount of debt and intends to stay that way. We expect to see increased profits from our market shift efforts by the end of Year 2. Over the next three years we expect lower profits as we make inroads into this tough market. We estimate that we will be able to reduce marginal costs and increase overall profitability byYear3orYear 4as we grow and take advantages of economies of scale.
Table: Profit and LossPro Forma Profit and Loss 2004 2005 2006
Sales $743,736 $880,434 $996,495
Direct Cost of Sales $535,525 $648,586 $734,085
Other Costs of Sales $0 $0 $0
Total Cost of Sales $535,525 $648,586 $734,085
Gross Margin $208,211 $231,848 $262,410
Gross Margin % 28.00% 26.33% 26.33%
Expenses Payroll $180,000 $180,000 $212,400
Sales and Marketing and Other Expenses $2,400 $2,400 $2,400
Depreciation $0 $1,000 $1,000
Rent $0 $0 $0
Utilities $1,320 $1,320 $1,600
Insurance $3,600 $3,800 $4,200
Payroll Taxes $27,000 $27,000 $27,000
Other $2,200 $2,500 $3,000
Total Operating Expenses $216,520 $218,020 $251,600
Profit Before Interest and Taxes ($8,309) $13,828 $10,810
EBITDA ($8,309) $14,828 $11,810
Interest Expense $3,498 $2,964 $2,564
Taxes Incurred $0 $3,259 $2,474
Net Profit ($11,807) $7,605 $5,773
Net Profit/Sales -1.59% 0.86% 0.58%
Projected Cash FlowWe do not expect to have any serious cash flow problems in the future. We plan on having allshort-term debts paid off in 2007 and long-term debts by 2012. The declining cash account during the period covered by this plan, andis to be expected as we build our new customer base. Once we reach a sufficient volume of sales, we will take advantages of economies of scale to decrease costs and improve profit margin.
Table: Cash FlowPro Forma Cash Flow 2004 2005 2006
Cash Received Cash from Operations Cash Sales $483,428 $572,282 $647,722
Cash from Receivables $248,641 $301,751 $343,339
Subtotal Cash from Operations $732,069 $874,033 $991,061
Additional Cash Received Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $732,069 $874,033 $991,061
Expenditures 2004 2005 2006
Expenditures from Operations Cash Spending $180,000 $180,000 $212,400
Bill Payments $567,657 $694,038 $777,110
Subtotal Spent on Operations $747,657 $874,038 $989,510
Additional Cash Spent Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $5,000 $2,000 $2,000
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $2,400 $2,000 $2,000
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $755,057 $878,038 $993,510
Net Cash Flow ($22,988) ($4,005) ($2,449)
Cash Balance $17,440 $13,435 $10,986
Chart: Cash
