Running head: CAPSTONE PROJECT
Capstone Project- MGT660
Capstone Project- MGT660
A pro forma income statement is a projection of future business profits and losses. It allows the business to make operational changes that could affect the actual outcome before the projections are reality. The pro forma income statement for Once Upon A Child is a three year projection that accounts for a ten percent increase in gross sales each of the three years. The projections for Once Upon A Child show that the break-even point will occur in 2012 when net sales equal $450,000, gross profit equals $151,000 and total operating expenses equal $129,000. In 2013 the break-even point is projected to be $495,000, $172,000 and $140,000 respectively. And lastly, the projection for 2014 indicates a break-even point occurring when net sales equals $545,000, gross profit at $143,000 and total operating expenses at $148,000. However, the actual projections for Once Upon A Child would assume a positive net income of $49,000 for 2012 and 2013 and $99,000 for 2014. In order to be approved to open a Once Upon A Child franchise, a minimum of $75,000 cash is required, however, additional cash will increase the likelihood of obtaining financing. The total start-up cost required is $250,000, so the remaining $175,000 must be available through other forms of equity in order to collateralize the balance due. The parent company, Winmark, does not provide financing, however, Winmark will assist in obtaining SBA financing (Small Business Association) or financing through banks.
Financial information will be used to craft the business by allowing the ability to see where deficits lie and to correct those deficits. For example, if the deficits are indicating that there are more products being bought than are being sold, then a potential correction for the deficit could be to decrease the amount of items purchased, or to decrease the price of items in...
References: Franchise FAQ’s (n.d) retrieved from http://www.onceuponachild.com/own-a-store/faq on
James, Kendra. (n.d) What Are the Types of Financial Ratios Used to Analyze Financial
Performance? Retrieved from http://smallbusiness.chron.com/types-financial-ratios-used- analyze-financial-performance-3969.html on 3/28/12
Pro Forma Income Statements (n.d) retrieved from
http://www.businesstown.com/accounting/projections-statements.asp on 3/28/12
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