77

CHAPTER VII

FINANCIAL ASPECT

Presentation of total investment costs and financial projections like statement of

financial position, income statement, cash flow statements and changes in equity are

being disclosed in this chapter. Evaluation of financial statements and all the necessary

ratios for analysis is also included.

Table 21. Total Investment Cost

Capital Expenditure
Building 11,873,169.73
Land 10,000,000
Cash 8,000,000 29,873,169.73

Working Capital
Furnitures and 258,530
Fixtures 433,373 691,903
Equipment
Pre-operating

Expenditures
Permits and Fixtures 5,230
Supplies 87,823 93,053
TOTAL Php30,658,125.73

The business will not be a VAT registered entity since the dormitory does not meet

the revenue regulation on taxes as it has been amended under the new TRAIN LAW

stating under RA No. 10963 page 9 that in cases of mixed transactions, as in this case, the

business is not subject to VAT because the ruling specifically cites there to having a

business to be subject to VAT should exceed its gross receipts up to Php 3,000,000.00
 78

provided that the rental fee is Php 15,000 this has been also mentioned in the Social

Desirability aspect However, the business is being subjected to percentage tax instead.
 79

NRYC Dormitory
Projected Income Statement
For the years ended 2019-2023
Year -1 1 2 3 4
Rent Income-Dormitory 121,500.00 441,000.00 449,080.00 449,080.00 456,840.00
Rent Income-Commercial 120,000.00 1,050,000.00 1,046,880.00 1,046,880.00 1,014,660.00
Gross Revenue 241,500.00 1,491,000.00 1,495,960.00 1,495,960.00 1,471,500.00
Expenses
Payroll Expenses
Salaries and Wages (38,267.01) (145,748.00) (145,748.00) (150,135.04) (150,135.04)
Phil Health Contribution (1,650.00) (6,600.00) (6,600.00) (6,600.00) (6,600.00)
SSS Contribution (4,020.00) (16,080.00) (16,080.00) (16,080.00) (16,080.00)
PAG-IBIG Contribution (1,200.00) (4,800.00) (4,800.00) (4,800.00) (4,800.00)
13th Month Pay (12,000.00) (12,000.00) (12,000.00) (12,336.00) (12,336.00)
Total Payroll Expenses (57,137.01) (185,228.00) (185,228.00) (189,951.04) (189,951.04)
Non-payroll Expenses
Utilities Expenses (18,000.00) (93,000.00) (88,000.00) (88,000.00) (88,000.00)
Repairs and Maintenance (6,250.00) (26,250.00) (27,562.50) (28,940.63) (30,387.66)
Supplies Expense (87,823.00) (75,686.00) (89,241.00) (118,368.00) (92,741.00)
Advertising Expense (56,950.00) - - - -
Permits and Licenses (5,230.00) (20,370.50) (20,370.50) (19,977.50) (19,977.50)
Loan Procurement Expenses (500,000.00) - - - -
Other Percentage tax Expense (3,600.00) (31,500.00) (31,406.40) (31,406.40) (30,439.80)
Total Non-payroll Expenses (677,853.00) (246,806.50) (256,580.40) (286,692.53) (261,545.96)
Operating Income - 493,490.01 1,058,965.50 1,054,151.60 1,019,316.43 1,020,003.00
Depreciation (77,125.92) (308,503.68) (308,503.68) (308,503.68) (308,503.68)
PBI - 570,615.93 750,461.82 745,647.92 710,812.75 711,499.32
Interest Expense (487,500.00) (617,500.00) (585,000.00) (552,500.00) (520,000.00)
Net Profit - 1,058,115.93 132,961.82 160,647.92 158,312.75 191,499.32
Income Tax Expense - - - - -
Net Profit After tax - 1,058,115.93 132,961.82 160,647.92 158,312.75 191,499.32
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NRYC Dormitory
Projected Income Statement
For the years ended 2024-2028
Year 5 6 7 8 9
Rent Income-Dormitory 456,840.00 456,840.00 442,800.00 442,800.00 442,800.00
Rent Income-Commercial 1,014,660.00 1,014,660.00 983,520.00 983,520.00 983,520.00
Gross Revenue 1,471,500.00 1,471,500.00 1,426,320.00 1,426,320.00 1,426,320.00
Expenses
Payroll Expenses
Salaries and Wages (154,427.72) (154,427.72) (158,845.47) (158,845.47) (163,393.03)
Phil Health Contribution (6,600.00) (6,600.00) (6,600.00) (6,600.00) (6,600.00)
SSS Contribution (16,740.00) (16,740.00) (17,400.00) (17,400.00) (18,060.00)
PAG-IBIG Contribution (4,800.00) (4,800.00) (4,800.00) (4,800.00) (4,800.00)
13th Month Pay (12,681.41) (12,681.41) (13,036.49) (13,036.49) (13,401.51)
Total Payroll Expenses (195,249.13) (195,249.13) (200,681.96) (200,681.96) (206,254.54)
Non-payroll Expenses
Utilities Expenses (88,000.00) (88,000.00) (88,000.00) (88,000.00) (88,000.00)
Repairs and Maintenance (31,907.04) (33,502.39) (35,177.51) (36,936.39) (38,783.21)
Supplies Expense (75,686.00) (131,923.00) (75,686.00) (92,741.00) (118,368.00)
Advertising Expense - - - - -
Permits and Licenses (19,977.50) (19,977.50) (19,977.50) (19,977.50) (19,977.50)
Loan Procurement Expenses - - - - -
Other Percentage tax Expense (30,439.80) (30,439.80) (29,505.60) (29,505.60) (29,505.60)
Total Non-payroll Expenses (246,010.34) (303,842.69) (248,346.61) (267,160.49) (294,634.31)
Operating Income 1,030,240.53 972,408.18 977,291.43 958,477.55 925,431.15
Depreciation (308,503.68) (308,503.68) (308,503.68) (308,503.68) (308,503.68)
PBI 721,736.85 663,904.50 668,787.75 649,973.87 616,927.47
Interest Expense (487,500.00) (455,000.00) (422,500.00) (390,000.00) (357,500.00)
Net Profit 234,236.85 208,904.50 246,287.75 259,973.87 259,427.47
Income Tax Expense - - - 1,496.08 1,414.12
Net Profit After tax 234,236.85 208,904.50 246,287.75 258,477.79 258,013.35
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NRYC Dormitory
Statement of Changes in Net Assets
For the year Ending 2019-2028

Year Year -1 Year 1 Year 2 Year 3 Year 4

Capital Beg. 16,941,884.07 17,074,845.89 17,235,493.82 17,393,806.57
Add: Additional Investment 18,000,000.00
Net Income - 132,961.82 160,647.92 158,312.75 191,499.32
Less: Withdrawals -
Net Loss - 1,058,115.93 -
Capital End 16,941,884.07 17,074,845.89 17,235,493.82 17,393,806.57 17,585,305.89

Year Year 5 Year 6 Year 7 Year 8 Year 9

Capital Beg. 17,585,305.89 17,819,542.74 18,028,447.24 18,274,735.00 18,533,212.79
Add: Additional Investment
Net Income 234,236.85 208,904.50 246,287.75 258,477.79 258,013.35
Less: Withdrawals
Net Loss
Capital End 17,819,542.74 18,028,447.24 18,274,735.00 18,533,212.79 18,791,226.14
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Financial Statement Analysis

Average total debt

Debt−¿−equity −ratio=
Average total equity

7,250,000
=
17,767,850.01

= 40.80%

The 40.80% represents the average debt used to finance operations since the total assets

of a business firm are provided by the owners and creditors hence the larger amount

provided by the owners the less risk is assumed by the creditors.

Average total debt

Debt ratio=
Avergetotal assets

7,250,000
¿
25,017,850.01

= 28.97%

28.97% represents the percentage of the total assets provided by the creditors.

Average EBIT
¿ Interest Earned =
Ave interest expen se

566,913.93+ 487,500
¿
487,500

= 2.16 times

ave . totalowner s ' equity

Equity ratio=
ave total assets
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17,767,850.01
¿
25,017,850.01

= 71.02%

The figure above represents the percentage of total assets provided by the owner.

Average net income+ Ave . Interest Expense+ Ave . Income tax

Returnon Assets=
Average total assets

79,122.64 +487,500+291
¿
25,017,850.01

= 2.26%

2.26% represents the average asset profitability

ave . net income

Return on Equity=
ave . total equity

79,122.64
¿
17,767,850.01

= 4.45%

Conclusion

It is now safe to say that the business is feasible with reference to the analyses

made on the financial statements above and also as to the projections made in this

chapter. It is however normal for a business entity to be operating at loss in its first year

of operation considering that the major expenditures are to be bought upon or on the

primordial period of the business calendar. As to the business organizational chart, the

duties and responsibilities of those of that enumerated are properly distributed coupled

with trust and confidence of the future chosen qualified employees. Lastly, as to the
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projections, the figures turned out to be positively increasing and thus benefits can be

realized by the owner itself and other benefactors enumerated in the social desirability

aspect.

Recommendation

For other researchers who intend to utilize this study, the following are

recommended for the betterment of this study:

1. The period of financial statements are recommended to be computed to a period

of fifteen (15) years. Thus, resulting to more reasonable computation of loan

repayment.

2. The proponents recommend a revaluation of the land in the tenth (10th) year, since

it was not incorporated in this study.

3. The perishable item(s) with useful life of four (4) years must be extended up to

seven (7) years, and (3) years up to five (5) years.