please write a intro and thesis for the paper below Three-year pro forma income statement (Brittney and Jill)Pro forma income statements are an important part of business planning, providing a means

please write a intro and thesis for the paper below 

Three-year pro forma income statement (Brittney and Jill)

Pro forma income statements are an important part of business planning, providing a means to estimate necessary data to create budgets and cash flow forecasts and secure financing. Critical to the success of a pro forma statement is the assumptions that underlie the projections (Pro forma statements, n.d.). The Multi-Fry-er’s revenue projections for the first year are based on lunchtime sales. If average sales are assumed to be $5.50 and with an average of 100 customers served per day and the truck is open 5 days a week for 50 weeks out of the year, first year revenue is projected to be $137,500. In the second year, Multi-Fry-er anticipates serving 150 lunches per day and in the third year, Multi-Fry-er will add a second truck, doubling their sales projections. Expenses are based on industry standards including food and beverage costs at 30% of sales and labor at 30% of sales (Myrick, n.d.). The remaining expenses also following industry averages, providing a realistic expectation of projected expenses. The resulting projections show a net income before taxes of $17,000 in the first year. Net income projection for the second year of $112,000 reflects an increase in sales and the addition of franchise income. Finally, net income projections for the third year approach $276,000 with the addition of a second truck and growth in the franchises.    

Break-even point

The break-even point is a critical analysis for any business. It is crucial for a business to understand how many products must be sold in order to cover their expenses (Importance of break-even analysis, 2017). The Multi-Fry-er must sell 29,689 lunches (at a price of $8.25 per lunch) to break-even over the course of the year in both 2019 and 2020. From the first to second year fixed and variable costs remain consistent, affording the company a higher profit margin with a similar break-even point. With the addition of another truck in 2021 and the increased expenses that go along with operating a second truck, the Multi-Fry-er must sell 58,473 lunches which is nearly double the break-even point of the first two years. The pro forma income statements indicate the Multi-Fry-er is comfortably above this range, and as shown in its three-year projection, able to surpass the break-even point a little more each year. 

Investment capital

For many businesses, investment capital is needed to help get a business off the ground.  Whether it is from banks, business partners, angel investors, or parent companies, investment capital can be used to acquire the necessary fixed assets to get take a business from a dream to reality (Ward, 2018). In the case of Multi-Fry-er, their main acquisition will be their food truck.  This will essentially be a rolling kitchen and will be an expensive necessity that will need to pass the same type of inspections as any other restaurant. In the Phoenix area, food trucks can cost an anywhere from $21,000 to $118,000 for a used food truck (Food trucks for sale, 2019). This price could be doubled if Multi-Fry-er were to create and build their own equipment from scratch.

 A bank loan should be the first avenue taken to secure financing. Restaurant start-ups however tend to be risky for an investor because of the volatility of the market (Ward, 2018). Other sources of financing such as Kabbage, OnDeck, BlueVine, and Funding Circle are all different avenues should the bank angle fall short. The main drawback is most of these institutions require the recipient of the loan to be in business for a least 1 year, some even longer (Small business loans, 2019). This could easily prevent new small businesses from using these services. If a small business loan is granted, these funds would need to be added into the monthly costs of the business. Timely repayment of this loan would ultimately help Multi-Fry-er if they decide to upgrade their equipment or expand their business in the future by creating a good track record with the lending institution. This would make additional funding, if needed, easier to come by.   

Financial Business Strategy

First and foremost, in order for Multi-Fry-er to obtain strategic financial business management it needs to define its objectives in order to quantify and qualify it’s resources to plan to achieve its goals and maximize on capital resources. Multi-Fry-er aims to manage the financial business strategy in a way that will set itself up for success and profit in a timely and realistic fashion. It is known that financial plans focus on the long-term gains for a company, therefore long-term and short-term goals are essential to the process (Merritt, n.d.). Budgeting will help Multi-Fry-er in the financial planning because efficiency will be gained by focusing on a reduction of waste. Operating costs are a huge objective that needs to be budgeted and monitored in order to make sure sufficient funds stay steady throughout the operation. In regards to management of the financial information, the Multi-Fry-er the management team will collect data weekly, analyze it, consistently make financial decisions that are favorable for the company. Analysis of variances and trends will be used to forecast for the remainder of the year and identify any issues that might arise.

Key Financial Ratios

The Multi-Fry-er will utilize four key financial ratios to measure organizational performance and ultimately determine success of the organization. Management will use the prime costs to total costs financial ratio to determine expenses for food, beverages and staff. Prime costs to total costs should equal approximately 65% of a prepared food business’ total sales (Hanson, 2019). Secondly, the Multi-Fry-er’s management will calculate specific food costs to total cost. This ratio will determine the breakdown of specific products offered. Using the food cost to total cost metric will prove useful when adjusting the Multi-Fry-er’s menu to include certain seasonal food items. Next, the Multi-Fry-er will utilize the inventory turnover ratio to determine the adequate amount of food purchases. An inventory turnover ratio metric that is higher than the standard industry level represents the purchase of insufficient inventory, a lack of utilization of quantity discounts and a risk of shortages (Hanson, 2019). On the other hand, a calculation that is under the industry standard means that too much food is being purchased, business has slowed, or food quality is potentially declining due to the lack of fresh products, which may potentially have a direct impact on long-term sales. Lastly, the Multi-Fry-er will use the current ratio which measures the liquidity of an organization. The current ratio will measure organizational performance by showing the Multi-Fry-er’s ability to pay for items in the short term, including food, beverages and staff wages (Hanson, 2019). These four key financial ratios will measure organizational performance of the Multi-Fry-er and provide a roadmap to financial success and long-term profitability. 

Conclusion

Multi-Fry-er’s pro forma income statement demonstrates a modest gain in the first year of operation, with steady growth during the next two years. Adding a new truck in the third year will increase net income and will help Multi-Fry-er continue to grow their business and establish their name in the food truck industry. By expanding their business through a franchise business model, the Multi-Fry-er will bring in additional income and expand its brand nationally (Murray, 2017). Using the local resources and establishing positive business relationships with suppliers, allow the Multi-Fry-er to keep food costs down and remain competitively priced. By utilizing start-up funds, managing the operating costs closely, and minding inventory turnover, Multi-Fry-er can continue to make this a successful business endeavor.