Financial Plan

Financial Plan - Financial Plan We want to finance growth...

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Financial Plan We want to finance growth mainly through cash flow. We recognize that this means we will have to grow more slowly than we might like. The most important factor for our financial plan is collection of receivables. Our home health care services will be reimbursed primarily by Medicare, Medicaid, and other private insurances. History indicates that these payors are sometimes slow to reimburse and receivables can get hung up in the automated payment system if not tracked closely. As we broaden our scope of services to include a larger payor base, these lags in collection of receivables will have less impact on cash flow. Our figures are based on start-up capital as shown in the Start-up and Start-up Funding tables; we will consider an additional loan if needed. 7.1 Important Assumptions The General Assumptions table, below, shows our important (and conservative) annual assumptions concerning interest rates, tax rates, and personnel burden. In addition: 1. We assume a strong economy, without major recession. 2. We assume, of course, that there are no significant unforeseen changes in the federal policy that dictates Medicare and Medicaid reimbursement of Home Health Care Services. General Assumptions Year 1 Year 2 Year 3 Plan Month 1 2 3 Current Interest Rate 10.00% 10.00% 10.00% Long-term Interest Rate 8.00% 8.00% 8.00% Tax Rate 30.00% 30.00% 30.00% Other 0 0 0 7.2 Break-even Analysis The Break-even Analysis below is based on monthly fixed costs and an Average Per Unit Variable Cost. This assumption about cost of sales may at first look low, but in our service-based business, payroll is included with other operating expenses in our fixed monthly amounts, so the variable costs relate to the only other cost of service provided: mileage to and from service locations. At these levels, we need to bill and collect the amount shown below per month to cover our per month costs. We don't really expect to reach break-even until a few months into the business operation.
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Break-even Analysis Monthly Revenue Break-even $17,532 Assumptions: Average Percent Variable Cost 6% Estimated Monthly Fixed Cost $16,555 7.3 Projected Profit and Loss Our projected profit and loss is shown in the following table, with sales increasing throughout the three years of the plan, and profits are notable even for the start-up phase of this business. per month
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This note was uploaded on 11/13/2010 for the course IT 6410 taught by Professor Bebble during the Spring '10 term at Walden University.

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Financial Plan - Financial Plan We want to finance growth...

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