Step $2$: Create pro forma financial statements given specific dollar inputs $($listed below$)$ that might relate to a given start$-$up $($income statement and balance sheet$)$ with a beginning balance sheet, three year forecast balance sheet and income statement and estimated value $($use $5$x projected net earnings for year $3).$ Assume for your initial balance sheet you receive a bank loan of $$200,000(7\%$ simple interest$)$ along with a personal investment by your ownership group. With these funds you acquire $$70,000$ in inventory and $$150,000$ in fixed assets. You are able to get a supplier to carry $50\%$ of inventory in A$/$P and you begin with an initial cash account of $$177,000.$ In your initial balance sheet you will need to determine how much cash your investment group needs to contribute to support your business. In step $2$b you will build out the next three years of your financial statements $($balance sheet and income statement$)$ using the following assumptions: Your cash account will increase $5\%$ per year, your initial bank loan of $$200,000$ charges $7\%$ interest per year. In addition to interest you must make a principal reduction of $5\%$ of the outstanding balance at the end of each year. You anticipate sales in year $1$ to be $$450,000$ and you expect $15\%$ growth in sales in year $2,$ and $20\%$ in year $3.$ Cost of Goods sold are $55\%$ of sales, and operating expenses total $35\%$ of sales $($estimate realistically to each expense item so total equals $35\%$ of sales$),$ taxes are $21\%$ of operating profit. Your initial inventory of $$70,000($increases $15\%$ each year$),$ You anticipate an annual ending A$/$R of $15\%$ of annual sales, Fixed Assets, Net, initially of $$150,000($increase by $4\%$ each year$).$ A$/$P $($initially $$35,000)$ will change with inventory and equal $50\%$ of ending inventory in each year. Owners Equity is the balance between total assets minus total liabilities each year. Assume all earnings are retained and plowed back into the company. This is a privately held company $($not publicly traded$).$ Use the template$/$spreadsheet attached herein to prepare your financials. $($Step $2$a $-$ beginning balance sheet; Step $2$b $-$ ending Balance Sheet for years $1-3,$ income statement for the same periods and and company valuation due$).$

$\backslash$table$[[$Income Statement,,,$],[,$Year $1,$Year $2,$Year $3],[$Revenue$,$Actual,Projected,Projected$],[$Sales$,,,],[$Cost of Goods Sold,,,$],[$Gross Profit,,,$],[,,,],[$Operating Expenses,,,$],[$Marketing$,,,],[$Staffing$/$Benefits$,,,],[$Supplies$,,,],[$Legal$,,,],[$Regulatory$,,,],[$Insurance$,,,],[$Rent$,,,],[$Depreciation$,,,],[$Phone$,,,],[$Internet$,,,],[$Utilities$,,,],[$Total

$\backslash$table$[[$Income Statement,,,$],[,$Year $1,$Year $2,$Year $3],[$Revenue$,$Actual,Projected,Projected$],[$Sales$,,,],[$Cost of Goods Sold,,,$],[$Gross Profit,,,$],[,,,],[$Operating Expenses,,,$],[$Marketing$,,,],[$Staffing$/$Benefits$,,,],[$Supplies$,,,],[$Legal$,,,],[$Regulatory$,,,],[$Insurance$,,,],[$Rent$,,,],[$Depreciation$,,,],[$Phone$,,,],[$Internet$,,,],[$Utilities$,,,],[$Total Operating Expenses,,,$],[$Operating Profit,,,$],[$Interest Expense,,,$],[$Net Income Before Taxes,,,$],[$Taxes$,,,],[$Net Income After Taxes,,,$],[$EBITDA$,,,],[$Multiple$,,,],[$Value$,,,]]$Operating Expenses,,,$],[$Operating Profit,,,$],[$Interest Expense,,,$],[$Net Income Before Taxes,,,$],[$Taxes$,,,],[$Net Income After Taxes,,,$],[$EBITDA$,,,],[$Multiple$,,,],[$Value$,,,]]$