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p. 181 of 203 BACK | NEXT Foreword 1. Introduction to the Guidelines 2. User Instructions 3. Preparing and Appraising Investment Project 4. Financial Management of Executing Agencies 5. Reporting and Auditing 6. Financial Institutions 7. Knowledge Management 7.1. Useful Websites 7.2. Operations Manual (OM) 7.3. Project Administration Instructions (PAIs) 7.4. International Standards 7.5. International Accounting and Auditing Architecture 7.6. Financial Review Checklist for RRPs 7.7. Appraisal Checklist: Nonrevenue-Earning Project 7.8. Appraisal Checklist: Revenue-Earning Project 7.9. Appraisal Checklist: Private Sector Project 7.10. Appraisal Checklist: Financial Institution 7.11. Undertaking Sensitivity and Risk Analyses 7.12. Model Operating Covenants 7.13. Model Capital Structure Covenants 7.14. Model Liquidity Covenants 7.15. Commonly Used Ratios 7.16. Model Financial Statements: Service Organization 7.17. Model Financial Statements: Manufacturing Organization 7.18. Model Terms of Reference for an Auditor 7.19. Audit Report Questionnaire Addendum

Financial Management and Analysis of Projects : 7. Knowledge Management

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7.17. Model Financial Statements: Manufacturing Organization

7.17.1. The following model set of summary financial statements is appropriate for use by a manufacturing organization. When using these financial statements, it is essential that:

• An appropriate Statement of Accounting Policies be developed and agreed between ADB and the borrower (see section 5.2)
• Appropriate Notes to the Financial Statements supplement the financial statements.
• Where appropriate, the Financial Statements should be tailored so that they adequately reflect the performance and position of the organization.

7.17.2. The format used for this particular model set of summary financial statements is appropriate for year-end reporting.

Example Manufacturing Organization Income Statement [Format for year-end reporting] For the year ended 31 December 20XX
		For the Year Ended 31 December 20X2				Cumulative Since Project Start-Date
		Actual	Forecast	Variance		Actual	Forecast	Variance
	Notes	$'000s	$'000s	$'000s	%	$'000s	$'000s	$'000s	%
SALES	1	893,121	1,431,093	-537,972	-37.6%	1,976,522	2,173,098	-196,576	-9.0%
Less Cost of Goods Sold	2	813,673	1,296,081	482,408	37.2%	1,760,823	1,932,016	171,193	8.9%
GROSS PROFIT
		79,448	135,012	-55,564	-41.2%	215,699	241,082	-25,383	-10.5%
Operating Costs
Administrative Salaries		27,326	37,742	10,416	27.6%	39,950	41,506	1,556	3.7%
Depreciation		3,917	7,335	3,418	46.6%	8,554	7,953	-601	-7.6%
Amortization		12,357	12,357	..	0.0%	12,357	12,357	..	0.0%
Administration Costs		56,037	88,259	32,222	36.5%	92,672	97,306	4,634	4.8%
Marketing Expenses		3,109	4,985	1,876	37.6%	6,904	7,596	692	9.1%
		102,746	150,678	47,932	31.8%	160,437	166,718	6,281	3.8%
OPERATING PROFIT		-23,298	-15,666	-7,632	48.7%	55,262	74,364	-19,102	-25.7%
Other income		1,000	1,080	-80	-7.4%	1,166	1,260	-94	-7.5%
Foreign exchange gains/(losses)		..	-1,570	1,570	-100.0%	-1,564	-1,845	281	-15.2%
Net Income before Interest and Taxes		-22,298	-16,156	-6,142	38.0%	54,864	73,779	-18,915	-25.6%
Project-related interest expenses		-42,672	-63,657	20,985	-33.0%	-52,343	-39,604	-12,739	32.2%
Other interest expenses		..	..	..	0.0%	..	..	..	0.0%
Income tax expense		..	..	..	0.0%	..	-8,189	8,189	-100.0%
Net Income after Interest and Taxes
		-64,970	-79,813	14,843	-18.6%	2,521	25,986	-23,465	-90.3%
Gross Margin (% of Sales)		8.9%	9.4%	-0.5%	…	10.9%	11.1%	-0.2%	…
Operating Margin (% of Sales)		-2.6%	-1.1%	-1.5%	…	2.8%	3.4%	-0.6%	…

Example Manufacturing Organization Balance Sheet [Format for year-end reporting] As at 31 December 20XX
		For the Year Ended 31 December 20X2				Cumulative Since Project Start-Date
		Actual	Forecast	Variance		Actual	Forecast	Variance
	Notes	$'000s	$'000s	$'000s	%	$'000s	$'000s	$'000s	%
Current Assets
Cash and bank		25,308	10,373			34,085	-62,165
Bills receivable		56,114	59,943			82,791	91,025
Accounts receivable	3	18,705	19,981			27,597	30,342
Inventories	4	365,150	402,058			427,488	455,796
Prepayments and other current assets		120,193	120,193			120,193	120,193
		585,470	612,548			692,154	635,191
Less: Current Liabilities
Accounts payable		93,174	103,203			140,826	156,768
Short-term debt		207,610	207,610			207,610	207,610
Notes and bills payable		5,000	5,000			5,000	5,000
Advances from customers		13,084	13,084			13,084	13,084
Accrued wages and salaries		184,427	184,427			184,427	184,427
Taxes payable		72,607	72,648			72,890	81,167
Accruals and other current Liabilities		47,749	47,749			47,749	47,749
Current portion of term debt		3,000	13,578			28,824	71,070
		626,651	647,299			700,410	766,875
WORKING CAPITAL		-41,181	-34,751			-8,256	-131,684
Plus: Non-current Assets
Fixed assets		800,263	1,222,024			1,136,482	1,056,928
Capital work in progress (Assets under construction)		445,108	169,390			520,880	913,740
Intangibles and deferrals		49,426	37,069			24,712	12,355
Other non-current assets		30,572	15,572			..	..
		1,325,369	1,444,055			1,682,074	1,983,023
Less: Non-current Liabilities
Term loans		443,700	621,349			554,132	670,517
Payables		7,646	7,646			7,646	7,646
Other non-current liabilities		49,250	49,250			49,250	49,250
		500,596	678,245			611,028	727,413
NET ASSETS		783,592	731,059			1,062,790	1,123,926
EQUITY
Issued and paid-up capital		315,147	342,427			671,637	706,787
Accumulated surpluses/(deficits)		468,445	388,632			391,153	417,139
		783,592	731,059			1,062,790	1,123,926
Current Ratio		0.93	0.95			0.99	0.83
Quick Ratio		0.16	0.14			0.21	0.08
Long-term Debt: Equity		0.64	0.93			0.57	0.65

Example Manufacturing Organization Statement of Cash Flows [Format for year-end reporting] For the year ended 31 December 20XX
	For the Year Ended 31 December 20X2					Cumulative Since Project Start-Date
		Actual	Forecast	Variance		Actual	Forecast	Variance
	Notes	$'000s	$'000s	$'000s	%	$'000s	$'000s	$'000s	%
OPERATING CASH FLOWS
Receipts
Cash receipts from customers		915,146	1,448,537	-533,391	-36.8%	1,972,084	2,173,621	-201,537	-9.3%
Tax rebates		23,260	27,280	-4,020	-14.7%	30,990	35,150	-4,160	-11.8%
Other receipts		1,000	1,080	-80	-7.4%	1,166	1,260	-94	-7.5%
Payments
Employees and suppliers		-896,292	-1,387,934	491,642	-35.4%	-1,811,168	-2,019,189	208,021	-10.3%
Taxes paid		-5,942	-7,508	1,566	-20.9%	-10,212	-11,414	1,202	-10.5%
Other payments				..	0.0%			..	0.0%
Net Cash Flows from Operations	5
		37,172	81,455	-44,283	-54.4%	182,860	179,428	3,432	1.9%
INVESTING CASH FLOWS
Receipts
Interest received		..	..	..	0.0%	..	..	..	0.0%
Sales of fixed assets		..	..	..	0.0%	..	..	..	0.0%
Sales of investments		..	..	..	0.0%	..	..	..	0.0%
Payments
Interest paid		-28,482	-42,370	13,888	-32.8%	-41,700	-39,604	-2,096	5.3%
Capital expenditures		..	-219,390	219,390	-100.0%	-351,490	-392,860	41,370	-10.5%
Purchases of investments					0.0%			..	0.0%
Net Cash Flows from Investing Activities
		-28,482	-261,760	233,278	-89.1%	-393,190	-432,464	39,274	-9.1%
FINANCING CASH FLOWS
Receipts
Capital contributions from owners		..	..	..	0.0%	..	..	..	0.0%
Proceeds from new borrowings		..	168,370	-168,370	-100.0%	247,620	185,610	62,010	33.4%
Payments
Repayment of borrowings		-3,000	-3,000	..	0.0%	-13,578	-28,824	15,246	-52.9%
Dividends paid		..	..	..	0.0%	..	..	..	0.0%
Net Cash Flows from Financing Activities
		-3,000	165,370	-168,370	-101.8%	234,042	156,786	77,256	49.3%
CASH AND CASH EQUIVALENTS
Balances as at 1 January		19,618	25,308			10,373	34,085
Currency changes on opening balances		..	..			..	..
Net increases/(decreases) for period		5,690	-14,935	-20,625	-138.1%	23,712	-96,250	-119,962	-124.6%
Balances as at 31 December
		25,308	10,373			34,085	-62,165

Example Manufacturing Organization Notes to the Financial Statements [Format for year-end reporting] For the year ended 31 December 20XX
	For the Year Ended 31 December 20X2				Cumulative Since Project Start-Date
	Actual	Forecast	Variance		Actual	Forecast	Variance
	$'000s	$'000s	$'000s	%	$'000s	$'000s	$'000s	%
Note 1: Gross Margin by Product
Sales by Product:
Product A	240,318	284,659	-44,341	-15.6%	394,096	433,618	-39,522	-9.1%
Product B	230,868	258,132	-27,264	-10.6%	357,413	393,240	-35,827	-9.1%
Product C	262,416	586,880	-324,464	-55.3%	812,700	894,080	-81,380	-9.1%
Product D	149,919	287,022	-137,103	-47.8%	397,913	437,760	-39,847	-9.1%
Product E	9,600	14,400	-4,800	-33.3%	14,400	14,400	..	0.0%
Total
	893,121	1,431,093	-537,972	-37.6%	1,976,522	2,173,098	-196,576	-9.0%
Cost of Sales by Product:
Product A	203,418	311,059	107,641	34.6%	352,165	405,723	53,558	13.2%
Product B	203,418	336,981	133,563	39.6%	316,948	367,083	50,135	13.7%
Product C	260,375	414,746	154,371	37.2%	739,546	734,166	-5,380	-0.7%
Product D	138,324	220,334	82,010	37.2%	334,556	405,723	71,167	17.5%
Product E	8,138	12,961	4,823	37.2%	17,608	19,321	1,713	8.9%
Total
	813,673	1,296,081	482,408	37.2%	1,760,823	1,932,016	171,193	8.9%
Gross Profit by Product ($'000):
Product A	36,900	-26,400	63,300	-239.8%	41,931	27,895	14,036	50.3%
Product B	27,450	-78,849	106,299	-134.8%	40,465	26,157	14,308	54.7%
Product C	2,041	172,134	-170,093	-98.8%	73,154	159,914	-86,760	-54.3%
Product D	11,595	66,688	-55,093	-82.6%	63,357	32,037	31,320	97.8%
Product E	1,462	1,439	23	1.6%	-3,208	-4,921	1,713	-34.8%
Total
	79,448	135,012	-55,564	-41.2%	215,699	241,082	-25,383	-10.5%
Gross Margin by Product ( % ):
Product A	15.4%	-9.3%	24.6%	…	10.6%	6.4%	4.2%	…
Product B	11.9%	-30.5%	42.4%	…	11.3%	6.7%	4.7%	…
Product C	0.8%	29.3%	-28.6%	…	9.0%	17.9%	-8.9%	…
Product D	7.7%	23.2%	-15.5%	…	15.9%	7.3%	8.6%	…
Product E	15.2%	10.0%	5.2%	…	-22.3%	-34.2%	11.9%	…
Total
	8.9%	9.4%	28.2%	…	10.9%	11.1%	20.5%	…
Note 2: Cost of Goods Sold
Raw Materials	424,751	690,624	265,873	38.5%	945,534	1,039,383	93,849	9.0%
Utilities	238,734	416,461	177,727	42.7%	592,612	679,561	86,949	12.8%
Direct Labor	79,639	121,775	42,136	34.6%	118,937	112,413	-6,524	-5.8%
Direct Depreciation	35,257	66,012	30,755	46.6%	76,988	71,601	-5,387	-7.5%
Other Variable Costs	22,750	38,117	15,367	40.3%	52,182	57,366	5,184	9.0%
	801,131	1,332,989	531,858	39.9%	1,786,253	1,960,324	174,071	8.9%
Plus opening finished goods	93,437	80,895	-12,542	-15.5%	117,803	143,233	25,430	17.8%
Less closing finished goods	-80,895	-117,803	-36,908	31.3%	-143,233	-171,541	-28,308	16.5%
Cost of Goods Sold
	813,673	1,296,081	482,408	37.2%	1,760,823	1,932,016	171,193	8.9%

Example Manufacturing Organization Notes to the Financial Statements [Format for year-end reporting] For the year ended 31 December 20XX
	For the Year Ended 31 December 20X2				Cumulative Since Project Start-Date
	Actual	Forecast	Variance		Actual	Forecast	Variance
	$'000s	$'000s	$'000s	%	$'000s	$'000s	$'000s	%
Note 3: Receivables
By Organization Type:
Related parties	576	700			750	750
State-owned organizations	10,256	12,500			17,200	19,000
Other organizations	9,744	9,000			12,500	14,000
Gross Receivables
	20,576	22,200			30,450	33,750
By Age
Less than 30 days old	10,000	11,000			15,000	19,000
30 to 60 days old	5,000	5,500			7,000	9,000
60 to 90 days old	2,500	2,500			5,000	4,000
90 to 180 days old	2,000	2,000			2,000	1,000
More than 180 days old	1,076	1,200			1,450	750
Gross Receivables
	20,576	22,200			30,450	33,750
Less: Provision for Doubtful Debts	-1,871	-2,219			-2,853	-3,408
Net Receivables per balance
	18,705	19,981			27,597	30,342
Note 4: Inventories
By Age
Less than 2 months old	100,000	120,000			125,000	160,000
2 to 4 months old	80,000	90,000			95,000	150,000
4 to 6 months old	100,000	95,000			95,000	90,000
6 to 9 months old	60,000	60,000			70,000	40,000
9 to 12 months old	20,000	30,000			35,000	20,000
More than 12 months old	15,150	17,058			17,488	5,796
Gross Inventories
	375,150	412,058			437,488	465,796
Less: Provision for Obsolete Inventories	-10,000	-10,000			-10,000	-10,000
Net Inventories per balance sheet
	365,150	402,058			427,488	455,796
Note 5: Reconciliation of Income Statement to Operating Cash Flows
Net Surplus/(Deficit) per Income Statement	..	..			..	..
Items included in net surpluses but not in
net cash flows from operations:
Unrealized net foreign exchange gains	..	..			..	..
Interest revenues	..	..			..	..
Interest expenses	..	..			..	..
Asset movements
Depreciation	..	..			..	..
Gains/(losses) on sales of assets	..	..			..	..
Other non-cash items
Movements in employee benefit liabilities	..	..			..	..
Movements in working capital
Decrease/(increase) in receivables	..	..			..	..
Decrease/(increase) in inventories	..	..			..	..
Decrease/(increase) in work in progress	..	..			..	..
Increase/(decrease) in payables	..	..			..	..
Net Cash Flows from Operations
	..	..			..	..

Back 7.16. Model Financial Statements: Service Organization	Next 7.18. Model Terms of Reference for an Auditor