CRKC7003 Financial Management Assignment Sample

Executive Summary

In this assignment, there will be a discussion over the financial viability of the Chocolate Business prescribed by Zachary. Financial reports will be created and assessed to get a result on the viability and feasibility of the current business plan.

Table of contents

Introduction.

Summary of all assumptions.

Break-even analysis.

Profit and Loss Statement for the first year of operations and Balance Sheet at the end of the first year

Monthly cash flow for the first year of operation.

Annual cash flow thereafter

Explanation of how much cash the venture will need to get started

The amount payable for Exclusive Rights of Eurochoc

Sensitivity analysis that you think would be helpful

Conclusion and recommendation

Critical Reflection

References

Introduction

Financial analysis of the business plan is very important when it comes to analyzing the feasibility and viability of the future business plan. It can be said that finances are the only way through which an entrepreneur can judge the future of the business. Financial stability and profitability are very important for the firm to determine the profits that will be received by the entrepreneur by running the business in the future days. It can be said that through the use of effective financial plans and analysis of the financial an entrepreneur can be successful in conducting the future business. It can be said that introducing an effective cash flow analysis, sales, and cost forecast will help in analyzing the future cash inflow and outflow with the profitability of the business to the entrepreneur. This will judge whether the business plan is profitable and financially viable or not. In their assignment, there will be preparation of a profit and loss statement, cash flow statement, and balance sheet which will demonstrate the financial viability of the business which will be initiated by Zachary in the future days. In this way, it will be easy to analyze whether the future business plan is financially viable and profitable or not.

Summary of All Assumptions

Some assumptions are made in line with calculating the financial stamen of the company. It can be said that through all these basic assumptions the calculation was made easy and practical to increase the efficiency of the financial analysis that will help the analyst to determine the financial feasibility of the current business. There are Profit and loss statements made, the balance sheet of the company has been created and the cash flow of the first and subsequent years has been made to check the cash inflow and outflow which will happen through the business and will initiated by Zachary shortly.

The main assumption which is made in this project is that the sales have been gradually increasing it it has met the maximum point forecasted by the owner. Thus, there is a gradual increase in sales of the company. The gradual increase in sales quantity has also increased the cost of goods sold, freight, and credit card payments which vary in accordance to the quantity of the products produced by the company in the first annual year hence the cost of these elements has also seen and gradual increase. As there was no mention of the taxation of the profit incurred by the company it is expected that a corporate rate tax of 30 % will imply the net income that will be generated by the company at the end of the year.

Break-Even Analysis

It can be said that to determine the break event point or to do break even analysis it is very important the sales, variables cost, Contribution, fixed cost, and profit of the company are determined which will help the break-even analysis of the future business which will be conducted by Zachary (Quattrone, 2016).

The formula of break-even point in sales value = Fixed Cost x (Sales/ Contribution)

Or, 28,420 x ( 255,550/ 56105)

Or, 28,420 x 4.55

Or, 129,449

The breakeven point of the company is $ 129,449

It can be said that the breakeven point of the business in the future is nearly half of the sales that look beneficial for this Startup Company and business.

Profit and Loss Statement for the first year of operations and Balance Sheet at the end of the first year

Balance Sheet

Explanation of How much Cash the Venture will need to get started?

Now from the above scenario of profit and loss, and cash flow, it can be said that Zachary Should have costs that will be needed for the operation in the first year as there is a chance of getting revenue at the end of the year. So the first year expanses of the operational activities of the firm will have to be taken by the owner himself. It can be said that the total task that will incurred in the first year of operation is $ 230, 660 which is a good amount that is to be beard by the owner himself. Apart from this the owner will have to have $ 200,000 as cash for the further inconvenience which can be caused in the inconvenience of the business. Hence 430,660 should be invested by the proprietor into the business which will help in effect initialization of the business proposed by Zachary (Fullerton et al. 2014).

The amount payable for Exclusive Rights of Eurochoc

There is a need to buy the exclusive right of Eurochoce that is very important to the company to conduct the business in the future. It can be said that the increase and decrease of rights values may affect the business in the future so it is important that the company buys these rights on a predetermined basis and this will increase the viability and reliability of the business conduct under a long-term period. It can be said that it is very important for the company to buy rights at lower prices and this will decrease the initial cost which will be incurred by the company and optimize the total resources which are used in the initialization of the business. It can be said this will help the owner to carry out the business activity at a low estimated initial cost beneficial for the profitability of the firm in the future.

Sensitivity Analysis that you think would be helpful

Sensitivity analysis is a financial management tool that is used as a procedure in which different variables of different sets are defined as independent variables and the relationship to the dependent variable elements is defined to know to how much extent the dependent variables will be affected by changes in the independent variables. In this case, it can be said the expenses of the company should be taken as the dependent variable and sales are to be taken as independent variables. It can be said that through the increase in the independent variables that is sales the expenses of the firm will increase which shows that in the initial days of the company’s business, the optimization of monetary resources cannot be undertaken as this will tend to effect the natural operation of the firm (Renz and Herman, 2016).

Conclusion and Recommendation

Concluding in the light of the above context it can be said that the initialization of such a business will be beneficial for the proprietor. It can be said that the company can opt for this business, as it is profitable in the first year as well. It looks like the trend of the company’s growth will increase after the first year which will be beneficial for the firm. Some recommendations will be made for the betterment of the business in the and they are as follows:

1. It can be said that the business option is profitable but some things are to be managed as soon as the company operates in a higher context. The company will have to optimize the use of monetary resources to increase the profitability of the firm and decrease the use of monetary resources in waste activities.
2. It can also be said that business should be done in retail markets to as this will tend to increase the scope of revenue that can be earned by the firm in an annual year (Otley, 2016).

Critical Reflection

I feel after the creation and assessment of the financial reports that the current business is profitable if the following procedure is undertaken effectively. As the business is going to collect profit at the end of the first it can be assumed that the business will grow in the next few years which will be beneficial for the proprietor of the business. I also feel that the company can grow rapidly after the first year and acquire financial capital. It is recommended that Zachary should also commence business in the retail market so that the scope of revenue increases which will increase the profitability of the firm.

References

Fullerton, R.R., Kennedy, F.A. and Widener, S.K., 2014. Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management32(7-8), pp.414-428.

Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014. Management accounting research, 31, pp.45-62.

Quattrone, P., 2016. Management accounting goes digital: Will the move make it wiser? Management Accounting Research,31, pp.118-122.

Renz, D.O. and Herman, R.D. eds., 2016. The Jossey-Bass Handbook of Nonprofit Leadership, and Management. John Wiley & Sons.

Related Link: Assignment Help