[UNLOCK] Financial Analysis and Project Assessment

This assignment involves a comprehensive financial analysis of a company across four years (2017-2021). The provided data includes various expense categories such as salary and wages, rent, insurance, depreciation, and other operating expenses. Marketing expenses and administration costs are also detailed with percentage allocations. Additionally, cash inflows from sales and other income sources are presented. A project assessment called 'Project A' is included, which involves an initial investment of $4,500,000 and subsequent net cash balances after each year's financial analysis.

ADVANCED INNOVATIVE BUSINESS
PRACTICE

Executive summary
Analytical tools have significent importance for the firms because same help firm in analyzing
business in difererent manner and provide input for making business deicisions. Think Childeren
care is operating in unique sector and there are very high growth prospects. In this regard
projection of cash flows are usually made and by doing so viability of business idea is measured.
It is identified on analysis of facts that project is viable for company and it must make
investment in its business.

TABLE OF CONTENTS
Executive summary.........................................................................................................................2
INTRODUCTION...........................................................................................................................1
Description of company...................................................................................................................1
PESTEL analysis.........................................................................................................................2
Porter five force analysis.............................................................................................................3
Project strategy and justification.....................................................................................................4
Business strategy and proposed market positioning....................................................................4
Perceptual map and competitor analysis......................................................................................4
Four ps in business.......................................................................................................................5
Launch strategy............................................................................................................................6
Pitch of profitability.........................................................................................................................6
Ratio analysis...............................................................................................................................6
Income statement.........................................................................................................................8
Cash flow statement.....................................................................................................................8
Project evaluation........................................................................................................................9
Stakeholder charter..........................................................................................................................9
Stakeholder engagement charter..................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
APPENDIX....................................................................................................................................12

INTRODUCTION
Think Childcare is the one of the company that is operating in child care sector. In the
current report analysis of relevant sector is done and varied threats as well as opporutnity that are
in market are identified. In middle part of the report projections are made and viability of project
is measured. at end of the report conclusion is prepared and in this way entire researcjh work is
carried out.
Description of company
In the current report Think Childcare limited company is taken and same is analyzed.
Business operations of the firm are quite different from other firms. Mentioend organization is a
place where childrens are admitted and company empoyees try to create curiosity to learn among
childrens and nurtur them in propeer manner. Two things that have huge impact on children
entire life is nurturing and curiotistiy to learn or whatever student learn in its life. Nurtur at
childhood stage reflect whether individuals will be able to grow in future in terms of career
growth or will pick wrong direction. It is very important to educaten them in proper manner. If
education is given to childrens in systematic manner then their curiosity get increased in respect
to learning about new things. Firm Think Childcare is taken for analysis purpose because its
business model is unique in nature which differentiate it from other companies. Moreover,
business model is such that business can never observe slowdown because child education and
its nurturing remain on top priority for the parents always. Hence, relevant business is taken in to
consideration for analysis purpose in present research study. Think Childcare have many positive
impact on the society as it can be observed that it is the organization that is fully committed
towards educating childrens by creating curiosity among them. Such kind of thing lead to
creation of personal growh of childrens when they are in small age (Balarajan, Selvaraj and
Subramanian, 2011). Parents are too busy on job and it is difficult for them to handle their
childrens in systematic manner. Such kind of things make society weak ansd prove costly to the
nation. Mentioned organization is not only earning a profit for it but also do lots of good thing
for the society and due to this reason it can be said that mentioend organization is contributing a
lot to society by giving right direction to the childrens which will lead society in future time
period.
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PESTEL analysis
 Political environment: It is one of the major component of the business environment as
under political conditions and impact that they have on the nation is covered. In the
nation there are number of political parties that operate and each of them have their own
ideologies. Acoriding to ideology political parties give priority to specific type of people
and society or entity in the nation and work for their benefits. In case if political party
that is ruling that nation is more concerned about society then it will not support actions
of the firms that are taking steps which are not in benefit of society. Hence, it can be said
that political environment have huge impact on the companies that are operating in
specific nation (Bernal and Keane, 2011). Australia government is fully committed
towards geowth of the business firms and is taking every step to supprt them in operating
business. Australia government is committed to work for benefit of the people and due to
this reaosn it increase wage payment. This thing can negatively affect business firm as
decision taken by the government of Australia lead to increase in employee cost at
workplace. It can be said that political environment to some extent have negative impact
on busines firm.
 Economic environment: Economic environment is the another factor that have influence
on the nation and firms operating in it. Economic environment usually comprise interest
rates, monetary policy, fiscal policy and exchange rates. All these factors have impact on
the nation economy and due to this reason it is very important for the firms to consider
these factors while operating business and making decisions in respect to it. It can be
observed that Australia GDP is 2.8% which is very low and it can be said that economic
conditon of the nation is not good. However, this will not create problem for the firm
because services provided from its side is related to childrens and is very unique. Hence,
change in economic environment can not significently affect nation economy.
 Social environment: Social environment also have impact on people because it reflect
their thinking, beliefs and attitude as well as value system. Social environmement
detrmine whether firm product will be prefered by people or not (Chakraborty and
Majumdar, 2011). Socially services provided by the firm are acceptable and people have
positive towards it. Hence, it can be said that social environment have positive impact on
the firm.
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 Technological environment: Technology environment refers to the sort of technology
infrastruture firm have in its own business. In case technology is advanced then firm
successully compete with its rivals and remain in good position in the market. Services
are provided to childrens where use of higher technology is not required. Apart from this
firm already integrate its operations on integrated system which will improve its
operational effeciency. Hence, it can be said that technology environment have positive
impact on the business firm.
 Environmental factor: It refers to the impact that firm have on environment due to
performance of business operations. Think Childcare does not perform operations that
have serious impact on environment and due to this reason it can be said that it does not
have impact on natural environment (Folbre, 2012).
 Legal factor: It refers to the legal factor that have impact on busines firm. Firm is not
penalized till the date and it does not have any sort of threat from this component of
business environment.
Porter five force analysis Threat from new entrants: There is threat from new entrants as any firm can enter in to
this domain. Field is very lucrative in nature and due to this reason there are many
chances that new player can enter in to market. Bargaining power of suppliers: There is less bargaining power of suppliers as firm have
good brand name and people directly interact with mentioned institute and due to this
reason there is less bargaining power of suppliers. Bargaining power of buyers: There is low bargaining power of buyers as it can be
observed that such kind of institutes are no present in large number in Australia.
However, there are few of alternatives and due to this reason it can be said that
bargaining power of customers is low or moderate. Threat from substitute products: There is moderate threat from substitutes because there
are less competitors in the market (Haan and Wrohlich, 2011). It can be said that firm
have good bargaining power in its business. Rivalry among existing players: There is high rivalry among existing players as there are
few players and they make an attempt to gain top positionn in relevant domain.
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Project strategy and justification
Business strategy and proposed market positioning
Think Children is operating in child care sector which is one of the growing domain in
Australia. It can be observed that it will be beneifcial for the firm to choose aggreive business
expansion strategy. This is because more firm will expand its business its popularity will
increase among people. Hence, it can be said that number of childrens taking admission in its
institute will increase at rapid pace. This aggesive strategy will help it in expanding its operations
at rapid rate. In current time period many rivals of the firm are also following same strategy to
improve their performance. As part of market positionng strategy image of the firm must be
created on basis of sort of services that are provided to the customers in the busienss. Means that
way in which childrens are treated at workplace must be taken in to account in order to do
positioning of firm among custoemrs and creating its good image among them (Hotz and Xiao,
2011). Way in which attempt is made to develop intellecual capacity of childrens is another
factor on basis of which good positioning of firm can be done among customers. It is the one of
the best strategy that will benefit firm and will help it in creating new customers in its business.
Normally, it is observed that firms do marketing of their products and for this they position their
products in better manner. Positioning of product is done on basis of its core strong points. These
strong points may be anything. It is very important for the company to do marketing of its
products in better manner so that tough competition can be given to competitors in the market,.
Perceptual map and competitor analysis
Low quality service
Moderate quality service
High quality service
Acceptable only
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Major competitors of the business firm are G8 Education and Affinity Education Group Ltd.
Market share of Think Childcare is 30% and same of G8 Education is 15%. Affinity group have
high market share of 40% in the market. There are some of the major strength and weakness of
these firms relative to Think Childcare.
Strength of G8 Education
 G8 Education have large number of centers in Australia. Currently, it is operating 349
centers in the mentioned nation and 18 in Singapore.
 It have sufficient number of employees at workplace.
Weakness of G8 education
 Service quality in some of braches are not so good and it is its major weakness.
Strength of Affinity Group
 Mentioned organization is operating number of branches in Australia.
Weaknes of Affinity group
 Number of braches are less then rivals and here it need to work to improve its business.
In order to beat competitors in the market two fold strategy will be folllowed and under
this new branches will be openeed and at same time main focus will be on service quality
so that customers can be retained in the business and profitability can be increased at
rapid rate (Lyon and Fernandez, 2012).
3i competitor analysis
There are three parts of 3i competitor analysis which include immediate competition,
impending competition and invisible competition. All major competitors comes in immediate
competition because their size and business operations are similar the the Think Children
company and due to this reason firm need to respond immdeiately to these rivals.
Four ps in business Product: Major product of the firm is childcare services that are given to childrens that
comes in category of 1 to 7 years of age. There is no different types of products or
packages because similar services will be given to all childrens in the institute. Price: Price is moderately charged on the customers as already there are rivals and in
order to give tough competition to them it is very important to sale service at moderate
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price so as to remain in competition in the market (Pestoff, Brandsen and Verschuere,
2013). Promotion: In order to promote products advertisment is given on traditional channels of
communication like TV, newpapers, journals and magezines. By doing so at mass level
marketing is done by the business firm. In this way firm is promoting its products at
workplace. Place: Firm is opening its stores in different locations in Australia. It is also focusing on
offering its services in foreign nations but currently its main focus is on home nation so
as to take major benefits of oportunities that are available in hometown. Physical evidence: As part of physical evidence in each center sufficient amount of
equiments and items that can attract childrens is placed so as to create good image and
environment at workplace (Tomlinson and Schwabenland, 2010). People: There are sufficient number of employees at workplace and by doing so it is
ensured that childrens will be treated in proper manner at workplace and quality level will
also be good. Process: For activity that is organized on daily basis specific process is determined and
same is strictly followed while making available services to the childrens in premises.
Launch strategy
As part of launch strategy main focus will be on opening franchisee or new centers at
different locations in Australia. This strategy is also currently followed by the business firm and
proved very successful for it an due to this reason it is assumed that further complying with this
strategy will prove beneficial to the company.
Pitch of profitability
Ratio analysis
Table 1Ratio analysis
2016 2015
Net profit 4809 5367
Net sales 54513 46512
Net profit ratio 9% 12%
Current assets 4911 4395
Current liability 9488 6855
Current ratio 0.517601 0.641138
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Debt 10281 5360
Equity 21206 17380
Debt equity ratio 0.484816 0.3084
Net profit 4809 5367
Shares issues 40404 37664
EPS 0.119023 0.142497
Sales 54513 46512
Receivables 1937 1175
Debtor turnover ratio 28.143 39.58468
 Net profit ratio: It is consdiered as one of the most important ratio because it is used to
measure firm performance. Under this ratio, not only firm profitabiity is measured but its
capability to control expenses in business is also evaluated. It can be seen from the table
that is placed above that value of net profit ratio was 12% in year 2015 and it decreased
to 9%. This reflect that there is huge difference in this percentage which means that firm
profitability decline in comaprison to previous time period and there may be number of
reasons behind this. Lack of control on indirect expenses in the business may be one of
the prominent reason behind such decline in profitability in the business (Wrohlich,
2011). Hence, it can be said that it is very important for the company to maintian very
strong control on expenses because by doing so profitability can be increased in the
business. It can be said that firm need to review its expenses and accordingly it must
spend money in specific pattern.
 Current ratio: It is the ratio which indicate state of liquidity in the business. Cash
payment and receipt going on in business. If in specific case firm failed to make payment
on time then in that situation its image tarnished among creditors and they form negative
perception about it. Thus, they need to ensure that there is sufficient amount of liquidity
in the business and firm will be able to pay all its liabilities on time and in proper manner.
Table given above is reflecting that current ratio of firm in year 2015 was 0.64 and it
decreased to 0.51 which means that there is lack of cash balance in business and company
can not pay all its liabilities on time if it make use of cash balance that currently it have in
its business. Standard ratio for current ratio is 2:1 and current value us 0.51 which is very
low. It can be said that company must increase securities and cash balance in its business.
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 Debt equity ratio: Capital structure also have significent impact on the business firm.
Capital structure of the firm is meausred by using debt equity ratio. under this method
long term loan amount is divided by shareholder equity. By doing so in balanced manner
capital structure is prepared. it can be seen from table that debt equity ratio of the firm
increased from 0.30 to 0.48 which means that debt amount increased in the business.
currently, debt equiity ratio value is below 1 and this means that to some extent capital
structure of the firm is balanced in nature.
 EPS: Earning per share is the one of the most important ratio as it reflect earning that
comes on each unit of shares. It can be seen from table that value of EPS is 0.11 in
current time period and it decreased in comparison to previous time period. It can be said
that firm failed to give good return to shareholders and it needs to increase its
profitability.
 Debtor turnover ratio: It is the ratio which reflect extent to which sales is generated from
debtors. Means that extent to which units are sold on credit basis to debtors is measured
by using this ratio. Debtor turnover ratio value decreased from 39.58 to 28.14. This
reflect that less number of units are sold on credit basis to debtors which is good for the
firm.
Income statement
From income statment it can be observed that net profit amount increased from 790541 to
1433464 in year 2018. Therafter, in year 2019 value increased to 3012452 and in year 2020 it
predicted at 4679679. Finally in year 2021 value increased to 6880331. Means that it is expected
that in the upcoming years it is expected that net profit amount will increased at rapid rate.
Hence, it is expected that in upcoming time period good amount of return will be earned by the
firm.
Cash flow statement
Cash flow statement is positive and this means that it is expected that net cash amount
will remain positive in business as value increased from 1866568 to 11536601. However, in
alignment to sales expenses will increase in business and on this basis it can be said that firm will
perform well in its business.
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Project evaluation
It can be observed from table given in appendix that project will be covered in two years
which means that project is viable in nature. ARR of project is 74.60% which is high and reflect
that project is profitable for the company.
Stakeholder charter
Stakeholder engagement charter Communicate: As per charter it is very important to ensure that all relevant information
are communicated to stakeholder in proper manner. this is because they support firm
business and ifn they will not be taken in ton confidence then their support can not be
received and firm may face loss in its businesss. Cosult early and often: In case any thing new good or bad occured in the business
project then it is necesary to communicate all relevant information to stakeholders. In
case something negative happened in business then in that case it isn important to consult
with key stakeholders before making final decisiions (Balarajan, Selvaraj and
Subramanian, 2011). Remember they are only human: It must be ensured that all things are communicate
clearly to the stakeholders because some misunderstandings can also originate between
firm and its stakeholders. They are also human being and even can think rationally but
they can also make mistake. Hence, it is very importanr to make everything very clear to
stakeholders. Plan it: Investment must be planned very carefullly before firm going to meet its
stakeholders (Stakeholder engagement, 2017). By doing so it is ensured that everything
will going on well and in interest of stakeholders. Relationships are key: Firm top managers must focus on developing strong relationship
with stakeholders. This is because it is stakeholders that will support an organization.
Hence, it is very important to maintain very strong relationship with them so that
whenever required support of stakeholders like creditors can be received on time and
flexibioluity can be maintained in the business operations. Simple but not easy: Under this principle firms instead of making prediction alone must
take consulation with stakeholders and on that basis must make forecast about changes
that can be observed in respect to project. By doing so good relationship can be
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maintianed with them and deciisons can be taken on which both sides have full
concensus. Environment: UN charter state business firms must take steps to ensure that their
business operations are not harming natural environment and is supporting it (The ten
principles of the UN global compact, 2017). In case firm operations have impact on firm
steps can be taken immediately to reduce that impact. Anti corruption: Business firms must take strict action against any case of corruption if
happened in the business. By doing so it can be ensured that such kind of practice will not
happpened again in business. Labour: All labour must be treated equally and child labour must not be allowed in the
business. Wages of fair amount must be given to employees at workplace. Human rights: It must be ensured that human rights of employees are safe at workplace
and their interest are not hurted.
CONCLUSION
On the basis of above disucssion it is concluded that there is significent importance of
project management for the firms. before selcting any project first of all evaluation must be done
and in this regard cash flow must be estimated accurately. prediction can be made after making
due consultation with stakehodlers son that they can also be taken on confidence and proper
support can be received from them . All these things ensured that project will be operated in
proper manner and objectives will be achieved on time.
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REFERENCES
Books and Journals
Balarajan, Y., Selvaraj, S. and Subramanian, S. V., 2011. Health care and equity in India. The
Lancet. 377(9764). pp.505-515.
Bernal, R. and Keane, M. P., 2011. Child care choices and children’s cognitive achievement: The
case of single mothers. Journal of Labor Economics. 29(3). pp.459-512.
Chakraborty, R. and Majumdar, A., 2011. Measuring consumer satisfaction in health care sector:
The applicability of servqual. Researchers World. 2(4). p.149.
Folbre, N., 2012. For love and money: Care provision in the United States. Russell Sage
Foundation.
Haan, P. and Wrohlich, K., 2011. Can child care policy encourage employment and fertility?:
Evidence from a structural model. Labour Economics. 18(4). pp.498-512.
Hotz, V. J. and Xiao, M., 2011. The impact of regulations on the supply and quality of care in
child care markets. The American economic review. 101(5). pp.1775-1805.
Lyon, F. and Fernandez, H., 2012. Strategies for scaling up social enterprise: lessons from early
years providers. Social Enterprise Journal. 8(1). pp.63-77.
Pestoff, V., Brandsen, T. and Verschuere, B. eds., 2013. New public governance, the third sector,
and co-production (Vol. 7). Routledge.
Tomlinson, F. and Schwabenland, C., 2010. Reconciling competing discourses of diversity? The
UK non-profit sector between social justice and the business case. Organization. 17(1).
pp.101-121.
Wrohlich, K., 2011. Labor supply and child care choices in a rationed child care market.
Online
The ten principles of the UN global compact, 2017. [Online]. Available through:<
https://www.unglobalcompact.org/what-is-gc/mission/principles>.
Stakeholder engagement, 2017. [Online]. Available through:<
https://www.apm.org.uk/resources/find-a-resource/stakeholder-engagement/key-
principles/>.
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APPENDIX
2017 2018 2019 2020 2021
Revenue 5000000 6500000 9100000 11830000 15379000
Less: Cost of goods sold 333484 350158 367666 386049 405352
Gross profit 4666516 6149842 8732334 11443951 14973648
Expenses
Marketing expenses 750000 750000 750000 750000 750000
Administration expenses 100000 130000 182000 236600 307580
Finance cost 250000 250000 250000 250000 250000
Insurance 41105 41105 41105 41105 41105
Rent 197305 203224 209321 215601 222069
Salary and wages 2236127 2392655 2560141 2739351 2931106
Depreciation 137018 137018 137018 137018 137018
Other operaitng expenses 164421 213747 299246 389020 505726
Sum of expenses 3875976 4117750 4428832 4758695 5144604
PBIT 790541 2032092 4303503 6685256 9829045
Tax 237162 609628 1291051 2005577 2948713
Net profit 790541 1422464 3012452 4679679 6880331
2017 2018 2019 2020 2021
Marketing expenses 15.00% 15.00% 15.00% 15.00% 15.00%
Administration expenses 2.00% 2.00% 2.00% 2.00% 2.00%
Finance cost 5.00% 5.00% 5.00% 5.00% 5.00%
Insurance 0.82% 0.82% 0.82% 0.82% 0.82%
Rent 3.95% 3.95% 3.95% 3.95% 3.95%
Salary and wages 44.72% 36.81% 28.13% 23.16% 19.06%
Depreciation 2.74% 2.74% 2.74% 2.74% 2.74%
Other operating expenses 3.29% 3.29% 3.29% 3.29% 3.29%
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Cash inflow 2017 2018 2019 2020 2021
Sales 5000000 6500000 9100000 11830000 15379000
Other income 50000 52500 55125 57881.25
60775.312
5
Sum of cash inflow 5050000 6552500 9155125 11887881 15439775
Cash outflow
Salary and wages 2236126.5
2392655.3
6
2560141.2
3
2739351.1
2 2931105.7
Rent 197305.28
203224.43
8
209321.17
1
215600.80
6
222068.83
1
Marketing expenses 750000 750000 750000 750000 750000
Sum of expenses
3183431.7
8 3345879.8
3519462.4
1
3704951.9
3
3903174.5
3
Net cash balance 1866568 3206620 5635663 8182929 11536601
Project A
Initial
investment -4500000
1 790541 -3709459
2 1422464 -2286995
3 3012452
725456.9
5
4 4679679
5405136.
1
5 6880331 12285467
Project A
Initial
investment 4500000
1
790540.6
2
2
1422464.
5
3
3012451.
9
4 4679679.
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