Financial Plan for A to Z Skincare Ltd.

This document includes a financial plan for A to Z Skincare Ltd. which deals in skin care products. It includes a cash flow forecast, balance sheet forecast, profit and loss statement and the break-even analysis based on the marginal costing statement. The document also discusses the forecasting technique, statutory requirements, negotiation strategy for acquiring funding, and budget monitoring. Additionally, it analyzes the financial records of Woolworths Ltd. by applying horizontal and vertical analysis.

BSBFIM801
MANAGE FINANCIAL
RESOURCES
Assessment 1
Submitted by:
<Student name>
<Student Id>

Student Name Student Id
Introduction:
The new business is being proposed to be started in the city of Adelaide in
Australia. The business would be dealing in the skin care products and the
decision to introduce the same has been taken as per the requirement of the
place as there are not many shops and businesses dealing in the skin care
beauty products. For the purpose of the assessment and the analysis, a
business case has been prepared with the help of the financial statements.
The financial statements which has been included as a part of the
assessment are cash flow forecast, balance sheet forecast and the break-
even analysis for the new business. The same has been prepared based on
several permutation and combination and then presented to the decision
makes for decision making. The name of the new company would be “A to Z
Skincare Ltd.”
Part 1:
Financial Plan:
A financial plan that includes a cash flow forecast, balance sheet forecast, profit
and loss statement and the break-even analysis based on the marginal costing
statement for your new business has been shown below:
A to Z Skincare Ltd.
Marginal Costing Statement
for year ended 31st December 20X8
(Amt. in $)
Particulars per unit 12 months
Sales 8.00 120,000
Variable Cost
Material 2.00 30,000
Contribution 6.00 90000.00
Fixed Costs
Labour 2.08 31,200
Depreciation 0.48 7,200
Other overheads 2.9 43,500
Total Fixed Costs 81,900
Net Profit 0.54 8100.00
Break even point (in units) 13,650
Break even point (in sales) 109,200

Student Name Student Id
Month: 1 2 3 4 5 6 7 8 9 10 11 12 Totals
Receipts
Percent of Annual Sales 8% 4% 5% 10% 8% 12% 9% 8% 9% 7% 9% 11% 100%
Budgeted sales volume
(units) 1,200 600 750 1,500 1,200 1,800 1,350 1,200 1,350 1,050 1,350 1,650 15,000
Budgeted selling price 8 8 8 8 8 8 8 8 8 8 8 8
Total Receipts 9,600 4,800 6,000 12,000 9,600 14,400 10,800 9,600 10,800 8,400 10,800 13,200 120,000
Payments
Direct Materials Purchases 2,400 1,200 1,500 3,000 2,400 3,600 2,700 2,400 2,700 2,100 2,700 3,300 30,000
Direct Labour 2,496 1,248 1,560 3,120 2,496 3,744 2,808 2,496 2,808 2,184 2,808 3,432 31,200
Other Overhead Costs:
Depreciation 600 600 600 600 600 600 600 600 600 600 600 600 7,200
Utilities 300 150 188 375 300 450 338 300 338 263 338 413 3,750
Insurance 216 108 135 270 216 324 243 216 243 189 243 297 2,700
Factory Supervisor's Salary 408 204 255 510 408 612 459 408 459 357 459 561 5,100
Rent 120 60 75 150 120 180 135 120 135 105 135 165 1,500
Maintenance 216 108 135 270 216 324 243 216 243 189 243 297 2,700
Administrative Wages 480 240 300 600 480 720 540 480 540 420 540 660 6,000
General Office Expenses 408 204 255 510 408 612 459 408 459 357 459 561 5,100
Interest 492 246 308 615 492 738 554 492 554 431 554 677 6,150
Selling and administrative
expenses 840 420 525 1,050 840 1,260 945 840 945 735 945 1,155 10,500
Total Payments 8,976 4,788 5,835 11,070 8,976 13,164 10,023 8,976 10,023 7,929 10,023 12,117 111,900
Net Cashflow 624 12 165 930 624 1,236 777 624 777 471 777 1,083 8,100
Opening Bank Balance 3,500 4,124 4,136 4,301 5,231 5,855 7,091 7,868 8,492 9,269 9,740 10,517
Closing Bank Balance 4,124 4,136 4,301 5,231 5,855 7,091 7,868 8,492 9,269 9,740 10,517 11,600
A to Z Skincare Ltd.
Cash Budget for the year 20X8
Cash Flow Forecast - 12 Months

Student Name Student Id
A to Z Skincare Ltd.
Income statement for the year ended 31st December 20X8
£ £
Sales
Sales 120,000
Other - Sales of scrap 5,000
Total Sales 125,000
Less Cost of sales
Opening Inventory 6,500
Purchases 32,500
Closing Inventory 7,250 31,750
Total Cost of sales 31,750
Gross Profit 93,250
Operating Expenses
Labour expenses 31,200
Depreciation 7,200
Utilities 3,750
Insurance 2,700
Factory Supervisor's Salary 5,100
Rent 1,500
Maintenance 2,700
Administrative Wages 6,000
General Office Expenses 5,100
Interest 6,150
Selling and administrative expenses 10,500
Total expenses 81,900 81,900
11,350
Net Profit 11,350
A to Z Skincare Ltd.

Student Name Student Id
Statement of Financial Position
As on 31st December 20X8
Assets
Non-Current Assets
Property, plant, and equipment 32,000
Less accumulated depreciation 5,000
Net book value 27,000
Furniture 6,000
Less accumulated depreciation 1,000
Net book value 5,000
Current Assets
Inventory 7,250
Receivables 23,550
Cash at bank 11,600 42,400
Total Assets 74,400
Capital and Liabilities
Capital introduced 49,050
Add:
Net profit for the year 11,350
Less:
Drawings Nil
60,400
Closing capital 60,400
Non-Current Liabilities
Loan from bank 8,900
Current Liabilities
Payables 3,850
Bank overdraft 1,250 5,100
Total Capital and Liabilities 74,400

Student Name Student Id
Part 2:
Financial Report
 Products or services:
Describe the products or services that your business will produce.
The company would be dealing in the business of selling skin care products
some of which are fairness creams, lotions, cosmetics, shampoos, hair
conditioners, gels, talc, etc.
 Forecasting technique:
Identify which type of forecasting technique you will use to develop further
financial forecasts.
The forecasting technique which has been used here is the top down
forecasting technique as per which the numbers are being extrapolated from
general to specific and forecasts are based on the overall market scenario
and the information from the market is used to find or estimate the company’s
mark. The financial forecasts have also used the industry information like the
requirement of capital, the cash flow requirement, the receivable and the
payable days, working capital requirement and so on (Choy, 2018).
 Analysis of forecasts:
How will you analyse these forecasts?
The financial statements which has been included as a part of the assessment
are cash flow forecast, balance sheet forecast and the break-even analysis for
the new business. The same has been prepared based on several
permutation and combination and using the most relevant cost for each type
of expenses. All the possible revenue and expense streams has been taken
into consideration.
 Statutory requirements:
What statutory requirements do you need to consider in preparation of your
budget?
The statutory requirements which needs to be considered while preparation of
the budget for the new company includes the sales tax provision on the units
of goods sold, the income taxes to be paid periodically to the government
based on the income earned by the entity and provision for other legal and
statutory issues which might creep up during the course of the business.

Student Name Student Id
 Collection of comparative and trend information to support budget:
Describe how you will collect comparative and trend information to support
your budget?
The comparative and trend information can be collected through the
secondary data sources collection like that of internet, company website,
annual report of the companies, stock exchange information. The same can
be taken for different companies in the same industry or similar start-ups in
the local ecosystem to give a true comparable base (Alexander, 2016).
 Negotiation strategy to acquiring funding for business project:
Explain your negotiation strategy with the bank manager relating to acquiring
funding for your business project.
The negotiation strategy would be that the bank would be getting more
business in terms of the debt once the business expands. Further the bank
would also be earning the interest and service revenue from the business. As
per the forecasted financial statements, the business would have positive
cash flow and therefore the interest as well as the principal payment is
ensured (Heminway, 2017).
 Records maintained to ensure up-to-date information about resource
allocations and usage:
Describe the records that you will maintain to ensure up-to-date information
about resource allocations and usage
The production manager in the company would be accountable for
maintaining the records of procurement and use of all the resources such that
there is real time information available and that there is no shortage on
account of resources. This would help in effective utilisation and timely
monitoring of the resources (Linden & Freeman, 2017).
 Reporting budget performance and expenditure:
How will you report budget performance and expenditure?
The chief accountant of the company would be accountable and responsible
for circulating the variance analysis and the reasons for the same on a set
upon frequency which may be weekly, monthly or quarterly. This would cover
the comparison of the actual performance as against the budgeted numbers
and help in monitoring the expenditures in case the same has been
overspent. The cash budget shown above is the rough estimation of all the
streams of revenue and expenses accruing to the business.
 Risk return analysis:
Explain the risk factors associated with your business idea and the expected
returns?
There are various risks associated with the business model in hand such as
the seasonal nature of the cosmetic and skin care products where different

Student Name Student Id
variety of products are needed in different seasons, the credit risk, the
counterparty default risk in case of dues from debtors, etc. Furthermore, the
success of the given idea purely depends on the success in terms of quality of
the products delivered and if they are as per customers tastes and
preferences.
 Budget monitoring:
Describe how you plan to monitor the budget in the event of deviations.
The budget would be monitored by the chief accountant and all the deviations
in respect of the same would have to be approved by the Divisional Head and
the CFO of the company. The reason for any deviation should be clearly
established and stated such that the budget is driven in a controlled manner
and estimated profitability can be achieved. Due to the nature of business, it is
recommended to use the flexible budget.
Part 3:
The company which has been selected for analysis is Woolworths Ltd. which is one
of the listed companies on the Australian Stock Exchange. The company is one of
the largest retail conglomerate in Australia and New Zealand and is the 2nd largest
revenue making company both in Australia as well as New Zealand. The company’s
main business includes departmental stores, liquor sale, hotels, pubs, supermarkets,
etc. It has a history of over 90 years and employs more than 200000 people.
 Explain the reports that require lodging by this company according to
the Australian Security and Investment Commission (ASIC)
The financial statements of the last 2 years of the company have been
analysed to check on the reports that is required to be lodged by the company
as per the Australian Security and Investment Commission (ASIC). Some of
the reports include the consolidated balance sheet, consolidated profit and
loss statement, statement of changes in equity and the cash flow statement
and the Directors report (Belton, 2017).
 Analyse these financial records by applying the horizontal and vertical
analysis methods.
The financial records like that of profit and loss account and the balance sheet
have been analysed below based on the horizontal and vertical analysis.
The horizontal analysis has been shown below followed by the vertical
analysis (Jefferson, 2017).
Woolworths Limited
Consolidated statement of profit or loss
Particulars 2018 2017 Increase/(Decrease)
$m $m Amount %
Continuing Operations
Revenue from the sale of goods and services 56,726 54,841 1,885 3.44%

Student Name Student Id
Other operating revenue 239 193 46 23.83%
Total operating revenue 56,965 55,034 1,931 3.51%
Cost of sales (40,256) (39,105) (1,151) 2.94%
Gross profit 16,709 15,929 780 4.90%
Other revenue 222 244 (22) -9.02%
Branch expenses (10,854) (10,671) (183) 1.71%
Administration expenses (3,529) (3,176) (353
) 11.11%
Earnings before interest and tax 2,548 2,326 222 9.54%
Financing costs (154
) (194) 40 -20.62%
Profit before income tax 2,394 2,132 262 12.29%
Income tax expense (718
) (651) (67) 10.29%
Profit for the period from continuing operations 1,676 1,481 195 13.17%
Discontinued Operations -
Profit from discontinued operations, after tax 119 112 7 6.25%
Profit for the period 1,795 1,593 202 12.68%
Woolworths Limited
Consolidated statement of profit or loss
Particulars 2018 2017
Amount % Amount %
Continuing Operations
Revenue from the sale of goods and services 56,726 99.58% 54,841 99.65%
Other operating revenue 239 0.42% 193 0.35%
Total operating revenue 56,965 100.00% 55,034 100.00%
Cost of sales (40,256) -70.67% (39,105) -71.06%
Gross profit 16,709 29.33% 15,929 28.94%
Other revenue 222 0.39% 244 0.44%
Branch expenses (10,854) -19.05% (10,671) -19.39%
Administration expenses (3,529) -6.20% (3,176) -5.77%
Earnings before interest and tax 2,548 4.47% 2,326 4.23%
Financing costs (154) -0.27% (194) -0.35%
Profit before income tax 2,394 4.20% 2,132 3.87%
Income tax expense (718) -1.26% (651) -1.18%
Profit for the period from continuing operations 1,676 2.94% 1,481 2.69%
Discontinued Operations 0.00% 0.00%
Profit from discontinued operations, after tax 119 0.21% 112 0.20%
Profit for the period 1,795 3.15% 1,593 2.89%

Student Name Student Id
Woolworths Limited
Consolidated statement of financial position
Particulars 2018 2017 Increase/(Decrease)
$m $m Amount %
Current assets
Cash and cash equivalents 1,273 909 364 40.04%
Trade and other receivables 801 745 56 7.52%
Inventories 4,233 4,207 26 0.62%
Other financial assets 53 16 37 231.25%
6,360 5,877 483 8.22%
Assets held for sale 821 1,244 (423) -34.00%
Total current assets 7,181 7,121 60 0.84%
Non-current assets
Trade and other receivables 93 72 21 29.17%
Other financial assets 522 507 15 2.96%
Property, plant and equipment 9,026 8,438 588 6.97%
Intangible assets 6,465 6,533 (68) -1.04%
Deferred tax assets 271 372 (101) -27.15%
Total non-current assets 16,377 15,922 455 2.86%
Total assets 23,558 23,043 515 2.23%
Current liabilities
Trade and other payables 6,960 6,812 148 2.17%
Borrowings 604 254 350 137.80%
Current tax payable 110 81 29 35.80%
Other financial liabilities 50 314 (264) -84.08%
Provisions 1,451 1,470 (19) -1.29%
9,175 8,931 244 2.73%
Liabilities directly associated with assets held for sale 21 21 - 0.00%
Total current liabilities 9,196 8,952 244 2.73%
Non-current liabilities
Borrowings 2,199 2,777 (578) -20.81%
Other financial liabilities 61 116 (55) -47.41%
Provisions 942 1,011 (69) -6.82%
Other non-current liabilities 311 311 - 0.00%
Total non-current liabilities 3,513 4,215 (702) -16.65%
Total liabilities 12,709 13,167 (458) -3.48%
Net assets 10,849 9,876 973 9.85%
Equity
Contributed equity 6,055 5,615 440 7.84%
Reserves 353 357 (4) -1.12%
Retained earnings 4,073 3,554 519 14.60%
Equity attributable to equity holders of the parent entity 10,481 9,526 955 10.03%
Non-controlling interests 368 350 18 5.14%
Total equity 10,849 9,876 973 9.85%

Student Name Student Id
Woolworths Limited
Consolidated statement of financial position
Particulars 2018 2017
Amount % Amount %
Current assets
Cash and cash equivalents 1,273 5.40% 909 3.94%
Trade and other receivables 801 3.40% 745 3.23%
Inventories 4,233 17.97% 4,207 18.26%
Other financial assets 53 0.22% 16 0.07%
6,360 27.00% 5,877 25.50%
Assets held for sale 821 3.49% 1,244 5.40%
Total current assets 7,181 30.48% 7,121 30.90%
Non-current assets
Trade and other receivables 93 0.39% 72 0.31%
Other financial assets 522 2.22% 507 2.20%
Property, plant and equipment 9,026 38.31% 8,438 36.62%
Intangible assets 6,465 27.44% 6,533 28.35%
Deferred tax assets 271 1.15% 372 1.61%
Total non-current assets 16,377 69.52% 15,922 69.10%
Total assets 23,558 100.00% 23,043 100.00%
Current liabilities
Trade and other payables 6,960 29.54% 6,812 29.56%
Borrowings 604 2.56% 254 1.10%
Current tax payable 110 0.47% 81 0.35%
Other financial liabilities 50 0.21% 314 1.36%
Provisions 1,451 6.16% 1,470 6.38%
9,175 38.95% 8,931 38.76%
Liabilities directly associated with assets held for sale 21 0.09% 21 0.09%
Total current liabilities 9,196 39.04% 8,952 38.85%
Non-current liabilities
Borrowings 2,199 9.33% 2,777 12.05%
Other financial liabilities 61 0.26% 116 0.50%
Provisions 942 4.00% 1,011 4.39%
Other non-current liabilities 311 1.32% 311 1.35%
Total non-current liabilities 3,513 14.91% 4,215 18.29%
Total liabilities 12,709 53.95% 13,167 57.14%
Net assets 10,849 46.05% 9,876 42.86%
Equity
Contributed equity 6,055 25.70% 5,615 24.37%
Reserves 353 1.50% 357 1.55%
Retained earnings 4,073 17.29% 3,554 15.42%
Equity attributable to equity holders of the parent entity 10,481 44.49% 9,526 41.34%
Non-controlling interests 368 1.56% 350 1.52%
Total equity 10,849 46.05% 9,876 42.86%

Student Name Student Id
 Explain whether you think that the organisations financial decisions will
serve to meet the organisations planned outcomes.
Yes, I do feel that the organisations financial decision would serve to meet the
organizational planned outcomes as all such financial decisions ae based on a
lot of financial reports and analysis, permutations and combinations. Each such
decision is taken in consultation with the team of experts and in line with the
planned financial outcomes (Goldmann, 2016). The budgeting and forecasting
activities forms the core of such decision making.
Conclusion:
From the above discussion and analysis, it can be seen that the planning and
starting a new business is a tedious task as a lot of financial analysis and
decision making goes into in, be it the products and services to be sold, the area
to be catered and customers to be targeted. The finances have to be arranged
and a number of forecasts have also to be prepared. There needs to a periodical
variance analysis to monitor the actual performance as compared to the budget
so that the resources as well as the funds can be monitored. The existing
business has also been analysed with the help of the financial statements,
horizontal and vertical analysis to understand if the organizational financial
decision helps in achieving the organizational goals.

Student Name Student Id
References
Alexander, F. (2016). The Changing Face of Accountability. The Journal of Higher
Education, 71(4), 411-431.
Belton, P. (2017). Competitive Strategy: Creating and Sustaining Superior Performance.
London: Macat International ltd. Retrieved from
https://www.routledge.com/Competitive-Strategy-Creating-and-Sustaining-Superior-
Performance/Belton/p/book/9781912128808
Choy, Y. K. (2018). Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous
Worldview Analysis. Ecological Economics, 145.
doi:https://doi.org/10.1016/j.ecolecon.2017.08.005
Goldmann, K. (2016). Financial Liquidity and Profitability Management in Practice of Polish
Business. Financial Environment and Business Development, 4, 103-112. Retrieved
from https://doi.org/10.1007/978-3-319-39919-5_9
Heminway, J. (2017). Shareholder Wealth Maximization as a Function of Statutes,
Decisional Law, and Organic Documents. SSRN, 1-35.
Jefferson, M. (2017). Energy, Complexity and Wealth Maximization, R. Ayres. Springer,
Switzerland . Technological Forecasting and Social Change, 353-354.
Linden, B., & Freeman, R. (2017). Profit and Other Values: Thick Evaluation in Decision
Making. Business Ethics Quarterly, 27(3), 353-379.
doi:https://doi.org/10.1017/beq.2017.1