Financial Management: Feasibility Study of Rose Oil Business

This paper focuses on a new business which would be run by Daniel. Case states that the Daniel has retired from the job and looking for a new venture to start. He is planning to start the rose oil business which will be imported from the Bulgaria and will sell the same in France market. In the paper, the business feasibility of Daniel’s business has been studied and it has been found whether the business is feasible or not.

Running Head: Financial Management
1
Project Report: Financial Management

Financial Management
2
Contents
Executive summary..........................................................................................................3
Introduction.......................................................................................................................4
Case overview...................................................................................................................4
Assumptions and summary of findings............................................................................6
Break even analysis..........................................................................................................9
Profit and loss statement.................................................................................................11
Balance sheet..................................................................................................................14
Monthly cash flow..........................................................................................................15
Annual cash flow............................................................................................................18
Capital required..............................................................................................................19
Sensitivity analysis.........................................................................................................19
Venture undertaken.........................................................................................................20
Conclusion and recommendation...................................................................................21
Reflection........................................................................................................................21
References.......................................................................................................................22

Financial Management
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Executive summary:
This paper focuses on a new business which would be run by Daniel. Case states that
the Daniel has retired from the job and looking for a new venture to start. He is planning to
start the rose oil business which will be imported from the Bulgaria and will sell the same in
France market. Daniel is planning to purchase the oil in kgs and then sell to it in small
packing in the France market. In the paper, the business feasibility of Daniel’s business has
been studied and it has been found whether the business is feasible or not. Various financial
analysis techniques have been applied over the case. The techniques have been applied on the
basis of given information by Daniel. Firstly, the summary of findings has been prepared to
summarise the case and understand all the requirement of the business. Moreover, the break
even analysis has been done on the case to measure that whether the company would be able
to sell enough quantities of rose oil that it could reach over a point where the revenue and
expenses of the company are similar.
Further, the sales of the firm have forecasted and on the basis of that financial
statement of the business has prepared. Profit and loss statement, monthly cash flow
statement, annual cash flow statement and balance sheet statement has been prepared to
measure the performance of the company after a year so that the better decision could be
made about the performance of the company. The main aim of the business paper is to
evaluate that how much investment is required to start the business and whether the business
would offer enough profits to Daniel. Is it really worth to make such heavy investment in this
business proposal? In order to answer all such questions, the paper has been prepared.

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4
Introduction:
Financial management, it is one of the important aspect of a business. It figures out all
the activities and queries related to the funds, projects, investment, profit, financial position
etc. Financial management is a kind of approach in a business which is followed by the
business to meet the common financial objectives and goals of the business (Ward, 2012).
The financial planning in a business is basically done by the top level management to secure
and manage all the performance of the business. It takes the concern over all the financial
objectives and items to evaluate the financial position and perfo5rmance of a business.
Financial management not only limited to the financial activities and recording of financial
transaction rather it takes the concern over all the factors which could directly or indirectly
affect the financial position and financial performance of the business (Ward, 2012).
The approach of financial management is followed by the financial department and
top level management through the help of various financial techniques such as evaluation of
net profit, financial position of the business, the breakeven level of the company, sensitivity
analysis, vertical analysis, ratios etc. The main motto of the financial management to identify
and raise the funds and allocate those funds to the different project to earn more. Financial
management starts from finding the sources to raise the fund to earn more funds (Zabarankin,
Pavlikov and Uryasev, 2014). In the report, the case of Daniel has discussed where Daniel
has retired from his job and wants to start a new venture of rose oil. The rose oil will be
imported from the Bulgaria and will sell the same in France market. Daniel is planning to
purchase the oil in kgs and then sell to it in small packing in the France market. In the paper,
the business feasibility of Daniel’s business has been studied and it has been found whether
the business is feasible or not.
Case overview:

Financial Management
5
Daniel is a France citizen who has retired from his job and got some amount. Now,
rather than being at home, he is planning to open a new venture of rose oil. One of his friends
lives in Bulgaria market and he has decided to import the rose oil from him. The rose oil will
be bought by him in Kgs and he planned to sell it in small packets of 2.5 grams in the France
market. The market feasibility shows that the demand of the product would be high and from
the 50 units in the first month, the sell would be improved to 800 small packets by the end of
the year. The sales of the company would be variable and Daniel has decided to order the
rose oil on the basis of the demand only. The market feasibility of the company states that the
total revenue of the company would be improved by the end of the year because of the
increment in the demand. With the increment in the sales, profitability level of the business
would also be improved. There are various fixed and variable expenses associated with the
business which would affect over the profits of the business. However the study over the
market and business depicts that the main fixed expenses of the business are rent, labour and
machineries of the business.
Daniel has also explained in the business brief that if required, Daniel could take the
loan from the bank. The maximum limit of the bank loan is € 75,000 which would be lent on
the rate of 8%. The total savings of Daniel are € 7,30,000 which will be invested in the
business to run the business smoothly and earn more money from the business. Daniel would
sell the rose oil from online portal as well as one of his friend has also approach to sell 20
bottles on monthly basis. In order to sell 20 bottles to friend, Daniel would require purchasing
new machinery and hiring assistant. The business would help the Daniel to meet his goals.
The main vision behind this business plan is to ensure that the financial performance of the
business become well as well as the business could serve better to its stakeholders. Below is
the list of the case facts and figures:

Financial Management
6
Lump sum payment € 730,000.00
Life time (years) 6
Material price per kg BGN 19000
Discount 33%
Shipment cost BGN 450
Inventory time 3 Weeks
Order would be placed
monthly
Minimum inventory level 4 Weeks
Refrigerator € 8,500.00
filtering and dosing
equipment
€ 5,200.00
Industrial room € 850.00 Per month
Payable advance with 3 month
deposit
Website € 7,500.00
Market study € 6,500.00
Demand per month Kg 2
Starting month demand Bottles 50
Average selling price KG 800
Packaging and shipping € 5.50 Per bottle
Credit card 1.30%
Salary each employee NOK 15500 per year
Number of employees 2
Loan amount € 75,000
Interest rate 8%
Tax rate 40% payable in
arrears
Sales unit 800 Bottle
Sales measurement 800
bottles
2.5 gms
Price 45 per bottle
Shipping 8.2 Per bottle
Assumptions and summary of findings:
On the basis of evaluation over the Daniel’s case, it has been studied that Daniel is
planning to open the new venture but not sure about the financial activities. The financial
statement of the business has been prepared in the report along with their outcome to

Financial Management
7
understand the future performance and the financial stability of the business. In order to
prepare the financial statement such as profit and loss statement, monthly cash flow, annual
cash flow, balance sheet, sensitivity analysis, breakeven point etc, few assumptions have been
made which are stated as below:
1. The sales of the business would be increased monthly from 50 units of rose oil bottle
to 800 rose oil bottle.
2. There is not any fixed % to increment in the sales. It will be improved on the basis of
the demand and reach (Zimmerman and Yahya-Zadeh, 2011).
3. Purchase order would be placed on the basis of sales forecast. Same units of item
would be ordered so that no stock has to maintain.
4. The machineries of the company would be depreciated from the second year of the
installation.
5. The depreciation rate on fixed assets would be 10% (Weaver, Weston and Weaver,
2011).
6. Website of the company would never be depreciated as it is subject to continuous
upgrading and hence, no depreciation would be imposed.
7. Website cost of the company has considered as an expense for the company as it is
updated in the nature and hence, it cannot be considered as an asset.
8. The entire personalized bottle would be sold to Nina only.
9. Breakeven analysis study has been performed on Nina’s order and sells from online
portal differently because of the different cost involvement.
10. It has been assumed that the entire cash would be invested by Daniel in the business.

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11. Business does not have any liability.
12. Currency exchange rate is 0.51 (Fx rate, 2019).
13. Capital of the company would differ on the basis of the total assets of the venture
(Voelkl and Fritz, 2017).
Below is the sales forecast table of the company:
Sa
le
s
(u
ni
ts)
Sal
es
(Pa
cke
ts)
Sales Sa
le
s
(u
ni
ts)
Sal
es
(Pa
cke
ts)
Sales Pur
chas
e
(uni
ts)
Purc
hase
(unit
s for
pers
onali
zed
sales
)
Purch
ase
cost
Shipm
ent
Discou
nt
receive
d
Dec
em
ber
0 50 20 €
1,136.
15
€
40.16
€
559.60
Jan
uar
y
50 50 €
2,250.00
20 20 €
700.0
0
110 20 €
2,110.
00
€
74.59
€
1,039.2
5
Feb
rua
ry
11
0
110 €
4,950.00
20 20 €
700.0
0
157 20 €
2,872.
84
€
101.55
€
1,414.9
8
Ma
rch
15
7
157 €
7,065.00
20 20 €
700.0
0
225 20 €
3,976.
53
€
140.57
€
1,958.5
9
Apr
il
22
5
225 €
10,125.0
0
20 20 €
700.0
0
290 20 €
5,031.
53
€
177.86
€
2,478.2
2
Ma
y
29
0
290 €
13,050.0
0
20 20 €
700.0
0
350 20 €
6,005.
38
€
212.29
€
2,957.8
7
Jun
e
35
0
350 €
15,750.0
0
20 20 €
700.0
0
450 20 €
7,628.
45
€
269.66
€
3,757.3
0
Jul
y
45
0
450 €
20,250.0
0
20 20 €
700.0
0
480 20 €
8,115.
38
€
286.88
€
3,997.1
3
Aug
ust
48
0
480 €
21,600.0
20 20 €
700.0
580 20 €
9,738.
€
344.25
€
4,796.5

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9
0 0 45 5
Sep
tem
ber
58
0
580 €
26,100.0
0
20 20 €
700.0
0
650 20 €
10,874
.60
€
384.41
€
5,356.1
5
Oct
obe
r
65
0
650 €
29,250.0
0
20 20 €
700.0
0
700 20 €
11,686
.14
€
413.10
€
5,755.8
6
Nov
em
ber
70
0
700 €
31,500.0
0
20 20 €
700.0
0
800 20 €
13,309
.22
€
470.48
€
6,555.2
9
Dec
em
ber
80
0
800 €
36,000.0
0
20 20 €
700.0
0
Tot
al
48
42
484
2
€
217,890.
00
24
0
240 €
8,400.
00
€
4,84
2.00
€
82,484
.67
€
2,915.8
0
€
40,626.
78
On the basis of the above analysis, assumptions, findings, the financial statement such
as profit and loss statement, monthly cash flow, annual cash flow, balance sheet, sensitivity
analysis, breakeven point etc have been prepared.
Break even analysis:
Financial activities include breakeven analysis. It is an approach which is used by the
financial managers or the top level management of the company to decide that at least how
units are required to be sold by the company in the market to reach over breakeven point
(Zabarankin, Pavlikov and Uryasev, 2014). Break even point is the level where business does
not suffer any loss as well as it does not get any profits (Lord, 2007). Breakeven analysis
makes it easiest for the financial mangers to identify that how much units are minimum sold
by them to sustain in the market and in order to earn a specific level of profit, how much units
are required to sell in the market. Breakeven analysis approach considers the sales per unit,
variable cost per unit and fixed cost of the business to identify the minimum number of units
which are required to be sold to sustain in the market and cover all the expenses of the
business (Weston and Brigham, 2015). This process does not only depict about the selling

Financial Management
10
units rather it also tells the financial manager about the total sales amount which must be earn
by the company.
In Daniel’s venture, the main product of the company is rose oil bottles which would
be sold by him through online portal. Along with that, there is one more product also which
would be personalized for his friend. Through the calculations, it has been found that the
selling price of rose bottle which would be sold online is 45 and the personalized bottle
would be sold in € 35.00. The variable cost of each of the product is € 16.8 and € 16.8 equally
(Palicka, 2011). However, the fixed cost of both the product differs because of the labour and
machineries. Through the calculations, it has been measured that the contribution margin of
each of the product is € 28.2 and € 18.2. Hence, it has been found that the breakeven units of
the company are 121 units and 59 units. The breakeven sales amount of the company is €
5479.6 and € 2050.51. It depicts that from the initial months, company would be able to cover
the expenses and earn the profits. If the sales of the rose oil bottles would be lesser than the
calculated break even units then it will lead the business towards losses and affect the
performance of the company (Oliver and Schoff, 2017). The performance of the company by
the end of the year would be impressing and it would help the Daniel to make better profits.
The breakeven calculations of the company are as follows:
Cost-Volume-Profit Relationships - Breakeven
Per Unit Amounts Per Unit Amounts
Selling price € 45.00 € 35.00
Variable costs € 16.80 € 16.80
Contribution
margin
€ 28.20 € 18.20
Total fixed costs €
3,433.33
€ 1,066.00

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11
Breakeven in
units
121.77 Units 58.59 Units
Breakeven in
dollars
€ 5,479.60 € 2,050.51
(Peterson and Fabozzi, 2002)
Through the evaluation over the above table, it has been concluded that the overall
performance of the new venture would be great because it would make it easier for the
business to cover the expenses and earn more amount as profit.
Profit and loss statement:
Statement of profit and loss is one of the final financial statements of the business
which is prepared by the companies to record the revenues and expenditure of the business so
that the profitability level of the business could be calculated. In this statement, total expenses
of the company are deducted from the total revenue of the company in order to identify the
profit or loss position of the company (Phillips and Stawarski, 2016). The statement of profit
and loss makes it easier for the businesses and management to identify the ability of the
business to manage the market level and improve the performance of the company.
In case of Daniel, there are mainly 2 products which would be sold by him through
different medium. The main product includes the normal bottle and customized bottles of
rose oil. Through the calculations and overall study over the case, it has been identified that
the total sales of the company would be € 226,290.00 from which the sales of personalized
bottle would be € 8400. Cost of goods sold of the business at the end of the year would be €
85592.47 (Radebaugh, Gray and Black, 2006). It leads to the further outcome that the gross
profit of the company at 31st Dec 2018 would be € 181,324.31 (Madura, 2014). Further, the
total expenses of the company has been studied and found that the total expenses of the
company would be € 102,751.57. After tax deductions, net profit of the venture would be €
47,143.64.

Financial Management
12
Income Statement
As on 31st Dec 2018
Revenues
Sales € 217,890.00
Add: Personalized oil bottles € 8,400.00
Total Sales € 226,290.00
Cost of goods sold
Purchase
Less: Discount received
€ 82,484.67
€ - 40626.78
Cost of preparing oil bottles € 192.00
Cost of purchase € 2,915.80
Gross income € 181,324.31
Expenses
Labour € 33,400.00
Market study € 6,500.00
Packaging and shipment € 52,987.00
Website € 7,500.00
Credit card costs € 2,364.57
Total expenses € 102,751.57
Net profit before tax € 78,572.74
Less: 40% tax € 31,429.10
Net profit after tax € 47,143.64
(Lumby and Jones, 2007)
the total revenues of the company has been studied and found that the revenues of the
company would be increased along with the time and it would help the company to maintain
the better performance in the market. the selling units of the company wold be imcresed from
50 units to 800 units and it would also improve the profitability % of the company (Ross,
Westerfield, Jaffe and Kakani, 2008).
Further, the expenditure of the company has bee studied and found that the packaging
and shipment charges are the highest administration cost of the company. If company could
manage to lower this cost than the total profitability level of the company would be improved

Financial Management
13
at great extent (Tian and Jiang, 2015). the estimated expenses of the company for the year are
given below:
Figure 1: Estimated expenses
(Schlichting, 2013)
In terms of %, the total adminitsrative expenses of the venture is presneted below. It
explauns that the highest cost involvment expenses of the venture is packaging and shipment
cost and the lowest cost involvment expenses of the company is credit card cost. little focus
on packaging and shipment cost could reduce the cost of the company at a great level.

Financial Management
14
Figure 2: 2018 Expenses
(Tsanakas and Millossovich, 2016)
Balance sheet:
Statement of balance sheet is one of the final financial statements of the business
which is prepared by the companies to record the assets, liabilities and capital of the business
so that the financial position of the business could be calculated. In this statement, total
liabilities of the company are deducted from the total assets of the company in order to
identify the capital of the company (Higgins, 2012). The statement of balance sheet makes it
easier for the businesses and management to identify the ability of the business to manage the
market level and improve the performance of the company.
In case of Daniel’s business, it has been found that the company does not have any
liabilities. The current assets of the company are € 745,859.22 whereas the total fixed assets
of the company is €8950 which leads to the conclusion that the total assets of the company
are € 754,809.22. As the company does not have any liabilities then the total assets of the

Financial Management
15
company are equal to the total capital of the business (Fulin, 2011). Below table is the
estimated balance sheet of the company:
Balance Sheet
As on 31st Dec 2018
Assets
Current assets
Cash at hand € 730,000.00
Inventory € 13,309.22
Unearned sales € 700.00
Prepaid rent € 2,550.00
Total current Assets € 745,859.22
Fixed Assets
Machineries € 450.00
Refrigerator € 8,500.00
Total assets € 754,809.22
Liabilities
Current Liabilities -
Long term liabilities -
Total liabilities -
Capital € 754,809.22
(Jiashu, 2009)
Monthly cash flow:
Statement of cash flow is one of the final financial statements of the business which is
prepared by the companies to record the cash outflows and cash inflows of the business so
that the cash position of the business could be calculated. In this statement, total cash
outflows of the company are deducted from the total cash inflows of the company in order to
identify the cash level of the company (Kaplan and Atkinson, 2015). The statement of cash
flow makes it easier for the businesses and management to identify the ability of the business
to manage the market level and improve the performance of the company.

Financial Management
16
In case of Daniel’s business, it has been found that the company does not have any
fixed cash inflow and cash outflow. The inflows and outflows of the company depend upon
the demand of the product and market changes (Krantz, 2016). At the initial level, €
730,000.00 would be invested by Daniel in the venture. On the basis of the study, at initial
months, the cash outflow of the company would be higher, but along with the time, the
company would be able to make better profits.
Cash
Budg
et
Jan Feb Ma
r
Ap
r
Ma
y
Jun Jul Au
g
Sep Oct Nov Dec Tot
al
Cash
receip
ts
Capit
al
introd
uced
€
730
,00
0.0
0
€
730,
000.
00
Sales €
2,2
50.
00
€
4,9
50.
00
€
7,0
65.
00
€
10,
125
.00
€
13,
050
.00
€
15,
750
.00
€
20,
250
.00
€
21,
600
.00
€
26,
100
.00
€
29,2
50.0
0
€
31,5
00.0
0
€
36,0
00.0
0
€
217,
890.
00
Disco
unt
receiv
ed
€
559
.60
€
1,0
39.
25
€
1,4
14.
98
€
1,9
58.
59
€
2,4
78.
22
€
2,9
57.
87
€
3,7
57.
30
€
3,9
97.
13
€
4,7
96.
55
€
5,35
6.15
€
5,75
5.86
€
6,55
5.29
€
40,6
26.7
8
Perso
nalize
d
choco
late
box
€
700
.00
€
700
.00
€
700
.00
€
700
.00
€
700
.00
€
700
.00
€
700
.00
€
700
.00
€
700.
00
€
700.
00
€
700.
00
€
7,70
0.00
Total
receip
ts
€
732
,80
9.6
0
€
6,6
89.
25
€
9,1
79.
98
€
12,
783
.59
€
16,
228
.22
€
19,
407
.87
€
24,
707
.30
€
26,
297
.13
€
31,
596
.55
€
35,3
06.1
5
€
37,9
55.8
6
€
43,2
55.2
9
€
996,
216.
78
Cash €

Financial Management
17
paym
ent
-
Refri
gerat
or
€
8,5
00.
00
€
8,50
0.00
Indus
trial
Room
€
850
.00
€
850
.00
€
850
.00
€
850
.00
€
850
.00
€
850
.00
€
850
.00
€
850
.00
€
850
.00
€
850.
00
€
850.
00
€
850.
00
€
10,2
00.0
0
filteri
ng
and
dosin
g
equip
ment
€
5,2
00.
00
€
5,20
0.00
Purch
ase
€
1,1
36.
15
€
2,1
10.
00
€
2,8
72.
84
€
3,9
76.
53
€
5,0
31.
53
€
6,0
05.
38
€
7,6
28.
45
€
8,1
15.
38
€
9,7
38.
45
€
10,8
74.6
0
€
11,6
86.1
4
€
13,3
09.2
2
€
82,4
84.6
7
Labo
ur
€
2,5
83.
33
€
2,5
83.
33
€
2,5
83.
33
€
2,5
83.
33
€
2,5
83.
33
€
2,5
83.
33
€
2,5
83.
33
€
2,5
83.
33
€
2,5
83.
33
€
2,58
3.33
€
2,58
3.33
€
2,58
3.33
€
31,0
00.0
0
Labo
ur for
perso
nalize
d
boxes
€
200
.00
€
200
.00
€
200
.00
€
200
.00
€
200
.00
€
200
.00
€
200
.00
€
200
.00
€
200
.00
€
200.
00
€
200.
00
€
200.
00
€
2,40
0.00
Packa
ging
and
shipm
ent
€
40.
16
€
74.
59
€
101
.55
€
140
.57
€
177
.86
€
212
.29
€
269
.66
€
286
.88
€
344
.25
€
384.
41
€
413.
10
€
470.
48
€
2,91
5.80
Websi
te
€
7,5
00.
00
€
7,50
0.00
Mark
et
study
€
6,5
00.
00
€
6,50
0.00
Mach
ine
€
450
.00
€
450.
00
Shipp € € € € € € € € € € € € €

Financial Management
18
ing
cost
410
.00
902
.00
1,2
87.
40
1,8
45.
00
2,3
78.
00
2,8
70.
00
3,6
90.
00
3,9
36.
00
4,7
56.
00
5,33
0.00
5,74
0.00
6,56
0.00
39,7
04.4
0
Packa
ging
and
shipm
ent
€
605
.00
€
863
.50
€
1,2
37.
50
€
1,5
95.
00
€
1,9
25.
00
€
2,4
75.
00
€
2,6
40.
00
€
3,1
90.
00
€
3,5
75.
00
€
3,85
0.00
€
4,40
0.00
€
26,6
31.0
0
€
52,9
87.0
0
Decor
ative
paper
€
16.
00
€
16.
00
€
16.
00
€
16.
00
€
16.
00
€
16.
00
€
16.
00
€
16.
00
€
16.
00
€
16.0
0
€
16.0
0
€
16.0
0
€
192.
00
Credi
t card
costs
€
29.
25
€
64.
35
€
91.
85
€
131
.63
€
169
.65
€
204
.75
€
263
.25
€
280
.80
€
339.
30
€
380.
25
€
409.
50
€
2,36
4.57
Total
paym
ent
€
33,
990
.65
€
7,6
28.
67
€
9,2
12.
98
€
11,
298
.28
€
13,
293
.35
€
15,
381
.65
€
18,
082
.20
€
19,
440
.83
€
22,
343
.83
€
24,4
27.6
5
€
26,2
68.8
2
€
51,0
29.5
2
€
252,
398.
44
Net
receip
ts/
paym
ent
€
698
,81
8.9
5
-€
939
.42
-€
33.
00
€
1,4
85.
31
€
2,9
34.
86
€
4,0
26.
22
€
6,6
25.
10
€
6,8
56.
29
€
9,2
52.
72
€
10,8
78.5
0
€
11,6
87.0
4
-€
7,77
4.24
€
743,
818.
34
Openi
ng
balan
ce
€
-
€
698
,81
8.9
5
€
697
,87
9.5
3
€
697
,84
6.5
4
€
699
,33
1.8
5
€
702
,26
6.7
1
€
706
,29
2.9
3
€
712
,91
8.0
3
€
719
,77
4.3
3
€
729,
027.
04
€
739,
905.
54
€
751,
592.
58
€
743,
818.
34
Closi
ng
balan
ce
€
698
,81
8.9
5
€
697
,87
9.5
3
€
697
,84
6.5
4
€
699
,33
1.8
5
€
702
,26
6.7
1
€
706
,29
2.9
3
€
712
,91
8.0
3
€
719
,77
4.3
3
€
729
,02
7.0
4
€
739,
905.
54
€
751,
592.
58
€
743,
818.
34
€
1,48
7,63
6.68
(Kinsky, 2011 and Kruth, 2013)
Annual cash flow:
On the basis of the monthly cash flows of the company, the list of annual cash flows
has also prepared which states that the overall cash position of the company would be
improved by the end of the year and it will help the company to grow further (Lee and Lee,
2006).
Cash flow statement
Cash receipts

Financial Management
19
Capital introduced € 730,000.00
Sales € 217,890.00
Discount received € 40,626.78
Personalized chocolate box € 7,700.00
Total receipts € 996,216.78
Cash payment
Refrigerator € 8,500.00
Industrial Room € 10,200.00
filtering and dosing equipment € 5,200.00
Purchase € 82,484.67
Labour € 31,000.00
Labour for personalized boxes € 2,400.00
Packaging and shipment € 2,915.80
Website € 7,500.00
Market study € 6,500.00
Machine € 450.00
Shipping cost € 39,704.40
Packaging and shipment € 52,987.00
Decorative paper € 192.00
Credit card costs € 2,364.57
Total payment € 252,398.44
Net receipts/ payment € 743,818.34
Opening balance € 743,818.34
Closing balance € 1,487,636.68
(Moles, Parrino and Kidwekk, 2011)
Capital required:
It is important for each of the business to make an investment. Without the
investment, a business could never start and run (Reilly and Brown, 2011). Capital
requirement term is used for the total funds which would be required to start a business. In
Daniel’s case, the total required capital would be € 7,30,000. The classification of each of the
item is as follows:
Required cash flow statement
Purchase cost € 1,136.15
Shipping cost € 40.16
Refrigerator € 8,500.00

Financial Management
20
Industrial Room € 2,550.00
Machine € 450.00
Website € 7,500.00
Additional cash for operations € 709,823.69
Total required cash at initial
stage
€ 730,000.00
(Horngren, 2009)
Sensitivity analysis:
Sensitivity analysis approach explains about different values of an independent
amount due to the affect on an individual value over it. It evaluates that if few changes have
taken place in independent variables than how it would affect over the dependent variable of
the company (Hillier, Grinblatt and Titman, 2011).
Sensitivity Analysis
Investment -€ 730,000.00
Sales € 226,290.00
Variable cost € 174,344.04
Fixed cost € 6,500.00
Pre tax profit € 78,572.74
Taxes € 31,429.10
Profit after taxes € 47,143.64
Cash flow from operations € 743,818.34
Net cash flow € 1,487,636.68
Sensitivity Analysis
Range NPV
Key
variables
Pessimistic Expected Optimistic Pessimi
stic
Expect
ed
Optimis
tic
Optimistic
Investmen
t
€
803,000
€
730,000
€
657,000
2.15 2.6 2.86
Sales €
203,661
€
226,290
€
248,919
2.34 2.6 2.98
Variable
cost
€
156,910
€
174,344
€
191,778
2.22 2.6 2.775
% of sales 77.04% 77.04% 77.04%
Fixed cost € € € 2.43 2.6 3.05

Financial Management
21
5,850 6,500 7,150
In the above table, it has been found that the changes in sales level and exchange rate
would impact over the overall financial performance of the company.
Venture undertaken:
On the basis of the overall study over Daniel’s business, it has been found that the
business would perform well in the market. Firstly, the break even units of the company are
lesser than the total selling units of the company which defines that the expenses would be
covered by the company (Barlow, 2006). Further, the financial statement of the company also
defines that the huge profit would be generated by the company. The available financial
resources of the company are also impressive. Along with that, the cash position of the
company is also better (Gapenski, 2008). All of these points conclude to the decision that the
business must be undertaken by Daniel.
The demand of the product would be increased in further market and it will help the
business to grow further in the market. Along with the financial performance, the non
financial performance of the company would also be better because of the convenient
packing and the imported item (Horngren, 2009). Daniel would not even require any loan to
start the business. Thus it is suggested to Daniel to invest in the business and undertake this
venture.
Conclusion and recommendation:
To conclude, the decision of undertaking this venture is quite worth for Daniel. The
financial performance, financial position, cash position, breakeven level, sensitivity analysis
etc financial techniques define that the performance of the business would be great. In terms
of profitability, it has been found that few focus and control over the packaging and shipment

Financial Management
22
process would reduce the cost burden on the company and help the business to improve the
profitability level. The demand of the product would be increased in further market and it will
help the business to grow further in the market. On the basis of the overall study over
Daniel’s business, it has been found that the business would perform well in the market. All
of these points conclude to the decision that the business must be undertaken by Daniel.
Reflection:
Through conducting the above study over the Daniel’s case, I got to learn various new
things and financial techniques which is life saver in the life of an entrepreneur. It helps the
entrepreneur to understand every aspect of the business before launching the business into the
market. My financial knowledge and understanding have been a level up after solving this
case study. If we talk about the case then according to my understanding, Daniel should
undertake this venture and given his full time to the business because the ides is great and it
wall debility help him to meet the individual goals. The study defines that no external fund
would be required by the business to run the business and hence, it better option for the
Daniel to invest into the business.

Financial Management
23
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