Finance Assignment 2022

Running head: FINANCE
FINANCE
Name of the student:
Name of the university:
Author Note:

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Table of Contents
Introduction:...............................................................................................................................2
Assumption made during the process........................................................................................2
Break Even Point Analysis.........................................................................................................3
Profit or loss statement Analysis:...............................................................................................6
Monthly and annual Cash Flow Statement of the company:...................................................10
Discounted Cash Flow Statement Analysis.............................................................................12
Sensitivity analysis of the business plan..................................................................................14
Conclusion................................................................................................................................15
References................................................................................................................................17

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Introduction:
The aim of assignment is to provide assistance to a 57 year old aunt named Chiara for
the purpose of acquiring a new venture named Best Nuts. The company has been established
by the US producers of the coated nuts consisting the unusual and innovative flavours. The
products of the company are produced and sold in Italy for a period of four years for the
purpose of exchanging the upfront in the payment as per the rights. The financial statement of
the firm is prepared based on the certain parameters by which the business of the company is
conducted accordingly. The entire report is based on the preparation of the income statement,
break even analysis and balance sheet in the first year of business operation. Apart from that
the monthly cash flow statement of the company is conducted along with the annual cash
flow during the first year of operation of the firm. The invested capital in the business has
been are further depicted in the balance sheet of the firm for the purpose of understanding the
amount of assets obtained by the company.
The sensitivity analysis of the company have been performed based on the set of
activities or information’s which are provided by the company (Addison 2017). The monthly
cash flow in the first year of observation gives the entire picture regarding the current
performance of the company along with the predicting the future aspects of the business. The
profitability of the business can be identified by the process of evaluation based on the
information provided by Chiara.
Assumption made during the process
 The significant assumption made during the process is setting up the enterprise known
as the Best Nuts which have the rights to sell the products in Italy for a period of four
years period an exchange rate of the upfront payment for rights.

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 It is assumed that the average cost of the retail nuts in the USA is an average of the
$27.5 per pound (Ib) and further best nuts is prepare to sell the requirements to
Chiara.
 It is assumed that the conversion rate in the currency which is taken in this case is
0.89 and further evaluation is done based on the initial investments.
 In case of the depreciation and amortization of the firm the assumption which is made
is regarding the non-current assets. As the minimum estimated life of the depreciation
and amortization of the 5 years and for that reason in case of evaluation it is taken on
the basis of 5 years based on the straight line value of the firm (Palley 2016).
 It is also assumed as per the given information is that demand is as per the overall
business prospect of the company. Further assumption is made regarding the average
selling price of the company in Italy is €90per kg of nuts and shipping in Italy
consisting and average of €3.0per kg.
 The other important thing is at the time of credit card sale the company is charging
about 1.5% per sale and remittance monthly total made for a period of fifteen days to
Chiara (Bailey 2017).
 The assumption regarding tax which is made about 4% per annum and investment is
made accordingly.
Break Even Point Analysis
Breakeven point analysis further helps to identify the level of breakeven situation of
the company. The breakeven situation of the company is referred as the no profit or loss
situation based on a particular level of production. The elements in the break even cost of the
company consists of the variable cost per unit of sales, fixed cost and revenue in terms of
sales of the company (Fracassi 2016). The payback period of the company is related to the
investment process of the company. The breakeven analysis for the company is particularly

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based on determining the level of production or a desired level of sales mix. Initially with the
gradual increase in the production of the company, the company is able to meet the breakeven
point accordingly. Enhancing the production of the business will automatically enhance the
warehousing and transaction based on the short term transaction (Dang, Li and Yang 2018).
Break-Even Analysis:
Particulars Fixed Variable TOTAL
Sales Volume 360 1365 1725
Estimated Sales Revenue
15,000.00
€
122,850.00
€
137,850.00
€
Variable Expenses:
Cost of Material
13,562.12
€ 51,423.03 € 64,985.14 €
Packaging & Shipping Cost 1,080.00 € 4,095.00 € 5,175.00 €
Credit Card Charges 1,842.75 € 1,842.75 €
Packaging Cost for Boxes 288.00 € 288.00 €
Total Variable Expenses
14,930.12
€ 57,360.78 € 72,290.89 €
Contribution Margin 69.88 € 65,489.22 € 65,559.11 €
Average Contribution Margin p.u. 38.01 €
Fixed Expenses:
Rent for Industrial Room 6,600.00 €

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Employee's Salary 23,000.00 €
Labor Cost for Packaging 3,600.00 €
Depreciation of Refrigerator 1,187.50 €
Deferred Revenue Expenditure- Market Research 1,250.00 €
Amortization of Website Designing 2,000.00 €
Amortization of Distribution Right 11,250.00 €
Total Fixed Expenses 48,887.50 €
Break Even Sales in Unit 1 1285 1286
Break Even Sales in CHF 57.13 €
115,646.69
€
115,703.83
€
Interpretation of the above table:
The break even analysis of the company have been conducted from the following
information provided by Chiara. The break even analysis of the company is evaluated for the
purpose in order to understand the pace related to the growth of the company (Cochrane
2017). The breakeven point of the company is a situation where the company will be in a no
profit or loss situation. It is significant to evaluate the breakeven point to further provide
report to the management for the purpose of taking investment decisions. Adopting the proper
pricing strategy will help of analyzing the breakeven point of the company. The breakeven
unit of the company is 1286 which means that by selling that particular number of unit, the
company will be able to achieve the breakeven point (Cochrane 2017). And selling more than
the breakeven unit the company will be able to achieve profit after reaching the breakeven
point of the company.
The projected sales volume of the company have been evaluated for 12 months
where the fixed cost of the company will remain constant at the level of 30 per kg (Zingales
2015). On the other hand the volume of the variable cost have been increasing gradually with
the increase in production of the company. The overall growth orate of the company have
been constantly fluctuating where the average growth rate of the production is at 13.46 %. As