Financial Analysis of Hattie Geodes Business
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AI Summary
This business report analyzes the financial plan for the Geodes business, including assumptions and estimates. It covers cash flow, break-even analysis, and financial ratios.
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Criteria and Weighting Mark Grade
Assumptions, estimates and sensitivity analysis (25%) 50 12.5
Cash flow and DCF analysis (25%) 50 12.5
Other financial details (35%) 40 14
Critical reflection (10%) 55 5.5
Referencing and presentation (5%) 60 3
Total 44.5%
Criteria and Weighting Mark Grade
Assumptions, estimates and sensitivity analysis (25%) 50 12.5
Cash flow and DCF analysis (25%) 50 12.5
Other financial details (35%) 40 14
Critical reflection (10%) 55 5.5
Referencing and presentation (5%) 60 3
Total 44.5%
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Grading Policy
PASS FAIL
80%+ (A) 70-79% (A) 60-69% (B) 50-59% (C) 40-49% (D) 30-39% € <30% (F)
Knowledge and Clarity of Reasoning
Exceptionally comprehensive
knowledge base. Ability to
discriminate and justify key
issues and relate them to the
wider context. Lines of
thought are innovative and
transparent and the
arguments are confidently
expressed to develop and
synthesise compelling and
novel conclusions.
Conclusions drawn make a
new contribution to the
knowledge base of the
discipline and there is clear
evidence of originality in the
work innovative thinker.
Excellent, comprehensive
knowledge base. Ability to
discriminate and justify key
issues and relate them to
the wider context. Lines of
thought are transparent
and the arguments are
confidently expressed to
develop and synthesise
compelling conclusions.
Substantial knowledge
base. Ability to discriminate
key issues and establish
some links to the wider
context. Arguments are
confidently expressed
through clear, logical lines
of thought. Conclusions are
firmly articulated,
comprehensive, relevant
and arise directly from the
premised arguments.
Sound knowledge base.
Ability to discriminate
key issues. Arguments
are confidently
expressed through
clear, logical lines of
thought. Conclusions
are firmly articulated,
relevant and arise
directly from the
premised arguments.
Some defended
knowledge of current,
relevant issues. Limited
development of
arguments where lines
of thought are
discernible. Limited
conclusions arising
from premises.
Some evidence of
relevant
knowledge base
but little argument
and lines of
thought are poorly
expressed and
often demonstrate
confused thinking.
Conclusions drawn
but often not
related to
discussion.
Student has
failed to meet
the majority of
the LOs of the
assessment.
Interface between Theory and Practice in the Professional Context
Exceptional critical analysis of
the interface between theory
and practice, which evaluates
and challenges theoretical
adequacy and synthesises the
development of professional
practice. Exceptional
evidence of self
understanding which leads to
creative and novel use of
multiple frameworks for
evaluation and synthesis and
challenges current practice in
the professional context.
Rigorous critical analysis of
the interface between
theory and practice, clearly
elaborated to evaluate
theoretical adequacy and
synthesise the
development of
professional practice.
Excellent, creative use of
multiple frameworks for
evaluation and synthesis of
own stance.
Excellent critical
analysis/evaluation of the
relationship between
theory and practice.
Substantial use of multiple
theoretical frameworks to
evaluate professional
practice with wide ranging
synthesis to show how each
is informing the other.
Clear, critical evaluation of
their usefulness.
Good, critical
analysis/evaluation of
the relationship
between theory and
practice. Some use of
multiple theoretical
frameworks to evaluate
professional practice.
Demonstrable synthesis
to show how each is
informing the other.
Some evaluation of their
usefulness.
Some articulation of
the relationship
between and critical
analysis/evaluation of
the significance of
relevant theory to
specific professional
practice with some
awareness of how each
may be informed by
the other.
Some use of
relevant theory
but lack of
awareness of
relationship to
practice. Little
integration of the
articulation
between theory
and practice.
Student has
failed to meet
the majority of
the LOs of the
assessment.
PASS FAIL
80%+ (A) 70-79% (A) 60-69% (B) 50-59% (C) 40-49% (D) 30-39% € <30% (F)
Knowledge and Clarity of Reasoning
Exceptionally comprehensive
knowledge base. Ability to
discriminate and justify key
issues and relate them to the
wider context. Lines of
thought are innovative and
transparent and the
arguments are confidently
expressed to develop and
synthesise compelling and
novel conclusions.
Conclusions drawn make a
new contribution to the
knowledge base of the
discipline and there is clear
evidence of originality in the
work innovative thinker.
Excellent, comprehensive
knowledge base. Ability to
discriminate and justify key
issues and relate them to
the wider context. Lines of
thought are transparent
and the arguments are
confidently expressed to
develop and synthesise
compelling conclusions.
Substantial knowledge
base. Ability to discriminate
key issues and establish
some links to the wider
context. Arguments are
confidently expressed
through clear, logical lines
of thought. Conclusions are
firmly articulated,
comprehensive, relevant
and arise directly from the
premised arguments.
Sound knowledge base.
Ability to discriminate
key issues. Arguments
are confidently
expressed through
clear, logical lines of
thought. Conclusions
are firmly articulated,
relevant and arise
directly from the
premised arguments.
Some defended
knowledge of current,
relevant issues. Limited
development of
arguments where lines
of thought are
discernible. Limited
conclusions arising
from premises.
Some evidence of
relevant
knowledge base
but little argument
and lines of
thought are poorly
expressed and
often demonstrate
confused thinking.
Conclusions drawn
but often not
related to
discussion.
Student has
failed to meet
the majority of
the LOs of the
assessment.
Interface between Theory and Practice in the Professional Context
Exceptional critical analysis of
the interface between theory
and practice, which evaluates
and challenges theoretical
adequacy and synthesises the
development of professional
practice. Exceptional
evidence of self
understanding which leads to
creative and novel use of
multiple frameworks for
evaluation and synthesis and
challenges current practice in
the professional context.
Rigorous critical analysis of
the interface between
theory and practice, clearly
elaborated to evaluate
theoretical adequacy and
synthesise the
development of
professional practice.
Excellent, creative use of
multiple frameworks for
evaluation and synthesis of
own stance.
Excellent critical
analysis/evaluation of the
relationship between
theory and practice.
Substantial use of multiple
theoretical frameworks to
evaluate professional
practice with wide ranging
synthesis to show how each
is informing the other.
Clear, critical evaluation of
their usefulness.
Good, critical
analysis/evaluation of
the relationship
between theory and
practice. Some use of
multiple theoretical
frameworks to evaluate
professional practice.
Demonstrable synthesis
to show how each is
informing the other.
Some evaluation of their
usefulness.
Some articulation of
the relationship
between and critical
analysis/evaluation of
the significance of
relevant theory to
specific professional
practice with some
awareness of how each
may be informed by
the other.
Some use of
relevant theory
but lack of
awareness of
relationship to
practice. Little
integration of the
articulation
between theory
and practice.
Student has
failed to meet
the majority of
the LOs of the
assessment.
PASS FAIL
80%+ (A) 70-79% (A) 60-69% (B) 50-59% (C) 40-49% (D) 30-39% € <30% (F)
Use of literature
Exceptional, discerning and
balanced range of key and
peripheral primary and
secondary sources
demonstrating a very high
level of critical evaluation and
synthesis and the ability to
challenge received wisdom in
the subject. Outstanding
evidence of wide reading on
the subject and this is
incorporated into novel
conclusions.
Excellent, wide range of key
and peripheral primary and
secondary sources,
demonstrating critical
evaluation and synthesis
within the professional
context.
Substantial selection of key
primary and secondary
literature sources
demonstrating analysis and
critical evaluation of a wide
range of relevant issues for
the professional context.
Good selection of key
primary literature
sources with critical
evaluation of significant
issues for the
professional context.
Some limited analysis of
related, secondary
material.
Range and choice of
evidence/literature
marginally inadequate.
Some recognition and
critical analysis of
issues of significance
for the professional
context.
Narrow but mainly
relevant selection
of evidence/
literature
demonstrating
some recognition
of significance for
the professional
context.
Student has
failed to meet
the majority of
the LOs of the
assessment.
Organisation of Material
Exceptional clarity of
presentation that
demonstrates ability to
attend to all detailed aspects
of organisation and structure
of discussion and all
supporting evidence. The
work has the qualities
consistent with publishable
material.
Excellent, coherent
organisation and structure
which enhances
comprehension. Excellent
presentation of all material.
Referencing is accurate to a
high degree.
Organisation is
comprehensive and
structure coherent. Well
presented, with
considerable attention to
detail which facilitates
effortless comprehension.
Supporting material is well
presented and ordered
with accurate referencing
and minimal errors of
detail.
Organisation and
structure is coherent.
Well presented,
facilitating
comprehension.
Supporting material is
well presented and
ordered. Accurate
referencing.
Organisation and
structure does not
adequately support the
work. Presentation
includes supporting
material but is
somewhat disorganised
in places. Most
referencing is sound
and appropriate but
limited in scope. For
professional courses
any work which
contains evidence of,
or reference to, unsafe
or dangerous practice
should be deemed a
fail.
Poorly organised,
incoherent
structure. Poor
presentation and
referencing. Little
appropriate
supporting
material given.
Student has
failed to meet
the majority of
the LOs of the
assessment.
80%+ (A) 70-79% (A) 60-69% (B) 50-59% (C) 40-49% (D) 30-39% € <30% (F)
Use of literature
Exceptional, discerning and
balanced range of key and
peripheral primary and
secondary sources
demonstrating a very high
level of critical evaluation and
synthesis and the ability to
challenge received wisdom in
the subject. Outstanding
evidence of wide reading on
the subject and this is
incorporated into novel
conclusions.
Excellent, wide range of key
and peripheral primary and
secondary sources,
demonstrating critical
evaluation and synthesis
within the professional
context.
Substantial selection of key
primary and secondary
literature sources
demonstrating analysis and
critical evaluation of a wide
range of relevant issues for
the professional context.
Good selection of key
primary literature
sources with critical
evaluation of significant
issues for the
professional context.
Some limited analysis of
related, secondary
material.
Range and choice of
evidence/literature
marginally inadequate.
Some recognition and
critical analysis of
issues of significance
for the professional
context.
Narrow but mainly
relevant selection
of evidence/
literature
demonstrating
some recognition
of significance for
the professional
context.
Student has
failed to meet
the majority of
the LOs of the
assessment.
Organisation of Material
Exceptional clarity of
presentation that
demonstrates ability to
attend to all detailed aspects
of organisation and structure
of discussion and all
supporting evidence. The
work has the qualities
consistent with publishable
material.
Excellent, coherent
organisation and structure
which enhances
comprehension. Excellent
presentation of all material.
Referencing is accurate to a
high degree.
Organisation is
comprehensive and
structure coherent. Well
presented, with
considerable attention to
detail which facilitates
effortless comprehension.
Supporting material is well
presented and ordered
with accurate referencing
and minimal errors of
detail.
Organisation and
structure is coherent.
Well presented,
facilitating
comprehension.
Supporting material is
well presented and
ordered. Accurate
referencing.
Organisation and
structure does not
adequately support the
work. Presentation
includes supporting
material but is
somewhat disorganised
in places. Most
referencing is sound
and appropriate but
limited in scope. For
professional courses
any work which
contains evidence of,
or reference to, unsafe
or dangerous practice
should be deemed a
fail.
Poorly organised,
incoherent
structure. Poor
presentation and
referencing. Little
appropriate
supporting
material given.
Student has
failed to meet
the majority of
the LOs of the
assessment.
Financial analysis of the business of Hattie geodes
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Contents
Introduction.................................................................................................................................................1
Summary of assumptions and estimates for analysis including justifications.................................................1
Other Financial Details................................................................................................................................8
Monthly Cash Flow Statement..................................................................................................................11
Forecasted Annual Cash Flow For 3 Years...............................................................................................12
Required Capital To Start The Venture.....................................................................................................14
Sensitivity Analysis...................................................................................................................................15
Discounted cash Flow...............................................................................................................................16
Financial Ratio Analysis...........................................................................................................................18
Interpretation of financial result based on ratio calculation.....................................................................20
Conclusion................................................................................................................................................22
Recommendation.......................................................................................................................................23
Critical Reflection.....................................................................................................................................24
References.................................................................................................................................................25
Introduction.................................................................................................................................................1
Summary of assumptions and estimates for analysis including justifications.................................................1
Other Financial Details................................................................................................................................8
Monthly Cash Flow Statement..................................................................................................................11
Forecasted Annual Cash Flow For 3 Years...............................................................................................12
Required Capital To Start The Venture.....................................................................................................14
Sensitivity Analysis...................................................................................................................................15
Discounted cash Flow...............................................................................................................................16
Financial Ratio Analysis...........................................................................................................................18
Interpretation of financial result based on ratio calculation.....................................................................20
Conclusion................................................................................................................................................22
Recommendation.......................................................................................................................................23
Critical Reflection.....................................................................................................................................24
References.................................................................................................................................................25
As a student at the University of Cumbria I uphold and defend academic integrity, academic
rigor and academic liberty as core values of higher learning. I attest, on my word of honour, that
work submitted in my name is my own work, and that any ideas or materials used in support of
this work which are not originally my own are cited and referenced accordingly.
rigor and academic liberty as core values of higher learning. I attest, on my word of honour, that
work submitted in my name is my own work, and that any ideas or materials used in support of
this work which are not originally my own are cited and referenced accordingly.
Introduction
Starting a new business require a proper analysis. Thus, financial analysis of the business
plan pertaining to the new venture should be properly analyzed, which assist in determining the
viability of the overall business plan in respect to the future earnings. This business report is
being prepared which analysis the business plan being proposed pertaining to the Geodes
business. It involves the break-even point analysis, preparation of the cash flow statement along
with the other financial statement which is important for the new business venture plan. This will
result in better and effective analysis of the plan developed along with understanding the
viability of the business for the long run is also measured and monitored. Along with this, certain
estimations and assumptions have been made in preparation of the financial statement of the
business. This will help in framing certain recommendations in respect to the business plan based
upon the information provided. At last, the critical reflection of the report is presented which will
be provided to Hattie in order to make the project a success.
Summary of assumptions and estimates for analysis including justifications
Sources of Funding
It is being clear from the case study, that Hattie has already received a lump sum amount
of 450,000 pounds after leaving the company. This amount can be utilized by Hattie pertaining
to the business operation of the Geodes. In terms of requirement of additional funds, Hattie is
willing to take 40,000 pounds as loan at the rate of 7% interest. In addition to this, it is also
assumed that the company can also borrow funds from the capital market pertaining to the
business operation of Geodes. The last option which is available to Hattie is to add partners to
the venture who will bring in their share of capital to the business and will also have a share in
the profits of the company. This will help in decreasing the financial burden of Hattie to a great
extent.
1
Starting a new business require a proper analysis. Thus, financial analysis of the business
plan pertaining to the new venture should be properly analyzed, which assist in determining the
viability of the overall business plan in respect to the future earnings. This business report is
being prepared which analysis the business plan being proposed pertaining to the Geodes
business. It involves the break-even point analysis, preparation of the cash flow statement along
with the other financial statement which is important for the new business venture plan. This will
result in better and effective analysis of the plan developed along with understanding the
viability of the business for the long run is also measured and monitored. Along with this, certain
estimations and assumptions have been made in preparation of the financial statement of the
business. This will help in framing certain recommendations in respect to the business plan based
upon the information provided. At last, the critical reflection of the report is presented which will
be provided to Hattie in order to make the project a success.
Summary of assumptions and estimates for analysis including justifications
Sources of Funding
It is being clear from the case study, that Hattie has already received a lump sum amount
of 450,000 pounds after leaving the company. This amount can be utilized by Hattie pertaining
to the business operation of the Geodes. In terms of requirement of additional funds, Hattie is
willing to take 40,000 pounds as loan at the rate of 7% interest. In addition to this, it is also
assumed that the company can also borrow funds from the capital market pertaining to the
business operation of Geodes. The last option which is available to Hattie is to add partners to
the venture who will bring in their share of capital to the business and will also have a share in
the profits of the company. This will help in decreasing the financial burden of Hattie to a great
extent.
1
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Profit and Loss Items
Purchase of Geodes
Hattie will purchase geodes from established supplier in Uruguay Colado Geodes. It will
be purchased at U$ 350/kg and it will receive a discount of 45% on this price. As this in
Uruguayan peso it has to be converted into GBP (Aggelopoulos and Georgopoulos, 2017). The
exchange rate is taken as ÂŁ1 = U$ 59.15 from London stock exchange. It is expected that in
future, eth exchange rate will decline. On conversion the purchase price will be:
Calculation of purchase price
1 £= 59.15
Purchase price /kg of geodes 350/59.15
5.92
Purchase quantity
Based on the sales assumption over the year it is assumed that it will be able to sell the
quantity purchased from the seller. As provided that it will be keeping one-month stock at the
end of month the stock for January next year will also be purchased by them in December.
Total quantity purchased = 5050 + 750 = 5800
Discount
Supplier is also allowing discount of 45% to Hattie on purchase of the geodes/kg. The
discount is calculated as
Purchase price 5.92
Discount of 45% 2.66
Purchase price 3.25
The final purchase price per kg of Geodes for Hattie will be ÂŁ3.25 and it is calculated after
converting the purchase price.
2
Purchase of Geodes
Hattie will purchase geodes from established supplier in Uruguay Colado Geodes. It will
be purchased at U$ 350/kg and it will receive a discount of 45% on this price. As this in
Uruguayan peso it has to be converted into GBP (Aggelopoulos and Georgopoulos, 2017). The
exchange rate is taken as ÂŁ1 = U$ 59.15 from London stock exchange. It is expected that in
future, eth exchange rate will decline. On conversion the purchase price will be:
Calculation of purchase price
1 £= 59.15
Purchase price /kg of geodes 350/59.15
5.92
Purchase quantity
Based on the sales assumption over the year it is assumed that it will be able to sell the
quantity purchased from the seller. As provided that it will be keeping one-month stock at the
end of month the stock for January next year will also be purchased by them in December.
Total quantity purchased = 5050 + 750 = 5800
Discount
Supplier is also allowing discount of 45% to Hattie on purchase of the geodes/kg. The
discount is calculated as
Purchase price 5.92
Discount of 45% 2.66
Purchase price 3.25
The final purchase price per kg of Geodes for Hattie will be ÂŁ3.25 and it is calculated after
converting the purchase price.
2
Freight
As it is imported from other country it will have to bear the freight cost of U$ 200. The
goods will be stored for four weeks including packaging (Naoum and Papanastasopoulos, 2020).
The above cost also needs to be converted into GBP on the above exchange rate as:
Freight 200/59.15
3.381
The freight costs are higher than the cost of geodes to Hattie.
Selling price
The selling price for one kg of geodes is kept at ÂŁ35 including the packaging and
shipping. Selling prices has been kept after making proper analysis of the market demand and
prices. The price is only limited to internet sales. The selling price per cabinet relating to venture
is different which is ÂŁ45 per cabinet which includes 1.5 kg of geodes. This is being provided to
Ian at discount as selling price of 1.5 kg geodes is 52.5 (35+17.5).
Sales
As provided the demand in 1st month will be 50 kg for year and it will reach the target
level of 750 kg per month by end of December. It is assumed that it will incur marketing and
promotion of the business over internet to increase the sales (Bidabad, 2019). Based on it, the
sales assumption are made for every month for internet sales are as follows.
3
As it is imported from other country it will have to bear the freight cost of U$ 200. The
goods will be stored for four weeks including packaging (Naoum and Papanastasopoulos, 2020).
The above cost also needs to be converted into GBP on the above exchange rate as:
Freight 200/59.15
3.381
The freight costs are higher than the cost of geodes to Hattie.
Selling price
The selling price for one kg of geodes is kept at ÂŁ35 including the packaging and
shipping. Selling prices has been kept after making proper analysis of the market demand and
prices. The price is only limited to internet sales. The selling price per cabinet relating to venture
is different which is ÂŁ45 per cabinet which includes 1.5 kg of geodes. This is being provided to
Ian at discount as selling price of 1.5 kg geodes is 52.5 (35+17.5).
Sales
As provided the demand in 1st month will be 50 kg for year and it will reach the target
level of 750 kg per month by end of December. It is assumed that it will incur marketing and
promotion of the business over internet to increase the sales (Bidabad, 2019). Based on it, the
sales assumption are made for every month for internet sales are as follows.
3
Month Sales (kg)
1 50
2 100
3 250
4 350
5 350
6 400
7 450
8 500
9 550
10 600
11 700
12 750
Total 5050
The sales total amounts to 5050 from internet sales and if it adopts the venture with Ian it
will be able to sell 108 kg more with cabinet sales. That will amount to 108kg for the year. The
total sales in kg are 5158. However, the selling price of both internet and cabinet sales are
different.
4
1 50
2 100
3 250
4 350
5 350
6 400
7 450
8 500
9 550
10 600
11 700
12 750
Total 5050
The sales total amounts to 5050 from internet sales and if it adopts the venture with Ian it
will be able to sell 108 kg more with cabinet sales. That will amount to 108kg for the year. The
total sales in kg are 5158. However, the selling price of both internet and cabinet sales are
different.
4
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Break Even Analysis
From the case scenario, it is clear that Hattie will undertake a new venture into the
Geodes which is different from the conventional business. She also plans to sell cabinets for the
Geodes which will be also a part of the business. Thus, the breakeven point analysis (BEP) has
been carried out for both the ventures which Hattie is willing to establish.
Cost Statement
Cost statement
Hattie
Selling price /kg of geodes 35
Variable cost
Geodes 3.25
Freight 3.38
Credit card handling fees 0.54
Packaging and shipping 5.50
Variable cost 12.67
Fixed Cost
Rent 300
Wages 1500
Depreciation (4000+3500 * 10% / 12) 62.5
Total Cost 1862.5
5
From the case scenario, it is clear that Hattie will undertake a new venture into the
Geodes which is different from the conventional business. She also plans to sell cabinets for the
Geodes which will be also a part of the business. Thus, the breakeven point analysis (BEP) has
been carried out for both the ventures which Hattie is willing to establish.
Cost Statement
Cost statement
Hattie
Selling price /kg of geodes 35
Variable cost
Geodes 3.25
Freight 3.38
Credit card handling fees 0.54
Packaging and shipping 5.50
Variable cost 12.67
Fixed Cost
Rent 300
Wages 1500
Depreciation (4000+3500 * 10% / 12) 62.5
Total Cost 1862.5
5
Break Even Calculation per kg
Selling Price 35
Variable cost 12.67
Fixed Cost 1862.5
BEP 1862.5 /
(35 – 12.67)
BEP in kgs 83.41
BEP in amount 2919.27
Venture with Ian
Venture with Ian
Selling price per cabinet 45
Variable cost
Geodes 3.25
Freight 3.38
Credit card handling fees 0.54
Packaging and shipping 5.50
Total variable Cost 12.67
6
Selling Price 35
Variable cost 12.67
Fixed Cost 1862.5
BEP 1862.5 /
(35 – 12.67)
BEP in kgs 83.41
BEP in amount 2919.27
Venture with Ian
Venture with Ian
Selling price per cabinet 45
Variable cost
Geodes 3.25
Freight 3.38
Credit card handling fees 0.54
Packaging and shipping 5.50
Total variable Cost 12.67
6
Fixed Cost
Salary/ month 200
Break Even Calculation per cabinet
Selling Price 45
Variable cost 12.67
Fixed Cost 200
BEP 200 /
(45 – 12.67)
BEP in cabinet 6.18
BEP in amount 278.37
In order to attain, the situation of break-even point, the number of cabinets
to be sold is 6.18 which will result into attaining the BEP amount of 278.38.
7
Salary/ month 200
Break Even Calculation per cabinet
Selling Price 45
Variable cost 12.67
Fixed Cost 200
BEP 200 /
(45 – 12.67)
BEP in cabinet 6.18
BEP in amount 278.37
In order to attain, the situation of break-even point, the number of cabinets
to be sold is 6.18 which will result into attaining the BEP amount of 278.38.
7
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Other Financial Details
Profit and Loss Statement for 1st year of operation (in pounds)
Profit and Loss Year 1
Revenues
Internet Sales (5050 kg * 35) 176750
Cabinet sales (108 kg * 45) 4860
181610
Cost of Goods Sold
Purchases 18850
(5800*3.25)
Less: Closing Stock 2437.5
16412.5
Cabinet Accessories 504
Freight 19604
(5800*3.38)
36520.5
Gross Profit 145089.5
Credit Card Commission @ 1.2% 2121
Salary 18000
Packaging & Shipping
8
Profit and Loss Statement for 1st year of operation (in pounds)
Profit and Loss Year 1
Revenues
Internet Sales (5050 kg * 35) 176750
Cabinet sales (108 kg * 45) 4860
181610
Cost of Goods Sold
Purchases 18850
(5800*3.25)
Less: Closing Stock 2437.5
16412.5
Cabinet Accessories 504
Freight 19604
(5800*3.38)
36520.5
Gross Profit 145089.5
Credit Card Commission @ 1.2% 2121
Salary 18000
Packaging & Shipping
8
(5050+108) *5.5 28369
Salary for cabinet 2400
50890
Interest on borrowings 0
Profit before tax 50890
Tax @28% 14249.2
Net Profit 36640.8
Balance sheet
Balance Sheet for first year (in pounds)
Particulars Amount Amount
Assets
Non-current assets
Property, plant and equipment 180000
Investments 110000
Loans 55000
Other financial assets 74000
Deferred tax assets, net 42000
Other non-current assets 18000
Total non-current assets 479000
Current assets
Inventories 35000
Financial assets 14000
Investments 50000
Trade receivables 25000
Cash and cash equivalents 38000
Bank balance 40000
Other financial assets 12000
9
Salary for cabinet 2400
50890
Interest on borrowings 0
Profit before tax 50890
Tax @28% 14249.2
Net Profit 36640.8
Balance sheet
Balance Sheet for first year (in pounds)
Particulars Amount Amount
Assets
Non-current assets
Property, plant and equipment 180000
Investments 110000
Loans 55000
Other financial assets 74000
Deferred tax assets, net 42000
Other non-current assets 18000
Total non-current assets 479000
Current assets
Inventories 35000
Financial assets 14000
Investments 50000
Trade receivables 25000
Cash and cash equivalents 38000
Bank balance 40000
Other financial assets 12000
9
Total current assets 214000
Total assets 693000
Equity and Liabilities
Liabilities
Non-current liabilities
Financial liabilities 100000
Borrowings 40000
Provisions 25000
Total non-current liabilities 165000
Current liabilities
Financial liabilities 30000
Trade payables 39000
Provisions 33776
Tax payable 14249
Total current liabilities 117025
Total liabilities 282025
Equity
Equity share capital 120000
Other equity reserve 60000
Other Reserves 38534
Profit reserve 36641
Accumulated losses 131123
Equity attributable to owners of the parent 12555
Non-controlling interests 12122
Total Equity 410975
Total Equity and Liabilities 693000
The calculation which are shown above in the preparation of the balance sheet is based
on the relevant standards which is being stated by the General Accepted accounting principles
(GAPP). Note that there is an additional potential for the debtors and trade payables as the
business undertaken by Hattie is mainly involved into the credit purchase and sales. This is
because of huge amount of transaction. All the accumulated losses are being described under the
equity head of the balance sheet.
The financial statements highlight the crucial information pertaining to the performance
of the business entity. This can be effectively done through the help of the application of the
financial ratios in association with the long run stability of the business. In addition to this, it is
helpful in revealing the areas which more attention is required to be put on, for further
developing it in order to attain better outcomes. It is being assumed that the financial
10
Total assets 693000
Equity and Liabilities
Liabilities
Non-current liabilities
Financial liabilities 100000
Borrowings 40000
Provisions 25000
Total non-current liabilities 165000
Current liabilities
Financial liabilities 30000
Trade payables 39000
Provisions 33776
Tax payable 14249
Total current liabilities 117025
Total liabilities 282025
Equity
Equity share capital 120000
Other equity reserve 60000
Other Reserves 38534
Profit reserve 36641
Accumulated losses 131123
Equity attributable to owners of the parent 12555
Non-controlling interests 12122
Total Equity 410975
Total Equity and Liabilities 693000
The calculation which are shown above in the preparation of the balance sheet is based
on the relevant standards which is being stated by the General Accepted accounting principles
(GAPP). Note that there is an additional potential for the debtors and trade payables as the
business undertaken by Hattie is mainly involved into the credit purchase and sales. This is
because of huge amount of transaction. All the accumulated losses are being described under the
equity head of the balance sheet.
The financial statements highlight the crucial information pertaining to the performance
of the business entity. This can be effectively done through the help of the application of the
financial ratios in association with the long run stability of the business. In addition to this, it is
helpful in revealing the areas which more attention is required to be put on, for further
developing it in order to attain better outcomes. It is being assumed that the financial
10
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performance of the business can be analyzed in a better way in regard to the amount which is
being displayed in the financial statements. Therefore, the financial statement analysis of the
business is carried out of the current business scenario.
Monthly Cash Flow Statement
11
being displayed in the financial statements. Therefore, the financial statement analysis of the
business is carried out of the current business scenario.
Monthly Cash Flow Statement
11
Forecasted Annual Cash Flow For 3 Years
In regard to the receipts it is being assumed that the receipts from customers will increase
by 10% in the year 2021 and 20% in 2022. In addition to this, the salary of the part time assistant
is expected to increase at the rate of 5% in the year 2021 and 2022. Also, the pay to two part time
students is also increasing at the same rate of 5% each year. The proceeds from the capital
contribution is expected to increase at the rate of 12% in the year 2021 and 2022.
CASH FLOW STATEMENT
PARTICULARS 2020 2021 2022
Cash flow from operating
activities
Receipts from customers 181610 199771 239725.2
Inventory cash purchase (Four-week
stock) 2448.10 2692.91 3231.49
Cabinet Accessories 7200 8000 8400
Credit Card Commission @ 1.2% 2179.32 2397.252 2876.7024
Rent 3600 3600 3600
Salary for part time assistant 2400 2520 2646
Salary for two part time students 18000 18900 19845
Accounts payable 2800 2800 2800
Income Tax 11342.66 12476.926 14972.3112
Net cash flow from operating
activities (A) 131639.92 146383.91 181353.69
Cash flow from investing
activities
Cash from selling of property 100000 120000 100000
12
In regard to the receipts it is being assumed that the receipts from customers will increase
by 10% in the year 2021 and 20% in 2022. In addition to this, the salary of the part time assistant
is expected to increase at the rate of 5% in the year 2021 and 2022. Also, the pay to two part time
students is also increasing at the same rate of 5% each year. The proceeds from the capital
contribution is expected to increase at the rate of 12% in the year 2021 and 2022.
CASH FLOW STATEMENT
PARTICULARS 2020 2021 2022
Cash flow from operating
activities
Receipts from customers 181610 199771 239725.2
Inventory cash purchase (Four-week
stock) 2448.10 2692.91 3231.49
Cabinet Accessories 7200 8000 8400
Credit Card Commission @ 1.2% 2179.32 2397.252 2876.7024
Rent 3600 3600 3600
Salary for part time assistant 2400 2520 2646
Salary for two part time students 18000 18900 19845
Accounts payable 2800 2800 2800
Income Tax 11342.66 12476.926 14972.3112
Net cash flow from operating
activities (A) 131639.92 146383.91 181353.69
Cash flow from investing
activities
Cash from selling of property 100000 120000 100000
12
Investment securities sales 5000 6000 10000
Purchase of property 2000 2500 6000
Investment in tools 15000 20000 30000
Investment in machinery 100000 120000 150000
Investment in drill 35000 45000 55000
Purchase of other investments 13000 13500 14000
Net cash flow from investing
activities (B) -60000 -75000 -145000
Cash flow from financial activities
Proceeds from capital contribution 80000 89600 100352
Cash receipt from borrowings 30000 60000 80000
Drawings during the year 40000 47000 3000
Repayment of long-term loans 20000 25000 35000
Dividends 15000 16000 18000
Net cash flow from financial
activities (C) 35000 61600 124352
Net increase/(decrease) in cash
(A+B+C) 106639.92 132983.91 160705.69
Overall cash flow analysis
It can be summarized that the option is seemed to be fairly profitable but at the initial
stage of the start-up, the cost would exceed the cash inflows which will result into making of the
negative balance for the new venture business. On the other hand, the operation of the following
month will assist in covering up the loss which is being incurred during the first month (Chen
and et.al., 2021). From the actual cash flow, it has been estimated that the operation will be
profitable in the long run starting from 2020 to 2021. This will result into increase in the cost and
13
Purchase of property 2000 2500 6000
Investment in tools 15000 20000 30000
Investment in machinery 100000 120000 150000
Investment in drill 35000 45000 55000
Purchase of other investments 13000 13500 14000
Net cash flow from investing
activities (B) -60000 -75000 -145000
Cash flow from financial activities
Proceeds from capital contribution 80000 89600 100352
Cash receipt from borrowings 30000 60000 80000
Drawings during the year 40000 47000 3000
Repayment of long-term loans 20000 25000 35000
Dividends 15000 16000 18000
Net cash flow from financial
activities (C) 35000 61600 124352
Net increase/(decrease) in cash
(A+B+C) 106639.92 132983.91 160705.69
Overall cash flow analysis
It can be summarized that the option is seemed to be fairly profitable but at the initial
stage of the start-up, the cost would exceed the cash inflows which will result into making of the
negative balance for the new venture business. On the other hand, the operation of the following
month will assist in covering up the loss which is being incurred during the first month (Chen
and et.al., 2021). From the actual cash flow, it has been estimated that the operation will be
profitable in the long run starting from 2020 to 2021. This will result into increase in the cost and
13
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the revenue pertaining to the business which will consequently lead to making the company
profitable. It has also been assumed that the receipt from the customers will rise by 10% and
20% in the year 2021 and 2022 respectively (Dhole and et.al., 2021). This rate is expected to
continue for the next 5 years of the business operation as the supplier will expand gradually after
which the revenue will be stick at a certain point. For the first month sale, only 50 units of
Geodes will be sold. It is to be noted that the inventory for the business increases at the business
grows which results into cash out flow. In addition, the same amount of payment is made to the
account payables.
Required Capital To Start The Venture
Particulars Amount Amount
Supplier cost of Geodes supply 29896 5.92
(Less) Discount @45% 13453.2 2.664
Price to be paid to supplier 16442.8 3.256
Freight 19609.8 3.381
Price to be paid to supplier 4977.75
Geodes in business for first month @50 units 248887.5
Special jig and tools 3500
Market research 3000
Room rent for operations 300
Website design 4000
Packing and shipping per geodes @5.5 per kg 4125
Salary for part time assistant 200
Salary for two part time students 1500
Total capital required to start the business 265512.5
14
profitable. It has also been assumed that the receipt from the customers will rise by 10% and
20% in the year 2021 and 2022 respectively (Dhole and et.al., 2021). This rate is expected to
continue for the next 5 years of the business operation as the supplier will expand gradually after
which the revenue will be stick at a certain point. For the first month sale, only 50 units of
Geodes will be sold. It is to be noted that the inventory for the business increases at the business
grows which results into cash out flow. In addition, the same amount of payment is made to the
account payables.
Required Capital To Start The Venture
Particulars Amount Amount
Supplier cost of Geodes supply 29896 5.92
(Less) Discount @45% 13453.2 2.664
Price to be paid to supplier 16442.8 3.256
Freight 19609.8 3.381
Price to be paid to supplier 4977.75
Geodes in business for first month @50 units 248887.5
Special jig and tools 3500
Market research 3000
Room rent for operations 300
Website design 4000
Packing and shipping per geodes @5.5 per kg 4125
Salary for part time assistant 200
Salary for two part time students 1500
Total capital required to start the business 265512.5
14
The amount required for the purpose of starting the new venture business is 265512.5.
So, there is no requirement of taking additional funds.
Note: There is no negative cash flow in the starting years, thus, hose expenditures are notnot
included in determining the capital required.
Sensitivity Analysis
For the purpose of calculating the sensitivity analysis, there are certain assumptions
which is being made (Borgonovo, 2017). It is being assumed that there is an increase and decline
in the financial figures by the rate of 10% in the price taking the figures of the original or actual
costs as the base. A detailed analysis of the same is done below.
SENSITIVITY ANALYSIS
Particulars 10% Decrease Original 10% increase
Sales revenue 33750 37500 41250
Fixed cost
Rent for the operations 270 300 330
Market research 2700 3000 3300
Special jig and tools 3150 3500 3850
Website design 3600 4000 4400
Salary for part time assistant 180 200 220
Salary for two part time students 1350 1500 1650
Total fixed cost 11250 12500 13750
Freight 152.1 169 185.9
15
So, there is no requirement of taking additional funds.
Note: There is no negative cash flow in the starting years, thus, hose expenditures are notnot
included in determining the capital required.
Sensitivity Analysis
For the purpose of calculating the sensitivity analysis, there are certain assumptions
which is being made (Borgonovo, 2017). It is being assumed that there is an increase and decline
in the financial figures by the rate of 10% in the price taking the figures of the original or actual
costs as the base. A detailed analysis of the same is done below.
SENSITIVITY ANALYSIS
Particulars 10% Decrease Original 10% increase
Sales revenue 33750 37500 41250
Fixed cost
Rent for the operations 270 300 330
Market research 2700 3000 3300
Special jig and tools 3150 3500 3850
Website design 3600 4000 4400
Salary for part time assistant 180 200 220
Salary for two part time students 1350 1500 1650
Total fixed cost 11250 12500 13750
Freight 152.1 169 185.9
15
Purchase of material (162.5+10.6) 146.25 162.5 178.75
Packing and shipping per geodes @
5.5 per kg 3712.5 4125 4537.5
Total variable cost 3858.75 4456.5 4902.15
Profit before tax 18641.25 20543.5 22597.85
Tax @ 28% 5219.55 5752.18 6327.398
Net profit 13421.70 14791.32 16270.45
Discounted cash Flow
The discounted cash flow (DCF) is the approach which is being used for the purpose of
understanding and determining the future cash flow of the in association with the present value
(Nie, 2018). Through this, the business organization can identify the profitability of the business
over a longer period of time. In the given case, discounting rate is not provided, thus, it is
assumed to be 3%. After taking into consideration, the above situation and reports, the
computation of DCF is done as below.
CALCULATION OF DISCOUNTED CASH FLOW
Particulars Amount
Discounti
ng factor
@ 3%
Cash inflows
Year 1 106639.92 0.9709
Year 2 132983.912 0.9426
Year 3 160705.6944 0.9151
Discounted value of Year 1 Cash inflow 103533.9029
Discounted value of Year 2 Cash inflow 125350.0914
Discounted value of Year 3 Cash inflow 147068.4758
Discounted cash flow 375952.47
16
Packing and shipping per geodes @
5.5 per kg 3712.5 4125 4537.5
Total variable cost 3858.75 4456.5 4902.15
Profit before tax 18641.25 20543.5 22597.85
Tax @ 28% 5219.55 5752.18 6327.398
Net profit 13421.70 14791.32 16270.45
Discounted cash Flow
The discounted cash flow (DCF) is the approach which is being used for the purpose of
understanding and determining the future cash flow of the in association with the present value
(Nie, 2018). Through this, the business organization can identify the profitability of the business
over a longer period of time. In the given case, discounting rate is not provided, thus, it is
assumed to be 3%. After taking into consideration, the above situation and reports, the
computation of DCF is done as below.
CALCULATION OF DISCOUNTED CASH FLOW
Particulars Amount
Discounti
ng factor
@ 3%
Cash inflows
Year 1 106639.92 0.9709
Year 2 132983.912 0.9426
Year 3 160705.6944 0.9151
Discounted value of Year 1 Cash inflow 103533.9029
Discounted value of Year 2 Cash inflow 125350.0914
Discounted value of Year 3 Cash inflow 147068.4758
Discounted cash flow 375952.47
16
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Since there is no discount rate available, 3% rate is taken which is the opportunity cost.
This will help in determining whether the investment is profitable or not. From the perspective of
the long run, it is considered to be beneficial to the business that the DCF is 375952.47 for the
year in which the business plan of Hattie is proposed. This implies that the business plan is
advantageous in terms of profitability as per the current scenario which also states that it will be
profitable in long run as well.
Computation of Net present value
Year Cash
inflows
Discounting
factor @
3%
1 106639.92 0.9709
2 132983.91 0.9426
3 160705.69 0.9151
Total Net present value (A) 375952.46
Capital initially invested (B) 265512.50
Net t present value (A)-(B) 110439.96
The NPV of the business plan is determined which clearly shows that the NPV of the
project is far more than the capital invested (Khansalar and Namazi, 2017). Therefore, it is
economically feasible for Hattie to establish the new business venture in Geodes.
17
This will help in determining whether the investment is profitable or not. From the perspective of
the long run, it is considered to be beneficial to the business that the DCF is 375952.47 for the
year in which the business plan of Hattie is proposed. This implies that the business plan is
advantageous in terms of profitability as per the current scenario which also states that it will be
profitable in long run as well.
Computation of Net present value
Year Cash
inflows
Discounting
factor @
3%
1 106639.92 0.9709
2 132983.91 0.9426
3 160705.69 0.9151
Total Net present value (A) 375952.46
Capital initially invested (B) 265512.50
Net t present value (A)-(B) 110439.96
The NPV of the business plan is determined which clearly shows that the NPV of the
project is far more than the capital invested (Khansalar and Namazi, 2017). Therefore, it is
economically feasible for Hattie to establish the new business venture in Geodes.
17
Financial Ratio Analysis
Current ratio/ liquidity ratio Amt.ÂŁ million
Ratio Formula 1st year
Current assets 294000
Current liabilities 224500
Ratio Current assets/ current liabilities 1.31 times
Quick ratio Amt.ÂŁ million
Ratio Formula 1st year
Quick assets Current assets- inventory 224000
Current liabilities 19233
Ratio Quick assets / current liabilities 1 times
Gross profit margin ratio Amt.ÂŁ million
Ratio Formula 1st year
Gross profit(GP) 145089.5
Revenue 181610
Ratio (GP/revenue)*100 79.80%
Net profit margin ratio Amt.ÂŁ million
Ratio Formula 1st year
Net profit(NP) 29166.84
Revenue 181610
Ratio (NP/revenue)*100 16.06%
18
Current ratio/ liquidity ratio Amt.ÂŁ million
Ratio Formula 1st year
Current assets 294000
Current liabilities 224500
Ratio Current assets/ current liabilities 1.31 times
Quick ratio Amt.ÂŁ million
Ratio Formula 1st year
Quick assets Current assets- inventory 224000
Current liabilities 19233
Ratio Quick assets / current liabilities 1 times
Gross profit margin ratio Amt.ÂŁ million
Ratio Formula 1st year
Gross profit(GP) 145089.5
Revenue 181610
Ratio (GP/revenue)*100 79.80%
Net profit margin ratio Amt.ÂŁ million
Ratio Formula 1st year
Net profit(NP) 29166.84
Revenue 181610
Ratio (NP/revenue)*100 16.06%
18
Interest cover ratio Amt.ÂŁ million
Ratio Formula 1st year
EBIT Earning before tax and interest 50890
Total interest 2800
Ratio EBIT/total interest charges 5.50%
Debt to equity ratio Amt.ÂŁ million
Ratio Formula 1st year
Total debt 389500
Total assets 793000
Ratio Total debt/total assets 49.12%
Trade receivable period
Ratio Formula 1st year
Trade receivable 25000
Net sales 181610
Ratio 365/(Net sales/ trade receivable) 50 days
Trade payable period
Ratio Formula 1st year
Trade payable 41000
COGS 36520
Ratio (Cogs/trade payable) *365 410 days
19
Ratio Formula 1st year
EBIT Earning before tax and interest 50890
Total interest 2800
Ratio EBIT/total interest charges 5.50%
Debt to equity ratio Amt.ÂŁ million
Ratio Formula 1st year
Total debt 389500
Total assets 793000
Ratio Total debt/total assets 49.12%
Trade receivable period
Ratio Formula 1st year
Trade receivable 25000
Net sales 181610
Ratio 365/(Net sales/ trade receivable) 50 days
Trade payable period
Ratio Formula 1st year
Trade payable 41000
COGS 36520
Ratio (Cogs/trade payable) *365 410 days
19
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Interpretation of financial result based on ratio calculation.
Liquidity ratio are the ratio that calculated to find capacity level of organization to meet
its obligation with its business holding. It defines the liquidity level that need to be maintained
better functioning of organization and to meet the current liabilities with short term holding.
This ratio provides assistance in determining and analysing the financial strength of the venture
and it also highlights the stability of the entity pertaining to carrying out the business operation in
a better way. In respect to this case study, the relation has been drawn of the current liabilities in
respect to the current assets of the company which helps in evaluating the effectiveness of the
business in meeting with its short-term obligations.
Current ratio is indicating the relationship between the current assets and current
liabilities to find the liquidity position of organization (Khoiriah, 2020). In the overall situation
standard ratio is 1.3 to 1.5 that is good for any company. Ratio for the organization is 1.31 times
that indicate they have current assets to meet short term financial obligation. This also indicates
that the business is having stable current assets which is sufficient for effectively meeting up
with the current obligations which might arise during the course of business. This is favourable
for Hattie as she can jump start the business operation in her Geodes business.
Quick ratio is the name suggest in current liabilities are determined with the quick assets
that need very short period to convert into cash. This is calculated to judge the situation where
company need fund with very less time and need to convert its holding into cash to meet
obligation. The company has quick ratio as 1 that is acceptably and no need to increase in, it is
only 0.31 times less than the current one. The company is having lower quick ratio which
indicates that the company has blocked huge amount in its inventory. This can result into
creation of the situation of cash crunch. Thus, effective steps are needed to be undertaken in
order to overcome the same.
20
Liquidity ratio are the ratio that calculated to find capacity level of organization to meet
its obligation with its business holding. It defines the liquidity level that need to be maintained
better functioning of organization and to meet the current liabilities with short term holding.
This ratio provides assistance in determining and analysing the financial strength of the venture
and it also highlights the stability of the entity pertaining to carrying out the business operation in
a better way. In respect to this case study, the relation has been drawn of the current liabilities in
respect to the current assets of the company which helps in evaluating the effectiveness of the
business in meeting with its short-term obligations.
Current ratio is indicating the relationship between the current assets and current
liabilities to find the liquidity position of organization (Khoiriah, 2020). In the overall situation
standard ratio is 1.3 to 1.5 that is good for any company. Ratio for the organization is 1.31 times
that indicate they have current assets to meet short term financial obligation. This also indicates
that the business is having stable current assets which is sufficient for effectively meeting up
with the current obligations which might arise during the course of business. This is favourable
for Hattie as she can jump start the business operation in her Geodes business.
Quick ratio is the name suggest in current liabilities are determined with the quick assets
that need very short period to convert into cash. This is calculated to judge the situation where
company need fund with very less time and need to convert its holding into cash to meet
obligation. The company has quick ratio as 1 that is acceptably and no need to increase in, it is
only 0.31 times less than the current one. The company is having lower quick ratio which
indicates that the company has blocked huge amount in its inventory. This can result into
creation of the situation of cash crunch. Thus, effective steps are needed to be undertaken in
order to overcome the same.
20
Profitability ratio is calculated to find the relationship between various types of income
with the sales. That help organization for assess the ability that they have at different level. It can
define the gross profit and net profit level that what will be key factors for increase and decrease
in that ratio. It assigns the profitability of the company that how profitable the organization is.
Gross profit margin is used to define the profit level of the company, means at what the
core business providing profit to the organization. Company which have maximum GP ratio
always have the better future and sustainability in market. In selected firm that have 79.80%
GRP that means they more highly focused on core business. This indicates that the company is
effective in managing its operating cost which ash resulted into higher gross profit. This seems to
be sound and favorable to the business.
Net profit margin defines the relationship between the net income with the sales, means
what is actual performance of the company and what they have earned in the financial year.
Company has NPR that is 16.6% that seems to be good at overall level but with the reference of
GPR they have very low and need to control other expenses. Therefore, it becomes important to
understand that the non-operating expenses of the business is very high which has a direct impact
over the final profitability of the company. Thus, measures are required to be taken in order to
reduce the expenses and increase the profit of the business.
Coverage ratio is used to define the debt, its component to find overall ability of the firm
to meet long and short-term liabilities with the assets.
Interest coverage ratio is calculated to define at position to pay the interest with the net
income of the firm. It makes assessment for the ability to pay interest with income only.
Company has 5.50% that means interest charger are 5% of total income.
Debt to Equity Ratio defines the combination that a firm is using equity and debt. More
than 50% debt is not a good sign for any company (Nuryani and Sunarsi, 2020). The selected
firm has 49.12% that is at not bad and good.
Efficiency ratio is used to define effective of the firm with their functioning. These are
ratio design to make assessment of the production efficiency of the firm. This ratio is used in
measuring the internal operational efficiency of the business which is being determined and
evaluated in the business.
21
with the sales. That help organization for assess the ability that they have at different level. It can
define the gross profit and net profit level that what will be key factors for increase and decrease
in that ratio. It assigns the profitability of the company that how profitable the organization is.
Gross profit margin is used to define the profit level of the company, means at what the
core business providing profit to the organization. Company which have maximum GP ratio
always have the better future and sustainability in market. In selected firm that have 79.80%
GRP that means they more highly focused on core business. This indicates that the company is
effective in managing its operating cost which ash resulted into higher gross profit. This seems to
be sound and favorable to the business.
Net profit margin defines the relationship between the net income with the sales, means
what is actual performance of the company and what they have earned in the financial year.
Company has NPR that is 16.6% that seems to be good at overall level but with the reference of
GPR they have very low and need to control other expenses. Therefore, it becomes important to
understand that the non-operating expenses of the business is very high which has a direct impact
over the final profitability of the company. Thus, measures are required to be taken in order to
reduce the expenses and increase the profit of the business.
Coverage ratio is used to define the debt, its component to find overall ability of the firm
to meet long and short-term liabilities with the assets.
Interest coverage ratio is calculated to define at position to pay the interest with the net
income of the firm. It makes assessment for the ability to pay interest with income only.
Company has 5.50% that means interest charger are 5% of total income.
Debt to Equity Ratio defines the combination that a firm is using equity and debt. More
than 50% debt is not a good sign for any company (Nuryani and Sunarsi, 2020). The selected
firm has 49.12% that is at not bad and good.
Efficiency ratio is used to define effective of the firm with their functioning. These are
ratio design to make assessment of the production efficiency of the firm. This ratio is used in
measuring the internal operational efficiency of the business which is being determined and
evaluated in the business.
21
Period of Trade receivable and Payable have big influence in determining working cycle
and liquidity position. If the combination of both are at par then company can maintain low cash
holding (Ouyang and et.al., 2020). And dis-balance will lead to require more cash requirement.
The period for company is 50 days for trade receivable and more them one year for payment that
need to be reduced within one year.
It can be interpreted from the above ratio analysis, it can be stated that the operation
planned by Hattie is very liquid and is willing to run for a long term (Palepu and et.al., 2020). On
the overall basis, it can be summarized that the financial performance of the business is
moderate, and it requires implementing corrective steps in order to exercise control over the
unnecessary business expenditure. In addition to this, Hattie is required to make sure that the
firm should not pile up the liabilities in its first financial year as it would result into decline in the
operational efficiency of the business. In addition to this, it can be stated that the business is
fairly profitable and is having the potential to grow in the future, if the operation of the business
goes as per the designed plan. But, on the other side, it is crucial for the organization to
undertake certain unforeseen issues which might crop up within the operational activities of the
business. But, through the way of implementing measures would result into mitigating the risks
pertaining to maintenance of liquid assets along with the relevant provisions.
Conclusion
It can be summarized from the above that the operation of Hattie is seemed to be quite
profitable in regarding to the information provided for the business plan. The estimation has been
made pertaining to the future expected outcomes of the business in addition to the assumptions
being made in reading to the operations. The breakeven point analysis is being carried out of the
venture of Hattie based on which it is being determined that the company required to sell 63.45
kg of Geodes amounting to 2220.66 in order to cover its operational expenses. In addition to this,
monthly cash flow statement of the company was prepared along with the annual analysis of the
cash flow which states about the future expected cash flow within and outside of the business.
Next is the P&L Statement with its balance sheet was created for the first year of the business
operation. With the help of these statements, the financial ratio analysis of the business was
carried out in order to determine the financial position and performance of the business so that
22
and liquidity position. If the combination of both are at par then company can maintain low cash
holding (Ouyang and et.al., 2020). And dis-balance will lead to require more cash requirement.
The period for company is 50 days for trade receivable and more them one year for payment that
need to be reduced within one year.
It can be interpreted from the above ratio analysis, it can be stated that the operation
planned by Hattie is very liquid and is willing to run for a long term (Palepu and et.al., 2020). On
the overall basis, it can be summarized that the financial performance of the business is
moderate, and it requires implementing corrective steps in order to exercise control over the
unnecessary business expenditure. In addition to this, Hattie is required to make sure that the
firm should not pile up the liabilities in its first financial year as it would result into decline in the
operational efficiency of the business. In addition to this, it can be stated that the business is
fairly profitable and is having the potential to grow in the future, if the operation of the business
goes as per the designed plan. But, on the other side, it is crucial for the organization to
undertake certain unforeseen issues which might crop up within the operational activities of the
business. But, through the way of implementing measures would result into mitigating the risks
pertaining to maintenance of liquid assets along with the relevant provisions.
Conclusion
It can be summarized from the above that the operation of Hattie is seemed to be quite
profitable in regarding to the information provided for the business plan. The estimation has been
made pertaining to the future expected outcomes of the business in addition to the assumptions
being made in reading to the operations. The breakeven point analysis is being carried out of the
venture of Hattie based on which it is being determined that the company required to sell 63.45
kg of Geodes amounting to 2220.66 in order to cover its operational expenses. In addition to this,
monthly cash flow statement of the company was prepared along with the annual analysis of the
cash flow which states about the future expected cash flow within and outside of the business.
Next is the P&L Statement with its balance sheet was created for the first year of the business
operation. With the help of these statements, the financial ratio analysis of the business was
carried out in order to determine the financial position and performance of the business so that
22
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corrective actions can be implemented for mitigating the risks and potential loses to incur. It has
been found out that the liquidity position of the company is good, and the profitability is near to
worse. Based upon this, certain recommendation is being provided which will provide assistance
to the business in regard to carrying out the business in an effective and appropriate way.
Recommendation
Based upon the analysis of the above report made for Hattie needs to review and monitor
the plan regularly at a different interval of time which will help to ensure that the plan is up to
date and in case any change is required to be made then the correction can be made timely.
Changes like variation in the prevailing rates or the market conditions which can impact the
business operation. The new plan created should incorporate the future operations of the venture
and requires to made sure that those plans are prepared with utmost care which assists in
ensuring that the new plan is beneficial for the operating the business in the market (Sági, 2017).
In addition, Hattie is required to make sure that the financial statements of the business
along with the books of accounts are properly maintained and created as it is useful in improving
the performance of the business within the market. It will help in identifying the weakness of the
business so that the remedial steps can be undertaken in order to overcome those weaknesses
which the business might face in association with its monetary factors.
Hattie needs to keep the venture in accordance with the legal requirements prevailing
within the nation. This aspect is to support the venture in respect to keeping the company safe
from any of the legal obligations which will result into making the business operation better and
effective. Hattie should employ a person which is highly professional and experienced in
managing the legality of the business.
In addition, the company is required to keep the liquid funds at its disposal which will
help in mitigating the unforeseen risks, affecting the operational activities of the venture (Kim,
Kim and Jeon, 2018). This will help in serving as the working capital to the business with the
objective of covering up the business petty expenses of the business which incurs during daily
business activities.
23
been found out that the liquidity position of the company is good, and the profitability is near to
worse. Based upon this, certain recommendation is being provided which will provide assistance
to the business in regard to carrying out the business in an effective and appropriate way.
Recommendation
Based upon the analysis of the above report made for Hattie needs to review and monitor
the plan regularly at a different interval of time which will help to ensure that the plan is up to
date and in case any change is required to be made then the correction can be made timely.
Changes like variation in the prevailing rates or the market conditions which can impact the
business operation. The new plan created should incorporate the future operations of the venture
and requires to made sure that those plans are prepared with utmost care which assists in
ensuring that the new plan is beneficial for the operating the business in the market (Sági, 2017).
In addition, Hattie is required to make sure that the financial statements of the business
along with the books of accounts are properly maintained and created as it is useful in improving
the performance of the business within the market. It will help in identifying the weakness of the
business so that the remedial steps can be undertaken in order to overcome those weaknesses
which the business might face in association with its monetary factors.
Hattie needs to keep the venture in accordance with the legal requirements prevailing
within the nation. This aspect is to support the venture in respect to keeping the company safe
from any of the legal obligations which will result into making the business operation better and
effective. Hattie should employ a person which is highly professional and experienced in
managing the legality of the business.
In addition, the company is required to keep the liquid funds at its disposal which will
help in mitigating the unforeseen risks, affecting the operational activities of the venture (Kim,
Kim and Jeon, 2018). This will help in serving as the working capital to the business with the
objective of covering up the business petty expenses of the business which incurs during daily
business activities.
23
Critical Reflection
In this study I have carried out the financial analysis of the business of Hattie in which
the new business venture plan was assessed. Various aspects of finance were covered which
involves cash flow and capital expensive. I have also identified that the information provided by
Hattie is inadequate for better and reliable estimation. Basis of this, the preparation of the
financial statements was resulted into restricted to a large extent. The estimation was majorly
focused towards the revenue sources of Hattie apart from the estimated sales, investment,
working capital requirements etc.
I have provided proper justification of every assumption made in the study pertaining to
the creation and analysis of financial statements. In order to make the evaluation far more
effective and insightful, breakeven point analysis was carried out which assisted in determining
and prioritizing the order of the operational costs. It is important to note that the business is
having different priority which makes it important to make an evaluation through various
breakeven point and taking into account only one might not be able to provide accurate
estimation. I have also created a monthly cash flow statement of the company which has helped
me in determining the change in the sales revenue would impact the overall cash flow position of
the business.
Since Hattie already told that she is going out of town and will not be able to provide any
sort of assistance, but she also stated that the relevant and useful things can be easily found out
through internet. Therefore, I have searched all the relevant things which were essential for the
purpose of completion of the study and this helped me in gaining an understanding and
knowledge in regard to the key aspects and factors which should be referred to in order to meet
with the business needs. In order to help Hattie to understanding how each element of the
venture will result into contributing towards the success of the company. Also, if I were given
another opportunity to do the financial analysis, I would have made sure that the information
regarding the assets and expenditure are provided to me. This has also helped me in analyzing
the impact of change in factors over the pricing and the net profits of the venture. Since, Hattie is
into an attractive business venture which deals in the geodes which would be imported from
Uruguay and sell out in Europe. This helped me in understanding the key concepts pertaining to
24
In this study I have carried out the financial analysis of the business of Hattie in which
the new business venture plan was assessed. Various aspects of finance were covered which
involves cash flow and capital expensive. I have also identified that the information provided by
Hattie is inadequate for better and reliable estimation. Basis of this, the preparation of the
financial statements was resulted into restricted to a large extent. The estimation was majorly
focused towards the revenue sources of Hattie apart from the estimated sales, investment,
working capital requirements etc.
I have provided proper justification of every assumption made in the study pertaining to
the creation and analysis of financial statements. In order to make the evaluation far more
effective and insightful, breakeven point analysis was carried out which assisted in determining
and prioritizing the order of the operational costs. It is important to note that the business is
having different priority which makes it important to make an evaluation through various
breakeven point and taking into account only one might not be able to provide accurate
estimation. I have also created a monthly cash flow statement of the company which has helped
me in determining the change in the sales revenue would impact the overall cash flow position of
the business.
Since Hattie already told that she is going out of town and will not be able to provide any
sort of assistance, but she also stated that the relevant and useful things can be easily found out
through internet. Therefore, I have searched all the relevant things which were essential for the
purpose of completion of the study and this helped me in gaining an understanding and
knowledge in regard to the key aspects and factors which should be referred to in order to meet
with the business needs. In order to help Hattie to understanding how each element of the
venture will result into contributing towards the success of the company. Also, if I were given
another opportunity to do the financial analysis, I would have made sure that the information
regarding the assets and expenditure are provided to me. This has also helped me in analyzing
the impact of change in factors over the pricing and the net profits of the venture. Since, Hattie is
into an attractive business venture which deals in the geodes which would be imported from
Uruguay and sell out in Europe. This helped me in understanding the key concepts pertaining to
24
how the business-related decisions are undertaken by making use of investment appraisal
techniques which helps in knowing the viability of the proposal.
25
techniques which helps in knowing the viability of the proposal.
25
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References
Aggelopoulos, E. and Georgopoulos, A., 2017. Bank branch efficiency under environmental
change: A bootstrap DEA on monthly profit and loss accounting statements of Greek retail
branches. European journal of operational research. 261(3). pp.1170-1188.
Bidabad, B., 2019. GENERAL REGULATORY FRAMEWORK IN RASTIN PROFIT AND
LOSS SHARING BANKING:: PART III-AUXILIARY PROVISIONS. JBFEM. 2(1).
pp.51-66.
Borgonovo, E., 2017. Sensitivity analysis. An Introduction for the Management Scientist.
International Series in Operations Research and Management Science. Cham,
Switzerland: Springer.
Chen, X., and et.al., 2021. Australian evidence on analysts' cash flow forecasts: issuance,
accuracy and usefulness. Accounting & Finance. 61(1). pp.3-50.
Dhole, S., and et.al., 2021. The joint information role of analysts’ cash flow and earnings
forecasts. Accounting & Finance. 61(1). pp.499-541.
Khansalar, E. and Namazi, M., 2017. Cash flow disaggregation and prediction of cash
flow. Journal of Applied Accounting Research.
Khoiriah, N., 2020. The Effect of Current Ratio and Debt to Ratio Assets Against Return on
Assets. JASa (Jurnal Akuntansi, Audit dan Sistem Informasi Akuntansi). 4(2). pp.216-
223.
Kim, B., Kim, H. and Jeon, Y., 2018. Critical success factors of a design startup
business. Sustainability. 10(9). p.2981.
Naoum, V.C. and Papanastasopoulos, G.A., 2020. The implications of cash flows for future
earnings and stock returns within profit and loss firms. International Journal of Finance
& Economics.
Nie, Z. Q., 2018. Discounted cash flow (DCF) model detection based on goodwill impairment
test. Journal of Discrete Mathematical Sciences and Cryptography. 21(4). pp.959-968.
Nuryani, Y. and Sunarsi, D., 2020. The Effect of Current Ratio and Debt to Equity Ratio on
Deviding Growth. JASa (Jurnal Akuntansi, Audit dan Sistem Informasi Akuntansi).4(2).
pp.304-312.
Ouyang, W., and et.al., 2020. The cooling efficiency of variable greenery coverage ratios in
different urban densities: A study in a subtropical climate. Building and
Environment. 174. p.106772.
Palepu, K. G., and et.al., 2020. Business analysis and valuation: Using financial statements.
Cengage AU.
Sági, J., 2017. Credit guarantees in sme lending, role, interpretation and valuation in financial
and accounting terms. Economics Management Innovation. 9(3). pp.62-70.
26
Aggelopoulos, E. and Georgopoulos, A., 2017. Bank branch efficiency under environmental
change: A bootstrap DEA on monthly profit and loss accounting statements of Greek retail
branches. European journal of operational research. 261(3). pp.1170-1188.
Bidabad, B., 2019. GENERAL REGULATORY FRAMEWORK IN RASTIN PROFIT AND
LOSS SHARING BANKING:: PART III-AUXILIARY PROVISIONS. JBFEM. 2(1).
pp.51-66.
Borgonovo, E., 2017. Sensitivity analysis. An Introduction for the Management Scientist.
International Series in Operations Research and Management Science. Cham,
Switzerland: Springer.
Chen, X., and et.al., 2021. Australian evidence on analysts' cash flow forecasts: issuance,
accuracy and usefulness. Accounting & Finance. 61(1). pp.3-50.
Dhole, S., and et.al., 2021. The joint information role of analysts’ cash flow and earnings
forecasts. Accounting & Finance. 61(1). pp.499-541.
Khansalar, E. and Namazi, M., 2017. Cash flow disaggregation and prediction of cash
flow. Journal of Applied Accounting Research.
Khoiriah, N., 2020. The Effect of Current Ratio and Debt to Ratio Assets Against Return on
Assets. JASa (Jurnal Akuntansi, Audit dan Sistem Informasi Akuntansi). 4(2). pp.216-
223.
Kim, B., Kim, H. and Jeon, Y., 2018. Critical success factors of a design startup
business. Sustainability. 10(9). p.2981.
Naoum, V.C. and Papanastasopoulos, G.A., 2020. The implications of cash flows for future
earnings and stock returns within profit and loss firms. International Journal of Finance
& Economics.
Nie, Z. Q., 2018. Discounted cash flow (DCF) model detection based on goodwill impairment
test. Journal of Discrete Mathematical Sciences and Cryptography. 21(4). pp.959-968.
Nuryani, Y. and Sunarsi, D., 2020. The Effect of Current Ratio and Debt to Equity Ratio on
Deviding Growth. JASa (Jurnal Akuntansi, Audit dan Sistem Informasi Akuntansi).4(2).
pp.304-312.
Ouyang, W., and et.al., 2020. The cooling efficiency of variable greenery coverage ratios in
different urban densities: A study in a subtropical climate. Building and
Environment. 174. p.106772.
Palepu, K. G., and et.al., 2020. Business analysis and valuation: Using financial statements.
Cengage AU.
Sági, J., 2017. Credit guarantees in sme lending, role, interpretation and valuation in financial
and accounting terms. Economics Management Innovation. 9(3). pp.62-70.
26
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