Financial Management

Running head: FINANCIAL MANAGEMENT
Financial Management
Name of the Student:
Name of the University:
Author’s Note

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FINANCIAL MANAGEMENT
Executive Summary
The main purpose of this assessment is to analyze the case study which is provided stating a plan
to open a Chocolate retail business in Norway. The assessment shows detail analysis of the
various estimations which are considered in this assessment along with other statements which
are prepared. The assessment shows analysis of investment capabilities of the owner along with
evaluation of income statement, balance sheet and cash flow statement. In addition to this, a
discounted cash flow statement and Sensitivity analysis is also included in the discussion part of
the report. The assessment aims to establish whether the owner should proceed with the plan and
also establish the financial viability of the project.

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FINANCIAL MANAGEMENT
Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................4
Initial Investment Requirement...................................................................................................4
Assumptions................................................................................................................................5
Breakeven Analysis.....................................................................................................................7
Income Statement Analysis for the Period..................................................................................9
Balance Sheet for the Period......................................................................................................11
Cash Flow Statement Analysis of the Business.........................................................................14
Discounted Cash Flow Analysis for the Proposed Business.....................................................15
Capital Requirement of the Proposed Business.........................................................................17
Sensitivity Analysis for the Proposed Business.........................................................................18
Conclusion and Recommendation.................................................................................................20
Bibliography..................................................................................................................................22
Appendix..........................................................................................................................................0

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FINANCIAL MANAGEMENT
Introduction
The main purpose of this assessment is to analyze the viability of a business plan which
as per the case study which is provided. As per the case study provided, Uncle Benjamin who
wants to open a chocolate retail store which would be supplying gourmet chocolates for which
the financial viability would be checked. The business would be getting supplies of chocolates
from Zurich and also Switzerland. The business aims to get trading license from Zurich for a
period of five years and also get trade license from Switzerland. The analysis for viability of the
project would be including breakeven analysis which would be estimating the minimum sales
which the business needs to achieve in order to continue operations of the business (King 2013).
The analysis is conducted for the purpose of helping Uncle Benjamin in estimating the sales and
profit which can be generated from the retail business (Hammond and Berman 2013). The
owners of the business also anticipate that the importing of Chocolate materials from
Switzerland would also allow certain portion of discount to the business which will further
reduce the overall costs of the business.
In addition to Breakeven analysis, a forecasted financial statement of the business is to be
prepared and analyzed in order to identify the performance areas and the capacity of the business
to generate profits. The report would also be showing various assumptions and justifications
which are considered by the business in the analysis of the viability of the project and would also
help in the decision-making process of the business (Jary and Wileman 2016). The analysis also
includes Sensitivity analysis which would allow Uncle Benjamin to compare between different
scenarios. In addition to this, time value of the estimated profitability of the business will be
evaluated with the help of Discounted Cash Flow Model.

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FINANCIAL MANAGEMENT
Discussion
Initial Investment Requirement
In order to effectively establish the business, Uncle Benjamin would be requiring
significant amount of fund for procuring the chocolates from Switzerland and Zurich and also
managing the day to day activities of the business. The initial capital requirement of the business
is estimated and shown in the table below:
Initial Investment:-
Particulars Unit Cost per Unit Total
Purchase for 1 month's Sales 75 kg CHF 51.66 CHF 3,874.50
Air Freight 75 kg CHF 9.50 CHF 712.50
Total Cost of Material in CHF 75 kg CHF 61.16 CHF 4,587.00
Matreial cost in NOK 75 kg NOK 511.30 NOK 38,347.32
Packaging & Shipping Cost 75 kg NOK 45.00 NOK 3,375.00
Packaging Cost for Fixed Sales 25 kg NOK 160.00 NOK 4,000.00
Special Refrigerator NOK 55,000.00
Deposit for Industrial room NOK 14,400.00
First month of rent NOK 7,200.00
Website Design NOK 75,000.00
Market Research NOK 50,000.00
Employee's Salary NOK 13,333.33
Labor Cost NOK 4,200.00
Wrapping Machine NOK 15,000.00
Marketing & Distribution Right NOK 100,000.00
TOTAL INTIAL INVESTMENT NOK 379,856
Available Fund NOK 1,700,000
Cash Balance NOK 1,320,144
Figure 1: (Table Showing Initial Investment Requirement of the Business)
Source: (Created by the Author)

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FINANCIAL MANAGEMENT
The above table shows the initial investment which is estimated by the owner of the
business. The main selling products which is chocolate gourmet are being imported from
Switzerland and Zurich therefore the business needs to incur air fare for importing the
chocolates. In addition to this, the initial supply advance also needs to be paid by the owner of
the business. In addition to this, the business also needs to incur the following costs which are
shown in the table above in order to make the product of the business marketable (Popov and
Roosenboom 2013). There are certain assumptions which are considered while arriving at the
total initial investment which is required by the business. The marketing and distribution rights
for the products are assumed to be NOK 100,000 and the same is shown in the table above. The
initial requirement as per the table which is shown above is estimated to be NOK 3,79,856
considering all the initial expenses and maintenance requirements of the business. Uncle
Benjamin has the option of taking a loan for financing the initial expenses and meeting the initial
investment requirement of the business. However, the owner does not require to do so as it is
anticipated that all the initial investment would be met effectively with the lumpsum payment
which Uncle Benjamin received from retirement. This would enable the management of the
business to effectively finance all activities of the business smoothly (Laffy and Walters 2016).
The table which is shown above demonstrates that the business has appropriate funds to meet the
initial investment of the business and also would be left with a closing cash balance of NOK
1,320,144 which can be further invested in the activities of the business.
Assumptions
In order to estimate the profitability and breakeven analysis of the business, various
assumptions are considered for the analysis. The initial investment of the business shows the
marketing and distribution rights of the products is considered on an assumption basis judging