Financial Management .

The assessment analyzes the viability of a business plan for a retail business of different variety of nuts. It includes a detailed financial plan, assumptions, and factors to be considered. The financial plan shows the preparation of financial statements, cash flow statement, and breakeven analysis. The assessment also includes a viability analysis of the plan.

0FINANCIAL MANAGEMENT
Financial Management
Name of the Student:
Name of the University:
Author’s Note:

1FINANCIAL MANAGEMENT
Table of Contents
Executive Summary...................................................................................................................2
Details of the Plan......................................................................................................................2
Assumptions and Viability Analysis of the Plan........................................................................3
Cash Flow Statement and Financial Viability Analysis.............................................................7
Other Financial Presentation....................................................................................................17
Forecasted Balance Sheet of the Business...............................................................................26
Breakeven Analysis..................................................................................................................27
Recommendation......................................................................................................................28
Reflection.................................................................................................................................29
Reference and Bibliography.....................................................................................................31

2FINANCIAL MANAGEMENT
Executive Summary
The main purpose of this assessment is to analyze the viability of the business plan which is
being formulated for old aunt Chiara and the same is a new venture plan which would be
undertaken by her. The assessment would be including a detailed financial plan which is
developed for the business which is intended by Chiara. The business which is going to be
established would be in Italy and the main operations of the business is related to retail of
nuts which have a significant market in the country. The assessment considers the financial
aspects of the business plan of a retail business of different variety of nuts. The assessment
would be containing a detailed background of the business venture which is being considered
and the same would be include all the assumptions and factors which needs to be considered
by the owner of the business before taking any decisions. The financial plan would show the
assumptions which are considered while formulating the same and also would show the
preparation of the financial statements of the business. The financial statements would be
formulated on an estimation basis and would be including a profit and loss statement, cash
flow statement and a balance sheet. In addition to this, the attractiveness of the project would
be further assessed with the help of breakeven analysis which would provide an estimate of
minimum sales which the business needs to achieve in order to survive in the market and
continue its operations. This is done in order in order to assess the profit generating capacity
of the business and estimate whether the business would be successful in the market or not.
The financial plan would also be analyzed from the perspective of the market and ensure that
the plan is a viable one.
Details of the Plan
The assessment shows that Aunt Chiara is planning to invest in a business venture
which can bring in some good amount of revenue for the business (Burns and Dewhurst

3FINANCIAL MANAGEMENT
2016). The business plan is intended to be a retirement plan and the venture would be
financed from the lump sum retirement amount which Chiara received for early retirement
and the amount which Chiara received is shown to be € 450,000. The business plan which is
formulated aims to open a ratil business which would be supplying nuts to the customers
(Veenhof 2016).
The plan which is device shows that the owner wants to import nuts from USA from a
company named BestNuts Inc. The business plan is to offer a variety of coated nuts to the
consumers and the same would be including different variety such as almonds, brazil,
macadamia, pecan, pistachio. The business of BestNuts Inc. also offers such nuts and
therefore the plan of the management is to import such coated nuts in bulk and engaged in
new venture in Italy. The owner also plans to enter into a tie up agreement with a local
business which would be buying 50 boxes of coated nuts every month. This would ensure
that the business has appropriate amount of revenue and regular income on monthly basis
(Criaco et al. 2016). The market survey also shows that the plan which is formulated by the
owner is viable and can help in generating appropriate profits for the business (André, Cho
and Laine 2018). In addition to this, the owner would also be require some assets and also
needs to incur start-up costs which would be shown in the financial statements which is
prepared for the business (Mason and Harrison 2017).
Assumptions and Viability Analysis of the Plan
The business plan which is being formulated by the management of the company
would be including an appropriate financing plan which can help the business in identifying
the costs and revenue which can be generated by the business on the basis of an estimation.
The viability of the business would be judged from breakeven analysis which is also
incorporated in the assessment which is shown in the assessment. In order to judge the

4FINANCIAL MANAGEMENT
financial viability, the owner has prepared the income statement on the basis of month and
also an income statement which is yearly in nature (Gonzalez-Uribe and Leatherbee 2017).
The income statement would be showing the revenue which can be generated by the business
and also the costs which the business is most likely to incur as the business continues with its
operations (Xi et al. 2018). The analysis of the income statement is done with an objective to
compute the profitability of the business plan (Yambot et al. 2016). The financial plan also
includes balance sheet and cash flow statement which would give insights on the
performance of the business once the business is successfully established in the market. In
addition to this, the financial plan also includes a breakeven analysis in order to show how
much sales the management needs to achieve in order to ensure that the business is able to
survive in the long run (Gerasymenko, De Clercq and Sapienza 2015). The breakeven
analysis would show how sales the management of the company needs to achieve so that the
management is able to recover the fixed costs of the business so that the business is able to
continue with its operations effectively.
In order to formulate the financial plan, there are certain assumptions which are
considered by the owner so that the financial plans are developed as per the market and
current scenario and also as per the judgment of the owner. The assumptions which are
considered for the financial plan are listed below in point format.
 One of the assumption which is considered while preparing the financial statements of
the intended business is that 1 Lb is equal to 0.45 kg and this assumption is used in
the income statement of the business.
 The exchange rate of USD to Euro is considered to be 0.88. This is considered as the
business is undertaking imports for the coated nuts from the US and therefore the
foeign currency needs to be converted into home currency (Colombo et al. 2016). In
addition to this, the rate which is taken can change on day to day basis depending on

5FINANCIAL MANAGEMENT
the market situations and therefore a fixed rate of 0.88 is considered for the purpose of
conversion.
 The sales figure is anticipated to increase from 40 to 200 over the year and the same is
shown in the profit and loss statement which is formulated by the management of the
business. The sales price is an important consideration which the management of the
company needs to consider while taking any major decisions to proceed for the
business. It is on the basis of the sale price that the profitability of the business as well
as the cost element of the business is determined.
 The business also anticipates that they would be requiring certain assets for
effectively carrying out the operations of the business and therefore some assets needs
to be purchased by the management of the business. As per the anticipation of the
owner, the business would be requiring a refrigerator to appropriately store the coated
the nuts of the business. The refrigerator would also be required to be depreciated
over the years and the management anticipates that the asset would have a useful life
of 5 years and the same would be depreciated on straight line basis. The amount of
depreciation would be shown in the profit and loss account of the business.
 The business also recognizes that the owner would also be required to appropriately
deal with the initial costs of the business which the owner incurred before the business
was undertaken. The market study costs will be spread over the one year period.
 The owner also plans to develop a website in order to enhance the sales of the
business and thereby also increase the profitability of the business. The website is
considered to be an intangible assets of the business and therefore, the intangible
assets of the business are to be amortized over the 5 years period on the basis of
following straight line method.

6FINANCIAL MANAGEMENT
 The tax rate which is applicable in the country is also applied to get profit after tax
figure of the business. The tax which is computed is to be adjusted against the profits
of the business. However, it is assumed that tax would not be adjusted for capital
allowances.
 In addition to this, it is also assumed that Aunt Chiara did not invest in shares or any
other funds and therefore, there are no interest which needs to be considered by the
business (Robinson et al. 2015). The income statement would not be showing any
interest components.
 It is also assumed that there would not be much changes in the sales and costs of
figures of the business which suggest that the management of the company has
assumed that the market demand conditions would be stable and thus the sales would
not fluctuate that much.
Workings
WORKINGS LB(Usd) KG (Usd) KG(Euros )
Selling retail price 27.5 12.375 10.89
Purchase price 7.425 6.534
Exchange rate 0.88
Lb to Kgs ( 1lb=0.45kg) 0.45 0.396
Airfreight costs 2.7 1.215 1.0692
lbs 2.205
kg 1
Discount 40%
Price of nuts
$
27.50
After discount of nuts
$
16.50
Frieght()
$
2.70
Cost of purchase
$
19.20
Exchange rate
€
0.88
Cost of purchase €

7FINANCIAL MANAGEMENT
16.90
Time to receive the goods 3
Inventory to be maintained 4
Capital
€
4,50,000.00
loan
€
50,000.00
Figure 1: (Table showing other assumptions for the business)
Source: (Created by the Author)
The above figure shows the capital requirements and also shows a borrowing which is
undertaken by the business for the purpose of meeting the capital requirements of the
business. The above table also shows that the owner Chiara wants to maintain a safety stock
of four week before a new order is placed for a batch or products of the business. The
assumptions are also placed for the different types of costs which will be incurred by the
business in normal course of operations of the business.
Cash Flow Statement and Financial Viability Analysis
The cash flow statement is prepared by the management of the company for the
purpose of understanding the cash inflows and outflow of a business which is considered to
be important financial indicators of the business. The cash flow statement of the business is
prepared on an estimation basis considering the revenue and expenses sources which are
applicable to the business. The cash flow statement of the business is included in the financial
plan which is formulated by the owner for the purpose of estimating the cash inflows which
can be generated by the business and also the estimate the cash outflows of the business. The
cash flow statement is also used for measuring the liquidity status of a business and estimate
how the management of the company would be able to meet the current obligations of the
business.

8FINANCIAL MANAGEMENT
In the case of the new venture plan which is planned by the owner, the main source of
financing is from the lump sum amount which is received by Chiara when she took an early
retirement. The amount which is received by Chiara is show to be € 450,000 which is a
significant amount and an appropriate business can be started with the use of these funds. In
addition to this, Chiara also anticipated a requirement of loans from banks of € 50,000 which
would further help in financing the needs of the business (Guay, Samuels and Taylor 2016).
The business of coated nuts would be generating revenue from the sales in local markets and
also from the tie u agreement with another retailer’s business. This would be bringing in cash
inflows in the business and the expenses which are incurred to earn such revenue would be
recognized as cash outflows of the business (Weygandt, Kimmel and Kieso 2015). On the
basis of the cash flow statement, the overall liquidity situation of the business is estimated.
The cash flow statement of the business as per the anticipation of the management of the
business is shown in the table which is shown below:

9FINANCIAL MANAGEMENT
Year 0
Janu
ary
Febr
uary
Marc
h April May June July
Augu
st
Sept
emb
er
Octo
ber
Nove
mber
Dece
mber 1 2 3 4
Refrigerator
cost
€
-
4,75
0
€
-
Website cost
€
-
8,00
0
€
-
Study cost
€
-
5,00
0
€
-
Working
capital
requirement
€
-
95,5
04
€
-
€
95,50
4
Profit and loss
account
Average
Demand 40 55 69 84 98 113 127 142 156 171 185 200 1,440 2,400 2,400 2,400
Selling price
€
90
€
90
€
90
€
90
€
90
€
90
€
90
€
90
€
90
€
90
€
90
€
90
€
90
€
90
€
90
€
90
Internet sales
€
3,600
€
4,909
€
6,218
€
7,527
€
8,836
€
10,14
5
€
11,45
5
€
12,76
4
€
14,07
3
€
15,38
2
€
16,69
1
€
18,00
0
€
1,29,
600
€
2,16,
000
€
2,16,
000
€
2,16,
000

10FINANCIAL MANAGEMENT
No of Boxes 50 50 50 50 50 50 50 50 50 50 50 50 600 600 600 600
Selling price
€
25
€
25
€
25
€
25
€
25
€
25
€
25
€
25
€
25
€
25
€
25
€
25
€
25
€
25
€
25
€
25
Sales from
Boxes
€
1,250
€
1,250
€
1,250
€
1,250
€
1,250
€
1,250
€
1,250
€
1,250
€
1,250
€
1,250
€
1,250
€
1,250
€
15,00
0
€
15,00
0
€
15,00
0
€
15,00
0
Total sales
€
4,850
€
6,159
€
7,468
€
8,777
€
10,08
6
€
11,39
5
€
12,70
5
€
14,01
4
€
15,32
3
€
16,63
2
€
17,94
1
€
19,25
0
€
1,44,
600
€
2,31,
000
€
2,31,
000
€
2,31,
000
€
-
Cost of goods
sold- internet
sales (Kg)
€
37
€
37
€
37
€
37
€
37
€
37
€
37
€
37
€
37
€
37
€
37
€
37
€
37
€
37
€
37
€
37
Cost of goods
sold- boxes
€
22
€
22
€
22
€
22
€
22
€
22
€
22
€
22
€
22
€
22
€
22
€
22
€
22
€
22
€
22
€
22
Cost of goods
sold- internet
sales
€
1,490
€
2,032
€
2,574
€
3,116
€
3,658
€
4,200
€
4,742
€
5,284
€
5,825
€
6,367
€
6,909
€
7,451
€
53,64
8
€
89,41
4
€
89,41
4
€
89,41
4
Cost of goods
sold- boxes
€
1,118
€
1,118
€
1,118
€
1,118
€
1,118
€
1,118
€
1,118
€
1,118
€
1,118
€
1,118
€
1,118
€
1,118
€
13,41
2
€
13,41
2
€
13,41
2
€
13,41
2
Total Cost of
Goods sold
€
2,608
€
3,150
€
3,692
€
4,234
€
4,776
€
5,317
€
5,859
€
6,401
€
6,943
€
7,485
€
8,027
€
8,569
€
67,06
0
€
1,02,
826
€
1,02,
826
€
1,02,
826
Packaging cost
Interest sales
€
3
€
3
€
3
€
3
€
3
€
3
€
3
€
3
€
3
€
3
€
3
€
3
€
36
€
3
€
3
€
3
Packaging cost
boxes
€
0.8
€
0.8
€
0.8
€
0.8
€
0.8
€
0.8
€
0.8
€
0.8
€
0.8
€
0.8
€
0.8
€
0.8
€
10
€
0.8
€
0.8
€
0.8
Packaging cost € € € € € € € € € € € € € € € €

11FINANCIAL MANAGEMENT
Interest sales 120 164 207 251 295 338 382 425 469 513 556 600 4,320 7,200 7,200 7,200
Packaging cost
boxes
€
40
€
40
€
40
€
40
€
40
€
40
€
40
€
40
€
40
€
40
€
40
€
40
€
480
€
480
€
480
€
480
Total
Packaging cost
€
160
€
204
€
247
€
291
€
335
€
378
€
422
€
465
€
509
€
553
€
596
€
640
€
4,800
€
7,680
€
7,680
€
7,680
€
-
2 part time
staff
€
958
€
958
€
958
€
958
€
958
€
958
€
958
€
958
€
958
€
958
€
958
€
958
€
11,50
0
€
11,50
0
€
11,50
0
€
11,50
0
Assistant
€
300
€
300
€
300
€
300
€
300
€
300
€
300
€
300
€
300
€
300
€
300
€
300
€
3,600
€
3,600
€
3,600
€
3,600
Total
Employee cost
€
1,258
€
1,258
€
1,258
€
1,258
€
1,258
€
1,258
€
1,258
€
1,258
€
1,258
€
1,258
€
1,258
€
1,258
€
15,10
0
€
15,10
0
€
15,10
0
€
15,10
0
Rent
€
2,200
€
550
€
550
€
550
€
550
€
550
€
550
€
550
€
550
€
550
€
550
€
550
€
6,600
€
6,600
€
6,600
€
4,950
Selling
expense
1.50
%
€
54
€
74
€
93
€
113
€
133
€
152
€
172
€
191
€
211
€
231
€
250
€
270
€
1,944
€
3,240
€
3,240
€
3,240
EBITDA
€
2,170
€
5,833
€
7,846
€
9,859
€
11,87
2
€
13,88
5
€
15,89
8
€
17,91
1
€
19,92
4
€
21,93
7
€
23,95
0
€
25,96
3
€
1,77,
046
€
3,11,
554
€
3,11,
554
€
3,13,
204
Depreciation
cost
€
99
€
99
€
99
€
99
€
99
€
99
€
99
€
99
€
99
€
99
€
99
€
99
€
1,188
€
1,188
€
1,188
€
1,188
EBT
€
2,071
€
5,734
€
7,747
€
9,760
€
11,77
3
€
13,78
6
€
15,79
9
€
17,81
2
€
19,82
5
€
21,83
8
€
23,85
1
€
25,86
4
€
1,75,
858
€
3,10,
367
€
3,10,
367
€
3,12,
017
Tax
30.0
0%
€
621
€
1,720
€
2,324
€
2,928
€
3,532
€
4,136
€
4,740
€
5,344
€
5,947
€
6,551
€
7,155
€
7,759
€
52,75
7
€
93,11
0
€
93,11
0
€
93,60
5
PAT €
1,450
€
4,014
€
5,423
€
6,832
€
8,241
€
9,650
€
11,05
€
12,46
€
13,87
€
15,28
€
16,69
€
18,10
€
1,23,
€
2,17,
€
2,17,
€
2,18,

12FINANCIAL MANAGEMENT
9 8 7 7 6 5 101 257 257 412
Cash flows
€ -
1,13,
254
€
1,549
€
4,113
€
5,522
€
6,931
€
8,340
€
9,749
€
11,15
8
€
12,56
7
€
13,97
6
€
15,38
5
€
16,79
5
€
18,20
4
€
1,24,
288
€
2,18,
444
€
2,18,
444
€
2,19,
599
Figure 2: (Table showing Financials of the business)
Source: (Created by the Author)

13FINANCIAL MANAGEMENT
The above figure shows that the cash which is anticipated to be generated by the
business during the period which is considered for the analysis. The financials of the business
is anticipated by the business considering the similar businesses which are operating in the
market. The cash flow statement is shown for a period of 4 years and the statement also
shows cash flow of the intended business on monthly basis for the first year of the business.
The cash flow statement also shows the revenue which can generated by the business and the
cash expenses of the business are considered to be cash outflows of the business. The cash
flow of the business which is prepared by the management of the company is shown in the
figure below

14FINANCIAL MANAGEMENT
Cash flow Statement
Particulars 0
Janua
ry
Febru
ary
Marc
h April May June July
Augu
st
Septe
mber
Octo
ber
Nove
mber
Dece
mber
Year
1
Year
2
Year
3
Year
4
Opening
balance
€
4,50,
000.0
0
€
3,36,
745.7
8
€
3,29,
844.3
0
€
3,26,
488.7
5
€
3,23,
233.2
2
€
3,20,
077.7
0
€
3,17,
022.1
9
€
3,14,
066.7
0
€
3,11,
211.2
2
€
3,08,
455.7
6
€
3,05,
800.3
2
€
3,03,
244.8
9
€
3,00,
789.4
7
€
4,50,
000.0
0
€
2,98,
434.0
7
€
2,85,
878.3
5
€
2,73,
322.6
2
Initital
Investmen
t
Refrigerat
or cost
€
(4,75
0.00)
€
(4,75
0.00)
Website
cost
€
(8,00
0.00)
€
(8,00
0.00)
Study cost
€
(5,00
0.00)
€
(5,00
0.00)
Working
capital
requireme
nt
€
(95,5
04.22
)
€
(95,5
04.22
)
€
95,50
4.22
Total sales
€
3,600
.00
€
4,909
.09
€
6,218
.18
€
7,527
.27
€
8,836
.36
€
10,14
5.45
€
11,45
4.55
€
12,76
3.64
€
14,07
2.73
€
15,38
1.82
€
16,69
0.91
€
1,11,
600.0
0
€
2,16,
000.0
0
€
2,16,
000.0
0
€
2,16,
000.0
0
Total Cost
of Goods
€
2,607
€
3,149
€
3,691
€
4,233
€
4,775
€
5,317
€
5,859
€
6,401
€
6,943
€
7,485
€
8,026
€
8,568
€
67,06
€
1,02,
€
1,02,
€
1,02,

15FINANCIAL MANAGEMENT
sold .90 .80 .70 .60 .50 .40 .30 .20 .10 .00 .91 .81 0.22
825.6
8
825.6
8
825.6
8
Total
Packaging
cost
€
160.0
0
€
203.6
4
€
247.2
7
€
290.9
1
€
334.5
5
€
378.1
8
€
421.8
2
€
465.4
5
€
509.0
9
€
552.7
3
€
596.3
6
€
640.0
0
€
4,800
.00
€
7,680
.00
€
7,680
.00
€
7,680
.00
Total
Employee
cost
€
1,258
.33
€
1,258
.33
€
1,258
.33
€
1,258
.33
€
1,258
.33
€
1,258
.33
€
1,258
.33
€
1,258
.33
€
1,258
.33
€
1,258
.33
€
1,258
.33
€
1,258
.33
€
15,10
0.00
€
15,10
0.00
€
15,10
0.00
€
15,10
0.00
Rent
€
2,200
.00
€
550.0
0
€
550.0
0
€
550.0
0
€
550.0
0
€
550.0
0
€
550.0
0
€
550.0
0
€
550.0
0
€
550.0
0
€
550.0
0
€
550.0
0
€
8,250
.00
€
6,600
.00
€
6,600
.00
€
4,950
.00
Selling
expense
€
54.00
€
73.64
€
93.27
€
112.9
1
€
132.5
5
€
152.1
8
€
171.8
2
€
191.4
5
€
211.0
9
€
230.7
3
€
250.3
6
€
270.0
0
€
1,944
.00
€
3,240
.00
€
3,240
.00
€
3,240
.00
Tax
expense
€
621.2
4
€
1,720
.15
€
2,324
.05
€
2,927
.95
€
3,531
.85
€
4,135
.76
€
4,739
.66
€
5,343
.56
€
5,947
.46
€
6,551
.37
€
7,155
.27
€
7,759
.17
€
52,75
7.48
€
93,11
0.05
€
93,11
0.05
€
93,60
5.05
Closing
balance
€
3,36,
745.7
8
€
3,29,
844.3
0
€
3,26,
488.7
5
€
3,23,
233.2
2
€
3,20,
077.7
0
€
3,17,
022.1
9
€
3,14,
066.7
0
€
3,11,
211.2
2
€
3,08,
455.7
6
€
3,05,
800.3
2
€
3,03,
244.8
9
€
3,00,
789.4
7
€
2,98,
434.0
7
€
2,98,
434.0
7
€
2,85,
878.3
5
€
2,73,
322.6
2
€
3,57,
426.1
2
Figure 2: (Table Showing Cash Flow Statement of the business)
Source: (Created by the Author)

16FINANCIAL MANAGEMENT
The cash flow statement which is shown above reflects all the cash expenses which
are undertaken by the management for supporting the activities of the business. In addition to
this, the cash forecast is done in order to assess the financial viability of the business. The
initial investments which are made by the management of the company is shown in the above
table. The initial investment forms an important part of the expenditures which the
management of the company needs to undertake in order to ensure that the start up of the
business is efficiently done. The initial investments which are recognized for the business
includes refrigerator cost, market study costs, website development costs and working capital
management costs. The cost of refrigerator is important as the business needs to appropriately
store coated nuts so that their hardness and texture can be maintained (Weng et al. 2018). The
retail business offers a variety of nuts and therefore, it is an utmost requirement that the same
are appropriately kept in storage so that no harm can come to the product. The cost which is
incurred on market study is also important as the same would enable the business to identify
the target market and the key competition in the market. The market survey would be
beneficial to the business as the cost and revenue anticipation can be done on the basis of the
trends of the market. In addition to this, the owner can identify various non-financial factors
which can affect the new business such as taste and preference pattern of the consumers, rules
and regulations of the country, competitive pressure in the market. These are considered to be
important factors and thereby have an impact on the decision making process of the business.
The website development costs needs to be incurred by the management of the
business so that the name and product which is offered by the business can be advertised to
people. The online medium in today’s generation is regarded as the best form of
advertisement as it covers a wide range of area (Sedláček and Skalický 2017). The website
will also be created to enhance the revenue of the business as the owner plans to take orders
in bulk from online as well which would enhance the marketability of the business. Another

17FINANCIAL MANAGEMENT
major initial expense comprise of the working capital requirements which is the fund kept
aside to finance the activities of the business and also meet current obligations of the business
effectively. The other costs which are incurred in the cash flow statement are rent,
employee’s salaries and packaging costs for the products. These cost have to be incurred by
the management of the company on regular basis and therefore the same are shown for each
month as per the cash flow statement which is prepared for the business.
Therefore, it can be said that the cash flow statement is appropriately prepared for the
business and the business as per estimation seems to be financially stable. The net cash flow
which is generated from the business on monthly basis is shown to be positive which shows
that the business would be profitable and would be able to generate more revenue for the
business in the long run. The cash flow statement therefore shows that the business is viable
and therefore the owner should move forward with the project as the financial analysis shows
that the business would be able to generate profits and also expand the business.
Other Financial Presentation
The other financial presentation which the management needs to consider is the
income statement of the business, Balance sheet of the intended business and breakeven
analysis in order to show the minimum sales which the business needs to achieve in order to
maintain the sales and profitability of the business. The analysis of financial position of the
business would be done on the basis of the financial statements of the business. The
presentation of the financial statements needs to be included in the financial plan which is
formulated by the management.
Profit and Loss Statement
The profit and loss statement of a business is prepared with an objective to evaluate
the profit generating ability of the business. The profit and loss statement shows all the

18FINANCIAL MANAGEMENT
revenue and expenses of the business for the year and thereby computes the net profit which
is earned by the business. In the case of the new business, the profit which is computed by the
owner is an estimate of the future performance of the business. The forecasted profit and loss
statement for the business for the first is shown in the table which is presented below:

19FINANCIAL MANAGEMENT
PROFIT & LOSS FOR YEAR ENDED 2018
JAN FEB MARC
H
APRI
L
MAY JUNE JULY AUG SEP OCT NOV DEC TOTA
L
SALES 40 50 60 70 90 110 130 150 170 180 190 200
REVENUE
@ 90 per Kg 3,600 4,500
5,4
00 6,300 8,100 9,900
1
1,700
1
3,500
1
5,300
1
6,200
1
7,100
1
8,000
129,
600
Cost of sales
@ 6.534 per
kg
(261) (327)
(
392) (457) (588) (719) (849) (980)
(
1,111)
(
1,176)
(
1,241)
(
1,307)
(9,
409)
Marco Sales 30 30 30 30 30 30 30 30 30 30 30 30
Marco
Revenue 1,250 1,250
1,2
50 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250 1,250
15,
000
Marco Cost ( (2,

20FINANCIAL MANAGEMENT
of sales (196) (196) 196) (196) (196) (196) (196) (196) (196) (196) (196) (196) 352)
Gross profit
3,861 4,827
5,7
92 6,757 8,688
1
0,619
1
2,549
1
4,480
1
6,411
1
7,376
1
8,341
1
9,307
132,
839
Sales,
Marketing &
admin. costs
Salaries
(1,917
)
(
1,917)
(1,9
17)
(
1,917)
(
1,917)
(
1,917)
(
1,917)
(
1,917)
(
1,917)
(
1,917)
(
1,917)
(
1,917)
(23,
000)
Salary for
additional
assistant
(300) (300)
(
300) (300) (300) (300) (300) (300) (300) (300) (300) (300)
(3,
600)
Packing &
Ship @ 3.00
per Kg
-120 -150 -180 -210 -270 -330 -390 -450 -510 -540 -570 -600 (4,
320)

21FINANCIAL MANAGEMENT
Packing of
Marco
50@0.80
(40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (40) (40)
(
480)
Airfreight
internet sales (43) (53) (64) (75) (96) (118) (139) (160) (182) (192) (203) (214)
(1,
540)
Airfreight on
Macro sales (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32) (32)
(
385)
Dep. of
refrigerator
@20%
(79) (79) (79) (79) (79) (79) (79) (79) (79) (79) (79) (79)
(
950)
Website
Amortisation (133) (133)
(
133) (133) (133) (133) (133) (133) (133) (133) (133) (133)
(1,
600)
Rent -550 -550 -550 -550 -550 -550 -550 -550 -550 -550 -550 -550 (6,
600)
Marketing
res. (417) (417)
(
417) (417) (417) (417) (417) (417) (417) (417) (417) (417)
(5,
000)

22FINANCIAL MANAGEMENT
Credit card
fees 1.5% of
Revenue
(54) (68) (81) (95) (122) (149) (176) (203) (230) (243) (257) (270)
(1,
944)
Total Admin.
costs (3,685
)
(
3,739)
(3,7
93)
(
3,847)
(
3,956)
(
4,064)
(
4,172)
(
4,281)
(
4,389)
(
4,443)
(
4,498)
(
4,552)
(49,
419)
Net profit
before taxes 177 1,088
1,9
99 2,910 4,732 6,555 8,377
1
0,199
1
2,022
1
2,933
1
3,844
1
4,755
83,
420
Taxes@ 30%
53.00 326
6
00 873 1,420 1,966 2,513 3,060 3,606 3,880 4,153 4,427
26,
877
Net profit
after taxes 230 1,414
2,5
99 3,783 6,152 8,521
1
0,890
1
3,259
1
5,628
1
6,813
1
7,997
1
9,182
110,
297
Figure 3: (Table showing profit and loss statement for the first year)
Source: (Created by the Author)

24FINANCIAL MANAGEMENT
The profit and loss statement which is presented in the table above shows the analysis
of profitability for 12 months period. The above figure also shows the taxes which is charged
to compute the profit after tax of the business. The sales price per unit of the business is
shown to be € 90 per kg. The above table also shows that the number of units which is sold
by the business is increasing which is as per the estimation of the management. As the
number of units which is offered by the business increases so does the revenue which is
generated by the business on monthly basis and so does that costs which is associated with
the product. The profit and loss statement which is forecasted by the owner shows that the
objective of the business is to achieve growth in the process of the business and thereby also
enhance the revenue of the business. The profit and loss statement which is prepared for
monthly basis is aimed to evaluate the short term position of the business as per anticipation.
The short term plans would be formulated on the basis of the forecasted profit and loss
statement which is shown in the above figure.
In order to estimate the long term profitability of the business, a forecasted profit and
loss statement is prepared for a period of four years. The profit and loss statement depicting
long position of the business is shown in the table below:
Income Statement
Particulars Year 1 Year 2 Year 3 Year 4
Internet sales
€
1,29,600
€
2,16,000
€
2,16,000
€
2,16,000
Sales from Boxes
€
15,000
€
15,000
€
15,000
€
15,000
Total sales
€
1,44,600
€
2,31,000
€
2,31,000
€
2,31,000
Cost of goods sold- internet
sales
€
53,648
€
89,414
€
89,414
€
89,414
Cost of goods sold- boxes
€
13,412
€
13,412
€
13,412
€
13,412
Total Cost of Goods sold € € € €

25FINANCIAL MANAGEMENT
67,060 1,02,826 1,02,826 1,02,826
Gross Profit
€
77,540
€
1,28,174
€
1,28,174
€
1,28,174
Packaging cost Interest sales
€
4,320
€
7,200
€
7,200
€
7,200
Packaging cost boxes
€
480
€
480
€
480
€
480
Total Packaging cost
€
4,800
€
7,680
€
7,680
€
7,680
Total Employee cost
€
15,100
€
15,100
€
15,100
€
15,100
Rent
€
6,600
€
6,600
€
6,600
€
6,600
Selling expense
€
1,944
€
3,240
€
3,240
€
3,240
Depreciation
€
1,188
€
1,188
€
1,188
€
1,188
Total Administrative expense
€
29,632
€
32,620
€
32,620
€
32,620
EBT
€
47,908
€
95,554
€
95,554
€
95,554
Tax
€
14,372
€
28,666
€
28,666
€
28,666
Profit
€
33,536
€
66,888
€
66,888
€
66,888
Figure 4: (Table showing profit and loss statement for the four years)
Source: (Created by the Author)
The above profit and loss statement which is prepared by the owners is forecasted to
depict the long position of the business. Some of the expenses which is shown in the above
table are clubbed together for the purpose of better classification of expenses of the business.
In the long position, the profits which is generated by the business is expected to increase for
the first year and then the same is shown to be constant for the next three years. This is done
as the management anticipates that the sales revenue would be constant for the three years
and the cost expenses of the business also considered to be same. The profit and loss
statement which is prepared by the business for long position shows favorable results as per
the anticipation of the management. The profitability of the business is shown to be

26FINANCIAL MANAGEMENT
appropriate and therefore it can be said that the owner Aunt Chiara can move forward with
the project and thereby start off its business.
Forecasted Balance Sheet of the Business
The balance sheet is a statement which is prepared by the management to demonstrate
the financial position of the business. The balance sheet of the business effectively shows the
assets and liabilities of the business which are considered to determine the performance of the
business during the period. The balance sheet which is prepared for the new retail business
demonstrates the assets and liabilities which the business considers to be using in the
business. The balance sheet of the business which is prepared for the business is shown
below:
Balance Sheet Statement
Particulars Year 1 Year 2 Year 3 Year 4
Cash Balance € 2,98,434.07 € 2,85,878.35 € 2,73,322.62 € 3,57,426.12
Refrigerator € 3,562.50 € 2,375.00 € 1,187.50 € -
Receivables € 1,81,539.22 € 2,28,634.68 € 2,42,377.90 € 1,59,461.90
Total Asset € 4,83,535.79 € 5,16,888.03 € 5,16,888.03 € 5,16,888.03
Capital € 4,50,000.00 € 4,50,000.00 € 4,50,000.00 € 4,50,000.00
Retained earnings € 33,535.79 € 66,888.03 € 66,888.03 € 66,888.03
Total equity € 4,83,535.79 € 5,16,888.03 € 5,16,888.03 € 5,16,888.03
Total equity and liability € 4,83,535.79 € 5,16,888.03 € 5,16,888.03 € 5,16,888.03
Figure 5: (Table showing Balance Sheet for the four years)
Source: (Created by the Author)
The balance sheet of the business which is forecasted depending on the market
demand is shown in the figure above. The business has purchased assets during the year and
therefore the management has purchased. The other asset which is shown in the balance sheet
of the business is receivables which represent a part of the current assets of the business. The
liabilities and equity side of the business is mainly comprised of retained earnings and share

27FINANCIAL MANAGEMENT
capital of the business. The management of the company needs to appropriately consider the
aspect of reporting of other assets as when they have completed the assessment for the same.
The balance sheet is appropriately presented by the management of the company and
therefore, it can be said that the management should proceed with the project. In addition to
this, the assets of the business is anticipated to increase over the four year period which is
shown in the balance sheet which is presented above. Therefore it can be said that the balance
sheet s appropriate and the management needs make investments in the project.
Breakeven Analysis
Break-even analysis is useful in the determination of the level of production or a
targeted desired sales mix. The viability of the business would be judged from breakeven
analysis which is also incorporated in the assessment which is shown in the assessment. In
addition to this, the financial plan also includes a breakeven analysis in order to show how
much sales the management needs to achieve in order to ensure that the business is able to
survive in the long run. The breakeven analysis would show how sales the management of the
company needs to achieve so that the management is able to recover the fixed costs of the
business so that the business is able to continue with its operations effectively.
Break even analysis
Particulars Year 1 Year 2 Year 3 Year 4
Total sales € 1,44,600 € 2,31,000 € 2,31,000 € 2,31,000
Total Cost of Goods sold € 67,060 € 1,02,826 € 1,02,826 € 1,02,826
Selling expense € 1,944
€
3,240
€
3,240
€
3,240
Contribution € 75,596 € 1,24,934 € 1,24,934 € 1,24,934
Contribution margin 52.28% 54.08% 54.08% 54.08%
Fixed cost € 21,700 € 21,700 € 21,700 € 21,700
Breakeven sales € 41,508 € 40,123 € 40,123 € 40,123

28FINANCIAL MANAGEMENT
Figure 5: (Table showing Balance Sheet for the four years)
Source: (Created by the Author)
The breakeven analysis is effectively computed for the business and the same shows
the figures for total sales and the fixed costs which is associated with the business. The cost
of good sold is shown to have increased from previous year and then it is shown to be
constant in nature. The breakeven units of the business is shown to be € 40123 for the next
period of the business. The breakeven analysis which is shown for the business is also shown
to be favorable and therefore, it can be said that the management should proceed with the
project which is planned.
Recommendation
The recommendation which can be suggested to Aunt Chiara which can help her to
formulate the business plan in a better way and also ensure that the business which is about to
set up is financially strong, are listed below in details:
 The business needs to reduce the costs of the business and ensure that the same are
kept low at all times. The profit and loss statement which is prepared by the business
for both the short run and long run position shows that the costs of the business are
significantly high which can affect the profitability of the business. The estimation of
the costs of the business is as per the market conditions and also after considering the
effects of inflation. In case the business is able to keep the costs of the business at a
minimum, it can be anticipated that the profits which can be generated by the business
will be significantly more.
 The business needs to appropriately value the assets of the business and thereby also
ensure that the management of the business is able to enhance the profitability of the
business. The asset are important components behind success of a business and

29FINANCIAL MANAGEMENT
therefore Aunt Chiara needs to purchase more assets after the first year period as this
would make the business more efficient and further enhance the distribution network
of the business.
 The owner needs to consider about expanding the scale of operations of the retail
business in order to ensure the long term survival and profitability of the business. As
determined from the market survey, the competitiveness in the market is immense and
therefore a strong growth plan needs to be formulated by Aunt Chiara in order to
ensure that the business is able to thrive in the face of tough competition.
 The management need to appropriately manage the cash flows of the business and
have a proper record of the cash inflows and outflows of the business. This would
allow the owner to have better control over the revenue and operations of the
business. In addition to this, this would also help in effective identification of the
costs and also reduction of the same.
 The owner needs to set up a proper capital structure for the business. It is an
assumption that the owner would not be requiring any debt capital for the purpose of
financing the activities of the business and would only be using retirement fund which
is received by the business. The owner can use a portion of debt in the capital mix so
that an appropriate balance can be maintained by the business and the business is also
to take advantage of leverages. In addition to this, debt capital also has tax advantage
associated with the same and therefore the same needs to be considered by Aunt
Chiara.
Reflection
In my opinion, Aunt Chiara should move forward with the project as the project is
shown to be profitable in nature and also has appropriate cash flow of the business. The

30FINANCIAL MANAGEMENT
initial market survey shows that the business of retail industry is favorable and the same can
be entered easily by new entrepreneur. The market however is highly competitive which can
be an obstacle for the retail business is being planned. I am of the belief that the business plan
which is proposed by Aunt Chiara has a lot of potential in terms of revenue generation and
also preference of the customers. I also think that the idea of providing different variety of
nuts is superb and securing the distribution network through colleagues of Aunt Chiara would
definitely ensure that the product which is offered by the business is demand. This would also
ensure constant revenue on a monthly basis.
I am also of the opinion that the business needs more investment and more assets
needs to be invested in the business. The initial capital requirements of the business needs to
be meet appropriately by Aunt Chiara. The start-up is the key to build a strong foundation for
the business in order to ensure that the business is able to operate for a long period of time.
Therefore, it can be said that the retail business which is suggested is highly profitable and
should be invested in. Aunt Chiara should move forward with the project as the future for the
same seems to be favorable.

31FINANCIAL MANAGEMENT
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