Financial Management - Analysis of Fictive Business

Financial Management –
Analysis of Fictive Business

Table of Contents
Executive Summary ........................................................................................................................3
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................2
Summary of assumption and estimate analysis with justification..........................................2
Break Even Analysis..............................................................................................................4
Profit ans Loss Statement.......................................................................................................5
Balance sheet end of the first year..........................................................................................6
Monthly cash flow for the first year of operation...................................................................8
Annual cash flow..................................................................................................................10
A clear Explanation..............................................................................................................11
Sensitivity Analysis..............................................................................................................14
CRITICAL REFELECTION.........................................................................................................15
CONCLUSION & RECCOMEDATION .....................................................................................16
REFERENCES..............................................................................................................................18

Executive Summary
Financial management is manage all the financial activities in systematic manner in order
to analysis financial position of business. There are prepared different types of statements that
examine operational activities of business in different manner and provide accurate results. All
the financial results are presented to internal as well as external stakeholders to helps in decision
making procedure. Along with they are providing sufficient recommendation in regard of the
business. This report based on the case study in which a person after his retirement wants to open
new venture of German handmade chocolate. For this prepare a financial plan in which involve
all the assumptions in regard of particular business. It helps to analysing of risk and take right
action in regard of business in proper manner. This report mainly focus on the profit & loss
statement, balance sheet, cash glow on monthly and annual basis to analysis acrual position of
business.

INTRODUCTION
Financial management is defined as a procedure of planning, organizing, controlling and
monitoring financial resources with a view of acquire organisational goals & objectives. It is
followed by the business to control all the financial activities like procurement of funds,
accounting, risk assessments, proper utilization of funds and every other things related to money.
In the general manner, financial management is the application of general principles in which
manage all the financial activities in proper manner (Ogiela, 2015). To analysis actual position of
business prepare different types of financial statements like Profit & loss statement, financial
position of statement that present the liquidity position as well as profitability of business. These
statements are presenting to outsider stakeholders after analysis they take decision in regard of
investment in business. If finance are not properly dealt with a business will face barriers that
may have various repercussions on its growth as well as development.
This report based on the case study in which a 60 year old uncle retire from their job and
wants to set up new business of German fine handmade chocolates in different flavours. Before
start his business wants to prepare financial plan where include all the cost of chocolates and
related expenditures. Isaac take chocolates from his friend who lives in Germany at 40%
discounts and cover shipping cost, refrigerator, maintain premium stock in specific room and
many other things. Along with also cover packaging and shipping, credit facility, website
designing and staff members who can conduct operational activities effectively. If necessary,
borrow up extra amount of 80,000 at 7% per annum. To understand actual position of business
prepare defined all the assumptions with proper justification. Additionally, calculate break even
analysis, profit & loss statement, monthly cash flow to analysis all the operational activities, after
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that annual cash flow, critical analysis to determine the attractiveness of new venture. At the end
of the report provide appropriate recommendations in regard of new venture and concluded that.
MAIN BODY
Summary of assumption and estimate analysis with justification
There are defined summary all the assumption in roper manner and estimate about the
different transactions in proper manner which are described below:
 Isaac take chocolates from the friend Alphen Choc an average of 120 Euro (€) per kg and
ready to sell them at a 40% discount to this price (Miotto and Parente, 2015).
 It is estimated that shipping from Alpen Choc by air freight about € 14 on average. These
order are receiving about in two weeks with the preparation and packaging time.
 To maintain minimum stock order on monthly basis to Alphen doc and asure about the
range of supply a suitable range of chocolates to customers.
 To stock all the chocolates purchase a refrigerator at a cost of CAD 15500 to keep in
good conditions. Additionally, take a room on rent at a cost of CAD 3500 per month
(which is payable in advance). Along with also deposit some amount of security deposits
for the rent.
 To sell out the chocolates in Canada use internet facility and design a website and for this
planning require to CAD 8500 with the development of e-commerce websites.
 For the market study spent about CAD 5000 and estimate demand about 750 Kg a month.
Although in the first year sales would start from the 50 Kg in first month before building
up slowly by the year to the full level at the end of a year (Ferguson and Morton-
Huddleston, 2016).
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 As per the analysis it is determined that average selling price in Canada of CAD 160 Kg
in which do not consist of sales tax because it does not influence.
 For the Packaging and shipping in Canada would average CAD 6 per Kg and for this not
charge by the customer.
 All the transactions of sales would be conducted on credit card and for this taking a 1.2%
fee per sale. It is remitting the monthly total to Isaac two weeks after the end of financial
month.
 Isaac believes that to conduct operational activates require two part time students at a
total cost of CAD 2500 per month.
 In future require any additional amount which will available CAD 80000 at 7% per
annum.
 To compute overall activities require to apply marginal tax at 25% payable one year in
arrears.
 To sell out decorated chocolate boxes to friend require to wrapping all the boxes which
cost CAD 8 per box and machine CAD 2200 (Altman, and et. al, 2017).
 The another friend of Isaac give contracts to purchase one hundred chocolate box (each
containing 250 gm of chocolates) from him per month at the price of CAD 45 each.
 For effectively work Isaac add amount of social charges which is CAD 500 per month.
At the end provide justification for all the activities that to ready for financial disaster
require to follow all the activities in systematic manner. So Isaac prepare a financial plan in
which record all the amounts of all the transactions that can be happen in future. Most of the
transactions are based on the assumption because many time actual and standard activities are
not matching with each other.
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