Barclay's Airline Launch: Financial Analysis and Planning Report

This report provides a comprehensive financial analysis of Barclay's proposed airline venture. It begins with an executive summary and introduction, followed by an examination of strategic frameworks such as the Ansoff Matrix and BCG Growth-Share Matrix to justify the launch. The report includes a net present value (NPV) calculation to assess the financial viability of the project. A detailed financial plan is presented, encompassing break-even analysis, projected profit and loss statements, cash flow projections, and a projected balance sheet. Financial ratios are also calculated to evaluate the company's performance. The analysis aims to determine the potential for growth and success of the airline. The conclusion summarizes the key findings and recommendations for Barclay's.

FINANCE IN
MANAGEMENT AND
LEADERSHIP

EXECUTIVE SUMMARY
The below report have evaluated the importance of finance and management in
leadership. From the report, it can be seen that Barclay's new idea of developing its product
market and launch its new Barclay's Airline is most effective in terms of achieving growth and
success. Along with it, the prepared financial plan elaborates in what manner the company can
gradually reach towards required growth in the upcoming year of 2020, 2021, and 2022. It can be
seen that as per its market reach and reputation the new airline business can maximize the
efficiency of the business and can help it to reach new level of growth and development.

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Ansoff Matrix.........................................................................................................................1
BCG Growth-Share Matrix....................................................................................................1
Net present value....................................................................................................................3
Financial Plan.........................................................................................................................4
Break Even Analysis..............................................................................................................5
Projected Profit and Loss........................................................................................................6
Projected Cash Flow...............................................................................................................7
Projected balance sheet:.........................................................................................................9
Financial ratios.....................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
It is one of the most important aspect for a business to have effective financial systems in
place to achieve required set of growth and development. The topic of the report is finance in
leadership in management. The below report identifies the financial plan of a new business
venture. The chosen organisation for the report is Barclay's. The organisation is a British
investment bank and company that provides financial services. It is headquartered in London.
The report is going to explore the Barclays launch of a new product which is Barclay's Airline. It
is going to highlight, the important aspects such as it break even analysis, projection of profit and
loss, projection of cash flow, projection of balance sheet and financial ratios.
MAIN BODY
Ansoff Matrix
Below mentioned are the core strategies which the organization needs to make use of
while launching its airline: Market Development: In development of market, Barclay's can develop its market by
targeting its existing products to new segments of market. It is not possible for the firm to
make use of this strategy because the idea and the product is new. Product development: In this strategy, the organization tends to develop new products
into its existing segments of market. Barclay's in order to launch its airline can make use
of this strategy. Market Penetration: In market penetration, the firm tends to seek or achieve new growth
by selling its existing products in to the current segments of its market in order to
increase the market share. It is not possible for the Barclay's because the product and the
idea is totally new for the firm.
 Diversification: This strategy needs to be used by the Barclay in order to launch and gain
new market reputation while launching its new Airline in the market. In diversification
strategy, the organization grows by diversifying into new businesses from developing
new products and new markets.
BCG Growth-Share Matrix
The BCG Growth-Share matrix is a portfolio planning model which is developed by
Bruce Henderson. The matrix is based on the observation that a company's unit of the business
can be classified into four categories which are based on combinations of market growth and
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market share relative. Below explores is the usage of BCG Matrix in order to identify the reason
Barclay's is seeking to launch its new airline:
(Source: Strategic Management, 2018) Dogs: The category of the dogs have the lowest market share and a very low growth rate
as well. The personal banking service of the Barclays is the one which is most effective
one since past one decade (Bushee and et.al., 2018). The organization is investing huge
sums of money in order to provide its clients with effective personal banking services.
This money which is tied up here is having a very little potential and it is making its
business facing losses. It is important for the business to reach new potential and ensure
that required growth is being achieved. In order to ensure this, Barclay's has decided to
enter into new markets, and this is where it chosen to launch its Airplane airlines. Question Marks: The segment of question mark explores those areas of a business which
grows rapidly and consumes large amounts of cash. Also, they have a low market share
which does not allow them to generate much cash (Whitehead, 2015). The corporate
banking sector of the Barclay's is in this category. The corporate sector of the company is
consuming a large amount of money and is making it difficult for the organization to
ensure required achievement of growth and objectives. In order to ensure this, it is
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Illustration 1: The BCG Growth-Share Matrix

important for the organization to launch its new Airplane airlines to make it possible to
achieve set growth and development (Zin and et.al., 2018). Stars: The star category products generate a large amount of cash because of their strong
market share which is relative but they also consume large amounts of cash. The wealth
management is the part of Barclays which arrive in the star category of the business
(Flower, 2018). It tends to produce and generate large amount of cash because of its
strong market share but it also consumes a large amount of share. It is important for the
organization to maintain an equanimity in order to achieve required growth and
development and ensure products market reach. In order to do this, the company has
decided to grow its products and services on large platforms by launching Airplane
airlines (Widiatama and et.al., 2018).
 Cash Cows: The cash cows of the organization exhibit a return on assets which is greater
than the growth rate of the market. In order to ensure this, it is important for the
organization to have such assets in control. These assets provide the organization with
new growth and development opportunities. Barclay's from the last recession has reduced
its weight age of assets and has suffered from growth aspects. In order to regain its
growth, the organization has ensured that its development goes accordingly, it has
ensured development of Airplane Airlines (Zinovchuk, 2016).
Net present value
Calculation of net present value of the company
Net Present Value Net cash inflow
Discounting
factor @10% Present value
Initial investment £75,000.00
2020 £545,000.00 0.909 £495,454.55
2021 £613,929.00 0.826 £507,379.34
2022 £678,910.13 0.751 £510,075.23
Total present value £1,512,909.11
Less: Initial investment -£75,000.00
Net present value £1,437,909.11
Interpretation
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The net present value is the method used in the financial accounting which helps in
determining the present value of difference between future cash inflows and cash outflows of the
business organisation (Allen, 2016). This technique helps the Barclay’s in analysing the future
value of its own business organisation.
From the above calculation of the net present value of Barclay’s, it can be interpret that
the net present value of factors of the company after completion of 3 years would be
£1,437,909.11. If the business makes an initial investment of £75,000.00, it would gain a
sufficient amount of cash inflow to the business.
Further, the above calculations are also showing that the cash inflow from the investment
made by the Barclay will also help the company in enhancing its cash inflows into the business.
In this regard, from the above calculations it can be analysed that the Barclay is going to be a
profitable company in the near future. The amount of cash inflows from its initial investment will
result in enhancing the amount of cash inflows from the business through which its financial
condition would grow rapidly and would become unable to achieve its business objectives easily
and effectively as well. Financial Plan
In order to enhance the profitability and financial capacity of the business, a financial
plan has been developed. With the help of this financial plan, Barclay would be able to determine
its future positioning.
The financial plan of Barclay includes a break even analysis of the company as to help it
to analyse number of units to be sold by the business in a particulars period as to generate the set
objectives of business. Further, it also includes various budgeted or forecasted financial reports
like cash flow statements, income statements, balance sheet, etc. these reports would provide
information about the future profitability and liquidity of Barclay (McCall, 2018). In addition,
with the help of these statements, the company would also become able to determine the areas
where the funds would be needed to invest and areas from which it could generate the funds as to
maintaining sufficiency of cash in the business.
In this regard, the financial plan will help the Barclay in maintaining efficiency in its
business operations.
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Break Even Analysis
Break even analysis 2020 2021 2022
Fixed cost 6000 6000 6000
variable cost 120 98 125
selling prices 280 280 280
Break even analysis=
Fixed cost/ (Selling price-
variable cost) 37.50 32.97 38.71
Interpretation
Break even analysis can be defined as a financial measure that helps in detecting the
number of goods or services to be sold by the business in order to achieve its goals relating to the
profit earnings of a company. This analysis will help the Barclay’s in determining the minimum
amount of goods and services to be sold by them. This analysis helps the managers in
development of the best marketing and selling strategies for the firm. Through which the
company could achieve its business objectives and goals.
After the evaluations it can be seen as the monthly Break-even analysis of the
organisation is keep increasing. It is allowing the organisation to reach and develop its products
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and services to the required potential and ensure new market reach during its launch of the Air-
plane Airlines. Its variable cost is declining over the year which is showing enhancement of the
efficiency of business that is the main cause of enhancing efficiency of the break even analysis of
business.
Projected Profit and Loss
Net profit/ loss
-100000
0
100000
200000
300000
400000
500000
600000
-60750
425250
480677
532897
Initial investment
2020
2021
2022
The projected profits of the organisation can improve from a low sales percentage in year
one (2020) to a modest sales percentage. In year two (2021), the expected sales are as per the
peak and are at respectable in year three and thereafter as well. In gross number, the organisation
is creating a healthy profit in the second year of its operations.
Forecasted income statement
Particulars
Initial
investment 2020 2021 2022
Sales revenue £560,000.00 £627,200.00 £702,464.00
Less: Cost of goods sold £20,000.00 £20,500.00 £21,012.50
Gross profit £540,000.00 £606,700.00 £681,451.50
Operating expenses
Payroll £- £2,500.00 £2,500.00 £2,500.00
Marketing/Promotion £- £3,000.00 £3,150.00 £3,307.50
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Depreciation £- £1,000.00 £1,025.00 £1,050.63
Rent £- £2,000.00 £2,000.00 £2,000.00
Utilities £- £1,500.00 £1,500.00 £1,500.00
Purchasing crafts £40,000.00 £- £- £-
Equipment £35,000.00 £2,000.00 £- £10,000.00
Insurance £- £1,200.00 £1,218.00 £1,236.27
Payroll Taxes £- £800.00 £828.00 £856.98
Other £- £1,000.00 £1,050.00 £1,102.50
Total operating expenses £75,000.00 £15,000.00 £13,271.00 £23,553.88
Operating profit -£75,000.00 £525,000.00 £593,429.00 £657,897.63
Less: corporate tax @
19% -£14,250.00 £99,750.00 £112,751.51 £125,000.55
Net profit/ loss -£60,750.00 £425,250.00 £480,677.49 £532,897.08
Interpretation
Income statement shows the profitability of business organisation. It includes all the
incomes and expenses incurred by the company while performing its business operations (Mills
2018). The forecasted income statement of the Barclay shows various operating and non
operating expenses that would be incurred by the business in upcoming 3 years.
The forecasted income statement of the Barclay shows information about estimated
operating and non operating incomes and expenses to be incurred by it in the future. With the
help of this forecasting the managers of it would become able to analyse and evaluate each
expense of the firm, detecting the areas at which expenses could be eliminated or reduced
accordingly, and develop their most effective strategies accordingly.
Further, by analysing the above budgeted income statement, it can be interpreted that the
company is going to generate sufficient profits from the business. As it can be seen that the profit
of Barclay would rise yearly, it can be evaluated that it is a profitable company which is going to
enhance its profit margin over the year.
Projected Cash Flow
The cash flows of the business plan tend to flow positively from the infusion which is
initial infusion of the investment that needs to be taken forward. It is going to produce
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continuous cash as long as the target of sales being met. The borrowing is only required if the
seasonal fluctuations occur or if the plans of expansion are accelerated further. It helps the
business to grow and achieve its required growth.
The chart below illustrates the accumulation of first year cash during its formative stage.
Forecasted cash flow statement
Particulars
Initial
investment 2020 2021 2022
Airline services
Number of travelers £2,000.00 £2,240.00 £2,508.80
Average costs £280.00 £280.00 £280.00
Total revenue £560,000.00 £627,200.00 £702,464.00
Total revenue (Cash
inflow) £560,000.00 £627,200.00 £702,464.00
Operating Expenses
Payroll £2,500.00 £2,500.00 £2,500.00
Marketing/Promotion £3,000.00 £3,150.00 £3,307.50
Depreciation £1,000.00 £1,025.00 £1,050.63
Rent £2,000.00 £2,000.00 £2,000.00
Utilities £1,500.00 £1,500.00 £1,500.00
Purchasing crafts £40,000.00 £- £- £-
Equipments £35,000.00 £2,000.00 £- £10,000.00
Insurance £1,200.00 £1,218.00 £1,236.27
Payroll Taxes £800.00 £828.00 £856.98
Other £1,000.00 £1,050.00 £1,102.50
Total operating expenses
(Cash outflows) £75,000.00 £15,000.00 £13,271.00 £23,553.88
Net cash flow -£75,000.00 £545,000.00 £613,929.00 £678,910.13
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Capital invested £250,000.00
Bank loan £400,000.00
opening cash balance £650,000.00 £575,000.00 £1,120,000.00 £1,733,929.00
closing cash balance £575,000.00 £1,120,000.00 £1,733,929.00 £2,412,839.13
Interpretation
Cash flow statement is kind of financial report that shows information relating to areas
showing future cash inflows and outflows of cash and cash equivalents from the business
(Robinson and et.al., 2015). The statement helps in determination of liquidity in the overall
business organisation. Further, forecasted income statements will help the Barclay’s in
determining the future liquidity of it. Maintenance of liquidity is important for enhancing its
capacity in repaying the debts, therefore, it is required by each company to maintain sufficiency
of liquidity in the business.
From the analysis of above budgeted cash flow statement of the Barclay, it can be
analysed that Barclay will invest a sum of £650,000. Company will invest a capital of 250,000
and further will take a bank loan of 400,000 for operating its business. The company will need to
invest in various operating activities like equipment, insurance, rents, etc. for running its normal
course of business activities.
Moreover, the forecasted cash flow statement shows that the net cash flow of business
will raise over the year. It would lead in enhancement of capacity of the business in maintaining
sufficiency of cash and cash equivalents in Barclay’s. It would lead in helping the firm in its
smooth running.
Projected balance sheet:
Foretasted balance sheet
Particulars
Initial
investment 2020 2021 2022
Assets
Current assets
Cash £575,000.00 £5,266,768.13 £613,929.00 £678,910.13
Inventories £5,000.00 £2,657.00 £567,102.00 £784,163.00
Debtors £4,200.00 £4,300.00 £4,400,339.00 £650,067.00
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