University Business Plan: Financial Analysis of Camera Production

This report presents a comprehensive business plan for a camera production venture, focusing on the financial aspects of the business. It begins with an executive summary outlining the objectives and assumptions made to prepare projected financial statements, including the income statement a...Read More

Running head: BUSINESS PLAN
BUSINESS PLAN
Name of the University
Name of the student
Author notes

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Executive summary
The aim of the report is to make an assessment of the business of camera production that are
used to detect reckless drivers. The report contains a detail of the various assumptions that the
partners of the business wants to make to prepare the projected income statement, cash flows
and assess the financial viability of the business.

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Table of Contents
Introduction................................................................................................................................2
Finance plan...............................................................................................................................3
Conclusion..................................................................................................................................7
References..................................................................................................................................8
Appendix..................................................................................................................................10

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Introduction
The main objective of the business is to produce cameras which will be used to detect
reckless drivers. The main source of the funds of the business will be equity and the partners
will give away 20% of the profit to the investors and the rest of the profit percentage will be
shared among the five partners of the business. the main motive of the business is to
maximise the value of the shareholders. From the forecasted balance sheet and the income
statement it will be possible to evaluate the future prospect of the business and to set the
strategy that will enable the business to achieve sustainable growth.
Finance plan
Capital requirement and funding proposal
Finance is required to operate the business
To operate the business more than $500000 will be required which can be raised from
equity funding. In the initial stage the business does not want to raise any fund from the debt
market as the partners does not have, he confidence in the initial stage to payback the debt. At
the initial stage it is better to raise fund from equity as the obligation to repay the fund is not
there in case of equity funding. In case of equity funding the only obligation is that the
partners have to share their profit percentage in case the business makes profit. the partners
have decided to contribute 20% of the total investment individually which results into 100000
each for five partners (Shirai and Amano 2017).
In the future to meet the working capital requirement the company will require some
more fund which it can generate either by taking loan from financial institutions or by taking
the assistance from external investors (Greene and Hopp 2017).
Current financial position

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Financial forecasts and assumptions
The main objective of the business is to produce high quality of camera and there by
increase its reputation in the market. in order to maximise the wealth of the shareholders the
business is not only looking to increase the profit margin but also wants to give emphasis on
increasing the sales gradually, reducing the stock level to the minimum point, increasing the
net worth which will increase the earning brand reputation of the business (Rahman Zaman
and Afroz 2017). the following assumptions has been considered while preparing the
forecasted financial statements:
The projected growth rate for sales is fixed at 20% on yearly basis with the target to
take the volume of sales beyond half a million within a period of 5 years and to increase the
sales further to one million within the 8th year of operation (Vítková Chovancová and Veselý
2017).
It is estimated that the business will be able to keep the stock in hand period within 60
days which will make it possible for the company to continuously purchase new inventory to
satisfy the demand of the customers. In addition to that the low inventory turnover period will
assist in negotiating the price of the raw materials with the suppliers and also to reduce the
holding costs (Robins 2017).
It is estimated that the working capital cycle period should not exceed more than 45
days to ensure that the operating efficiency can be maintained properly.
It is predicted that the net profit margin should be between the range of 5% to 10%
which will be increased gradually for the first three years of operation which will help the
business to give more importance to the production process and increase the quality of the

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products. This will also encourage the business to adopt aggressive marketing strategy and
increase the customer base in the starting period of its operation (Aithal 2017).
The assumptions that are made during the first three years of the projection summary are
stated below:
It has been predicted that on an average basis 30 cameras can be sold with an average
price of $3000 on monthly basis and if it can be done then the average yearly sales will be
$1080000 on the first year of operation which will be enough to increase the profitability of
the business in the initial stage (Andjelic and Vesic 2017).
For the second and third years of sales it can be assumed that the profit margin will be
20% and that is estimated on the basis of the customised articles and customised articles
offering.
It is estimated that the cost of goods sold and the selling and distribution expenses
will be 55% and 2.50% of the total revenue earned during the last three financial years.
In order to keep the calculation simple and easy to evaluate the estimated figures the
tax rate is considered to be 30%.
Cash flow projection
The projected cash flow of the first three years of operations has been made. It is
estimated that the sales revenue at the first year of operation will be 1080000 and it will grow
at a rate of 20% annually. In the second and third year of operation the amount of sales will
be $1296000 and in the third year the sales amount will be $1555200. From the sales revenue
the variable expenses, selling and distribution expenses and the income tax expenses are
deducted to calculate the cash generated from the operations. The variable expenses will

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grow at 55% on yearly basis, in the first year the expected variable cost will 594000 which
will increase to 712800 in the second year and in the third year the amount of variable
expenses will be $85536. Similarly, the selling and distribution expenses will grow at a rate
of 2.50. it is assumed that the rate of income tax will be 30%. From the assessment it can be
observed that in the first three years of operations the business will be able to generate cash
inflow from the operation. In the first year the cash generated from the operation will be
321300 which will increase to 385860 in the second year of operation and in the third year of
operation the amount generated from the operation is projected to be $462672 (Stewart
2017).
From the cash flow analysis it is observed that the net present value of the business is
$391798 which is positive and based on that assumption it can be said that the business will
be able to provide good return to the investors and the positive NPV reflects that the project
will be financially viable. This also indicates that the business will be able to provide
sustainable growth in the future also (Abdullahi et al 2017).
Projected profit and loss statement
From the projected profit and loss statement it can be possible to analyse the future
prospect of the business and the return that the business will fetch to the investors and the
partners. In the first year the expected sales are $1080000 and by following the estimated
growth rate of 20% in the fourth year the business will be able to achieve a turnover of
$2009736 (Hagedorn and Pinkwart 2016).
From the sales the operating expenses will be deducted to get the amount of before
tax profit of the business. From the projected profit and loss statement it is observed that in
the fourth year of operation the projected profit will be $854138.00. this indicates that the

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business will be able to continue to achieve its projected growth rate even at the fourth year
of operations. The amount of profit at the end of the fourth year is $854138. From the before
tax profit it is essential to deduct income tax at a rate of 30% from which the after-tax profit
available to the shareholders can be assessed. This is the actual amount that the partners will
get and from this profit the external investors will get their rate of return. the expected gross
profit margin is 45.00%., the operating profit margin is 42.50% and the net profit margin is
29.75%. from this analysis it can be said that the business will be able to achieve sustainable
growth in the future.
Exit strategy
The organisation is thinking to approach to external investors to meet the additional
requirement of working capital. It is estimated with the expansion of the business the partners
may require more funds and, in that case, they have to approach to external investors who
will give their fund and as a compensation they will expect a return for their investments. The
investors expect that they will get a higher return on their invested amount and that will
encourage them to invest more fund in the business. The business does not have any
obligation top repay the invested amount of the investors and in case the business suffers loss
the investors also have to incur such loss as in that case the business will not be able to
provide high return and the investors will lose their fund and the value of the value of their
wealth (Okamoto et al 2017).
The investors want to know that in case of liquidity how they will get their money
back and what will be their ROI at the time of liquidation. In response to that the partners
take the strategy to give away 50% of the invested amount to the investors with the projected
ROI of 42.34%.

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Conclusion
From the above analysis it can be said that the business has the potential to grow in
the future and the investors will get a good return by investing in the business. From the
projected financial statements it can be possible to evaluate the value of the business and on
the basis of these forecasted figures it can be assumed that the investors will be able to
increase the value of their wealth in the future by investing in this business.

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References
Abdullahi, S.R., Bello, S., Mukhtar, I.S. and Musa, M.H., 2017. Cost-Volume-Profit Analysis
as a Management Tool for Decision Making In Small Business Enterprise within Bayero
University, Kano. Iosr Journal Of Business And Management (Iosr-Jbm), 19(2), pp.40-45.
Aithal, P.S., 2017. ABCD Analysis as Research Methodology in Company Case
Studies. International Journal of Management, Technology, and Social Sciences
(IJMTS), 2(2), pp.40-54.
Aithal, P.S., 2017. Company Analysis–The Beginning Step for Scholarly
Research. International Journal of Case Studies in Business, IT and Education
(IJCSBE), 1(1), pp.1-18.
Andjelic, S. and Vesic, T., 2017. The importance of financial analysis for business decision
making. In Book of proceedings from Sixth International Scientific Conference Employment,
Education and Entrepreneurship (pp. 9-25).
Greene, F.J. and Hopp, C., 2017. Are formal planners more likely to achieve new venture
viability? A counterfactual model and analysis. Strategic Entrepreneurship Journal, 11(1),
pp.36-60.
Hagedorn, A. and Pinkwart, A., 2016. The financing process of equity-based crowdfunding:
An empirical analysis. In Crowdfunding in Europe (pp. 71-85). Springer, Cham.
Okamoto, Y., Watanabe, T., Utsumi, M. and Terashita, M., Hitachi Ltd, 2016. Electric power
business profit and loss calculation system and electric power business profit and loss
calculation method. U.S. Patent Application 15/175,083.

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Rahman, M.M., Zaman, M.U. and Afroz, S., 2017. Evaluating the Financial Performance
Through ‘Consumer Centric Decision’Approach in Pharmaceutical Companies of
Bangladesh: a Business Planning Perspective. European Journal of Economics and Business
Studies, 9(1).
Robins, N., 2017, April. State aid assessments in the aviation and ports sectors: The role for
economic and financial analysis. In ERA Forum (Vol. 18, No. 1, pp. 121-138). Springer
Berlin Heidelberg.
Shirai, K. and Amano, Y., 2017. Profit and Loss Analysis on a Production Business using
Lead Time Function. International journal of innovative computing, information & control:
IJICIC, 13(1), pp.183-200.
Stewart, K.E., 2017. The Business of Dentistry: A Financial Plan.
Vítková, E., Chovancová, J. and Veselý, D., 2017. Value Driver and Its Impact on
Operational Profit in Construction Company. Procedia computer science, 121, pp.364-369.

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Appendix

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