Financial Analysis and Recommendations for Hattie's Geodes Business

This report presents a comprehensive financial analysis of Hattie's proposed Geodes business venture. It begins with an introduction outlining the need for a detailed financial assessment to determine the viability of the business plan, focusing on future earnings and profitability. The report includes a summary of key assumptions and estimates, such as funding sources, purchase prices, freight costs, and sales projections, with justifications for each. It delves into profit and loss items, break-even analysis for both internet and cabinet sales, monthly and annual cash flow statements, required capital, sensitivity analysis, and discounted cash flow (DCF) calculations. Financial ratio analysis is performed to interpret the financial results and assess the business's performance. The report concludes with recommendations for Hattie based on the financial analysis and incorporates a critical reflection on the overall project, aiming to provide a comprehensive understanding of the business's potential for success.

Comments Specific to Your Submission
Criteria and Weighting Mark Grade
Assumptions, estimates and sensitivity analysis (25%) 50 12.5
Cash flow and DCF analysis (25%) 50 12.5
Other financial details (35%) 40 14
Critical reflection (10%) 55 5.5
Referencing and presentation (5%) 60 3
Total 44.5%

Grading Policy
PASS FAIL
80%+ (A) 70-79% (A) 60-69% (B) 50-59% (C) 40-49% (D) 30-39% € <30% (F)
Knowledge and Clarity of Reasoning
Exceptionally comprehensive
knowledge base. Ability to
discriminate and justify key
issues and relate them to the
wider context. Lines of
thought are innovative and
transparent and the
arguments are confidently
expressed to develop and
synthesise compelling and
novel conclusions.
Conclusions drawn make a
new contribution to the
knowledge base of the
discipline and there is clear
evidence of originality in the
work innovative thinker.
Excellent, comprehensive
knowledge base. Ability to
discriminate and justify key
issues and relate them to
the wider context. Lines of
thought are transparent
and the arguments are
confidently expressed to
develop and synthesise
compelling conclusions.
Substantial knowledge
base. Ability to discriminate
key issues and establish
some links to the wider
context. Arguments are
confidently expressed
through clear, logical lines
of thought. Conclusions are
firmly articulated,
comprehensive, relevant
and arise directly from the
premised arguments.
Sound knowledge base.
Ability to discriminate
key issues. Arguments
are confidently
expressed through
clear, logical lines of
thought. Conclusions
are firmly articulated,
relevant and arise
directly from the
premised arguments.
Some defended
knowledge of current,
relevant issues. Limited
development of
arguments where lines
of thought are
discernible. Limited
conclusions arising
from premises.
Some evidence of
relevant
knowledge base
but little argument
and lines of
thought are poorly
expressed and
often demonstrate
confused thinking.
Conclusions drawn
but often not
related to
discussion.
Student has
failed to meet
the majority of
the LOs of the
assessment.
Interface between Theory and Practice in the Professional Context
Exceptional critical analysis of
the interface between theory
and practice, which evaluates
and challenges theoretical
adequacy and synthesises the
development of professional
practice. Exceptional
evidence of self
understanding which leads to
creative and novel use of
multiple frameworks for
evaluation and synthesis and
challenges current practice in
the professional context.
Rigorous critical analysis of
the interface between
theory and practice, clearly
elaborated to evaluate
theoretical adequacy and
synthesise the
development of
professional practice.
Excellent, creative use of
multiple frameworks for
evaluation and synthesis of
own stance.
Excellent critical
analysis/evaluation of the
relationship between
theory and practice.
Substantial use of multiple
theoretical frameworks to
evaluate professional
practice with wide ranging
synthesis to show how each
is informing the other.
Clear, critical evaluation of
their usefulness.
Good, critical
analysis/evaluation of
the relationship
between theory and
practice. Some use of
multiple theoretical
frameworks to evaluate
professional practice.
Demonstrable synthesis
to show how each is
informing the other.
Some evaluation of their
usefulness.
Some articulation of
the relationship
between and critical
analysis/evaluation of
the significance of
relevant theory to
specific professional
practice with some
awareness of how each
may be informed by
the other.
Some use of
relevant theory
but lack of
awareness of
relationship to
practice. Little
integration of the
articulation
between theory
and practice.
Student has
failed to meet
the majority of
the LOs of the
assessment.

PASS FAIL
80%+ (A) 70-79% (A) 60-69% (B) 50-59% (C) 40-49% (D) 30-39% € <30% (F)
Use of literature
Exceptional, discerning and
balanced range of key and
peripheral primary and
secondary sources
demonstrating a very high
level of critical evaluation and
synthesis and the ability to
challenge received wisdom in
the subject. Outstanding
evidence of wide reading on
the subject and this is
incorporated into novel
conclusions.
Excellent, wide range of key
and peripheral primary and
secondary sources,
demonstrating critical
evaluation and synthesis
within the professional
context.
Substantial selection of key
primary and secondary
literature sources
demonstrating analysis and
critical evaluation of a wide
range of relevant issues for
the professional context.
Good selection of key
primary literature
sources with critical
evaluation of significant
issues for the
professional context.
Some limited analysis of
related, secondary
material.
Range and choice of
evidence/literature
marginally inadequate.
Some recognition and
critical analysis of
issues of significance
for the professional
context.
Narrow but mainly
relevant selection
of evidence/
literature
demonstrating
some recognition
of significance for
the professional
context.
Student has
failed to meet
the majority of
the LOs of the
assessment.
Organisation of Material
Exceptional clarity of
presentation that
demonstrates ability to
attend to all detailed aspects
of organisation and structure
of discussion and all
supporting evidence. The
work has the qualities
consistent with publishable
material.
Excellent, coherent
organisation and structure
which enhances
comprehension. Excellent
presentation of all material.
Referencing is accurate to a
high degree.
Organisation is
comprehensive and
structure coherent. Well
presented, with
considerable attention to
detail which facilitates
effortless comprehension.
Supporting material is well
presented and ordered
with accurate referencing
and minimal errors of
detail.
Organisation and
structure is coherent.
Well presented,
facilitating
comprehension.
Supporting material is
well presented and
ordered. Accurate
referencing.
Organisation and
structure does not
adequately support the
work. Presentation
includes supporting
material but is
somewhat disorganised
in places. Most
referencing is sound
and appropriate but
limited in scope. For
professional courses
any work which
contains evidence of,
or reference to, unsafe
or dangerous practice
should be deemed a
fail.
Poorly organised,
incoherent
structure. Poor
presentation and
referencing. Little
appropriate
supporting
material given.
Student has
failed to meet
the majority of
the LOs of the
assessment.

Financial analysis of the business of Hattie geodes

Contents
Introduction.................................................................................................................................................1
Summary of assumptions and estimates for analysis including justifications.................................................1
Other Financial Details................................................................................................................................8
Monthly Cash Flow Statement..................................................................................................................11
Forecasted Annual Cash Flow For 3 Years...............................................................................................12
Required Capital To Start The Venture.....................................................................................................14
Sensitivity Analysis...................................................................................................................................15
Discounted cash Flow...............................................................................................................................16
Financial Ratio Analysis...........................................................................................................................18
Interpretation of financial result based on ratio calculation.....................................................................20
Conclusion................................................................................................................................................22
Recommendation.......................................................................................................................................23
Critical Reflection.....................................................................................................................................24
References.................................................................................................................................................25

As a student at the University of Cumbria I uphold and defend academic integrity, academic
rigor and academic liberty as core values of higher learning. I attest, on my word of honour, that
work submitted in my name is my own work, and that any ideas or materials used in support of
this work which are not originally my own are cited and referenced accordingly.

Introduction
Starting a new business require a proper analysis. Thus, financial analysis of the business
plan pertaining to the new venture should be properly analyzed, which assist in determining the
viability of the overall business plan in respect to the future earnings. This business report is
being prepared which analysis the business plan being proposed pertaining to the Geodes
business. It involves the break-even point analysis, preparation of the cash flow statement along
with the other financial statement which is important for the new business venture plan. This will
result in better and effective analysis of the plan developed along with understanding the
viability of the business for the long run is also measured and monitored. Along with this, certain
estimations and assumptions have been made in preparation of the financial statement of the
business. This will help in framing certain recommendations in respect to the business plan based
upon the information provided. At last, the critical reflection of the report is presented which will
be provided to Hattie in order to make the project a success.
Summary of assumptions and estimates for analysis including justifications
Sources of Funding
It is being clear from the case study, that Hattie has already received a lump sum amount
of 450,000 pounds after leaving the company. This amount can be utilized by Hattie pertaining
to the business operation of the Geodes. In terms of requirement of additional funds, Hattie is
willing to take 40,000 pounds as loan at the rate of 7% interest. In addition to this, it is also
assumed that the company can also borrow funds from the capital market pertaining to the
business operation of Geodes. The last option which is available to Hattie is to add partners to
the venture who will bring in their share of capital to the business and will also have a share in
the profits of the company. This will help in decreasing the financial burden of Hattie to a great
extent.
1

Profit and Loss Items
Purchase of Geodes
Hattie will purchase geodes from established supplier in Uruguay Colado Geodes. It will
be purchased at U$ 350/kg and it will receive a discount of 45% on this price. As this in
Uruguayan peso it has to be converted into GBP (Aggelopoulos and Georgopoulos, 2017). The
exchange rate is taken as £1 = U$ 59.15 from London stock exchange. It is expected that in
future, eth exchange rate will decline. On conversion the purchase price will be:
Calculation of purchase price
1 ￡= 59.15
Purchase price /kg of geodes 350/59.15
5.92
Purchase quantity
Based on the sales assumption over the year it is assumed that it will be able to sell the
quantity purchased from the seller. As provided that it will be keeping one-month stock at the
end of month the stock for January next year will also be purchased by them in December.
Total quantity purchased = 5050 + 750 = 5800
Discount
Supplier is also allowing discount of 45% to Hattie on purchase of the geodes/kg. The
discount is calculated as
Purchase price 5.92
Discount of 45% 2.66
Purchase price 3.25
The final purchase price per kg of Geodes for Hattie will be £3.25 and it is calculated after
converting the purchase price.
2

Freight
As it is imported from other country it will have to bear the freight cost of U$ 200. The
goods will be stored for four weeks including packaging (Naoum and Papanastasopoulos, 2020).
The above cost also needs to be converted into GBP on the above exchange rate as:
Freight 200/59.15
3.381
The freight costs are higher than the cost of geodes to Hattie.
Selling price
The selling price for one kg of geodes is kept at £35 including the packaging and
shipping. Selling prices has been kept after making proper analysis of the market demand and
prices. The price is only limited to internet sales. The selling price per cabinet relating to venture
is different which is £45 per cabinet which includes 1.5 kg of geodes. This is being provided to
Ian at discount as selling price of 1.5 kg geodes is 52.5 (35+17.5).
Sales
As provided the demand in 1st month will be 50 kg for year and it will reach the target
level of 750 kg per month by end of December. It is assumed that it will incur marketing and
promotion of the business over internet to increase the sales (Bidabad, 2019). Based on it, the
sales assumption are made for every month for internet sales are as follows.
3

Month Sales (kg)
1 50
2 100
3 250
4 350
5 350
6 400
7 450
8 500
9 550
10 600
11 700
12 750
Total 5050
The sales total amounts to 5050 from internet sales and if it adopts the venture with Ian it
will be able to sell 108 kg more with cabinet sales. That will amount to 108kg for the year. The
total sales in kg are 5158. However, the selling price of both internet and cabinet sales are
different.
4

Break Even Analysis
From the case scenario, it is clear that Hattie will undertake a new venture into the
Geodes which is different from the conventional business. She also plans to sell cabinets for the
Geodes which will be also a part of the business. Thus, the breakeven point analysis (BEP) has
been carried out for both the ventures which Hattie is willing to establish.
Cost Statement
Cost statement
Hattie
Selling price /kg of geodes 35
Variable cost
Geodes 3.25
Freight 3.38
Credit card handling fees 0.54
Packaging and shipping 5.50
Variable cost 12.67
Fixed Cost
Rent 300
Wages 1500
Depreciation (4000+3500 * 10% / 12) 62.5
Total Cost 1862.5
5

Break Even Calculation per kg
Selling Price 35
Variable cost 12.67
Fixed Cost 1862.5
BEP 1862.5 /
(35 – 12.67)
BEP in kgs 83.41
BEP in amount 2919.27
Venture with Ian
Venture with Ian
Selling price per cabinet 45
Variable cost
Geodes 3.25
Freight 3.38
Credit card handling fees 0.54
Packaging and shipping 5.50
Total variable Cost 12.67
6