University Financial Analysis: Long Valley Podiatry Case Study Report

This case study presents a comprehensive financial analysis of Long Valley Podiatry Pty Ltd, a business providing medical treatment and services in Bonica. The analysis includes a detailed monthly cash budget, projecting revenues from client sessions and inventory sales, alongside various costs such as labor, sterilization, and fixed expenses. The study computes the breakeven number of client sessions, margin of safety, and the required number of sessions to achieve a target profit, providing critical insights into the business's financial viability. Furthermore, the assignment explores the cost-benefit analysis of different sterilization methods, and presents a revised profit and loss statement reflecting potential operational changes. The case study also addresses the clinic's business plan, including strategies for attracting clients and the importance of financial statements for decision-making, emphasizing the role of breakeven analysis and margin of safety in assessing the business's performance and potential for expansion. The analysis aims to provide a strategic overview of the business's financial health and operational efficiency.

Running head: FINANCIAL ANALYSIS
Financial Analysis
Name of the Student:
Name of the University:
Author’s Note:

1
FINANCIAL ANALYSIS
Table of Contents
Answer to Question 1......................................................................................................................2
Answer to Question 2......................................................................................................................3
Answer to Question 3......................................................................................................................5
Answer to Question 4......................................................................................................................6
Answer to Question 5......................................................................................................................7
Answer to Question 6....................................................................................................................10
Answer to Question 7....................................................................................................................12
Answer to Question 8....................................................................................................................13
Reference.......................................................................................................................................14

2
FINANCIAL ANALYSIS
Answer to Question 1
Monthly Cash Budget
Particulars
Annual
Figures Jan
Fe
b
Ma
r
Ap
r
Ma
y Jun Jul
Au
g
Se
p
Oc
t
No
v
De
c
Revenue from
clients 60800
5,0
67
5,0
67
5,0
67
5,0
67
5,0
67
5,0
67
5,0
67
5,0
67
5,0
67
5,0
67
5,0
67
5,0
67
Revenue from sale
of inventory
No-compression
socks 760 63 63 63 63 63 63 63 63 63 63 63 63
Orthotic sandals 2280
19
0
19
0
19
0
19
0
19
0
19
0
19
0
19
0
19
0
19
0
19
0
19
0
Cost of service and
sales
Labour costs -13680
-
11
40
-
11
40
-
11
40
-
11
40
-
11
40
-
11
40
-
11
40
-
11
40
-
11
40
-
11
40
-
11
40
-
11
40
Sterilisation packs of
equipment -3192
-
26
6
-
26
6
-
26
6
-
26
6
-
26
6
-
26
6
-
26
6
-
26
6
-
26
6
-
26
6
-
26
6
-
26
6
Client consumables -456 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38 -38
No-compression
socks -570
-
47.
5
-
47.
5
-
47.
5
-
47.
5
-
47.
5
-
47.
5
-
47.
5
-
47.
5
-
47.
5
-
47.
5
-
47.
5
-
47.
5
Orthotic sandals -1596
-
13
3
-
13
3
-
13
3
-
13
3
-
13
3
-
13
3
-
13
3
-
13
3
-
13
3
-
13
3
-
13
3
-
13
3
Fixed expenses
Rent expense -9000
-
75
0
-
75
0
-
75
0
-
75
0
-
75
0
-
75
0
-
75
0
-
75
0
-
75
0
-
75
0
-
75
0
-
75
0
Insurance expense -1800
-
15
0
-
15
0
-
15
0
-
15
0
-
15
0
-
15
0
-
15
0
-
15
0
-
15
0
-
15
0
-
15
0
-
15
0
Communications
expense -1440
-
12
0
-
12
0
-
12
0
-
12
0
-
12
0
-
12
0
-
12
0
-
12
0
-
12
0
-
12
0
-
12
0
-
12
0
Office supplies
expense -1080 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90 -90
Professional services
expense -2700
-
22
5
-
22
5
-
22
5
-
22
5
-
22
5
-
22
5
-
22
5
-
22
5
-
22
5
-
22
5
-
22
5
-
22
5

3
FINANCIAL ANALYSIS
Registration
expense -840 -70 -70 -70 -70 -70 -70 -70 -70 -70 -70 -70 -70
Depreciation
expense -3150
-
26
2.5
-
26
2.5
-
26
2.5
-
26
2.5
-
26
2.5
-
26
2.5
-
26
2.5
-
26
2.5
-
26
2.5
-
26
2.5
-
26
2.5
-
26
2.5
Earnings before
interest and
taxation 24336
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
Interest expense 0 0 0 0 0 0 0 0 0 0 0 0 0
Profit before
taxation 24336
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
2,0
28
The above table shows the cash budget which is prepared for the business of Long Valley
Podiatry Pty Ltd so that the management of the company can take its decisions in an appropriate manner
whether they want to make investments in the project or not. The monthly cash budget which is prepared
by the management of the company can effectively help the senior management to take decisions
regarding the expenses and income which can be generated for the business (Baum and Crosby 2014).
All the anticipated for the business is shown in the above table.
Answer to Question 2
The business of Long Valley Podiatry Pty Ltd is based on providing medical treatment
and services to the customers. The main source for the business is through sessions with the
patients and this enables the business to earn appropriate revenue. However, the management of
the company needs to decide how much sales need to be made so that the management of the
company is able to cover the fixed costs and thereby also make profits from long run operations
of the business.
Computation of breakeven number of client session:
Revenue from clients 60800
Less: Variable costs:
Labour costs 13680

4
FINANCIAL ANALYSIS
Sterilisation packs of equipment 3192
Client consumables 456
Total vcariable costs 17328
Contribution margin 43472
Profit volume ratio 71.50%
Total fixed costs 20010
Breakeven revenue from client session 27986.014
Fees per consultation 80
Breakeven no of client session 350
The above table shows the breakeven session which the business needs to achieve so that
the costs are covered and the business can make profits from the operations of the business. The
number of session of client which the business needs to undertake is 350 sessions so that the
costs of the business is covered in an appropriate manner.
Margin of Safety
Profit before tax 24,336
Margin of safety in amount 34,036
Margin of safety in number 425
The Margin of safety which the management of the company would be aiming to reach is
425 sessions for earning estimated profits and continuing the operations of the business. In terms
of amount, the business needs to achieve a figure of $ 34,036 for continuing the operations of the
business and thereby also further expanding the operations of the business.
Requirement of Profit
Total fixed costs 20,010
Target profit 30,000
Total of fixed cost and target profit 50,010
Required number of client session 874

5
FINANCIAL ANALYSIS
The management of the business needs to provide 874 sessions for the purpose of earning
a profits amount of $ 30,000 from the primary activities of the business. The profit can help the
business to further expand the operations and led to development of brand name for the business.
Answer to Question 3
The business of Long Valley Podiatry has two options for sterilisation process for the
purpose of effectively conducting the operations of the business. The management of the
company is trying to take the best decisions so that it can maximise the revenue from operations
and also keep the costs of the business at a minimum level. The options which is available to the
business are the use the sterilisation service provided by RPSS for which the company would be
charging a certain amount of fees. The alternative option which is available to the business of Long
Valley Podiatry is to purchase a steriliser and sets of instruments (Aggarwal and Thakur 2013).
The management of the company needs to apply cost benefit analysis for taking appropriate
decisions regarding which option is to be taken. The option which assist the business to earn
more revenue is to be selected. The analysis for the same is presented in the table presented
below:
Cost of sterilizer $ 10,000.00
Life of the machine (Years) 8
Annual depreciation $ 1,250.00
Annual maintenance costs $ 480.00
Total annual fixed costs $ 1,730.00
Number of clients in one day 12
Total number of customers in a year 4380
Sterilization cost per client $ 0.39
Add: Cost of sterilization pouch $ 0.83
Total cost per client $ 1.23
Sterilization cost charged by RPSS $ 4.20
Number of client session for the breakeven 514

6
FINANCIAL ANALYSIS
The analysis shows that buying the steriliser would be the most viable option for the
management of the company and if the management is able to achieve the costs which is
presented in the table above than the management of the company would be indifferent towards
the situation.. Therefore, the management of the company should purchase the steriliser.
Answer to Question 4
The revised profit and loss statement for the business considering the new processes
which is adopted by the business for the purpose of enhancing the scale of operations is
presented below:
Projected Income Statement
Particulars Amount Amount
Revenue from clients 70,400
Revenue from sale of inventory
No-compression socks 880
Orthotic sandals 2,640
Total Revenue 73,920
Cost of service and sales:
Labour costs (13,680)
Sterilisation packs of equipment (3,192)
Client consumables (456)
No-compression socks (570)
Orthotic sandals (1,596)
Total cost of service and sales (19,494)
Gross Profit 54,426
Fixed expenses:
Rent expense (9,000)
Insurance expense (1,800)
Communications expense (1,440)
Office supplies expense (1,080)
Professional services expense (2,700)
Registration expense (840)
Depreciation expense (3,150)

7
FINANCIAL ANALYSIS
Total fixd costs (20,010)
Earnings before interest and taxation 34,416
Interest expense -
Profit before taxation 34,416
Tax expenses 10,325
Profit after tax 24,091
The projected income statement for the business is shown above in revised conditions
which would help in estimating the revenue and expenses which is related to the business. The
profit figures which is shown in the revised income statement is $ 24,091.
Answer to Question 5
The business of Long Valley Podiatry aims to provide sessions for patients who look for
some treatment. The business would be providing products such as therapeutic footwear which
would be specially focuses on treatment for athletics. The owner of the business Mr Long has
made all the legal presentation so that the business can adhere to all legal regulations and
effectively conduct the operations of the business (Schlegel, Frank and Britzelmaier 2016). The
business would be also looking to attract clients from the valley so that the clinic can gain
recognition in the region in a quick manner. It is imperative that the business attracts more
customers to the business so that the business can generate more revenue from the operations of
the business (Williams and Dobelman 2017). In order to effectively identify the income and
expenses which is related to the business, the management intends to create a projected income
statement so that the management is able to take decisions regarding which activities are
necessary and which can be avoided. The projected income statement for a business can help the
management to take precautions regarding costs which can be avoided. The income statement
which is prepared by the clinic shows the main sources of revenue which the business can
generate and also shows the related expenses for the business (Park and Jang 2013). The

8
FINANCIAL ANALYSIS
projected income statement is prepared by the business so that the level of profits which the
business can earn can be effectively estimated.
The income statement which is prepared by the business shows the main sources of
revenue for the business which is patient revenue, No-compression socks, Orthotic sandals. The
total revenue for the business which is shown in the income statement which is formulated by the
management of the company. The revenue which is generated by the business is shown to be $
73,920 for the period which can be increased as the business gains more recognition in the
market. The business can generate appropriate level of profits on estimation basis for the
operations of the business and thereby can afford to expand the scale of business (Klychova et al.
2015). The analysis of the viability of the project would also be determined with breakeven
analysis for the client sessions. As per the analysis of the business, the clinic needs to provide
350 sessions in order to cover the costs of the business and more sessions are required for
making profits from the operations of the business. Breakeven analysis would allow the
management to estimate the number of sessions required and also have a clear idea of the costs
of the business. It is therefore considered that breakeven analysis is an effective tool for the
purpose of estimating whether the business is viable for operations. The analysis also shows
computation of Margin of Safety which is considered to be important from the perspective of the
management. The margin of safety for the business is the different between actual sales which is
achieved by the business and the breakeven sales of the business (Ihemeje, Okereafor and
Ogungbangbe 2015). The margin of safety for the clinic reflects the overall reduction in revenue
which would result in the business to earn margin of safety. The margin of safety which is
computed is shown to be 425 sessions which needs to be achieved by the business for continuing
the operations. The margin of safety for the clinic in terms of revenue is shown to be $ 34,036.

9
FINANCIAL ANALYSIS
The results of margin of safety should also be considered by the senior officials of the clinic so
that the scale of operations can be decided. The senior officials of the business need to take
decision regarding the level of profit which is considered and on the basis of the same breakeven
analysis can be applied for estimating the number of sessions which the clinic needs to
undertake. The clinic also needs to attract more patients so that the business is able to expand the
number of session which is taken.
The business plan which is formulated by Mr Long also shows that the clinic would be
looking to diversify the activities of the clinic. Besides providing sessions to the patients, the
clinic would also be providing different products which would having a medical origin. The
products would also be contributing to the revenue which the business is able to generate. It is
also anticipated that the business would further diversify the operations in future if the business
proves to be successful (Pearce 2016). The management of the company also intends to
appropriate manage the finances for the business so that the clinic is able to enhance the liquidity
position of the business. The liquidity status of the business would allow the management to
invest in new lines of products and thereby also further expand the operations of the business. In
the quest of expanding the product line of the clinic, Mr Long also needs to keep a check on the
overall liquidity situation for the business. The clinic would be relying on monthly cash budget
to keep a track of cash inflows and outflows of the clinic. In this manner, the owner can maintain
the liquidity status and therefore the business can meet any urgent obligations or undertake any
investments. This is the reason that appropriate investment appraisal techniques need to be
applied and simultaneously the clinic also needs to look for an alternative option so that right
selection can be made.

10
FINANCIAL ANALYSIS
The management of the company can expand the operations and also meet the current
liabilities and obligations of the business in an effective manner. One of the options which is
available to the business for generating revenue is from providing sterilisation services for which
the clinic has two options which needs to be selected. The management of the company would
also be looking to check the viability of the project and therefore would also be applying
investment appraisal techniques so that the business is able to take decision regarding whether to
hire RPPS company for sterilisation services or purchase their own sterilisation kit so that the
operations of the business are well supported. The management of the company would also be
looking to make a selection of the most appropriate technique so that the costs of the business is
reduced. In this manner, the management would also be able to attract more customers in the
services and grow as a business (Adams, Frost and Webber 2013). The decision which is taken
by the owner would also affecting the income statement and therefore the same would be
revising the income statement which is prepared by the clinic and it is also anticipated that the
same would be boasting the profits of the clinic. The analysis will be reflecting whether the
business would be generating profits in the long. The management of the company would be
focusing on enhancing the sales revenue of the business so that the business can achieve growth
and development (Henriques 2013).
The different techniques which is used for checking the overall viability of the clinic,
reveals that the project is viable and the same would be generating appropriate profits in the long
run of the business. Therefore, it is recommended that Mr Long needs to proceed with the clinic
project so that appropriate level of profits can be generated from the operations of the business.
Answer to Question 6
Projected Income Statement
Particulars Amount Amount

11
FINANCIAL ANALYSIS
Revenue from clients 35,200
Revenue from sale of inventory
No-compression socks 880
Orthotic sandals 2,640
Total Revenue 38,720
Cost of service and sales:
Labour costs (6,840)
Sterilisation packs of equipment (1,596)
Client consumables (228)
No-compression socks (285)
Orthotic sandals (798)
Total cost of service and sales (9,747)
Gross Profit 28,973
Fixed expenses:
Rent expense (4,500)
Insurance expense (900)
Communications expense (720)
Office supplies expense (540)
Professional services expense (1,350)
Registration expense (840)
Depreciation expense (1,575)
Total fixd costs (10,425)
Earnings before interest and taxation 18,548
Interest expense -
Profit before taxation 18,548
Tax expenses 5,564
Profit after tax 12,984
Revised Income Statement
Particulars Amount Amount
Revenue from clients 35,200
Revenue from sale achieved from SLOCA 7,200
Revenue from sale of inventory
No-compression socks 880
Orthotic sandals 2,640
Total Revenue 45,920
Cost of service and sales: