Financial Analysis Report: Profit & Loss and Cash Flow

This report provides a comprehensive financial analysis of two projects, including break-even analysis, profit and loss statements, balance sheets, and cash flow projections. It analyzes the financial performance of each project, considering factors such as sales, variable costs, fixed costs, and operating expenses. The report calculates break-even points, net income, and cash inflows for each project, and also includes a balance sheet analysis. Furthermore, it projects annual cash inflows for five years, calculating net present value to assess the projects' long-term financial viability. The report concludes with recommendations based on the findings, emphasizing the importance of cost reduction or revenue increase for overall financial benefit and highlighting the need for market research and strategic planning.

Develop the Profit and Loss Statement
for the first year of operations

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................3
Break even analysis.........................................................................................................................4
Profit and Loss Statement and Balance Sheet Analyses:.................................................................6
Monthly cash flow for the first year of operation............................................................................9
Projected annual cash inflows for 5 years.......................................................................................9
CONCLUSION AND RECOMMENDATION............................................................................11
REFERENCES..............................................................................................................................12

EXECUTIVE SUMMARY
This report is based on various financial elements such as break even analysis, profit and loss
statement, balance sheet, monthly cash flow and annual cash flows. The case presented shows
that Felix has provided not complete information’s; thus for calculation purpose data is assumed.
The transaction is carried out between two countries; Switzerland and French. Due to different
currencies; foreign currency exchange rate for one CHF is taken as 0.0090 XPF, all the
transactions will be carried out in Swiss France; because Felix is the citizen of Switzerland and
balance sheet and cost of operations has to be calculated for him.

Break even analysis
Project 1
4800 pearl Annually CHF CHF
Selling price per pearl 270 1296000
Less: Variable cost per
pearl:
Packaging and Shipping 15
Purchases 86
Handling fee @ 1.2% per
sale 3.240 105 502512
Contribution per pearl 165 793488
Period cost (Fixed Cost):
Total cost to sales (annual)
@ CHF (3.600/month*2) -
86400
Monitoring fee @
CHF100/month -1200
Rent @ CHF 850/month
-
10200 97800 97800
Net Profit 695688
Working Note:
Handling fee per order (400 pearl at a
time) =
400 Pearl × 270 ×
1.2% 1296
Per Kg Handling fee
= CHF 768/400 Kg =
CAD
1.92/Kg
Break even point (Units) =
Fixed cost/ Contribution per
unit
= CHF 97800/165 per pearl
= 593
Approx. 593 units
Break even point (CHF) = Breakeven point (units) × Sales
price per kg
= 593 × 270 per pearl

= 160036.3636
CHF 160,036
Interpretation: Based on the calculations above; Isaac appears to be opposing a total annual
increase of 695,688 francs. As it all is, its annual net transactions exceed the original investment
purpose yield of 593 units and its equity operations are less than CHF 160,036. If Felix can
understand how to extend his offers above to recover the original point of investment, at that
point he will receive a salary for each additional operation per kg. To manage costs based on
demand; the volume of each application is given as 400 units per month, the number of
applications per year is 12.
Project 2
360 Pendants annually
CHF Per
Pendants CHF
Selling Price 170 61200
Less: Variable Cost
Purchases 86
Drilling cost per set 25
Decoration box set 7.50 42660
Contribution cost /box 51.50
103860.0
0
Period cost (Fixed Cost):
Assistant Expenses Annually @ CHF
350/month 4200 4200
Net Earnings 108060.00
Break even point (Units) =
Fixed cost/ Contribution per
unit
= CHF 4200/51.5 per box
= 81.55
Approx. 81.55 boxes

Break even point (CHF) = Breakeven point (units) × Sales
price per kg
= 81.55 × 170 per box
= 13864.07767
CHF 13,864
Interpretation: Felix will accomplish his goal of not increasing or woe if he deals with 81.55
pearls per year; based on this it can be obtained that generates all contracts of CHF 13,864 over a
year. His salary call through a minimal cost strategy proves it; Isaac generates an annual income
of around 108060 francs. With each expansion in return the first investment point leads to higher
revenue.
Profit and Loss Statement and Balance Sheet Analyses:
Project 1
Income statement for the year ending
Particulars
CHF
(Dr.)
CHF
(Cr.)
Sales 1296000
Less: Cost of Sales:
Purchases (86 × 4800) 412800
Packing & Shipping (15 × 4800) 72000
Freight Charges (16.14 × 4800) 77472
Less: Closing stock (400 × 270) 108000 670272
Gross Profit 625728
Less: Operating expenses
Salary (7200 × 12) 86400
Monitoring charges (100 × 12) 1200
Rent (850 × 12) 10200 97800
Net Income before tax and interest 723528
Less: Interest@7% 5600
Net Income after interest before tax 717928
Less: Tax @ 25% 179482
Net Income after interest and tax 538446

Project 2
Income statement for the year ending
Particulars
CHF
(Dr.)
CHF
(Cr.)
Sales (360 units) 61200
Less: Cost of Sales:
Purchases (86 × 360) 30960
Boxes decorative (7.50 × 360) 2700
*Freight Charges (16.14 × 360) 5810
Less: Closing stock (30 × 109.64) 3289 36181
Gross Profit 25019
Less: Operating expenses
Salary (350 × 12) 4200
4200
Net Income before tax and interest 20819
Less: Interest@7% 5600
Net Income after interest before tax 15219
Balance sheet
Balance sheet as on year
Particulars CHF CHF
ASSETS
Fixed Assets:
Racking and safe 5700
Alarm system 5500 11200
Other Assets:
Miscellaneous Assets:
Website Design 8000
Market Analysis 9000 17000
Current Assets:
Prepaid Rent 850
Prepaid Remitted credit card handling fee 1296
Bank (balancing figure)
175340
2
175554
8

Total Assets
178374
8
EQUITY AND LIABILITIES
EQUITY :
Capital 900000
Add: Retained earnings 803748 170374
8
Non- Current Liability:
Loan from bank @7% 80000
Total Equity and Liabilities 178374
8
Interpretation: Project 1 has a lot to show on the value and risk side; since all exchanges are
continuous, so are allowances for suppliers. It is sole proprietorship; in this regard, no offers will
be made to financial experts. However, when activities are performed, it is considered that some
of the components, such as special lease agreements, current account overdrafts and lenders, may
increase and increase risk-taking.
For project 2 only salary analysis was investigated; based on the fact that everything in the
accounting report is comparable. The compensation or compensation and deficiency claim
reflects a net profit of CHF 15219 during the year.
This is a big future outcome, but this definition has many hidden costs on revenues that need to
be deducted from net income; for example, no sales and transportation costs are present; labor
costs should be incurred in the same way, the costs of caring for the required item and,
ultimately, various daily costs, for example, energy input, transportation costs, oil, network
energy, other employees pay fees, monthly expenses due paid to site servers and so on.

Monthly cash flow for the first year of operation
Project 1:
This project is receiving uneven cash flows during the year, starting month sale is 30 pearls per
month but at the end of the year it will increase to 250 pearl per month, so as an average there
will be 140 pearls sale per month. Calculation of monthly rough cash inflows at 30 pearls per
month:
Sale 30 × 270 = CHF 8100
Less: total variable cost @ 15 per
Unit
15 × 270 = CHF 4050
Less: Monthly rent 850 * 3/4 CHF 637.5
Less: Monthly salary CHF 7200
Cash out for month CHF (3787.5)
Project 2:
This project has regular cash flows which is 360 boxes per month for two years. It will also
support Felix in meeting with irregular cash received from project 1. One box carries only 250
gm chocolates; which is different standard of unit of sale. If needed it should be converted into
pearls for an ease in collaborative income statement. As both the projects are different, it is
suggested that business should calculate cash inflows from each project separately.
Sale 360 × 270 = CHF 97,200
Less: total variable cost @ 8 per box 360 × 32.50
=
CHF 11,700
Less: Monthly rent as per share 850/4 = CHF 212.5
Less: Monthly salary CHF 350
Earning for month CHF 84,837.5
Projected annual cash inflows for 5 years
Project 1
Annual Cash Inflows CHF
Profit after tax 538446
Depreciation on Racking and
safe@10% 570

Preliminary expenses written
off@20% 3400
Recovery of current Assets NA
Cash inflow from operations: 542416
Year
Initial
Investmen
t 900000
Cumulative
cash
inflows
Discounte
d @ 10%
Discounte
d cash
flows NPV
1 542416 542416 0.90 488174
138817
4
2 569537 1111953 0.81 461325 926850
3 598014 1709966 0.73 435952 490898
4 627914 2337881 0.66 411975 78923
5 659310 2997191 0.59 389316 310393
Project 2
Annual Cash Inflows CHF
Profit after tax 15218.8
Depreciation on small drill jig
@10% 55
Preliminary expenses written
off@20% NA
Recovery of current Assets NA
Cash inflow from operations: 15273.8
Year
Initial
Investmen
t 12700
Cumulative
cash
inflows
Discounte
d @ 10%
Discounte
d cash
flows NPV
1 15274 15274 0.90 13746 1046
2 16037 31311 0.81 12990 14037
3 16839 48151 0.73 12276 26313
4 17681 65832 0.66 11601 37913
5 18565 84397 0.59 10963 48876
Interpretation: Both Projects; 1 and 2 together showing positive net present value which shows
that available investment is better option of Felix and also having low risk for him to invest in
both projects together. The basic problem with other project is fixed income with the change in
time. Hence in long run it is suggested that Felix should consider any other alternatives.

CONCLUSION AND RECOMMENDATION
Based on a comprehensive investigation, it is clearly necessary that Felix must act to reduce his
costs or increase corporate revenue to benefit. However, the adoption of 1 offers the opportunity
to expand contract revenue because contract-based operations are in progress. In turn, in order to
expand the contract revenue, Felix needs promotions, advertisements, advertisements and
dynamic analysis through web-based network media that can be done on your own and require
outside or your own staff. This will increase labor costs again; in this way it takes over 2 years to
obtain a large net profit per year. In addition, a risk factor plays an important role in choosing
whether to remove the job or follow it. It is therefore proposed to accept Pearl's proposal,
however, after a specific contract and a firm agreement marked by an appreciation of the
currency trade, a price, a loan purchase and headquarters. At this point, it is strongly advised not
to be challenged much and to conduct a legitimate market study before embarking on a new
pursuit and also make an effort to start a business with a combination of capital financing and
duties.

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