Financial Management Report: Analysis of Zachary's Chocolate Business

This report provides a comprehensive financial analysis of Zachary's proposed online chocolate business, covering both retail operations in Belgium and online sales in the USA. It includes a detailed executive summary, introduction, and main body with calculations and interpretations of break-even points for both business locations. The report presents profit and loss statements, and cash flow statements for the first year and subsequent years. It also includes an analysis of the initial investment needed, sensitivity analysis, and financial recommendations to optimize business performance. The report concludes with a financial and critical analysis of the business model.

FINANCIAL MANAGEMENT

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................2
MAIN BODY...................................................................................................................................3
Break even point.....................................................................................................................3
Profit and loss statement.........................................................................................................7
Cash flow statement for first year........................................................................................12
Cash flow statement thereafter.............................................................................................14
Initial amount needed for business.......................................................................................16
Sensitivity analysis...............................................................................................................16
Recommendations................................................................................................................17
Financial analysis.................................................................................................................17
Critical analysis....................................................................................................................19
CONCLUSIONS............................................................................................................................19
REFERENCES..............................................................................................................................20

EXECUTIVE SUMMARY
Managing financial resources in an entity is a main factor which is needed to be considered by the professionals of any entity.
Therefore, In accordance with the operational activities of various industrial units which considers that there will be need of having
appropriate rise in the revenue as well as operational gains. In the present report there will be discussion based on managing the
operational practices of Zachary and the industrial activities. He has proposed to start a venture which will have operations on online
business throughout USA which will sale various flavours of chocolates among consumers. Financial analysis will be made over
proposed transactions, demonstrated as break even analysis, cash flows, income statement and balance sheet. Determination of such
data set will be helpful in accordance with developing the suitable business plan for a corporation. In addition, there will be
suggestions to organisation in terms of deciding the amount of investment which they must make for initiating the business. They
must make fruitful changes in the operations of the entity. There is need to have innovative changes in the operational practices of the
firm
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INTRODUCTION
Assessment of financial requirement of a firm which are required to address loopholes as well as brings the suggestive change
into operations. Thus, analysing such issues which will be effective and helpful as per decisions making. It will enable the
professionals in decision-making and apply various innovative techniques to overcome with operational issues in due period. Zachary
is planning to operate business activities which posses the appropriate changes in operational activities as well as balances financial
activities. They have planned to import chocolates from Brussels and make it sell in USA. Zachary's wife has suggested preparing a
financial plan and analyse ability and efficiency of business in terms of meeting the financial requirements in the right time. In
accordance with the operational needs and financial viabilities of business, it has been considered that there will be successive growth
and development of various techniques which in turn will be effective and attainable as per having appropriate financial details.
Determination of various financial measurements which will be helpful and assistive as per analysing the requirements of business as
per its transactions and analysed outcomes. Objective of business comprised with analysing the financial health as well as ability to
make spending over new market.
Determination of various facts there will be use of several accounting techniques as well as financial analysis which in turn
will be helpful and beneficial for business in terms of improving cost efficiencies in business. Therefore, it is a fruitful appropriate
which in turn will be appropriate as per ascertaining the viabilities as well as efficiency of entity in both segmentation. It can be said
that the online business will be helpful and beneficial in terms of making accurate marketing as well as developing brand image in the
market. Thus, implication of such activities into business operations which will be effective and beneficial as per having appropriate
demands and operations in attaining long-term goals. Operations of business in Belgium as retail business while in USA it only
operates as an online trade. In accordance with making the changes in activities there will be determination of various facts and
figures that will be effective and helpful as per developing the business performance. It comprises of various records of the costs and
relevant charges which in turn will be useful as per making proper control over operations.
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MAIN BODY
Break even point
Analysing the implication of costs will be helpful in terms of retaining the adequate amount of profit to business. Break even
analysis will be assistive and beneficial in terms of analysing the costs implicated in entity over the period (Break even analysis,
2018). Revenue derived from selling the articles on daily, monthly and annually basis will be effective to cover up the costs of
operations. Thus, analysing such factors will be motivating and helpful in encouraging businesses to have appropriate rise in income
level of firm. Improving performance of business in terms of making proper control over operations such as total cost and revenue
earned by professionals (Shanmugam and et. al., 2017). Therefore, it is a fruitful appropriate which in turn will be helpful and
appropriate as per analysing the viabilities as well as efficiency of business in operating in both the segmentations.
It can be said that the online business will be helpful and beneficial in terms of making accurate marketing as well as
developing brand image in the market. Thus, implication of such activities into business operations which will be effective and
beneficial as per having appropriate demands and operations in attaining long-term goals. Therefore, the motive of business is for
making satisfactory development of operations as well as demonstration of various operational needs and gains (Steinbach and et. al.,
2017). It brings the accurate information among professionals of a firm which bounds them in analysing the financial health as well as
managing the business operations in terms of attaining suitable revenue. Balancing the income as well as expenditure of a firm will be
useful in overcoming with financial drawbacks of entity.
Similarity, in relation with Zachary, it can be said that the business is operating over two different locations such as online or
retail businesses. Thus, to manage operations in both areas is quite complex and challenging. There will be variation in type of
expenditures implicates in both business categories. Thus, online business requires costs reduction with the packaging, marketing as
well as distribution of products to end customers (McKenny and et. al., 2017). On the other side, Retail operational unit carries costs
like rent, salaries to employees as well as various premise related costs. Thus, variation in operations and expenses will be overcome
by business professionals as per managing successful sales for long period. Thus, below listed analysis will be helpful and assistive as
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per analysing the Break even points of Both the business as per their selling costs, variable costs as well as fixed expenses incurred
while operating the business.
Belgium retail business:
Break-Even analysis (Belgium)
Particulars Formula Figures (In €)
Selling price per unit 72
Variable cost per unit 12
Contribution per unit
Selling price per unit - variable
cost per unit 60
Fixed cost 45600
BEP (in units) Fixed cost / contribution per unit 760
BEP (in value or monetary terms)
BEP (in units) * selling price per
unit 54720
Units need to sell for attaining desired profit margin
Particulars Formula Figures Figures (In €)
Fixed cost or expenses 45600
Desired profit 5000
Contribution per unit 60
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Number of units required to sell
Fixed cost + desired profit margin /
contribution per unit 843.33
Interpretation: By considering the above analysed Break even analysis which considers selling price of Chocolates i.e., 72
per kilograms and the variable costs as 12/kg. Thus, analysing such requirements will be assistive in terms of analysing contribution
per unit obtained by firm. Deducting variable costs from selling prices bring contribution margin of 60 per kg. On the other side, the
fixed cost of retail business is 45600 which are out of rent payable by a firm in a year. Thus, analysing BEP in unit which insists
outcomes as 54720 per unit while in monetary terms, it brings results as 13680. In relation with such obtained outcomes, it can be said
that firm's BEP point is 54720 units which will bring them the satisfactory revenue in combat with the costs incurred in retail
operations (Gong, Simpson, Koh and Tan, 2018). Therefore, it can be said that if they are making effective control over operations
which will be beneficial in covering with industrial gains and losses in due course. However, in terms of analysing the profit retained
by business as per meeting the expected revenue in the coming period which will be assistive and informative.
USA online business:
Break-Even analysis (USA)
Particulars Formula Figures (in $)
Selling price per unit 65
Variable cost per unit 10.25
Contribution per unit
Selling price per unit -
variable cost per unit 54.75
Fixed cost 183000
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BEP (in units)
Fixed cost / contribution
per unit 3342
BEP (in value or monetary
terms)
BEP (in units) * selling
price per unit 217260.27
Units need to sell for attaining desired profit margin
Particulars Formula Figures (in $)
Fixed cost or expenses 183000
Desired profit 5000
Contribution per unit 54.75
Number of units required to
sell
Fixed cost + desired profit
margin / contribution per
unit 3433.79
Interpretation: analysing the BEP status of USA online business which insists selling price of goods are 65 per lb and
variable cost is 10.25 per lb. Contribution per unit can be demonstrated as 54.7 which is deducting the variable costs from selling
prices. The fixed cost in online business was 183000 on which the BEP in units are 217260.27. The BEP in monetary terms has been
arrived as 217260.27. Moreover, it can be said that there will be an effective rise in income as if Zachary improves the sale of products
in each period around 3342 units. Similarly, there will be productive in terms of enhancing efficiencies of business. To balance gains
and expenditures of firm in due period which will be effective as it meets the targeted goals in a required period. On the other side,
concerning the profit margin of firm which ascertain that there is needed to have effective rise in the productivity as well as revenue
generation of the firm on which they have to meet targeted production level. In accordance with such variation, it can be said that they
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needed to have effective rise in the sales around 3342 units which will be adequate in context with earning favourable revenue and
gains from operation. However, it can be said that there is need to have effective changes into operations which will be assistive as per
making necessary improvements in the revenue gains and operational practices. Suggestion has been made in relation with making
necessary improvements in the productivity as well as marketing of firm which will eventually raise the sales and revenue of entity.
Rising sales of business will have positive impact in improving profitable gains.
Profit and loss statement
Concerning the preparation of various financial statemented in which is an initial requirement of preparing a statement is
income statements for period. It includes all the revenues and expenditures made in business such as in production of other operating
activities. Consideration of such transactions helps in analysing the profitability of firm and the operations made by them (Bell, Dyck
and Neubert, 2017). Determination of effective profits and revenue will be appropriate as per making the suitable gains and revenue
generation from business activities. This statement helps managerial professionals at entity in terms or analysing ability, cost structure
which in context with effective planning and decision making. Revenue generation will be effective to firm in terms of having
appropriate control over expenditures over variable and overheads. It proves managerial professionals in terms of using the alternative
solution as per making necessary improvements in the operational practices. On the other side, in relation with analysing the use of
this statement for shareholder's or other external users which will have positive impacts over the equity capital generation of the firm.
Therefore, they analyse the profitability on which divided payable by firm in respective period. This information appropriated them as
per analysing the outcomes as well as decision making. It will be most helpful and proactive technique in terms of attracting the large
numbers of consumers
An income statement is comprised with various transactions such as revenue generated through selling the article in the
market. The costs of goods sold which includes all production costs such as direct material, labour and production overheads.
Therefore, these together brings the gross profit margin of firm which indicated gains of firm from production. Thereafter, there
will be consideration of all the expenses which are incurred in operational practices (Sroufe, R. and Gopalakrishna-Remani,
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2018). This is the records of all operational activities as well as performance of business in the long term activities which will be
helpful as per inviting the large number of equity holders to make fruitful investments in the firm. Having an appropriate
disclosure of the financials will benefit accounting professionals and auditor to make suitable auditing of the firm. They will
suggest innovative changes which will have positive impacts in rising the revenue of firm. Below listed analysis is based on income
and expenditures of Zachary in first period such as:
Income statement
Particulars Amount (in $)
Revenue 4434500
less: Cost of goods sold 25000
Gross Profit 4409500
Operating expenses
Air fright expenses 1314500
rent 45600
web designing USA 10000
Depreciation on refridgerator 2450
Part time student 1320000
Packaging and Shipping USA 492000
Online credit sale 183000
Interest on borrowings 2800
Beatrice 6600
decorative paper 228000
Assistant for decoration and deliveries 6000
Total operating expenses 3610950
Operating income 798550
less: Tax (30%) 558985
Net income after tax 239565
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after tax investment 244356.3
Net income after interest and tax 483921.3
Interpretation: On the basis of above measurement it can be said that revenue generated from selling the goods and services
in the market have been arrived as 220523 of the first year. This revenue has been derived from sales made in retail operations as well
as online businesses. The costs of production made during the year was 25000. The operating expenses made during the year as air
freight expenses amounted to 1314500, refrigerator as 12250, rent as 45600 etc. therefore, the operating expenses of Zachary is
comparatively higher. Thus, it can be said that there is needed to make effective changes in the operational practices as well as
revenue generation of business. The taxes have been levied over the operating income which is proportionate to 30% and cash interest
is of 2% per annum which will be added in revenues and income generated by firm. Moreover, after analysing such data set it can be
said that managers of firm are needed to make effective changes in the operational activities as well as must make reduction in the
expenses which are affecting revenue generation of business. Thus, in accordance with the outcomes it can be said that Zachary has
income after tax and interest is 483921.3 which is an unfavourable result. Moreover, to reduce the variable costs as well as make
improvements in the revenue generation of firm will have effective rise in the capital gains as well as maintains the profitability of
entity.
After analysing the data set of Zachary it can be said that managerial professionals as well as accounting personnels needed to
have better execution of the financial activities held in the business. They must make fruitful changes in the operations of the entity.
There is need to have innovative changes in the operational practices of the firm. Thus, these are the techniques which will be
provoking as per making suitable operational activities. Mangers are required to concerned about reducing variable and overhead costs
incurred in a period which will improves profitability of business. Controlling costs and expenses incurred in the operations which will
have positive impact in profitability as well as better allocation of capital resources in various activities of business. Improving
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operational practices as well as revenue of firm which will be effective and helpful as per meeting the gains of the firm in the right
time.
Balance sheet:
This financial statement is comprised with all the assets and liabilities of business transit in a period therefore, the
determination of such outcomes will be assistive in terms of managing operations. Zachary will have proper analysis over
short term as well as long term ability of firm. Therefore, this is the main statements which brings the information relevant
with debts, assets as well as capital resources of entity in due course (Susskind, Kacmar and Borchgrevink, 2018). Financial
position reflects the ability of firm in meeting financial drawbacks as well as requirements of funds for operations. Moreover,
it is a summary statement which have summarized information of all data and details relevant with the operations of firm.
Determination of efficiency of venture in meeting the financial requirements as well as managing operations of entity in due
course will be attractive and influential to investors. It will have effective control over financial transactions of the firm in
meeting the revenue requirements as well as profitable gains at the same time. Below listed statement of financial position will
be helpful to Zachary's professionals as they will have appropriate information regarding efficiency, liquidity and solvency of
firm.
Balance sheet
Particulars Details Amount
Assets
Cash 2313750
Inventories 45000
Debtors 249156.3
Total Current assets 2607906.3
Fixed Assets
Building 125000
refrigerator 12250
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