MCO07 Financial Management Proof Reading Services

MCO07 Financial Management Proof Reading Services

On the basis of the above assumptions following sales and purchase sheet of the business has been prepared:

(Weston and Brigham, 2015)

The above table explains about the assumptions and estimations which have been made in order to prepare the final financial statement and the other relevant statement to measure the performance of the business.

Break even analysis:

Break even analysis is one of financial tools which is used by the manufacturing or production companies in order to identify the minimum units which must be produced by the business. It explains that how much minim inventory must be produced and sold by the business in order to generate that much amount which could cover the total cost of the business (Lee and Lee, 2006). This analysis makes it easier for the production manager, cost manager and other managers to identify that whether the business should run the operations line or not. If yes, than how many changes are required to be done in order to cover the associated cost and improve the margin of profit of the business. The sales, price, variable cost, contribution marginal and fixed cost are the main components in a business to measure the breakeven point level of the business.

On the basis of the calculations on Benjamin’s business, it has been measured that the business would be operated in the Oslo market where the chocolates would be sold by the business through 2 different sources i.e. through online portal and through direct sell. In case of sale through online portal, it has been found that the selling price per unit of the business is NOK 750 which consist NOK 565.52 variable cost. That leads to the study that the contribution pr margin of the business is NOK 184.48 (Zabarankin, Pavlikov and Uryasev, 2014). Further, the associated foxed cost with the business project is NOK 1,67,200. It explains that the business is required to sell around 906 units in order to generate the revenue which could cover all the expenses and cost of the business. In terms of amount, NOK 6,79,748.48 is required to earn by the business through selling the chocolates in the market. If the more units would be sold by the business than the extra revenue would denote the profit level of the business (Lord, 2007). The evaluation on total sales unit of the business explains that the 2910 kg of chocolates would be sold by the business which is higher than the break even sales of the business.

Further, in case of direct sell to Liv, it has been found that the selling price per unit of the business is NOK 880 which consist NOK 555.52 variable cost. That leads to the study that the contribution pr margin of the business is NOK 324.28. Further, the associated fixed cost with the business project is NOK 103,200. It explains that the business is required to sell around 318 units in order to generate the revenue which could cover all the expenses and cost of the business. In terms of amount, NOK 279,881.66 is required to earn by the business through selling the chocolates in the market. If the more units would be sold by the business than the extra revenue would denote the profit level of the business (Zimmerman and Yahya-Zadeh, 2011). The evaluation on total sales unit of the business explains that the 300 kg of chocolates would be sold by the business which is lower than the break even sales of the business. It explains that this process would lead to the business towards huge loss. However, the business is new and the future demand would decrease the loss position of the business.

(kruth, 2013)

On the basis of the study on both the projects of the business, of the online portal sales would offer huge profit to the business but the direct sell could lead the business towards the losses. However, the business is new and along with the time, the performance of the business would be improved.

 Profit and loss statement:

Profit and loss statement and the analysis is one of financial tools which are used by the companies in order to identify the total revenue and the expenses of the business which has been occurred in the business in a year. Profit and loss statement could be prepared monthly, quarterly, half yearly or annually, on the basis of the demands of the business. It explains that how much profit has been generated by the business. this analysis makes it easier for the top level management of the company to identify that how much profit could be generated by the business on the basis of the deduction of total expenses of the business from the total revenue (Tsanakas and Millossovich, 2016).

In case of Benjamin’s business, the profit and loss statement has been prepared to estimate the total revenue from the online sales and direct sales as well as the total expenses associated with the purchase of the chocolates, packaging, shipping, marketing etc. the calculations on the both kind of sales of the company explains that the sales from online portal and direct sales of the business is NOK 2,182,500 and NOK 2,64,000. It explains that the total sales of the business are NOK 24,46,500 (Moles, Parrino and Kidwekk, 2011).

The total discount received by the business NOK 706,315. It further explains that the gross profit of the business is $ 15,78,226. The total expenses of the business are NOK 3,68,119. It further explains that the net profit before tax of the business is NOK 12,10,108. The taxation rate of the business is 35%. It explains that the net profit after tax NOK 7,86,570. On the basis of the below given table, the profit and loss statement of the business has been estimated:

(Madura, 2014)

Revenues

The revenue of the business has been estimated on the basis of the given case and the assumptions and it has been found that the calculations on the both kind of sales of the company explains that the sales from online portal and direct sales of the business is NOK 2,182,500 and NOK 2,64,000. It explains that the total sales of the business are NOK 24,46,500. The revenue per unit of the company in case of online portal and direct sales are NOK 750 and NOK 880.

Expenditures

Further, the expenses of the business has been estimated on the basis of the given case and the assumptions and it has been found that the calculations on the both kind of sales of the company explains that the total expenses of the business is NOK 3,68,119 while the cost of purchase of the company and the shipping cost of the material of the business is NOK 13,26,629 and NOK 243,960 (Kinsky, 2011). It explains that the total sales of the business are NOK 24,46,500. The revenue per unit of the company in case of online portal and direct sales are NOK 750 and NOK 880. The cost of 2018 has been presented in the below form:

(McCoy et al, 2018)

On the basis of the above graph of 2018 expenses, it has been found that highest share of expenses is hold by the labour expenses. Labour expenses of the business are 57% of the total expenses of the business. Further, 23% of the expenses are hold by the packaging and shipment charges and 14% and 6% are hold by the market study and credit card cost of the business. It explains that if the labour cost of the business could be controlled by the business than the profitability level of the business would be improved more.

Balance sheet:

Balance sheet statement and the analysis is one of the financial tools which are used by the companies in order to identify the total assets, liabilities and equity capital of the business which is managed by the business on a particular date. Statement of financial performance could be prepared monthly, quarterly, half yearly or annually, on the basis of the demands of the business (Krnatz, 2016). It explains that how much resources have been managed by the business. this analysis makes it easier for the top level risk management of the company to identify that how much the company is financial strong as well as it also depicts about the liquidity and financial gearing risk of the business.

The balance sheet of the company explains that no liabilitie are held by the company, the total assets of the business are NOK 775,510 which also depict about the same level of equity of the company.

Monthly cash flow:

Monthly cash flow statement and the analysis is one of financial tools which are used by the companies in order to manage the cash level in the business. Statement of cash flow could be prepared monthly, quarterly, half yearly or annually, on the basis of the demands of the business. It explains that how much cash has been inflow and outflow by the business in a particular time period (Kruth, 2013). This analysis makes it easier for the top level management of the company to identify that how much cash is required for the business and how much could be managed by the company through its operating, financial and investing cash flows of the business.

In case of Benjamin’s business, the cash flow statement has been prepared to estimate the total cash flows of the business from the operating activities, investing activities and the financial activities of the business. The total receipts of the business are different in each of the year. It differs on the basis of the total sales and the other revenue generated by the business (Lumby and Jones, 2007). Further, the total payment done by the business is NOK 302,226. The net receipts of the company are NOK 47,79,119.

The cash flow table of the business explains that the business has introduced NOK 5,00,000 in order to manage the activities and the performance of the business.

(Krantz, M. 2016)

Annual cash flow:

Cash flow is one of the final financial statements of the business which is used to summarize all the cash outflows and cash inflows of the business in a particular time period. Cash flow is also known as statement of changes in the cash position which explains that how much cash has been inflow and outflow in a particular time period in the business. This cash flow statement account offers the idea and information about the ability and inability of the business to generate the cash inflow through managing the expenses and the revenue of the business (Lumby and Jones, 2007).

In case of Benjamin’s business, the cash flow statement has been prepared to estimate the total cash flows of the business from the various activities such as the investment into the PPE, sales, purchase, issue of share etc. on the basis of the cash flow statement, it has been found that the NOK 37,42,622 is the total revenue generated by the business. Further, the total payment done by the business is NOK 23,72,741 (Fulin, 2011). The net receipts of the company are NOK 13,69,880.

The cash flow table of the business explains that the business has introduced NOK 5,00,000 in order to manage the activities and the performance of the business.

(Kaplan and Atkinson, 2015)

Capital required:

It becomes important for an entrepreneur to raise some funds in order to run and manage the business. Capital requirement donates about the total fund which regulates the financial demand of the business (Horngren, 2009). The capital requirement could be analyzed by the business through identifying all the needs and the future perspective of the business. In case of the business, it has been found that the total requirement of the capital in the business is NOK 5,00,000. The below given table express that why the business need this much fund of the business. some of the additional funds are managed by the company in order to meet any sudden needs of the business.

(Higgins, 2012)

The table explains that the capital requirement must be evaluated by the business and must manage in order to improve the performance of the business.

Sensitivity analysis:

A sensitivity analysis is a financial analysis tool which measures the independent variable of the business on the basis of the dependent variable. Sensitivity analysis sets a boundary among the variables in order to measure the changes and the performance of the business (Hillier, Grinblatt and Titman, 2011). For instance, the sensitivity analysis has been performed on the basis of the various dependent and independent variables of the business. the below given tables present about the sensitivity analysis of the business.

(Elton, Gruber, Brown and Goetzmann, 2009)

The above calculation explains that the NPV position of the company would be different in all the situations i.e. Optimistic, expected and pessimistic, the 10% increment and 10% decrement in the dependent variables of the business could affect the NPV level of the business at huge.

Undertake the venture:

On the basis of the above study, it has been found that the business of Benjamin is quite sound. If the Benjamin would invest into the chocolate business than he would be able o make huge profit from the business. The sales of the business would be rise at great level as well as the profitability level of the business would also be improved. The business would be able to meet all the demands of the Benjamin related to the funds and management of the time (Gapenski, 2008). The study explains that the investment is lesser in the business and the revenues are higher.

Conclusion and recommendation:

To conclude, the business explains that the business is worth investing, the online portal of the business is quite impressive to manage and sell the chocolate boxes of the business. Further, it has been found that the market sales of the business would be improves much aong with the time. In case of direct sales, it has been found that the few changes are required to be done by the business in order to meet the break even point of the business so that the cost of the business could be covered. The company has enough funds to run and manage the business. No extra funds are required by the business to run the activities and operations of the business.

Reflection:

Through conducting the study on this business appear, i have got to know about various new financial concepts and their application in a real life situation. The various studies on the different financial statement made it easy for me to identify the different accounting and financial concepts and make a decision on the basis of those concepts. I have found through the case study that the business is worth investing, the online portal of the business is quite impressive to manage and sell the chocolate boxes of the business. Further, it has been found that the market sales of the business would be improves much along with the time. In case of direct sales, it has been found that the few changes are required to be done by the business in order to meet the breakeven point of the business so that the cost of the business could be covered. The few changes into the business could lead it towards the heights and thus it is recommended to the Benjamin to invest into the business.

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