Essays on Business plan (Financial part) Assignment

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FINANCIAL PLAN FINANCIAL PLAN Since the motor industry is a fairly competitive one, the financial plans need to be excellent. With the income and financial statements at their disposal, the managers will make strategic decisions that will be founded on fact since Proforma balance sheets are created by forecasting the individual account balances at a future date and then aggregating them into a financial statement format (Terry 1997). . Account balances are forecasted by identifying the forces that influence them and projecting how the accounts will be influenced in the future by such forces.

Sales, company policy, and restrictive debt covenants are often significant forces needed before developing a financial plan for South Sea engineering Solutions Company. This financial statement and balance sheet will explain why and how the SES Company should project financial statements into the future. Forecasting a firms financial statements can help both financial managers and general managers. Financial statements help the financial manager plan the firms financial needs. With an estimate of future income statement and balance sheet accounts, the consultancy company can tell how much financing might be needed, and when it might be needed (Franklin et al, 2006).

Thus, one purpose of financial plan is to forecast a firms financial statements under some specific conditions. Since total assets must equal the sum of total liabilities and owners equity, any imbalance will require management action. Having forecasted the amount and timing of the imbalance, a financial manager can arrange for financing (such as bank loans or stock offerings) or investment (such as marketable securities) long before the need becomes critical South sea engineering company expects to raise its own capital.

The main sources of capital to set up a technical consultancy company will be; Group savings Severance pay Loan from financial institutions Expenses and Costs: It is expected that £582,654 will be required to set up the technical consultancy firm, and £1032, 300 will be required for development and maintenance for a period of 6 months. We estimated another£ 435,765 will be required to cover another extra month before payment of the first order. In addition, we are likely to experience moderately low price/cost services of which it has to be included in the cost of sales but this will be tracked in the company sales and customer database Revenues: We approximate an added £822,360 from company sale of services in the first half of the financial year.

This is based from previous estimates done by locally focused businesses dealing with motor vehicle components a part from the chassis firewall Break-even Analysis SES company break-even analysis is based on the mean calculated at the end of the first year, for total sales units and for the operating cost.

They are grouped in unit revenue, fixed costs and unit costs. These units are important since they provide conservative assumptions used to estimate risk. Indeed managers ought to approximate future costs, revenues and profits by so doing it will assist them to plan and control future operations of the consultancy firm (Terry 1997). They will apply CVP analysis to determine levels of running the firm in order to avoid loss, gain profit and manager the operation of the hotel. They will also be in a position to evaluate business risk In this case, we shall determine CVP of this hotel business basing on the principal equation Profit= total revenue-less total costs Whereby Total cost= variable costs + fixed costs Break-even Analysis Monthly Revenue Break-even £40,501 Assumptions: Average Percent Variable Cost 4.8% Estimated Monthly Fixed Cost £39,975 As estimated from the cash flow statement, this consultancy firm has a high level of fixed costs, this in turn signify that huge losses are likely to result especially when the revenue is lowered by a huge margin or below the break-even point. The table below shows our break-even analysis.

The table represents extra expenses incurred in the development and maintenance of the technical consultancy firm Projected Cash Flow The company will be in a strong and reliable financial position after 6 months of operation. The net worth of the company is expected to grow as time goes by since the company will pay off debts and other loan facilities it incurred during formation (YOU HAVE ALREADY DONE) Business Ratios The table below represents a number of crucial ratios from the consultancy company. All the ratios are based on the performance of the company over three distinct financial periods (YOU HAVE ALREADY DONE) Financial Risks and Contingencies- Risks and Assumptions The main risk that the consultancy firm is likely to encounter is that clients are more likely to get advisory services from other places, since it is not usual for small consultancy firms to have much information’s about motor vehicles due to dynamism in the field and experience (Franklin et al, 2006).

As motor vehicles and components i. e. chassis advance in specialization, motor vehicle manufactures and car owners may tend to trust dealership more, this will in turn have a negative impact on the performance of the consultancy business.

This is as whole risk to this business, although we have hopes with time we will manage to overcome this risk. Assumptions In case the company is not managed well and clients do not it solutions to problems affecting their motor vehicles in time or the advisory services is infective to the problems, they will tend to assume that the services we provide from our consultancy company are lacking.

Therefore, appropriate strategies should be put in place to ensure that everything is up to the expected standard; this can be achieved if the company invests in doing research in this field, having qualified employees and keeping at par with current technology in the motor vehicle industry Contingency Plan In view of the fact that the integration between the company and the client’s core business will be high, the contingency plan is of huge concern.

If the consultancy services level goes beyond the forecasted levels then it will be advisable to go on with the business since this will be enough evidence that the business is viable REFERANCE S Richard, A.

B, Stewart C. M, & Franklin A. (2006). Principles of finance planning. New York: McGraw-Hill/Irwin. Brian J. Terry (1997). The international handbook of corporate finances. New York: Glenlake Publishing Company.

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