Financial Report on Smart Nutrition Clinic

        In today’s business landscape, financial planning is essential while starting up a new business or introducing a new product in the market. Financial planning cover breakeven-analysis, risk factor, financial statements, financial ratios, and financial projection for future. In this present work financial plan is developed for Smart Nutrition Clinic. Financial budget set out for this budget is AED 700,000 that is invested by owners and 50% is supported by bank loan on 10% interest rate. Financial plan will discuss all-important information in detail to provide a complete overview of Smart Nutrition clinic financial condition.

Company Overview of Smart Nutrition Clinic

        Smart Nutrition Clinic business will operate using smart platform rather than human inter-personal face to face interaction. Owners will execute Business operations in the targeted market by providing their customers an opportunity to visit a smart platform to get information regarding nutrition and dietitian. In the beginning, company will recruit only 1 employee to perform all duties including managerial task, social media marketing tasks, IT specialist tasks, nutrition specialist tasks, and other work duties. Company will start operations by purchasing required assets such as smart equipment for body measurement, decorative equipment, and smart system for databases.

Financial Details of Smart Nutrition Clinic

        Financial analysis section include important financial information about current and future financial position and profitability of the company. In this section, income statement, balance sheet, cash flow statement, and financial projection are presented.

Income Statement of Smart Nutrition Clinic

Income statement represents the first 3 years of the company. See the presented below statement.

Smart Nutrition Clinic

Projected Income Statements

Sales YEAR1 YEAR2 YEAR3 TOTAL

Total Sales 720,000 720,000 720,000 2,160,000

Cost of Sales

Cost of Goods Sold (GHQ SHARE 50%) 360,000 360,000 360,000 1,080,000

GROSS PROFIT 360,000 360,000 360,000 1,080,000

Gross Profit MARGIN % 50.0% 50.0% 50.0% 50.0%

Operating Expenses

Government fees 15,000 0 0 15,000

SALARIES & WAGES 58,000 48,000 48,000 154,000

TRAVEL EXP. 0 0 0 0

Professional Fees 0 0 0 0

Miscellaneous 150 100 100 350

OTHERS 0 0 0 0

EXP.1 Electricity and Water 24,000 24,000 24,000 72,000

EXP.2 Rent 100,000 100,000 100,000 300,000

EXP.3 Maintenance 60,000 60,000 60,000 180,000

EXP.4 0 0 0 0

Depreciation 50,000 50,110 50,202 150,312

Total Operating Expenses 307,150 282,210 282,302 871,662

Operating Income 52,850 77,790 77,698 208,338

Bank Charge/Interest 41,194 26,497 19,927 87,617

Tax 10,570 15,558 15,540 41,668

Net Income 22,226 66,851 73,311 162,388

Net INCOME Margin % 3.1% 9.3% 10.2% 7.5%

        Total sales AED 720,000 is calculated by multiplying total volume with selling price. Cost of Goods sold (CGS) is calculated as 50% of the total sales outcomes in fiscal year. While gross margin is calculated by subtracting the cost from sales (AED 360, 000). During three years company will have to pay at least AED 528,624 tax on their operating income. Tax is calculated by using 20% tax rate on income. Moreover, salaries & wages will remain same in these years as company will not increase number of employee from 1. Professional fee 15,000 is to be paid only in first year while starting business. Depreciation of assets is as 50000, 50110, and 50202 during three year with depreciation rate of 20%.

Cash Flow Statement of Smart Nutrition Clinic

        Cash flow statement has three main sections that covers information about cash flow from investing, cash flow from financing, and cash flow from operations (Tulsian, 2002). See the presented below statement.

Smart Nutrition Clinic

CAPITAL EXPENDITURE & OPERATION EXPENSES

Pre Start-up YEAR1 YEAR2 YEAR3

OPENING CASH BALANCE 700,000 360,250 414,862 412,865

REVENUE 720,000 720,000 720,000

COSG 360,000 360,000 360,000

EXTRA RQRD. MONEY 10,000 10,000 70,000

CAPEX

Smart Equipment 150,000 0 250 0

Smart Database System 50,000 360

Decorative Equipment 50,000 0 300 100

PLANT 2 0

OTHER ASSET 0 0 0 0

Total Asset Expenditure 250,000 0 550 460

OPEX

Government fees 15,000 0 0 0

SALARIES & WAGES 10,000 48,000 48,000 48,000

TRAVEL EXP. 0 0 0 0

Professional Fees 0 0 0

Miscellaneous 0 150 100 100

OTHERS 0 0 0 0

EXP.1 Electricity and Water 6,000 18,000 24,000 24,000

EXP.2 Rent 50,000 50,000 100,000 100,000

EXP.3 Maintenance 0 60,000 60,000 60,000

EXP.4 0 0 0 0

Depreciation (GOES DIRECTLY TO IS) 0 50,000 50,110 50,202

Bank Charge/Interest 8,750 32,444 26,497 19,927

TOTAL Operating Expenses 89,750 258,594 308,707 302,229

LOAN REPAYMENTS 0 56,794 62,741 69,311

CLOSING CASH BALANCE 360,250 414,862 412,865 470,865

In this statement cash in-flow is calculated by adding up all financial funding, bank loan, capital investment, and other cash inflows during these fiscal years (Loughran, 2011). While cash-outflows are calculated by adding up operating expense (e.g. salaries, electricity expense, and rent expense), financial expense (interest on loan), and asset expense (depreciation). At the end total closing cash balance of 360250, 414862, and 412865 are calculated by subtracting all cash-outflows from cash in-flows.

Balance Sheet of Smart Nutrition Clinic

        Balance Sheet of Smart Nutrition clinic provide overview about financial position of the company at the end of fiscal year (starting from 1st January and ending at 31st of December).

Smart Nutrition Clinic

Balance Sheet YEAR1 YEAR2 YEAR3

ASSETS

Current Assets

Cash 414,862 412,865 470,865

Accounts Receivable 360,000 360,000 360,000

Inventory 5,000 6000 6,500

Advance payments 0 0 0

Total Current Assets 779,862 778,865 837,365

Long Terms / Fixed Assets

Smart Equipment 150,000 150,250 150,250

Smart Database System 50,000 50,000 50,360

Decorative Equipment 50,000 50,300 50,400

PLANT 2 0 0 0

OTHER ASSET 500 500 500

Total Fixed Assets 250,500 251,050 251,510

COMULATIVE DEPRECIATION -50,000 -100,110 -150,312

Intangible Assets

Patents / Trademarks / Copyrights 15,000 15,000 15,000

Goodwill 0 0 0

Total Intangible Assets 15,000 15,000 15,00

TOTAL ASSETS 995,362 944,805 953,563

LIABILITIES

Current Liabilities

Accounts Payable 100,000 200,000 250,000

Wages/Payroll Expenses/Commissions Payable 48,000 48,000 48,000

Current Short Term Debt 100,000 100,000 100,000

Other 80,000 0 0

Total Current Liabilities 328,000 348,000 398,000

Long Term Liabilities

Long Term Debt 293,206 230,465 161,155

Other 0 0 0

Total Long Term Liabilities 293,206 230,465 161,155

Total Liabilities 621,206 578,465 559,155

OWNERS EQUITY

Owner's Equity 360,000 370,000 440,000

Retained Earnings 22,226 89,078 162,388

Less:  Owner's Draws/DIVIDENDS 0 0 0

Total Equity 382,226 459,078 602,388

TOTAL LIABILITIES AND EQUITY 1,003,432 1,037,543 1,161,543

        Cash amount is taken from closing cash balance of previous years. While accounts receivables 360000, 360000, and 360000 are the 50% of credit sales. Company did not make any unearned revenue transaction therefore advanced payments are kept 0. Other assets includes stationary and some hardware related equipment in the clinic that worth only 500 during these years. Intangible assets of license 15000 will remain same over the selected time duration.

Future Projection of Smart Nutrition Clinic

        The following table represent revenue projection in the up-coming 3 years. According to this expected sales (volume) is multiplied by the selling price of 250. It is expected that each customer will visit at least once a week thus in a month total visit will be 4. In case, company get 60 customer in first year than Expected sales is (calculated by 250*(48 per year visits * 60 total customer in a year).

Volume =customer visit per year*total customers in a year

=48*60=2880

revenue=volume*selling price

=2880 *250=720,000

Smart Nutrition Clinic

Revenue Projections of Smart Nutrition Clinic

YEAR1 YEAR2 YEAR3 Total

COSG % 50%

PRODUCT 1

NAME: Weight Measurement for Diet

Volume 2,880.00 2,880.00 2,880.00 8,640.00

Selling price 250 250 250 250

Cost Of Goods Sold 360,000 360,000 360,000 1,080,000

Sales 720,000 720,000 720,000 2,160,000

Cost Of Goods Sold 360,000 360,000 360,000 1,080,000

Gross profit 360,000 360,000 360,000 1,080,000

Ratio Analysis of Smart Nutrition Clinic

        According to the ratios analysis we can say that company will perform well with this financial position of sale, cost, cash, current assets, and liabilities. Gross profit margin and net income margin are also greater than the required percentages therefore we can conclude that cost estimations are appropriate for Smart Nutrition Clinic. Interest coverage ratio is less than 3 in first 2 years that is not appropriate. Somehow, in third year company will get better interest coverage ratio as it will exceed 3.

Recommendations of Smart Nutrition Clinic

        Current situation of business operations indicate that company is hardly managing its expenses and costs. Company need to increase their total number of clients each year in order to maximize profitability of the company in these fiscal years. Particularly, company should emphasis on current asset and current liabilities management to ensure capacity of paying liabilities and obligations.

Conclusion on Smart Nutrition Clinic

        Summarizing all we can say that the new business of Smart Nutrition Clinic will outperform in the market as financial analysis of future financial position and financial ratio are just according to the requirements. Positive gross margin and net income present strength towards managing cost and expense incurred by the smart clinic during the fiscal year. Moreover, financial statements balance sheet and cash flow statements represents the projected next three year financial position on the basis of given information about the company.

References of Smart Nutrition Clinic

Loughran, M. (2011). Financial Accounting For Dummies. John Wiley & Sons. Retrieved 2019

Tulsian, P. C. (2002). Financial Accounting. Pearson Education India. Retrieved 2019