Assignment on Financial plan of business

The financial plan include the following

1.      Balance sheet

2.      Income statement

3.      Cash flow

4.      Financial analysis using ratios

5.      Break even analysis

1.      Balance sheet:

Assets= Liabilities +owner’s equity

 Income statement:

Net income=Sales revenue-expenses

Salaries/wages:

Example of expenses: (utilities)

Example of expenses: (Costs of goods sold)

 Statement of Cash Flow:

This is mainly reflecting the ability of the firm to meet its short term liabilities:

Financial Analysis using ratios:

•      Is there a significant difference in my company’s ratio and the industry average?

Ans. the performance of the company is very effective and it generate more revenue as compare to other rations related to industry. So the company is working very effective in the industry sector.

•      If so, what is the difference meaningful?

Ans. yes the difference show that the company performing very well in the market and its itself generate enough revenue to overcome its all expenses.

•      Is the difference good or bad?

Ans. this difference is good because it help in promoting the activities of the company and also handle all the issues in most effective manner.

•      What are the possible causes of this difference?  What is the most likely cause?

Ans. possible causes include more sales, less expenses, less cost of sales and also fewer liabilities.

•      Does this cause require that I take action?

Ans. there is no need to take any additional action because this will promote the functions of the organization and also improving the sales of the company.

•      If so, what action should I take to correct the problem?

Ans. The main problem is the manage it’s all cash flow and also handle the additional in more productive way to utilize its additional revenue.

Break Even Analysis:

To calculate the BEP, you need to follow the following steps:

1.      Determine the expenses the business can expect to incur.

Ans. the current expenses of the company are; wages and salaries, utility bills , depreciation and other general expenses. 

2.      Categorize the expenses in step 1 into fixed expenses and variable expenses.

Ans. fixed expense are wages and salaries and depreciation and its variable expenses are utility bills and other general expenses.

3.      Calculate the ratio of variable expenses to net sales.

Ans.

4.      Compute the breakeven point 

  Breakeven Point (OR) =   Total Fixed Costs  

                                             Contribution margin