Please only do the parts:3. Executive Summary4. Main Report5. Critical ReflectionThe rest, I can...

Question

Please only do the parts:3. Executive Summary4. Main Report5. Critical Reflection
The rest, I can handle.
thanks!

UCBS7037 Financial Management Assessment University of Cumbria and Robert Kennedy College General Instructions – Please read carefully University of Cumbria, Financial Management Interim Assignment and Final Assessment 1. You are required to complete the assessment outlined below and submit your completed final document through the RKC Online Campus by the end of Unit 6. Your grade will be based 100% on this final document, to which you will also receive written feedback. 2. In addition you must upload part of the analysis for the above document by the end of Unit 3 (see Interim Assignment at the end of this document for more details). This draft will not be graded, but it is an important way of monitoring your progress, and you will receive feedback with respect to the topic covered in the interim assignment. 3. Please ask any questions about the interim assignment or final assessment in the Forum. 4. Note that this is a fictional case focused on understanding management accounting; you are not expected to comment in any way on aspects such as the market feasibility or the actual rates of tax in Switzerland. Financial Management - Final Assessment You have been asked by your 59 year old father-in-law Felix to help him assess a new venture. It is Friday night, and he needs the work finished by Sunday, in preparation for an early Monday morning meeting, so you know that he will not be able to give you any more information than he already has (and you will be unable to contact him over the weekend), and therefore you should rely on your own assumptions and estimates for some of the analysis if necessary. Felix, who was educated in London, now lives in Zurich, Switzerland, and recently took early retirement (from a chocolate firm he joined 25 years ago), leaving the company with a lump sum (after tax) payment of CHF 900,000. Surprisingly, rather than being depressed by his new state of independence, he is excitedly contemplating a new career as a retailer of natural pearls. He is confident that he can set up a business to import pearls from Tahiti and sell them in Zurich. His wife, who he met at business school, is pleased with his passion for this possible new venture but concerned that it might turn into a financial disaster. She has suggested that he develop a financial plan to evaluate the venture and its viability. After a couple of hours with Felix you have assembled the following information from him: - Orohena Pearls (owned by a business school roommate of Felix), an established supplier of Tahitian Pearls, located close to Pape’ete in Tahiti, is prepared to give him exclusive rights to sell their products in Switzerland for a six-year period in exchange for an upfront payment for those rights; - Single, undrilled, pearls sell in Tahiti for an average of 14,800 XPF each and Orohena Pearls (OP) is prepared to sell them to Felix at a 35% discount to this price (XPF is the international code for CFP francs the currency used in Tahiti and other parts of French Polynesia) - OP would ship to Felix on receipt of payment for each order; - Felix has found out that air freight (including insurance) from OP via courier would cost on average XPF 1,800 per pearl, and that the time from him placing an order to receiving the goods in Zurich would be three weeks (including the preparation and packing time in Tahiti); he would also have to pay the courier cost to OP on ordering; - Felix plans to order from OP monthly and intends to maintain a minimum stock of four weeks’ worth of sales to ensure that he will be able to supply a suitable range of pearls to customers; - He will buy racking and a special safe at a total cost of CHF 5,700 to store the pearls, and has found a small commercial room nearby that he can rent for CHF 850 per month, payable monthly in advance, plus a security deposit of three month’s rent (refundable in full if there is no damage to the premises); - He will also install an alarm system at an initial cost of CHF 5,500, plus a CHF 100 per month monitoring fee; - Felix will sell the pearls by internet only, and is planning to spend CHF 8,000 with a website designer to develop the site; - He has already spent CHF 9,000 on a market study that told him that once established, demand would be about 250 pearls per month, although in the first year sales would start at only 30 in the first month before building up slowly to the full level at the end of the first year, after which they would remain constant; - The above study assumed an average selling price in Switzerland of CHF 270 per pearl (ignore any impact of VAT/sales taxes in your calculations); - Packaging and shipping within Switzerland would average CHF 15 per pearl, and Felix is not currently intending to charge that to the customer; - All internet sales would be by credit card, with the credit card company taking 1.2% per sale and remitting the total monthly to Felix fifteen days after the end of each calendar month; - Felix believes that two students could run the operation part time at a total monthly cost to him (including employer’s social charges) of CHF 3,600 each; - Felix believes that if necessary he could borrow up to an additional CHF 75,000 at 6% p.a.; - The effective overall marginal tax rate on profit from a company set up to undertake this activity would be 40%, payable one year in arrears; Felix has also told you that he can invest any available cash at an after tax 4% per annum. Felix also has a friend, Paula, who owns two jewellery shops in the Zurich area. Paula is interested in the venture and has agreed that if Felix can incorporate the pearls into pendants, she would give him a one year contract to purchase 30 pendants per month. She would pay Felix CHF 170 cash for each pendant (to be paid on delivery to Paula), and these sales would be in addition to the internet sales outlined above (and would start immediately). To do this Felix would need to purchase a small drill and jig (costing CHF 550) to hold the pearl while drilling, as well as silver chains and clasps at a cost of CHF 25 per set, plus CHF 7.50 for a presentation box for the pendant. He would also hire an assistant specifically to make and deliver the pendants at an additional cost of CHF 350 per month. Felix remembers lectures on discounted cash flow analysis at business school (although he admits that he does not remember them well, unlike his wife who was a distinction student). He has asked you to prepare a financial analysis while he is away to help him with the decision, making clear any assumptions that you make; the analysis should not exceed 25 pages (everything included), and should include: - A summary of all assumptions and estimates that you have made for your analysis, including justifications where appropriate; - A break even analysis; - A Profit and Loss Statement for the first year of operations and Balance Sheet at the end of the first year; - Monthly cash flow for the first year of operation; - Annual cash flow for each further year; - A clear explanation, in plain English, of how much cash the venture will need to get started; - Any sensitivity analysis that you think would be helpful; - The most that Felix could offer OP as an upfront fee for the exclusive rights for the six year period (which does not include any pearl purchases) which would leave him no better or worse off than if he had not undertaken the venture, and the amount you suggest he should actually offer them; - Conclusions and recommendations; - A critical reflection of the method you have chosen to decide whether the venture is attractive or not, and what, if anything, you would do differently in any future financial analysis of this type, and why? Felix has explained that he is going to be out of town for a wedding so will be unable to provide any assistance at all, but as he pointed out before leaving “you will find this easy with computers and the internet to help”. Your report should demonstrate skills of critical reflection, effective communication and balanced judgement; note that this is not a market report. Scripts that are excessively long (i.e. exceeding the page limit) will not be read beyond the point of the limit; there is no minimum word limit. Do not put your name on the paper. The overall structure (within the 25 page limit as above) should be as follows: 1. Cover Page (1 page) 2. Table of Contents/List of Exhibits (1 page) 3. Executive Summary 4. Main Report 5. Critical Reflection 5. List of References. The data in your answer should be clearly laid out in tabular format so that your approach and answer are both plainly evident. Submissions should be machine readable in MS-Word format only; submit only one file, and include any Excel analysis as images, not embedded files. - Assumptions, estimates and sensitivity analysis: 25% - Cash flow and financial viability analysis: 25% - Other financial details (P&L Statement, Balance Sheet, break even, etc): 35% - Critical reflection: 10% - Referencing and presentation: 5% Interim Assignment The Interim Assignment is to develop the Profit and Loss Statement for the first year of operations, which you will see is also part of the required content of your final assessment paper. You should clearly explain any assumptions in this P&L Statement and you may, if you wish, make any changes to that P&L Statement for your subsequent Unit 6 final assessment submission. The Interim Assignment is not graded but you will receive feedback on it. Criteria and Weighting

fm-finalassessment-b-2-rgoypvds.pdf

Tanmoy · Accepted Answer

Executive Summary
In this case study we will discuss on the new business which will be initiate by Felix provided that he has the retirement fund which will act as the compensation during his employment in the chocolate factory. Therefore, with this fund Felix can invest in the new pearl business. But there is need for investment in every business activity. For Felix he needs to strategies actions which will enable him to become a prudent and profitable pearl retailer. Felix must give a name to his pearl business as well as get it registered as per the Companies Act. This will help the organization to become legalized and enable him to transact good and services with the suppliers and the customers without any hazards. For the registration of the business and to make it legalized there will be some expenditure which needs to be incurred by Felix. Apart from that there will be expenses which will be incurred for purchasing the pearls from the suppliers. There will also be costs incurred for importation of pearls from Tahiti to Zurich. There will be costs related to purchase of pearls, also there must be quality checking for the pearls by experts which is another expenditure for Felix. He must list down all the above costs which need to be incurred during the setup of the business. Also, Felix must check if the quality of pearls is commensurate with the price at which it is bought. Felix must conduct all these tasks objectively and must provide reasonable contingency which are commensurate with the price fluctuations in the pearl industry. As per the estimation it was observed that Felix business was a profitable one and will be able to generate huge profits in the long run. As per the budgeted cash flow statement it was observed that Felix’s business can generate positive cash flows from the second month onwards. In the first month the business will incur losses as it is new and the business will grow as well as generate positive cash inflow gradually. On the other hand, he can also invest in Orohena Pearl which is his friend’s business. In this case he cannot invest entire retirement fund which is 900000 CHF instead needs to invest 884995 CHF after deduction of the cash shortage. 	 
Main Reports
Assumptions & Estimates:
	Table 1: Summary of Assumptions and Estimates and Other Financial Details
	Retirement Payment
	9,00,000
	CHF
	CHF/CFP francs Exchange Rate
	110.52
	CFP Franc
	Per Pearl Price in Tahiti
	14800
	XPF per pearl
	Discount offered to Saad
	35%
	
	Air Freight (including insurance)
	1800
	XPF per pearl
	Weight Per Pearl
	6.4
	KG
	Total Weight of each order
	1600
	
	Courier Cost
	
	
	FedEx Economy (3 Weeks)
	12569.78
	CHF per 1600 KG
	Racking and Special Safe Cost
	5700
	CHF
	Small Commercial Room Rent
	850
	CHF per month
	Security Deposit
	2550
	
	Alarm System Cost
	5500
	CHF
	Alarm System Monitoring Cost
	100
	CHF per month
	Website Development Cost
	8000
	CHF
	Estimated Demand Per Month
	250
	
	First Month Starting Demand (assuming January)
	30
	
	Demand growth each month equal to the difference of 250 and 30 pearls over 11 months
	
	
	Selling Price per Pearl
	270
	CHF
	Packaging and Shipping within Switzerland
	15
	CHF per pearl
	Credit Card Company Charges
	1.20%
	per sale
	Two Student Salaries
	3600
	CHF each
	Maximum Borrowing
	75000
	CHF at 6%
	Marginal Tax Rate
	40%
	in arrears
	Available Cash Investment
	4%
	per annum
	Straight Line Depreciation method will be used to compute Depreciation Charges for NCAs
	
	
	Paula Contract:
	
	
	Demand of Pendants
	30
	per month
	Price per Pendant
	170
	CHF per pendant
	Drill and Jig Cost
	550
	CHF
	Silver Chains and Clasps
	25
	CHF per set
	Presentation Box
	7.5
	CHF per pendant
	Assistant Salary for Pendant Delivery
	350
	CHF per month
Break-even Analysis:
	Table 4: BREAK EVEN ANALYSIS
	Selling price per pearl
	270 CHF
	Variable Costs per Pearl
	
	Air Freight (including insurance)
	16 CHF
	Packaging and Shipping within Switzerland
	15 CHF
	Credit Card Company Charges
	3 CHF
	Presentation Box
	8 CHF
	Total VC per pearl
	42 CHF
	Contribution margin per unit
	228 CHF
	CM %
	84.43%
	
	
	Fixed Costs
	
	FedEx Economy (3 Weeks)
	12,570 CHF
	Small Commercial Room Rent
	850 CHF
	Alarm System Monitoring Cost
	100 CHF
	Two Student Salaries
	3,600 CHF
	Assistant Salary for Pendant Delivery
	350 CHF
	Total Fixed Costs
	17,470 CHF
	
	
	Breakeven Point in Pearls (per month)
	77
	Breakeven Revenue in Pearls (per month)
	20,690 CHF
	Breakeven Point in Pearls (Annual)
	920
	Breakeven Revenue in Pearls (Annual)
	2,48,284 CHF
Breakeven Analysis:
As per the information provided by Felix it is observed that he will be operating two business activities at a time. This will consist of the pearl business and the other selling pendants to his jeweller friend Paula. Since breakeven analysis is the standard method of evaluation of a problem, thus for this purpose there is two separate break-even analysis made (W. Ken Farr and Wesley N. Musser, 1984). 
In this case the variable cost of pearl per unit is 42 CHF and consists of Air Freight (including insurance); Packaging and Shipping within Switzerland; Credit Card Company Charges; Presentation Box. The contribution margin per unit determines how a specific product contributes towards the overall profit of the company. In this case it is Sales – Variable Costs = Contribution margin per unit. The total fixed costs are 17470 CHF. The break-even points in pearls are derived by dividing Total fixed costs ÷ Contribution margin per unit. The break-even revenue is achieved at 20690 which is calculated by multiplying selling price per pearl with breakeven points in pearls per month. Finally, if Felix’s pearl business operates like this then the breakeven point in pearl annually is 920 units and the revenue from pearls annually will be 248284 CHF. 
Profit & Loss statement:
There has been various expenditure included in the P/L account and is assumed to be most relevant to the business operations which is undertaken by Felix. The tax rate is at 40% and is as per the rate applicable in Switzerland. As per the P/L A/c it can be stated that the demand of pearls will increase rapidly in the initial months i.e., 66.67% in February onwards and will gradually lower to 8.70% in December. While estimating the P/L A/c we have also considered the depreciation and amortization amount which is a part of the operating expenses and are 150 CHF and 1019 CHF respectively. The monthly net income of Felix’s business is expected to rise gradually from a mere 1874 CHF in January to 12617 CHF in December. Hence the total net income of the business will be 72134 CHF. The net income amount is expected to enhance the business of Felix on a year-on-year basis. 
	Table 2: Profit and Loss Statement (CHF)
	
	January
	February
	March
	April
	May
	June
	July
	August
	September
	October
	November
	December
	Year 1 (2021)
	Demand of Pearls
	30
	50
	70
	90
	110
	130
	150
	170
	190
	210
	230
	250
	1680
	Demand Growth Rate
	
	66.67%
	40.00%
	28.57%
	22.22%
	18.18%
	15.38%
	13.33%
	11.76%
	10.53%
	9.52%
	8.70%
	
	Selling Price per Pearl
	270 CHF
	270 CHF
	270 CHF
	270 CHF
	270 CHF
	270 CHF
	270 CHF
	270 CHF
	270 CHF
	270 CHF
	270 CHF
	270 CHF
	270 CHF
	Sales Revenue
	8,100 CHF
	13,500 CHF
	18,900 CHF
	24,300 CHF
	29,700 CHF
	35,100 CHF
	40,500 CHF
	45,900 CHF
	51,300 CHF
	56,700 CHF
	62,100 CHF
	67,500 CHF
	4,53,600 CHF
	Other Revenue (Pendants)
	5,100 CHF
	5,100 CHF
	5,100 CHF
	5,100 CHF
	5,100 CHF
	5,100 CHF
	5,100 CHF
	5,100 CHF
	5,100 CHF
	5,100 CHF
	5,100 CHF
	5,100 CHF
	61,200 CHF
	Total Revenue
	13,200 CHF
	18,600 CHF
	24,000 CHF
	29,400 CHF
	34,800 CHF
	40,200 CHF
	45,600 CHF
	51,000 CHF
	56,400 CHF
	61,800 CHF
	67,200 CHF
	72,600 CHF
	5,14,800 CHF
	COGs
	2,611 CHF
	4,352 CHF
	6,093 CHF
	7,834 CHF
	9,575 CHF
	11,316 CHF
	13,056 CHF
	14,797 CHF
	16,538 CHF
	18,279 CHF
	20,020 CHF
	21,761 CHF
	1,46,232 CHF
	Gross Profit
	10,589 CHF
	14,248 CHF
	17,907 CHF
	21,566 CHF
	25,225 CHF
	28,884 CHF
	32,544 CHF
	36,203 CHF
	39,862 CHF
	43,521 CHF
	47,180 CHF
	50,839 CHF
	3,68,568 CHF
	Less: Operating Expenses
	
	
	
	
	
	
	
	
	
	
	
	
	
	Air Freight (including insurance)
	489 CHF
	814 CHF
	1,140 CHF
	1,466 CHF
	1,792 CHF
	2,117 CHF
	2,443 CHF
	2,769 CHF
	3,094 CHF
	3,420 CHF
	3,746 CHF
	4,072 CHF
	27,362 CHF
	Courier Expense
	1,508 CHF
	2,514 CHF
	3,520 CHF
	4,525 CHF
	5,531 CHF
	6,536 CHF
	7,542 CHF
	8,547 CHF
	9,553 CHF
	10,559 CHF
	11,564 CHF
	12,570 CHF
	84,469 CHF
	Rental Expense
	850 CHF
	850 CHF
	850 CHF
	850 CHF
	850 CHF
	850 CHF
	850 CHF
	850 CHF
	850 CHF
	850 CHF
	850 CHF
	850 CHF
	10,200 CHF
	Alarm System Monitoring Cost
	100 CHF
	100 CHF
	100 CHF
	100 CHF
	100 CHF
	100 CHF
	100 CHF
	100 CHF
	100 CHF
	100 CHF
	100 CHF
	100 CHF
	1,200 CHF
	Packaging and Shipping within Switzerland
	450 CHF
	750 CHF
	1,050 CHF
	1,350 CHF
	1,650 CHF
	1,950 CHF
	2,250 CHF
	2,550 CHF
	2,850 CHF
	3,150 CHF
	3,450 CHF
	3,750 CHF
	25,200 CHF
	Credit Card Company Charges
	97 CHF
	162 CHF
	227 CHF
	292 CHF
	356 CHF
	421 CHF
	486 CHF
	551 CHF
	616 CHF
	680 CHF
	745 CHF
	810 CHF
	5,443 CHF
	Two Student Salaries
	7,200 CHF
	7,200 CHF
	7,200 CHF
	7,200 CHF
	7,200 CHF
	7,200 CHF
	7,200 CHF
	7,200 CHF
	7,200 CHF
	7,200 CHF
	7,200 CHF
	7,200 CHF
	86,400 CHF
	Silver Chains and Clasps per Set
	25 CHF
	25 CHF
	25 CHF
	25 CHF
	25 CHF
	25 CHF
	25 CHF
	25 CHF
	25 CHF
	25 CHF
	25 CHF
	25 CHF
	300 CHF
	Assistant Salary for Pendant Delivery
	350 CHF
	350 CHF
	350 CHF
	350 CHF
	350 CHF
	350 CHF
	350 CHF
	350 CHF
	350 CHF
	350 CHF
	350 CHF
	350 CHF
	4,200 CHF
	Presentation Box Charges
	225 CHF
	225 CHF
	225 CHF
	225 CHF
	225 CHF
	225 CHF
	225 CHF
	225 CHF
	225 CHF
	225 CHF
	225 CHF
	225 CHF
	2,700 CHF
	Depreciation
	150 CHF
	150 CHF
	150 CHF
	150 CHF
	150 CHF
	150 CHF
	150 CHF
	150 CHF
	150 CHF
	150 CHF
	150 CHF
	150 CHF
	1,795 CHF
	Amortization of Development Costs
	1,019 CHF
	1,019 CHF
	1,019 CHF
	1,019 CHF
	1,019 CHF
	1,019 CHF
	1,019 CHF
	1,019 CHF
	1,019 CHF
	1,019 CHF
	1,019 CHF
	1,019 CHF
	12,222 CHF
	Total Operating Expenses
	12,462 CHF
	14,158 CHF
	15,855 CHF
	17,551 CHF
	19,247 CHF
	20,943 CHF
	22,639 CHF
	24,335 CHF
	26,031 CHF
	27,727 CHF
	29,423 CHF
	31,120 CHF
	2,61,491 CHF
	Profit before Taxation
	-       1,874 CHF
	89 CHF
	2,052 CHF
	4,015 CHF
	5,979 CHF
	7,942 CHF
	9,905 CHF
	11,868 CHF
	13,831 CHF
	15,794 CHF
	17,757 CHF
	19,720 CHF
	1,07,077 CHF
	Taxation
	-   CHF
	-          749 CHF
	36 CHF
	821 CHF
	1,606 CHF
	2,391 CHF
	3,177 CHF
	3,962 CHF
	4,747 CHF
	5,532 CHF
	6,317 CHF
	7,103 CHF
	34,943 CHF
	Net Income
	-       1,874 CHF
	839 CHF
	2,017 CHF
	3,195 CHF
	4,372 CHF
	5,550 CHF
	6,728 CHF
	7,906 CHF
	9,084 CHF
	10,261 CHF
	11,439 CHF
	12,617 CHF
	72,134 CHF
Balance Sheet:
The balance sheet of Felix business has been prepared in consideration with the Generally Accepted Accounting Principal (GAAP). There are additional charges which are mainly in the form of bad debts and due to changes in the cost, inflation rate and fluctuations which are mentioned in the calculation. The loss from the business and other expenditures are considered as outstanding in the liability section of the balance sheet (Linthicum et al., 2017). 
	Table 3: Balance Sheet Year 1 End (CHF) - 2021
	Non-Current Assets
	
	Racking and Special Safe (after depreciation)
	5,225 CHF
	Alarm System (after depreciation)
	5,042 CHF
	Website Development Cost (intangible asset after amortization)
	73,333 CHF
	Drill and Jig (after depreciation)
	504 CHF
	
	
	Current Assets
	
	Cash
	9,00,000 CHF
	
	
	Total Assets
	9,84,104 CHF
	
	
	Non-Current Liabilities
	
	Borrowings
	75,000 CHF
	
	
	Current Liabilities
	-   CHF
	
	
	Total Liabilities
	75,000 CHF
	
	
	Equity
	
	Equity Capital (Balancing Figure)
	8,36,970 CHF
	Retained Earnings
	72,

UCBS7037 Financial Management Assessment University of Cumbria and Robert Kennedy College General Instructions – Please read carefully University of Cumbria, Financial Management Interim Assignment...

Answer To: UCBS7037 Financial Management Assessment University of Cumbria and Robert Kennedy College General...

Answer To This Question Is Available To Download

Related Questions & Answers