Financial Foundation for Managers Café+ coffee shop

Question: Describe about Assumptions, Budget and Expected Profit and loss statement for the Cafe+? Answer: 1. Introduction Caf+ will be located charlotte street, Brisbane, Queensland. Coffee shop business is one of the bumming industries in Australia because of the rise in the demand of the quality coffee and gourmet at value price. The caf will be owned by the sole proprietor with several year of experience. The caf + will be open for business from Sunday to Saturday 7-10pm (Augenti, 2010). The caf+ will b serving the various types of coffee, teas along with the pastry, muffins, breads, cookies and rolls. The entire bakery stuff will be supplied daily by the local farmers. Caf+ will have exposure from food to beverages especially in the current locations. Although there are number of Caf house for the present in the Brisbane but lack of quality of coffee and price are some of the major opportunity which helps the business caf+ to grow in the Queensland market (Baligh, 2007). 2. Assumptions Mission To satisfy the customer needs for high quality coffee along with delicious and nutritious meals Excellent service with high degree of unique and fresh products served Comfortable and relaxing environment for relaxing and enjoying the latte and pastries in town. Caf+ will be looking to earn the profit to increase the employee satisfaction while providing stable return. Employees of the Caf+ will be treated fairly with salary and the other major facilities. People of all ages and backgrounds will be welcomed and enjoy the cuppa with family and friends. Objectives To become one of the bets coffee shop in the Brisbane in compare to its competitors. Turn the profit from first month of the operations Achieve the high market share within the 1st Increase the number of the customers by 32% every year Undertaking more aggressive marketing and promotions Improving the cost control by reducing the operational wastage (Barringer, 2010). Maintaining the same price level by creating the unique, upscale, innovative environment that will differentiate from the local coffee houses. The environment will have affordable access to the resources of the internet and other facilities within the caf +. Maintain 45% gross profit every month (Barney, 2009). Key success factors Design of the store will be both visually attractive and designed for the quick operations in order create high brand value. Training given to the employee to ensure the best coffee preparations techniques Marketing strategies aim to build solid base of loyal customers as well as maximizing the sales Varieties of coffee to tea to soft drinks along with free Wi-Fi that is not available with existing competitors (Barrow, 2011). Creation of unique and innovative form of atmosphere which will differentiate Caf+ with others Establish the Caf+ club for socializations and entrainment. Varieties within the gourmet like muffins, Choc lava, to fruit cake and smoothies which will create niche market for the caf+ among the competitors (Clarke, 2010). Assumption The Brisbane market for the coffee shop is been one of the major strength for the business. Most of the population in Brisbane has been habituated to do their breakfast at the coffee shop. The caf+ will be selling the cup of the coffee at value pricing as per the customer orders (Drummond et al. 2012). The caf+ will be selling espresso drinks , brewed coffee and teas as well as some of the major refreshments beverages along with varieties of the gourmet which is not been sold by the other members. The total capital invested for the caf + will be 209,810 that will be break down cost for the monthly expense of 187,300 out of which 22,510 was paid in the advance. One of the major marketing objectives is to maintain the sales of 536,650 for the 1st year and achieve the more than 35% of Brisbane market shares within the 12 months are some of the major marketing objectives for the company. The product will less costly and will be convenient place for the customer to eat healthy and live healthy (Jackson et al. 2008). Some of the other products which are sold by the Caf+ are Green tea, Tulsi tea and cardamom tea along with organic form of gourmet which will be increasing the market share of the company in the current business market. Value propositions Features Benefits Unique Environment of caf + Comfortable and relax along facilities of Wi-Fi Yes Quality of coffee and tea Refreshing and fresh Nm Variety of coffee tea, gourmet and meals Lots of options of the customers No Fresh and organic meals Health and well being Yes Chef High quality meals and espresso and tea Yes Desserts and cakes Complimentary with coffee and meals No 3. Budget ANNUAL SALES FORECAST for Caf+ Sales Forecast AUD $ 2015 AUD $ 2016 AUD $ 2017 Products Coffee beverages 350,400 385,440 423984 Tea and other beverages 87,600 96360 105,966 Gourmet etc 146,000 160,600 176,660 total sales 584,000 642,400 706,610 Direct cost of sales Coffee beverages 87,600 96360 105,996 Tea and other beverages 43,800 48,180 52,998 Pastries 73,000 80,300 88,330 subtotal direct cost 204,400 224,840 247,324 Fixed cost Fixed Cost for Caf + Equipment Amount ($AUD) Espresso Machine 6000 Coffee Maker 900 Coffee Grinder 200 Food service equipment 18000 Storage 3720 Counter Area Equipment 9500 serving Area Equipment 3000 Bookkeeping register 13,750 Office equipment 3600 Miscellaneous Expenses 500 Total usage of the equipment for 300 days (Excluding national holidays) Personnel plan Employees AUD $ 2015 AUD $ 2016 AUD $ 2017 Managers 35000 37800 40824 Employee (3 waiters, 2 dishwashers, 2 security guard 1 book keeper accountants 50,000 (6000*4=24000) (2500*2= 5000) (3000*2=6000) 5000 10,000 54000 58320 Chef 39600 52000 56000 Total people 10 11 13 Total payroll 124,600 143,800 155,144 Note : Working on the 3000 days as per the flexible working timings from (7am to 9pm ) every days ( except on national holidays) Although the managers and owns are experience in the chosen industry but some of the major employee are required which will help to garb the opportunity to manage the caf+ (Kaufman, 2010). Most of the personnel plans are very much required to control and develop the business objectives to achieve. With the help of flexible work timings and changing shift will help the business to manage and control the business (Rhyne, 2009). Market segment Segmentation bases Target customers segment of Fast food industry Geographic Region Queens land, Brisbane Density Rural and Urban (1.23 million) Age All age category Gender Male, females and others Income High ,Low and middle income groups Occupation Employees and professionals Demographic Social status Working class, middle class and higher class Family size Single, nuclear, joint family Psychographic Lifestyle Traditional and moderns Occasions Regular and other Festive seasons Behavioural Benefits Price advantages and diversify products under one roof. Occasions Parties, Birthdays, anniversary and festive season along with normal days Sources of funds From the above, it has been found that, both the partners will be investing 50,0000 each in order to on the business . The rest of $345000 is been arranged by the debt financing. Debt financing is one of the prominent ways of financing the business (Farrell, 2007). However, with large interest rates make it more riskier and dangerous. Apart from that, next options will be equity financing which has been which will not be easily available for the business because of new entrepreneur. It is less risky than the debt but company has to share with profit with the general share holders (Germain et al. 2008). 4. Expected Profit and loss statement for the Caf+ Assumptions Particulars 2015 2016 2017 Current interest rates 10% 10% 10% Long term interest rates 10% 10% 10% Tax rates 25.43% 25% 25.50% Project profit and loss statements Income statement for the Caf+ for the year 2015-17 Particulars AUD $ 2015 AUD $ 2016 AUD $ 2017 Sales 584,000 642,400 706,640 Direct cost (Raw materials and equipments) 204,400 224,840 247,324 Gross profit 379600 417,560 459,316 Expenditure Salary 124600 143,800 155,144 Sales and marketing expenditure 25,800 27,600 31,000 Depreciations 5400 5500 5500 Rent 48400 52800 52800 Lease rent 6000 6000 6000 Maintenance 5840 6424 7066 Phone and register 9000 9500 10000 Total operating expenses 243,730 273,194 290782 PBIT 135,870 273,194 290,782 EBDITA 141,270 1443660 168,534 Interest expense 2821 2326 1618 Tax incurred 33740 35,510 42,424 Net profit 99,308 106530 124,491 Net sales 17% 16.58% 17.62% Sales forecast for the year 2015 Sales month 1 month 2 month 3 month 4 month 5 month 6 month 7 month 8 month 9 month 10 month 11 month 12 Sales Coffee beverages 24000 27000 28800 28800 28800 28800 28800 28800 29400 31200 33000 33000 Tea and other beverages 6000 6750 7200 7200 7200 7200 7200 7200 7350 7800 8250 8250 Gourmet etc 10000 11250 12000 12000 12000 12000 12000 12000 12250 13000 13750 13750 total sales 40000 45000 48000 48000 48000 48000 48000 48000 49000 52000 55000 55000 direct cost Coffee bevergaes 6000 6750 7200 7200 7200 7200 7200 7200 7350 7800 8250 8250 Tea and other beverages 3000 3375 3600 3600 3600 3600 3600 3600 3675 3900 4125 4125 Pastries 5000 5625 6000 6000 6000 6000 6000 6000 6125 6500 6875 6875 subtotal direct cost 14000 15750 16800 16800 16800 16800 16800 16800 17150 18200 19250 19250 Profit and loss statements for the Caf+ Profit and Loss Statement for the year 2015 month 1 month 2 month 3 month 4 month 5 month 6 month 7 month 8 month 9 month 10 month 11 month 12 Sales 40000 45000 48000 48000 48000 48000 48000 48000 49000 52000 55000 55000 Direct cost 14000 15750 16800 16800 16800 16800 16800 16800 17150 18200 19250 19250 Gross profit 26000 29250 31200 31200 31200 31200 31200 31200 31850 33800 35750 35750 Expenditure Salary 10383 10383 10383 10383 10383 10383 10383 10383 10383 10383 10383 10383 Sales and marketing expenditure 2150 2150 2150 2150 2150 2150 2150 2150 2150 2150 2150 2150 Depreciations 450 450 450 450 450 450 450 450 450 450 450 450 Rent 0 4400 4400 4400 4400 4400 4400 4400 4400 4400 4400 4400 Lease rent 500 500 500 500 500 500 500 500 500 500 500 500 Maintenance 400 450 480 480 480 480 480 480 490 520 550 550 Pay roll taxes 1558 1558 1558 1558 1558 1558 1558 1558 1558 1558 1558 1558 Phone and register and WIFI 750 750 750 750 750 750 750 750 750 750 750 750 Total operating expenses 16191 20641 20671 20671 20671 20671 20671 20671 20681 20711 20741 20741 PBIT 9809 8609 10529 10529 10529 10529 10529 10529 11169 13089 15009 15009 EBDITA 10259 9059 10979 10979 10979 10979 10979 10979 11169 13089 15009 15009 Interest expense 248 245 243 241 239 236 234 232 232 229 227 225 Tax incurred 2868 2091 2572 2572 2573 2574 2574 2735 3216 3696 3696 3696 Net profit 6693 6273 7715 7716 7718 7720 7721 7723 8205 9647 11088 11090 Expected cash flow Cash Flow for the year 2015 , Caf+ Particulars month 1 month 2 month 3 month 4 month 5 month 6 month 7 month 8 month 9 month 10 month 11 month 12 cash sales 40000 45000 48000 48000 48000 48000 48000 48000 49000 52000 55000 55000 Sales tax 0 0 0 0 0 0 0 0 0 0 0 0 long term liabilities 0 0 0 0 0 0 0 0 0 0 0 0 total 40000 45000 48000 48000 48000 48000 48000 48000 49000 52000 55000 55000 Cash spending 10383 10383 10383 10383 10383 10383 10383 10383 10383 10383 10383 10383 Bill payments 728 22112 30569 29450 29449 29447 29447 29445 29474 30424 32727 34199 total Spent on operations 11,112 32,496 40228 40952 39834 39832 39830 39829 39857 40808 43110 4458 Repayment of loan 275 275 275 275 275 275 275 275 275 275 275 275 total cash spent 11387 32771 40503 41227 40109 40107 40105 40104 40132 41083 43385 44853 net cash flow 28613 12229 7497 6773 7891 7893 7895 7896 8868 10917 11615 10417 cash balance 95736 107966 115462 122235 130127 138020 145914 153811 162679 173596 185211 195,358 Expected Balance Sheet for Caf+ for 2015 Balance Sheet for Caf + for the Year 2015 Particulars month 1 month 2 month 3 month 4 month 5 month 6 month 7 month 8 month 9 month 10 month 11 month 12 Asset Current Asset cash 95736 107966 15,462 122,235 130,127 138,020 145,914 153,811 162,679 173,596 185,211 195,358 Inventory 15400 17325 18480 18480 18480 18480 18480 18480 18865 20020 21175 21175 total current asset 83150 111136 125291 133942 140,715 148607 156500 164,394 172291 181544 193616 206386 long term asset 59170 59170 59170 59170 59170 59170 59170 59170 59170 59170 59170 59170 depreciation 450 900 1350 1800 2,250 2700 3150 3,600 4050 4500 4950 5400 total long term asset 58720 58270 27820 57370 56920 56470 56020 55570 55120 54670 54220 53770 total asset 169856 183561 191762 198085 205,527 212970 220414 227,861 236664 248,286 260606 270,303 liabilities current Liabilities accounts payables 21118 28825 29587 28469 28465 28464 28462 29335 31586 33092 31974 31974 current borrowing 9725 9450 9175 8900 8625 8350 8075 7800 7525 7250 6975 6700 total current liabilities 30843 38275 38762 37369 37092 36815 36539 36262 36800 38836 40067 38674 long term liabilities 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 paid up capital 140000 140000 140000 140000 140000 140000 140000 140000 140000 140000 140000 140000 earning from selling of ownership -27680 -27680 -27680 -27680 -27680 -27680 -27680 -27680 -27680 -27680 -27680 -27680 Total capital 119013 125286 133000 140717 148435 156154 163876 171599 179804 189450 200538 211628 total liabilities 169856 183561 191762 198085 205527 212970 220414 227861 236664 248286 260606 270303 net worth 119013 125286 133000 140717 148435 156154 163876 171599 179804 189450 200538 211628 Ratios Ratios Profitability ratios month 1 month 2 month 3 month 4 month 5 month 6 month 7 month 8 month 9 month 10 month 11 month 12 Current ratios 2.70 2.90 3.23 3.58 3.79 4.04 4.3 4.53 4.68 4.67 4.83 5.34 Current asset/current Liabilities Gross profit margin ratio 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65 0.65 (gross profit*100)/sales ROA ratio 0.060 0.049 0.057 0.055 0.053 0.052 0.050 0.048 0.047 0.053 0.058 0.056 (EBIT*100)/total asset ROCE 5.51 4.80 4.95 5.30 5.54 5.78 6.03 6.28 6.43 6.39 6.50 6.99 Total asset/current liabilities Expense ratio 0.98 0.9 0.94 0.94 0.94 0.94 0.94 0.94 0.95 0.98 0.98 0.98 (expenditure/revenue) From the above financial feasibility, it has been found that, current ratio for the business is been adequate enough to handle the their operation which is to manage the employee pay roll and the manage the short term purchasing for the company which coffee beans, gourmet raw materials and the various napkins and the utensils for the business (Germain et al. 2008). The Current Ratio and the Quick Ratio (Acid Test) are both very high reflecting the fact that the business has a very strong and positive cash flow. This is due to sales being predominantly cash, whilst purchases are bought on largely on 30 day terms. Liquidity is sound. The current ratio of the company is there has been numerous occasion where the companies are looking to spend on the advertisement which will help the company to gather the large customer base of the Brisbane Australia (Glynett, 2012). After the ROCE of the company is for the first is more than 5 which shows that company has invested in the right areas for the owners of the company. The ROCE depicts the return on capital employed which has been one of the most important parts of the business ratios to understand whether or not company is bale to invest in the right areas (Morris et al. 2011). Apart from that, ROA of the company for the 2015 is very much depicts that company is able to manage and control asset as per the company development. ROA is been one of the major areas for the business which will give an insight for the valuation of asset. Expenditure ratio of the company is very much able to higher which shows that company is able to manage and control the revenue for the company. Besides that, gross profit margin of the company is higher than the expectation which is 0.65 (Godsmark et al. 2009). The ratio for the caf+ shows that company has enough cash and asst to manage its expenditure in the long run for the company. Conclusion From the above, it has been found that, the study, the research project highlights the relationship existent between the business plan and resources. The entire discussion on the selected topic centers round the aspect of understanding of the business and the financial feasibility which will helps to give an insight for whether the company is able to create the profitability with current business trend or not . As observed from the primary research, impact of financial feasibility is no doubt shows the positive aspect for the current business process. The study of the chapter described the response of expected financial plan which helps to gather the information to explain whether t or not the business is profitable . With help of cash flow , it has been found that company has enough cash to maintain the operation of the company. Apart from that, with help of income statement, it shows company ahs to investment 500, 00 of investment which will give the company enough scope to manage and control the expenditure and income. Lastly, balance of the caf+ very much help to understand whether the company is has asst like land and building and the equipment which the company ahs top purchase for the sake of the running the business. With the help of ratio analysis , it has been found that company ROCE is higher rather than what is was expected , therefore the business is very much financially feasible. Lastly, with the help of budgeted financial statements like profit and loss statement and the balance sheet would help to analyses the potential net return on investment of the ownership along with total expenditure. Reference list Books Augenti, L. (2010) How to Start a Home-Based Personal Trainer Business, 4th ed. London: Palgrave Macmillan. Baligh, H. H. (2007) Organization Structures: Theory and Design, Analysis and Prescription, 5th ed. Heidelberg, New York: Springer Verlag. Barney, J. B. 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