BSBFIM801 Accounting And Financial Management For Transportation Services

Answer:

Introduction

The organisation provides services related to manufacture packing materials and provide third party logistics services across Australia. The company will produce high quality packing material for “variety of food, beverage, pharmaceutical, medical-device, home and personal-care and other products”. Some of the main third-party logistics functions performed by the company includes “cross docking, Transportation services, Cross-docking, Inventory management, Packaging and different types of freight forwarding services and warehousing” (Evans 2015).

Part 1:

Start-up Requirements
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	Start-up Expenses
	Fixed Costs	Particulars	Amount ($)
		Premises (RENT & RATES)	$12,000
		Staff Expenses	$8,500
		Accountant Fees	$15,000
		Payroll Tax	$15,200
		Occupancy and equipment expenses	$4,200
		Advertising, marketing and loyalty	$1,139
		Postage & Telephone	$12,500
		Transaction Processing and market data	$1,475
		Fees and Commissions	$186
		Interest on loan 10%	$2,100
		Information technology and service expense	$1,941
		Preliminary expenses	$2,000
		Lease payments	$12,000
		Total Fixed Costs	$88,241
	Average Monthly Costs
		Rent	$1,000
		Lease payments	$1,000
		Interest on loan 3%	$175
		Postage & Telephone	$1,041.67
		Fees and Commissions	$16
		Staff Expenses	$708
		Total Average Monthly Costs	$3,941
		x Number of Months:	12
		Total Monthly Costs	$47,286
	Total Start-up Expenses	$135,527

	Start-up Assets
	Owner Funding
		Owners Fund	$120,000
		Total Owner Funding	$120,000
	Loans
		Bank Loan	$150,000
		Other
		Total Loans	$150,000
		Total Start up Funds	$270,000
	Assets
		Equipment	$55,000
		Land and Buildings	$101,337
		Vehicles	$20,000
		Total Fixed Assets	$176,337
	Total Start-up Assets		$446,337

(1) SALES FORECAST
Year	0	1	2	3	4	5
Projected Income		171,000	188,100	206,910	227,601	250,361
(b) Operating Expense		68,400	75,240	62,073	56,900	62,590

(2) CASHFLOW FORECAST
	Preop
Year	0	1	2	3	4	5

CASH INFLOWS
Cash from Sales		171,000	188,100	206,910	227,601	250,361

Directors loans	150,000	150,000	150,000	150,000	150,000	150,000
Capital Employed	125,000	120,000	150,000	175,000	200,000	225,000
Other cash inflows

TOTAL CASH INFLOW	275,000	441,000	488,100	531,910	577,601	625,361

CASH OUTFLOWS

Payments for materials		68,400	75,240	62,073	56,900	62,590
operating expenses ( )	0
Premises (rent, rates)	0	12,000	12,000	10,500	10,500	10,500
Staff Expenses	0	8,500	10,500	13,000	16,000	18,000
Fees and Commissions	0	2,100	2,250	2,450	2,600	2,850
Interest on loan 10%	0	15,000	15,000	15,000	15,000	15,000
Lease payments	0	12,000	14,500	16,500	18,500	5000
Corporation Tax		9,390	13,776	20,881	25,580	27,572
Market survey costs	0	1,941	1,485	1,825	1,900	2,000
Other preliminary expenses	0	2,000	2,150	2,300	2,550	2,750
capital expenditure
Vehicles	0	20,000	25,000	27,500	35,000	45,000
financing repayments
Loan repayments			37,500	37,500	37,500	37,500
TOTAL CASH OUTFLOWS	0	151,331	209,401	209,529	222,031	228,762
Cash flow summary
NET CASHFLOW FOR PERIOD	275,000	289,669	278,699	322,381	355,570	396,599
OPENING CASH BALANCE	0	275,000	564,669	843,368	1,165,750	1,521,320
CLOSING CASH BALANCE	275,000	564,669	843,368	1,165,750	1,521,320	1,917,919

(3) DEPRECIATION SCHEDULE
Year	0	1	2	3	4	5
Fixed Assets
Equipments	55000	49,500	44,000	38,500	33,000	27,500
Land and Buildings	101337	81,070	64,856	51,885	41,508	33,206
Vehicles	20000	16,000	12,800	10,240	8,192	6,554
Total book values (i.e. net fixed assets)	0	146,570	121,656	100,625	82,700	67,260



Annual Depreciation
Furniture-10% straight line		5,500	5,500	5,500	5,500	5,500
Vehicles – 20% reducing balance		20,267	16,214	12,971	10,377	8,302
Plant & machinery-20% reducing balance		4,000	3,200	2,560	2,048	1,638
Total annual depreciation		29,767	24,914	21,031	17,925	15,440

(4) PROFIT AND LOSS FORECAST
	Preop
Year	0	1	2	3	4	5

Revenue	0	171,000	188,100	206,910	227,601	250,361

Cost of sales	0	68,400	75,240	62,073	56,900	62,590

Gross profit	0	102,600	112,860	144,837	170,701	187,771

Gross Margin		149,090	155,957	158,189	167,913	186,027
Expenses/overheads
Premises (rent, rates)		12,000	12,000	10,500	10,500	10,500
Staff Expenses		8,500	10,500	13,000	16,000	18,000
Fees and Commissions		2,100	2,250	2,450	2,600	2,850
Accountant Fees		15,200	18,240	21,888	26,266	31,519
Payroll Tax		4,200	4,600	5,200	5,700	6,200
Occupancy and equipment expenses		1,139	1,134	1,202	1,274	1,351
Advertising, marketig and loyalty		12,500	14,250	16,750	18,500	20,500
Postage & Telephone		1,475	1,625	1,750	1,875	2,025
Transaction Processing and market data		186	192	195	168	171
Preliminary expenses		2,000	2,150	2,300	2,550	2,750
Lease Payments		12,000	14,500	16,500	18,500	20,500
Total expenses/overheads		71,300	66,941	75,235	85,433	95,865
Profit before tax		31,300	45,919	69,602	85,268	91,905
Tax @ 30%		9,390	13,776	20,881	25,580	27,572
Before tax net margin		18%	24%	34%	37%	37%
Profit after tax		21,910	32,143	48,721	59,688	64,334
Transfer to reserves		31,300	45,919	69,602	85,268	91,905

ROC		18%	27%	32%	34%	32%

Balance Sheet

	Assets	FY-1	FY-2	FY-3	FY-4	FY-5
	Current Assets
	Cash	$106,050	$137,050	$124,650	$110,900	$116,650
	Accounts receivable	$480,000	$520,000	$625,000	$660,000	$700,000
	Total current assets	$586,050	$657,050	$749,650	$770,900	$816,650
	Fixed (Long-Term) Assets
	Vehicles	$25,000	$25,600	$22,400	$19,200	$16,000
	Furniture	$32,000	$16,000	$12,800	$10,240	$8,192
	Equipment	$35,000	$22,400	$17,920	$14,336	$11,469
	(Less accumulated depreciation)	$15,200	$12,800	$10,880	$9,344	$8,115
	Intangible assets	$50,700
	Total fixed assets	$127,500	$51,200	$42,240	$34,432	$27,546
	Total Assets	$713,550	$708,250	$791,890	$805,332	$844,196

	Liabilities and Owner’s Equity
	Current Liabilities
	Accounts payable	$24,000	$25,000	$27,000	$25,000	$27,000
	Accrued Rent	$18,000	$18,000	$18,000	$18,000	$18,000
	Bank Charges Payable	$3,000	$3,000	$3,000	$3,000	$3,000
	Short-term loans	$10,000	$10,000	$10,000	$10,000	$10,000
	Income taxes payable	$2,970	$3,315	$6,975	$10,950	$14,880
	Accrued salaries and wages	$8,000	$10,000	$12,000	$15,000	$17,500
	General Expenses	$2,250	$2,450	$2,600	$2,850	$3,050
	Lease Payment	$14,000	$16,000	$19,000	$21,000	$24,000
	Current portion of long-term debt	$150,000	$140,000	$130,000	$140,000	$130,000
	Total current liabilities	$232,220	$227,765	$228,575	$245,800	$247,430
	Long-Term Liabilities
	Long-term debt	$75,000	$90,000	$80,000	$70,000	$60,000
	Less: Loan Repayment		$7,500	$7,500	$7,500	$7,500
	Deferred income tax	$189,500	$154,200	$176,290	$109,982	$84,946
	Total long-term liabilities	$264,500	$236,700	$248,790	$172,482	$137,446
	Owner’s Equity
	Owner’s investment	$200,000	$225,000	$275,000	$325,000	$375,000
	Net Profits	$6,930	$7,735	$16,275	$25,550	$34,720
	Reserve and Surplus	$9,900	$11,050	$23,250	$36,500	$49,600
	Total owner’s equity	$216,830	$243,785	$314,525	$387,050	$459,320
	Total Liabilities and Owner’s Equity	$713,550	$708,250	$791,890	$805,332	$844,196

Products or services

The products of the company will include manufacturing of high quality packaging material for “food, beverage, pharmaceutical, medical-device, home and personal-care and other products”. The third-party logistics services of the company include “cross docking, Transportation services, Cross-docking, Inventory management, Packaging and different types of freight forwarding services and warehousing” (Finkler et al. 2016).

Forecasting technique

The main forecasting is done with the application of ratio analysis.

Common Financial Ratios	Year 1	Year 2	Year 3	Year 4	Year 5
Debt Ratio (Total Liabilities / Total Assets)	0.63	0.48	0.38	0.30	0.23
Current Ratio (Current Assets / Current Liabilities)	2.24	2.52	2.75	2.92	2.95
Working Capital (Current Assets – Current Liabilities)	176,640	206,320	251,230	280,181	291,919
Assets-to-Equity Ratio (Total Assets / Owner’s Equity)	2.69	1.93	1.62	1.42	1.29
Debt-to-Equity Ratio (Total Liabilities / Owner’s Equity)	1.69	0.93	0.62	0.42	0.29

Analysis of forecasts

The overall analysis shows that the company has been able to increase its current assets and reduce the debt to equity over a period of five years.

Statutory requirements

The statutory requirement for the business will include:

Application for the Australian Business Number (ABN)
Registration of the business
Register a website name
Arranging for the Insurance needs
Registration for the taxes
Leasing of the premises

Collection of comparative and trend information to support budget

X-Axis Label	Sales	Gross Margin	Net Profit
Year 1	$171,000	$149,090	$21,910
Year 2	$188,100	$155,957	$32,143
Year 3	$206,910	$158,189	$48,721
Year 4	$227,601	$167,913	$59,688
Year 5	$250,361	$186,027	$64,334




	Sales	Profit Before tax	Pretax Net Margin
Year 1	171,000	31,300	18%
Year 2	188,100	45,919	24%
Year 3	206,910	69,602	34%
Year 4	227,601	85,268	37%
Year 5	250,361	91,905	37%

Negotiation strategy to acquiring funding for business project

Setting the business objectives clearly including the acceptable outcome and the anticipated outcome

Determining the tasks which are to be performed in the negotiation and outcomes for the same
Determination of the needs of the party and the rationale for the same
Listing, ranking and valuing the issues
Analysis of the other party
“Conducting research and consult with colleagues and partners”
Rehearing the negotiation
Writing an agenda

Records maintained to ensure up-to-date information about resource allocations and usage

Records maintained to ensure up to date information on resource allocations is seen with

“Entry book of input receipts”
“Entry book for taking credit of duty paid on inputs”
“Entry book of capital goods received”
“Entry book for taking credit of duty paid on capital goods” (Titman, Keown and Martin 2017)

Reporting budget performance and expenditure

Particulars	Year 1	Year 2	Year 3	Year 4	Year 5
Total Income	$ 171,000	$ 188,100	$ 206,910	$ 227,601	$ 250,361
Retainer Consulting	$ 120,000	$ 132,000	$ 145,200	$ 159,720	$ 175,692
Project Consulting	$ 28,000	$ 30,800	$ 33,880	$ 37,268	$ 40,995
Market Consulting	$ 23,000	$ 25,300	$ 27,830	$ 30,613	$ 33,674
Direct cost of sales	$ 68,400	$ 75,240	$ 62,073	$ 56,900	$ 62,590
Retainer Consulting	$ 105,000	$ 125,000	$ 140,000	$ 155,000	$ 180,000
Project Consulting	$ 65,000	$ 75,000	$ 78,000	$ 75,000	$ 80,000
Market Consulting	$ -101,600	$ -124,760	$ -155,927	$ -173,100	$ -197,410
Subtotal of Direct cost of sales	$ 68,400	$ 75,240	$ 62,073	$ 56,900	$ 62,590

Risk return analysis

The risk and return analysis has been done based on consideration of the various types of the systematic and unsystematic risks.

Budget monitoring

The budget monitoring will be considered as a continuous process which will include the following process:

Identification of the current position
Comparison of the current position
Identify any actions required
Reporting to the budget holder
Agreeing to the actions required
Taking the action

The company chosen to answer the following questions has been identified with Sealed Air.

Reports that require lodging by this company according to ASIC

The various types of the report that require compliance as per the ASIC is considered with “impairment testing, asset valuation, revenue recognition, tax accounting and accounting policy judgment and estimation”.

Analyse these financial records by applying the horizontal and vertical analysis

Vertical Analysis of New Company
Income Statement
Particulars	Y1	Percentage	Y2	Percentage
Revenue	22520	100.00%	35610	100.00%
Cost of Good Sold	8540	37.92%	12374	34.75%
Gross Margin	13980	62.08%	23236	65.25%
Operating Income	2701	11.99%	8330	23.39%
				0.00%
Administration Expenses	$ 5,838.00	25.92%	$ 7,312.00	20.53%
Operating Expenses	0	0.00%	0	0.00%
Finance Cost	0	0.00%	0	0.00%
Profit Before Tax	2701	11.99%	8330	23.39%
Income Tax Expenses	720	3.20%	2634	7.40%
Profit of the year	1631	7.24%	5146	14.45%

Vertical Analysis of Sealed Air
Income Statement
Particulars	2016	Percentage	2017	Percentage
Revenue	13421000	100.00%	13154000	100.00%
Cost of Good Sold	9724000	72.45%	9500000	72.22%
Gross Margin	3697000	27.55%	3654000	27.78%
Operating Income	212000	1.58%	496000	3.77%
Other Expenses	3485000	25.97%	3158000	24.01%
Finance Cost	$ 262,000.00	1.95%	207000	1.57%
Profit Before Tax	$ 198,000.00	1.48%	473000	3.60%
Income Tax Expenses	138000	1.03%	180000	1.37%
Profit of the year	$ 57,000.00	0.42%	305000	2.32%




Vertical Analysis of New Company
Balance Sheet
Particulars	Y1	Percentage	Y2	Percentage
Current Assets
Cash	6270	26.92%	1389	5.18%
Inventories	5120	21.98%	8374	31.25%
Other Current Assets	6864	29.47%	9480	35.38%
Total Current Assets	18254	78.36%	19243	71.81%

Non Current Assets
Property	3100	13.31%	5500	20.52%
Machinery and other non current assets	1940	8.33%	2054	7.67%
Total Non Current Assets	5040	21.64%	7554	28.19%

Total Assets	23294	100%	26797	100%

Current Liabilities
Accounts payable	5952	18.64%	7570	20.73%
Interest payables	450	1.41%	570	1.56%
Provisions	2242	7.02%	1577	4.32%
Total Current Liabilities	8644	27.06%	9717	26.61%
				0.00%
Non Current Liabilities				0.00%
Long term debt	$ 2,680.00	8.39%	$ 1,170.00	3.20%
Lease Liabilities	0	0.00%	0	0.00%
Total Non Current Liabilities	$ 2,680.00	8.39%	$ 1,170.00	3.20%
				0.00%
Total Equity	23294	72.94%	26797	73.39%

Total Liabilities and Equity	31938	100.00%	36514	100.00%




Vertical Analysis of Sealed Air
Balance Sheet
Particulars	2016	Percentage	2017	Percentage
Current Assets
Cash	63500	6.78%	77200	6.96%
Inventories	268500	28.67%	267100	24.09%
Other Current Assets	50100	5.35%	58100	5.24%
Total Current Assets	413700	44.18%	440900	39.77%

Non Current Assets
Plant and Equipment	71900	7.68%	71900	6.49%
Deferred tax assets	13300	1.42%	13500	1.22%
Other non current assets	500	0.05%	145500	13.12%
Total Non Current Assets	522800	55.82%	667800	60.23%

Total Assets	936500	100.00%	1108700	118.39%

Current Liabilities
Trade payables	420400	44.89%	428100	38.61%
Other Current liabilties	51400	5.49%	39500	3.56%
Total Current Liabilities	487100	52.01%	507700	45.79%
				0.00%
Non Current Liabilities				0.00%
Accrued Liabilities	0	0.00%	28000	2.53%
Provisions	$ –	0.00%	$ –	0.00%
Other Non Current Liabilities	80000	8.54%	34900	3.15%
Total Non-Current Liabilities	80000	8.54%	62900	5.67%
				0.00%
Total Equity	369400	39.44%	538100	48.53%

Total Liabilities and Equity	936500	100.00%	1108700	100.00%

Vertical Analysis of New Company
Particulars	Y1	Y2
Income Statement
Revenue	100.00%	100.00%
Cost of Good Sold	37.92%	34.75%
Gross Margin	62.08%	65.25%
Other Income	11.99%	23.39%
	0.00%	0.00%
Administration Expenses	25.92%	20.53%
Other Expenses	0.00%	0.00%
Finance Cost	0.00%	0.00%
Profit Before Tax	11.99%	23.39%
Income Tax Expenses	3.20%	7.40%
Profit of the year	7.24%	14.45%


Vertical Analysis of Sealed Air
Income Statement
Particulars	2016	2017
Revenue	100.00%	100.00%
Cost of Good Sold	72.45%	72.22%
Gross Margin	27.55%	27.78%
Other Income	1.58%	3.77%
Other Expenses	25.97%	24.01%
Finance Cost	1.95%	1.57%
Profit Before Tax	1.48%	3.60%
Income Tax Expenses	1.03%	1.37%
Profit of the year	0.42%	2.32%



Vertical Analysis of Sealed Air
Balance Sheet
Particulars	2016	2017
Current Assets
Cash	26.92%	5.18%
Inventories	21.98%	31.25%
Other Current Assets	29.47%	35.38%
Total Current Assets	78.36%	71.81%

Non Current Assets
Plant and Equipment	13.31%	20.52%
Deferred tax assets	8.33%	7.67%
Total Non Current Assets	21.64%	28.19%

Total Assets	100.00%	100.00%

Current Liabilities
Borrowings	18.64%	20.73%
Trade payables	1.41%	1.56%
Other Current liabilities	7.02%	4.32%
Total Current Liabilities	27.06%	26.61%

Non Current Liabilities
Provisions	8.39%	3.20%
Lease Liabilities	0.00%	0.00%
Total Non Current Liabilities	8.39%	3.20%

Total Equity	72.94%	73.39%

Total Liabilities and Equity	100.00%	100.00%


Vertical Analysis of New Company
Balance Sheet
Particulars	Y1	Y2
Current Assets
Cash	6.78%	6.96%
Inventories	28.67%	24.09%
Other Current Assets	5.35%	5.24%
Total Current Assets	44.18%	39.77%
	0.00%	0.00%
Non Current Assets	0.00%	0.00%
Plant and Equipment	7.68%	6.49%
Deferred tax assets	1.42%	1.22%
Other non current assets	0.05%	13.12%
Total Non Current Assets	55.82%	60.23%
	0.00%	0.00%
Total Assets	100.00%	118.39%
	0.00%	0.00%
Current Liabilities	0.00%	0.00%
Trade payables	44.89%	38.61%
Other Current liabilities	5.49%	3.56%
Total Current Liabilities	52.01%	45.79%
	0.00%	0.00%
Non Current Liabilities	0.00%	0.00%
Accrued Liabilities	0.00%	2.53%
Provisions	0.00%	0.00%
Other Non Current Liabilities	8.54%	3.15%
Total Non Current Liabilities	8.54%	5.67%
	0.00%	0.00%
Total Equity	39.44%	48.53%
	0.00%	0.00%
Total Liabilities and Equity	100.00%	100.00%

Organisations financial decisions will serve to meet the organisations planned outcomes

The organizations financial decisions will be able to serve the planned outcomes as the outcomes of the vertical analysis and horizontal analysis of the new company is head to head with Sealed Air (Kaiser et al. 2015).

Conclusion:

The significant financial findings and sales forecast stated in the report has been able to show that the various types of consideration for expenses and sources of income is conducive for starting the new business.

References and Bibliography

Evans, V., 2015. The FT Essential Guide to Writing a Business Plan: How to win backing to start up or grow your business. Pearson UK.

Finkler, S.A., Smith, D.L., Calabrese, T.D. and Purtell, R.M., 2016. Financial management for public, health, and not-for-profit organizations. CQ Press.

Heizer, J., 2016. Operations Management, 11/e. Pearson Education India.

Kaiser, M.G., El Arbi, F. and Ahlemann, F., 2015. Successful project portfolio management beyond project selection techniques: Understanding the role of structural alignment. International Journal of Project Management, 33(1), pp.126-139.

McNeil, A.J., Frey, R. and Embrechts, P., 2015. Quantitative risk management: Concepts, techniques and tools. Princeton university press.

McPherson, R.A. and Pincus, M.R., 2017. Henry’s Clinical Diagnosis and Management by Laboratory Methods E-Book. Elsevier Health Sciences.

Policy, I.C., 2016. FY 2016 Japan Fair Trade Commission Performance Evaluation Report (Standard Format). Policy.

Renz, D.O. and Herman, R.D. eds., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John Wiley & Sons.

Titman, S., Keown, A.J. and Martin, J.D., 2017. Financial management: Principles and applications. Pearson.

Zietlow, J., Hankin, J.A., Seidner, A. and O’Brien, T., 2018. Financial management for nonprofit organizations: Policies and practices. John Wiley & Sons.

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