BSBFIM501 Manage Budgets And Financial Plans

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BSBFIM501 Manage Budgets And Financial Plans
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Course Code: BSBFIM501 University: Academies Australasia Polytechnic
Country: Australia
Questions:
You are required to provide the bank or other potential investors/stakeholders a set of up/startup costs and forecasted projected results for your new business or enterprise.

1. Prepare and write an executive summary of your business proposal that you can provide as a description and introduction to your business investors/stakeholders.

2. Create supporting financial templates to calculate start up costs and other budgeted financial projections/forecasts.

3. Write an assumptions document for presentation to the investors /stakeholders or bank. 

4. Provide thoughts and calculations on your numbers presented
Answers:
Introduction To Business Investors Or Stakeholders
Vision Statement Of Adventure Travel And Tours Limited

The vision statement of Adventure Travel and Tours Limited is to become one of the well-known tourist resorts in Australia in the eyes of community, people and customer. The start-up tourist resort expects and demands the best that they desire to offer by keeping the service on top of the choice of valued local visitors and tourists (Renz 2016).

Mission Statement Of Adventure Travel And Tours Limited

The mission statement of Adventure Travel and Tours Limited is to offer superior hospitality experience and enhance guest’s maximum satisfaction. In addition, the start-up tourist resort believes in creation of positive work environment for attainment of results to satisfy guests, investors and employees. Adventure Travel and Tours Limited aims at satisfying the tourist and local visitors who actually travel for relaxation (Petty et al. 2015).

Goal Of Adventure Travel And Tours Limited

The goal of Adventure Travel and Tours Limited is to satisfy the need of valued customers and guests by conducting market research.

Objectives Of Adventure Travel And Tours Limited
To exceed in the customer expectations where the start-up company will provide access to luxury services to the valued customers in terms of tours, travels and resort
To maintain 90% occupancy rate at the time of peak periods
To hire experienced and hardworking staff members
Financial Plan
Basic Assumptions

BASIC ASSUMPTIONS:

Type of Business:

Company

Nature of Project:

Tours and Travels

Capital Structure:

 

Equity

50%

Non-Current Debts

50%

Types of Debts:

 

5 yr. Bonds at Par

0%

5 years Loan from Bank

100%

Required Rate of Return on Equity

10.00%

Interest Rate on Loan:

 

Bonds

0.00%

Loan from Bank

8.50%

Tax Rate

30%

Inflation Rate

0.00%

Mode of Sales:

 

Cash

100%

Credit

0%

Cash Collection Period

30 days

Mode of Purchase:

 

Cash

50%

Credit

50%

Cash Payment Period

60 days

Wages & Salary Payment

15th day on the following month

Electricity, Telephone & Internet payment

7th day on the following month

Other Operating Payments

Last day of the month

Insurance & Membership Fees

6 months’ Advance

Depreciation Method:

 

Building & Improvement

Straight Line Method

Furniture & Fittings

10% – Reducing Balance Method

Computer, Electrical Equipment & Other Accessories

30% – Reducing Balance Method

Kitchen Appliances, Cutleries & Cookeries

40% – Reducing Balance Method

Motor Vehicle

Straight Line Method

Explanation
Motor vehicle and building & improvement will be depreciated by using straight-line method
Computer, Electrical Equipment, Kitchen appliances, and furniture & Fittings will be depreciated by using reducing balance method
Mode of payment will be 50% of cash and 50% on credit
Loan from bank will taken at 8.50% (Madura 2014)
Start-Up Cost

Particulars

Amount

Residual Value

Non-Current Assets:

 

 

Land

$2,500,000

$0

Building & Improvement

$5,000,000

$1,500,000

Furniture & Fittings

$1,500,000

$450,000

Computer, Electrical Equipment & Other Accessories

$3,000,000

$0

Kitchen Appliances, Cutleries & Cookeries

$1,250,000

$0

Motor Vehicle

$1,000,000

$300,000

Preliminary Expenses:

 

 

Land Registration

$65,000

 

Business Registration

$125,000

 

License Fees

$50,000

 

Deposit for Electricity

$72,000

$72,000

Deposit for Telephone & Internet

$35,000

$35,000

Recruitment Cost

$125,000

 

Share Issuance Cost

$30,000

 

Other Miscellaneous Expenses

$200,000

 

Working Capital:

 

 

Purchase of Food, Drinks & Other Supplies

$2,250,000

 

Wages & Salaries

$500,000

 

Power & Fuel

$200,000

 

Promotion & Advertisement

$150,000

 

General Administrative Expenses

$300,000

$3,400,000

TOTAL START UP COST

$18,352,000

 

Capital Funding:

 

 

Equity Capital

$9,176,000

 

Loan From Bank

$9,176,000

 

TOTAL CAPITAL EMPLOYED

$18,352,000

 

Explanation
Total start-up cost that will be required for starting Adventure Tours and Travel Limited will be $18352000.
In case of capital funding, the start-up business will apply for loan from bank amounting to $9176000, equity capital amounting to $9176000 (Lasher 2013)
Depreciation And Amortization Schedule

DEPRECIATION & AMORTIZATION SCHEDULE:

Particulars

Opening Balance

Salvage Value

Estimated Life

Depreciation Rate

Period

Depreciation Amount

Closing Balance

 

 

 

 

 

(in Years)

 

 

Building & Improvements:

 

 

 

 

 

 

 

Year 1

$5,000,000

$1,500,000

25

 

1

$140,000

$4,860,000

Year 2

$4,860,000

$1,500,000

24

 

1

$140,000

$4,720,000

Year 3

$4,720,000

$1,500,000

23

 

1

$140,000

$4,580,000

Furniture & Fittings:

 

 

 

 

 

 

 

Year 1

$1,500,000

$450,000

12

10%

1

$150,000

$1,350,000

Year 2

$1,350,000

$450,000

11

10%

1

$135,000

$1,215,000

Year 3

$1,215,000

$450,000

10

10%

1

$121,500

$1,093,500

Computer, Electronic Equipment & Other Accessories:

 

 

 

 

 

 

 

Year 1

$3,000,000

$0

7

30%

1

$900,000

$2,100,000

Year 2

$2,100,000

$0

6

30%

1

$630,000

$1,470,000

Year 3

$1,470,000

$0

5

30%

1

$441,000

$1,029,000

Kitchen Appliances, Cutleries & Crookeries:

 

 

 

 

 

 

 

Year 1

$1,250,000

$0

5

40%

1

$500,000

$750,000

Year 2

$750,000

$0

4

40%

1

$300,000

$450,000

Year 3

$450,000

$0

3

40%

1

$180,000

$270,000

Motor Vehicle:

 

 

 

 

 

 

 

Year 1

$1,000,000

$300,000

10

 

1

$70,000

$930,000

Year 2

$930,000

$300,000

9

 

1

$70,000

$860,000

Year 3

$860,000

$300,000

8

 

1

$70,000

$790,000

Projected Room Bookings

PROJECTED ROOM BOOKINGS:

 

1st Year

2nd Year

3rd Year

Particulars

Qt.1

Qt.2

Qt.3

Qt.4

Qt.1

Qt.2

Qt.3

Qt.4

Qt.1

Qt.2

Qt.3

Qt.4

Nature Villa – Room Available

20

20

20

20

20

25

25

25

35

35

35

35

Occupancy Rate

50%

55%

60%

80%

80%

60%

70%

85%

87%

65%

67%

85%

Projected Booking – Nature Villa

900

990

1080

1440

1440

1350

1575

1913

2740.5

2047.5

2110.5

2677.5

Palm Cottage – Room Available

15

15

15

15

15

15

15

20

20

20

20

20

Occupancy Rate

60%

65%

67%

85%

85%

70%

72%

87%

88%

72%

74%

92%

Projected Booking – Palm Cottage

810

878

905

1148

1148

945

972

1566

1584

1296

1332

1656

Deluxe Suit – Room Available

3

3

3

3

3

3

3

3

5

5

5

5

Occupancy Rate

90%

75%

72%

92%

92%

75%

75%

94%

90%

78%

80%

92%

Projected Booking – Deluxe Suit

243

203

194

248

248

203

203

254

405

351

360

414

 Projected Sales Revenue

PROJECTED SALES REVENUE:-

 

1st Year

2nd Year

3rd Year

Particulars

Qt.1

Qt.2

Qt.3

Qt.4

Qt.1

Qt.2

Qt.3

Qt.4

Qt.1

Qt.2

Qt.3

Qt.4

Nature Villa – Room Booking

900

990

1080

1440

1440

1350

1575

1912.5

2740.5

2047.5

2110.5

2677.5

Average Room Rent

$8,500

$8,500

$8,500

$8,500

$8,500

$8,500

$8,500

$8,500

$10,000

$10,000

$10,000

$10,000

Projected Room Rent – Nature Villa

$7,650,000

$8,415,000

$9,180,000

$12,240,000

$12,240,000

$11,475,000

$13,387,500

$16,256,250

$27,405,000

$20,475,000

$21,105,000

$26,775,000

Palm Cottage – Room Booking

810

878

905

1148

1148

945

972

1566

1584

1296

1332

1656

Average Room Rent

$12,000

$12,000

$12,000

$12,000

$12,000

$12,000

$12,000

$12,000

$13,000

$13,000

$13,000

$13,000

Projected Room Rent – Palm Cottage

$9,720,000

$10,530,000

$10,854,000

$13,770,000

$13,770,000

$11,340,000

$11,664,000

$18,792,000

$20,592,000

$16,848,000

$17,316,000

$21,528,000

Deluxe Suit – Room Booking

243

203

194

248

248

203

203

254

405

351

360

414

Average Room Rent

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

$17,500

$17,500

$17,500

$17,500

Projected Room Rent – Deluxe Suit

$3,645,000

$3,037,500

$2,916,000

$3,726,000

$3,726,000

$3,037,500

$3,037,500

$3,807,000

$7,087,500

$6,142,500

$6,300,000

$7,245,000

Average Guest per Room

2

2

2

2

2

2

2

2

2

2

2

2

Average Fooding & Drinking Charges per Guest

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,000

$4,500

$4,500

$4,500

$4,500

Total Revenue from Fooding & Drinking

$15,624,000

$16,560,000

$17,431,200

$22,687,200

$22,687,200

$19,980,000

$21,996,000

$29,858,400

$42,565,500

$33,250,500

$34,222,500

$42,727,500

Projected Expenses

PROJECTED EXPENSES:-

 

1st Year

2nd Year

3rd Year

Particulars

Qt.1

Qt.2

Qt.3

Qt.4

Qt.1

Qt.2

Qt.3

Qt.4

Qt.1

Qt.2

Qt.3

Qt.4

One-Time Start-Up Cost:

 

 

 

 

 

 

 

 

 

 

 

 

Land

$2,500,000

 

 

 

 

 

 

 

 

 

 

 

Building & Improvement

$5,000,000

 

 

 

 

 

 

 

 

 

 

 

Furniture & Fittings

$1,500,000

 

 

 

 

 

 

 

 

 

 

 

Computer, Electrical Equipment & Other Accessories

$3,000,000

 

 

 

 

 

 

 

 

 

 

 

Kitchen Appliances, Cutleries & Crookeries

$1,250,000

 

 

 

 

 

 

 

 

 

 

 

Motor Vehicle

$1,000,000

 

 

 

 

 

 

 

 

 

 

 

Land Registration

$65,000

 

 

 

 

 

 

 

 

 

 

 

Business Registration

$125,000

 

 

 

 

 

 

 

 

 

 

 

License Fees

$50,000

 

 

 

 

 

 

 

 

 

 

 

Deposit for Electricity

$72,000

 

 

 

 

 

 

 

 

 

 

 

Deposit for Telephone & Internet

$35,000

 

 

 

 

 

 

 

 

 

 

 

Recruitment Cost

$125,000

 

 

 

 

 

 

 

 

 

 

 

Share Issuance Cost

$30,000

 

 

 

 

 

 

 

 

 

 

 

Other Miscellaneous Expenses

$200,000

 

 

 

 

 

 

 

 

 

 

 

Fixed Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation on Building & Improvement

$35,000

$35,000

$35,000

$35,000

$35,000

$35,000

$35,000

$35,000

$35,000

$35,000

$35,000

$35,000

Depreciation on Furniture & Fittings

$37,500

$37,500

$37,500

$37,500

$33,750

$33,750

$33,750

$33,750

$30,375

$30,375

$30,375

$30,375

Depreciation on Computer, Electronic Equipment & Other Devices

$225,000

$225,000

$225,000

$225,000

$157,500

$157,500

$157,500

$157,500

$110,250

$110,250

$110,250

$110,250

Depreciation on Kitchen Appliances, Cutleries & Cookeries

$125,000

$125,000

$125,000

$125,000

$75,000

$75,000

$75,000

$75,000

$45,000

$45,000

$45,000

$45,000

Depreciation on Motor Vehicles

$17,500

$17,500

$17,500

$17,500

$17,500

$17,500

$17,500

$17,500

$17,500

$17,500

$17,500

$17,500

Wages & Salary to Permanent Staffs

$450,000

$1,000,000

$1,000,000

$1,000,000

$1,100,000

$1,100,000

$1,100,000

$1,100,000

$1,200,000

$1,200,000

$1,200,000

$1,200,000

Membership to Hotel Association

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,500

$2,500

$2,500

$2,500

Insurance

$5,000

$5,000

$5,000

$5,000

$5,000

$5,000

$5,000

$5,000

$6,000

$6,000

$6,000

$6,000

Advertisement & Promotion

$50,000

$125,000

$50,000

$50,000

$62,500

$62,500

$62,500

$62,500

$68,750

$68,750

$68,750

$68,750

Variable Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Fooding & Drinking

$5,468,400

$5,796,000

$6,100,920

$7,940,520

$7,940,520

$6,993,000

$7,698,600

$10,450,440

$14,897,925

$11,637,675

$11,977,875

$14,954,625

Wages to Temporary Staffs

$2,613,150

$2,755,125

$2,890,620

$3,755,520

$3,755,520

$3,290,625

$3,604,050

$4,928,603

$7,010,775

$5,498,325

$5,658,300

$7,050,150

Supplies Expenses

$4,324,050

$4,539,375

$4,749,840

$6,161,940

$6,161,940

$5,376,375

$5,863,050

$8,067,668

$11,455,088

$9,013,613

$9,274,838

$11,536,763

Electricity

$4,984,200

$5,224,500

$5,461,560

$7,081,560

$7,081,560

$6,169,500

$6,717,600

$9,263,970

$13,145,175

$10,355,625

$10,655,325

$13,245,975

Power & Fuel

$2,868,975

$3,033,563

$3,188,430

$4,146,480

$4,146,480

$3,643,313

$4,001,625

$5,450,141

$7,761,938

$6,074,213

$6,251,400

$7,797,825

Telephone & Internet

$498,420

$522,450

$546,156

$708,156

$708,156

$616,950

$671,760

$926,397

$1,314,518

$1,035,563

$1,065,533

$1,324,598

Cost of Tour

$317,363

$336,375

$354,071

$460,834

$553,001

$487,013

$536,153

$727,799

$1,106,703

$864,513

$889,785

$1,110,915

Cleaning Charges

$2,882,700

$3,026,250

$3,166,560

$4,107,960

$4,107,960

$3,584,250

$3,908,700

$5,378,445

$7,636,725

$6,009,075

$6,183,225

$7,691,175

Maintenance Charges

$4,324,050

$4,539,375

$4,749,840

$6,161,940

$6,161,940

$5,376,375

$5,863,050

$8,067,668

$11,455,088

$9,013,613

$9,274,838

$11,536,763

Special Discount on Corporate Booking

$525,375

$549,563

$573,750

$743,400

$743,400

$646,313

$702,225

$971,381

$1,377,113

$1,086,638

$1,118,025

$1,388,700

Commission to Travel Agencies

$210,150

$219,825

$229,500

$297,360

$297,360

$258,525

$280,890

$388,553

$550,845

$434,655

$447,210

$555,480

TOTAL EXPENSES

$44,915,833

$32,114,400

$33,508,247

$43,062,670

$43,146,087

$37,930,488

$41,335,953

$56,109,313

$79,227,266

$62,538,881

$64,311,728

$79,708,343

Explanation
The net cash flow from operating activities in the first quarter of initial year arrives at $13,716,158 and gradually increases till third quarter of final year as it arrives at $24,673,103 (Karadag 2015).
The net cash flow from investing activities in the first quarter of initial year arrives at ($14,952,000) and gradually decreases till third quarter of final year as it arrives at ($37,500,000). The negative figure in the investing activities signifies that Adventure Tours and Travels Limited need to purchase non-current assets such as machinery, equipment for the company.
The net cash flow from financing activities in the first quarter of initial year arrives at $18,157,010 and gradually decreases till third quarter of final year as it arrives at ($6,618,190). Adventure Tours and Travel limited will issue shares, take loan from bank in the initial years of operations (Brigham and Ehrhardt 2013).
Working Capital Management

Working Capital Management:

Particulars

Year 1

Year 2

Year 3

 

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash at Bank

$16,921,168

$24,611,521

$38,690,831

$51,471,289

$46,601,520

$56,775,403

$73,625,886

$91,899,874

$95,075,345

$111,624,260

$139,946,717

$120,501,630

Total Current Assets

$16,921,168

$24,611,521

$38,690,831

$51,471,289

$46,601,520

$56,775,403

$73,625,886

$91,899,874

$95,075,345

$111,624,260

$139,946,717

$120,501,630

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts Payable

$3,264,150

$3,445,125

$3,616,920

$4,700,820

$4,700,820

$4,123,125

$4,520,550

$6,172,703

$8,784,338

$6,883,763

$7,084,238

$8,830,463

Accrued Expenses:

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

Salary to Staff

$1,021,050

$1,251,708

$1,296,873

$1,585,173

$1,618,507

$1,463,542

$1,568,017

$2,009,534

$2,736,925

$2,232,775

$2,286,100

$2,750,050

Electricity, Internet & Other Resources

$1,827,540

$1,915,650

$2,002,572

$2,596,572

$2,596,572

$2,262,150

$2,463,120

$3,396,789

$4,819,898

$3,797,063

$3,906,953

$4,856,858

Total Current Liabilities

$6,112,740

$6,612,483

$6,916,365

$8,882,565

$8,915,899

$7,848,817

$8,551,687

$11,579,026

$16,341,160

$12,913,600

$13,277,290

$16,437,370

Net Working Capital

$10,808,428

$17,999,038

$31,774,465

$42,588,724

$37,685,621

$48,926,587

$65,074,200

$80,320,848

$78,734,185

$98,710,660

$126,669,427

$104,064,260

Explanation

The start-up company working capital for first quarter arrives at $10808428 and last quarter of third year arrives at $104064260. By the end of third year, there will be enough working capital for the company so that they can easily meet the day-to-day working of business practices (Brigham and Daves 2014).

Break-Even Analysis

BREAK EVEN ANALYSIS:

Particulars

Year 1

Year 2

Year 3

 

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Weighted Average Room Rent

$10,760

$10,395

$10,395

$10,395

$10,395

$10,174

$10,174

$10,365

$11,625

$11,625

$11,625

$11,625

Fooding & Drinking Charges per room

$8,000

$8,000

$8,000

$8,000

$8,000

$8,000

$8,000

$8,000

$9,000

$9,000

$9,000

$9,000

Total Revenue per Booking

$18,760

$18,395

$18,395

$18,395

$18,395

$18,174

$18,174

$18,365

$20,625

$20,625

$20,625

$20,625

Variable Expenses per Unit:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Fooding & Drinking

$2,800

$2,800

$2,800

$2,800

$2,800

$2,800

$2,800

$2,800

$3,150

$3,150

$3,150

$3,150

Wages to Temporary Staffs

$1,338

$1,331

$1,327

$1,324

$1,324

$1,318

$1,311

$1,321

$1,482

$1,488

$1,488

$1,485

Supplies Expenses

$2,214

$2,193

$2,180

$2,173

$2,173

$2,153

$2,132

$2,162

$2,422

$2,440

$2,439

$2,430

Electricity

$2,552

$2,524

$2,507

$2,497

$2,497

$2,470

$2,443

$2,482

$2,779

$2,803

$2,802

$2,790

Power & Fuel

$1,469

$1,465

$1,463

$1,462

$1,462

$1,459

$1,455

$1,460

$1,641

$1,644

$1,644

$1,643

Telephone & Internet

$255

$252

$251

$250

$250

$247

$244

$248

$278

$280

$280

$279

Cleaning Charges

$1,476

$1,462

$1,453

$1,449

$1,449

$1,435

$1,422

$1,441

$1,615

$1,626

$1,626

$1,620

Maintenance Charges

$2,214

$2,193

$2,180

$2,173

$2,173

$2,153

$2,132

$2,162

$2,422

$2,440

$2,439

$2,430

Special Discount on Corporate Booking

$269

$265

$263

$262

$262

$259

$255

$260

$291

$294

$294

$293

Commission to Travel Agencies

$108

$106

$105

$105

$105

$104

$102

$104

$116

$118

$118

$117

Total Variable Expenses per booking

$14,695

$14,592

$14,529

$14,494

$14,494

$14,396

$14,298

$14,440

$16,197

$16,283

$16,280

$16,236

Contribution Margin per Booking

$4,065

$3,802

$3,866

$3,900

$3,900

$3,778

$3,877

$3,925

$4,428

$4,342

$4,345

$4,389

Depreciation on Building & Improvement

$35,000

$35,000

$35,000

$35,000

$35,000

$35,000

$35,000

$35,000

$35,000

$35,000

$35,000

$35,000

Depreciation on Furniture & Fittings

$37,500

$37,500

$37,500

$37,500

$33,750

$33,750

$33,750

$33,750

$30,375

$30,375

$30,375

$30,375

Depreciation on Computer, Electronic Equipment & Other Devices

$225,000

$225,000

$225,000

$225,000

$157,500

$157,500

$157,500

$157,500

$110,250

$110,250

$110,250

$110,250

Depreciation on Kitchen Appliances, Cutleries & Crookeries

$125,000

$125,000

$125,000

$125,000

$75,000

$75,000

$75,000

$75,000

$45,000

$45,000

$45,000

$45,000

Depreciation on Motor Vehicles

$17,500

$17,500

$17,500

$17,500

$17,500

$17,500

$17,500

$17,500

$17,500

$17,500

$17,500

$17,500

Wages & Salary to Permanent Staffs

$450,000

$1,000,000

$1,000,000

$1,000,000

$1,100,000

$1,100,000

$1,100,000

$1,100,000

$1,200,000

$1,200,000

$1,200,000

$1,200,000

Membership to Hotel Association

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,000

$2,500

$2,500

$2,500

$2,500

Insurance

$5,000

$5,000

$5,000

$5,000

$5,000

$5,000

$5,000

$5,000

$6,000

$6,000

$6,000

$6,000

Advertisement & Promotion

$50,000

$125,000

$50,000

$50,000

$62,500

$62,500

$62,500

$62,500

$68,750

$68,750

$68,750

$68,750

Total Fixed Expenses

$947,000

$1,572,000

$1,497,000

$1,497,000

$1,488,250

$1,488,250

$1,488,250

$1,488,250

$1,515,375

$1,515,375

$1,515,375

$1,515,375

Break Even Sales (in Units)

233

413

387

384

382

394

384

379

342

349

349

345

Break Even Sales (in amount)

$4,370,175

$7,604,701

$7,123,278

$7,060,246

$7,018,979

$7,159,493

$6,977,070

$6,963,529

$7,058,901

$7,198,856

$7,194,049

$7,121,685

Outcome Results
The break-even sales in unit is at 233 for first quarter of operations and end up with 345 for the last quarter of third year of operations that is less than the projected sales generated from rooms occupancy (Arnold 2013)
The break-even sales in amount is even low than the projected sales generated from rooms occupancy
Explanation
The initial investment of the start-up tours and travel companies arrives at $18,352,000.
To attain success in the business, the start-up company NPV will arrive at $80,935,265 for the initial 3 years of business operations
Projected Ratio Analysis

RATIO ANALYSIS:

Particulars

Year 1

Year 2

Year 3

 

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Quarter 1

Quarter 2

Quarter 3

Quarter 4

Total Revenue

$36,601,875

$38,510,438

$40,352,175

$52,388,775

$52,530,570

$45,935,438

$50,207,625

$68,861,959

$97,975,508

$76,959,383

$79,194,375

$98,595,900

Net Profit

$6,968,428

$6,750,610

$7,222,688

$9,874,515

$9,932,894

$8,456,273

$9,378,908

$13,529,037

$19,930,365

$15,312,150

$15,805,683

$20,081,268

Current Assets

$16,921,168

$24,611,521

$38,690,831

$51,471,289

$46,601,520

$56,775,403

$73,625,886

$91,899,874

$95,075,345

$111,624,260

$139,946,717

$120,501,630

Current Liabilities

$17,379,268

$19,904,195

$22,374,883

$27,303,437

$21,071,767

$22,541,566

$26,058,109

$33,144,159

$31,496,269

$32,662,354

$37,767,749

$40,529,009

Owner’s Equity

$9,176,000

$9,176,000

$9,176,000

$9,176,000

$9,176,000

$9,176,000

$9,176,000

$9,176,000

$9,176,000

$9,176,000

$9,176,000

$9,176,000

Net Profit Margin

19.04%

17.53%

17.90%

18.85%

18.91%

18.41%

18.68%

19.65%

20.34%

19.90%

19.96%

20.37%

Current Ratio

0.974

1.236

1.729

1.885

2.212

2.519

2.825

2.773

3.019

3.418

3.705

2.973

Return on Equity

0.759

0.736

0.787

1.076

1.082

0.922

1.022

1.474

2.172

1.669

1.723

2.188

Explanation

From the above projected ratio analysis figures, business investors and stakeholders will be informed about Adventure Tours and Travels Limited operations. The start-up tours and Travels Company will be achieving net profit margin at 19.04% in the first year of operations and end at 20.37% in the third year of operations. The current ratio will be at 0.97 in the initial stage of year and then it will lead to 2.97 where the company can easily meet the short-term obligations in the most appropriate way. Return on equity will be at 0.759 in the first year and 2.18 in the third year of operations for Adventure Tours and Travels Limited.

Reference List

Arnold, G., 2013. Corporate financial management. Pearson Higher Ed.

Brigham, E.F. and Daves, P.R., 2014. Intermediate Financial Management. Cengage Learning.

Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory & practice. Cengage Learning.

Karadag, H., 2015. Financial management challenges in small and medium-sized enterprises: A strategic management approach. Emerging Markets Journal, 5(1), p.26.

Lasher, W.R., 2013. Practical financial management. Nelson Education.

Madura, J., 2014. International financial management. Nelson Education.

Petty, J.W., Titman, S., Keown, A.J., Martin, P., Martin, J.D. and Burrow, M., 2015. Financial management: Principles and applications. Pearson Higher Education AU.

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

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