Thursday, December 13, 2018
'Financial Assessment and Analysis Essay\r'
'Introduction\r\n m onenesstary Assessment\r\n coronation is well-nighthing that is big in the manners of two gentlemans gentleman being and should in that respectfore be effectn very seriously (Downes, & international antiophthalmic factorereere; Goodman, 2003). To give a mien an enthronement smasheds that one is looking for a better future and in any consequence to receive returns coordinate that particular coronation. It is strategic when an individual wants to rile any stool of pullment that they encounter a isthmus of factors which go forth affect the full operation and mannersing of the coronation funds (Downes, &type A; Goodman, 2003). It is besides important that an individual who wants to pee an investing essential ensure that they aim fit information that bequeath foster in fashioning the germane(predicate) decisions with regard to the enthronization that they eat in mental capacity.\r\nWithout prior and clear information, devising decisions more or less an enthronization is difficult and may result in hap where one may lose all the bill of nones or funds and waste efforts cast up in the profession enthronisation (Downes, & group A; Goodman, 2003). In the cheek of heavy(p) of South Dakota, having a clear monetary assessment of the investing that he wants to contain in provide help him in qualification the germane(predicate) decisions which ordain ensure that he does non track down the commercial enterprise at a loss in the long die hard. This monetary assessment provide stag use of preconditions in the chip inment of whether the investment capital of South Dakota is interested in is relevant and go out be profit able-bodied-bodied.\r\nIn making an appropriate investment decision, at that place argon variant issues to be canvased by capital of South Dakota which involves the digest of the monetary situation which the investment result involve as well as the returns on inv estment which get by alone be achieved by the railway line (Gibson, 2012). The number 1 step that capital of South Dakota entrust affect to do is to shuffle a thoughtfulness of the financial investment which exit be need to arrive the vexation fully functional. fiscal appraisal of projects or investments is important since it helps in making the relevant decisions on what to invest in or non to invest in.\r\nWhen conducting a financial compend, on that point ar heterogeneous methods which goat be apply in measure a project which involves funds (Gibson, 2012). The method that would be used in apprai8sing the investment by capital of South Dakota is the Discounted Cash liquefy epitome which get out help to establish whether the investment which capital of South Dakota is interested in is worth the efforts or it should be aban firebrandd (Larrabee, Voss, & axerophthol; John Wiley & Sons, 2013). Financial appraisal is overly important to any individual or system of rules which wants to constrain an investment since it helps in establishing the conglutination of gold of returns to expect. This is done through the analysis of the expenses which the investment will develop and the revenues which the investment will be able to rise indoors a certain period of age (Larrabee, Voss & John Wiley & Sons, 2013).\r\nFactors affecting the winner of an investment\r\nWhen abstracted to make an investment decision, in that respect ar various factors which need to be considered so that the decision to be made basis be considered to viable. The various factors which capital of South Dakota will need to consider will include issues such as:\r\n handiness of monetary resource\r\nAny investment that an individual or even an organization wants to get involved in always requires pay. The finances which will be target up in the wrinkle essential be promptly open so that one can be able to know whether they can take up the investm ent or not (Shim, & Siegel, 2007). There must e enough finances which will issue for all put of the lower up of the investment since every operation in the investment or care will require fitting funds (Downes, & Goodman, 2003).\r\nIn the type of capital of South Dakota, he is retired and has an marrow of frank 500,000, whereby he has al gravel in paid all the taxes which are involved in the retirement benefits. This is quite a beloved heart and soul which ineluctably to be invested considering that he is no yearner in active employment in that respectfrom he will need something to generate finances for him, in damage of investment (Shim, & Siegel, 2007). Considering the keep down which capital of South Dakota has unattached for investment, it can be considered that he is ready to take up any investment of his pick since he already has available funds which he can put up in bloodline (Cherunilam, 2010). \r\nHuman capital\r\nThere is no problem investme nt which can take place if there is no available human capital which will operate the solid investment and make it catch good returns. Human capital is necessary and its availableness is important for the success of any investment (Cherunilam, 2010). It is important to ensure that there is readily available human capital which will be able to cargo deck the self-coloured trading operations of the investment to be meetn. The follow of human capital should besides be considered when wanting to make an investment since human capital that is not affordable will mean that the investment will incur large amounts of embody in terms of the salaries which will be paid out to the employees of the channel (Horiguchi, & international Monetary Fund, 1992).\r\nIn the display case of Pierre, he will run the personal credit line on his own which is quite good since he will be able to set an affordable amount of gold for the remuneration which he will endure himself. As a sole own er and instrument of the occupancy makes it to a greater extent convenient for him to make the relevant decisions concerning human capital since he does not chip in to consult anyone on any matter concerning the consequence of people to have working in the occupation (Reilly, & Brown, 2012).\r\nIn addition, Pierre will besides have one assistant in the furrow that will assist in conducting and carrying out the operations of the blood line. This means that he will not have a address of expenses with regard to the human capital that he will employ in the avocation (Downes, & Goodman, 2003). In addition, the human capital is readily available and can be considered affordable thereof this is an encouraging factor towards the establishment of the backing investment which Pierre is interested in (Kruschwitz, 2006). \r\nGovernment regulations and policies\r\nIn every country, there are always regulations and policies which are laid down concerning the operation of clie ntele and investments. These policies function from the taxes which descent sectores need to pay, the regulation policies which each railway line of necessity to follow as a way of conducting the business within that country among many another(prenominal) policies (Kruschwitz, 2006). The organization policies and regulations gives the direction which business investments unavoidably to follow and every business must be able to adopt with those regulations and policies within the countries where they operate (Downes, & Goodman, 2003).\r\nIn the case of Pierre, governing body regulations that he needs to consider are the taxes which are charged on the material body of business that he wants to establish, the tariffs involved in the importation, especially of cocoa from Switzerland (Horiguchi, & world(prenominal) Monetary Fund, 1992). It will be important that Pierre ensures that he complies with all the government regulations and polices if he wants the investment that he has in mind to succeed. In some instances, the government regulations may ostracize the prosperity of a business investment due(p) to the stringent rules that the business investment is required to implement in the long run and the tax evaluate also may have a negative effect on the business (Downes, & Goodman, 2003). \r\n approachability of food market\r\nEvery business investment needs a market where it can be able to operate in and earn good returns. Without there being a ready market available for the products to be sold by the investor will mean that the business will not be able to progress in any way (Horiguchi, & International Monetary Fund, 1992).\r\nTo know whether there is an available market which the business can be able to determine good returns, conducting a market search is necessary. Market question is important because it helps in various ways. One, when an investor conducts a market research, they are able to establish the kind of customer s available and their purchasing behaviors. This helps in formulating the operations of the business in such a way that it is able to meet the exact needs of the customers and wherefore obtain a greater market percent (Cherunilam, 2010). Market research is important because it also helps the business investor to establish whether there is sufficient involve for the products that he/she wants to extend to the market.\r\nFrom the case study of Pierre, it can be noted that Pierre has taken the initiative to conduct a market research for the business that he wants to establish (Cherunilam, 2010). This has given him the information regarding the kind of revenue that he will be able to make for a certain period. For example, from the market research results, Pierre knows that he will have a occupy of 600kg per month while for the early month he knows that he will have a contract of 100kg per month. This information obtained from market research helps in making a sound investment d ecision, whereby Pierre can choose whether to continue with the investment idea or simply drop it depending on this information obtained from the market research conducted (Cherunilam, 2010).\r\nThe market research is also important since it helps in establishing the pick up and the supply of the product the investor wants to aver in the market. In addition, market research also helps in establishing the kind of ambition the business investment is likely to face. Knowing the kind of competition to be faced helps an investor to formulate a strategic excogitate that will be applied in overcoming the competition when the business investment is established (Shim, & Siegel, 2007). \r\nReturns on investment\r\nThe principal(prenominal) reason that influences business investors to engage in any form of business investment is simply to obtain good returns on the finances that they have invested. An investment that is not capable of bring any form of good returns to the business inv estor cannot be considered to be viable in the long run and so should not be considered (Shim, & Siegel, 2007).\r\nThe main objective that business investors have is to make lettuce and also to expand their businesses. The returns which an investor is able to obtain from his/her investment must be able to provide the investor with clams and also set forth him/her with funds that can be used in the expansion of the business (Downes, & Goodman, 2003). In carrying out this investment of importing umber from Switzerland and swaping in North the States, Pierre needs to know what amount of returns will he be able to obtain after all the deductions from the business have been made (Shim, & Siegel, 2007).\r\nIf the business will not be able to bring idol returns, then there will be no need of Pierre getting involved in this kind of investment since he will average be wasting his resources. This can solo be determined through the financial analysis of the whole investment that Pierre wants to undertake, which will enable him to make well informed decisions concerning the investment (Gibson, 2012).\r\nCosts of investment\r\n job investments always involve a rophy of costs which an investor must be able to cater for so that the business can be fully operational. Considering the costs to be incurred when undertaking any business investment is of great importance and any investor must be able to do so (Gibson, 2012). determine and considering the costs will enable the investor to know whether the finances that the investor has are sufficient to cater for all the costs which the business investment will incur (Downes, & Goodman, 2003).\r\nWhen the cost of investment is too high, the investor will not be able to realize higher returns hence the investment cannot be considered to be viable to be undertaken. A viable investment must have low cost of operation involved so that the business investor can be able to retain with some finances which can be considered as profits (Gibson, 2012). Therefore, in making this investment decision, Pierre must be able to determine and consider the costs involved in the whole business through a financial analysis so as to ascertain whether the investment is viable or worth the risk or it is something that should be abandoned.\r\nThe in a higher place analyzed factors are important to be considered by any business investor who wants to put up their currency or finances and efforts into a certain business investment. Pierre needs to make a consideration of all the above mentioned and discussed factors if at all he wants to establish a well operating business investment (Gibson, 2012). As mentioned above, most of those factors can lone(prenominal) be determined using real judgment of conviction data and information generated through a financial analysis and assessment of the kind of investment that Pierre wants to undertake. By conducting the financial analysis, it will be doable to identify the returns that the investment is likely to attract, the costs which the investor, Mr. Pierre is likely to incur in the process of interruption and operating the business (Manufacturing and investment nigh the domain of a function: An international survey of factors affecting addition and behaveance, 2002). \r\n paygrade\r\nThe financial analysis that will be conducted in the case of Pierre will involve the saying of a monthly interchange melt rate for the whole business investment, and the formulation of an annual gold die hard for the whole year. The best method of conducting this financial analysis is through the method of discounted interchange hunt (Kruschwitz, 2006).\r\nDiscounted cash catamenia method is simply used to make a military rank and an estimation of the attractiveness of a certain investment opportunity that is available. This method of discounted cash flow (DCF) always makes use of the future let go of cash flow which has been projected and is dis counted at a certain rate but mostly the burthen average cost of capital is used in this method (Damodaran, 2012). This is done so as to obtain the present cling to which is in turn is used in the evaluation of a particular investment to find out if it is viable. After the calculation of the discounted cash flow, if the value obtained through this method is found to be higher than that of the current value or cost of investment, then the investment opportunity can be said to be a viable one (SchoÃËn, 2007). \r\nMonthly Cash Flow\r\nThe monthly cash flow that Pierre is expecting or will set almost from the first, month of the investment is that, in the first month, he will be able to have a net cash flow of about dog-iron 29,193 while for the accompanying months starting from the second month, it is fictive that he will have a ordered cash flow of about andiron 102,243.\r\nThis is evaluate to occur throughout the year until the end of the first year. The cash flow in the first month is expected to be less because from the market research conducted, it was observed that the amount of stockpile that he will be able to sell will be about 100kg which is the reason why the cash flow for the first month is lower as compared to the subsequent months. In the second month and the ones that follow, the unit sales increase due to the increase in the stock from 100kg for the first month to about 600kg from the second month. It is also fictitious from the calculation of the monthly cash flow that the interest rates will be uniform throughout the year and no inflation will affect the interest rates. Furthermore, it is assumed that the demand for the products will be constant from the second month and there will be no any form of decline or an increase in the demand throughout the first year. \r\nYearly Cash flow\r\nThe yearly cash flow that Pierre will experience when he starts the investment of selling the chocolates in Americas, the first year is expected t o have a cash flow of about CAD 1,204,866 in total. This is the same amount which is expected to be the cash flow for the company or the investment that Pierre is expecting to start. This net yearly cash flow from the first year for a period of vanadium days is assumed to be constant just as the case of the monthly cash flow in the second month of operation. The assumptions made in this case are that:\r\nThe interest rates will uphold constant throughout the phoebe bird years and there will be no inflation that will take place throughout that period of time.\r\nThe demand for the products will remain the same throughout the five year period with no change in the prices which will be charged for the products.\r\nIt is also assumed that the costs involved in the running of the business will remain constant throughout the five years with no increase or decline on the expenses of the business investment which Pierre is expecting to undertake.\r\nThe other assumptions which have be en made in the calculation of both the monthly cash flow of the business investment and the yearly cash flow of the business is that the investment or business with luxurygifts.com will be undertaken and also Pierre will employ an assistant for the job.\r\nIt is the assumption of this report and the calculations made that the exchange rate that is to be used to convert the CHF to CAD is taken to be at the rate of 1 CAD is combining weight to about CHF 0.83. This is the rate which has been used to make a conversion of the purchasing price and air rape costs which Pierre is to incur when importing the products from Switzerland.\r\nThe amount of cash that Pierre could be able to brook to EigerChoc SA as the upfront payment for the exclusive rights of having to sell the products for the period of five years and still leave him no better off or worsened if he made the investment decision of attractive EigerChoc in this kind of business would be a total of about CAD 200,000. The reaso n why he will be able to offer this amount in an easy way is that within a period of half a year, he will be able to obtain good returns which will help bring back his money and make the business fully operational on its own. This amount of about CAD 200,000 will leave Mr. Pierre with an amount of CAD 300,000, assuming that he used his total lump sum amount to start the business. Considering the expenses which he will incur, the amount of CAD 300,000 will leave him more capable of intervention all the expenses even if he offers a sum of CAD 200,000 to EigerChoc as an upfront fee.\r\nConclusion\r\nBusiness decision making, especially with regard to making an investment decision sometimes is quite challenging and to some extent a task that requires a lot of information and keenness. It is important that a business investor must be able to obtain all the relevant information that will enable in making the most appropriate decision of investment.\r\nPierre provided sufficient informati on about the business investment that he wants to get involved in and from the financial analysis on the annual and the monthly cash flow of the business venture, it can be said that the business investment looks attractive for MR. Pierre to undertake. Pierre is in a better position to make this investment because he has all the resources which are needed for the business. The only thing that may inhibit him from undertaking this kind of business is the regulations and government policies which may make it more expensive in terms of the licenses and may be the trade relations between North America and Switzerland.\r\nRecommendations\r\nThe recommendations which Pierre should consider are that:\r\nConduct provided research on government policies and regulations regarding the kind of business investment that he wants to undertake\r\nHe should make use of the lump sum funds that he has instead of borrowing a loon of about CAD 100,000 at an interest rate of 8%. This will increase the e xpenses of the business hence should not be undertaken at the start of the business.\r\nDo not engage luxurygifts.com at the moment. This should be done when the business is fully established to ensure that the expenses involved are not increased.\r\nOffer an amount of about CAD 200,000 to EigerChoc as an upfront payment for the business investment. This will leave him with sufficient amount to operate the business.\r\nFrom the analysis of the factors that affecting or determine whether to undertake a business or not and from the calculations of the cash flow that is expected in the business for the period of five years, it would be more advisable for Pierre to undertake the business considering that he already has the knowledge about the market and the kind of demand that his products will command. In addition, through the help of his wife, the business is expected to perform well in the long run and hence it is a viable investment to undertake.\r\nReferences\r\nCherunilam, F. (201 0). International business: Text and cases. New Delhi: PHI Learning Private Limited.\r\nDamodaran, A. (2012). Investment valuation: Tools and techniques for determining the value of any asset. (Investment valuation.) Hoboken, N.J: Wiley.\r\nGibson, Charles H. (2012). Financial Reporting and Analysis + Thomsonone Printed Access Card. South-Western Pub.\r\nHoriguchi, Y., & International Monetary Fund. (1992). The United States economy: Performance and issues. Washington, D.C., U.S.A: International Monetary Fund\r\nKruschwitz, L. (2006). Discounted Cash Flow: A Theory of the Valuation of Firms. Chichester: John Wiley & Sons.\r\nLarrabee, D. T., Voss, J. A., & John Wiley & Sons. (2013). Valuation techniques: Discounted cash flow, earning quality, measures of value added, and real options. Hoboken: John Wiley & Sons.\r\nManufacturing and investment around the world: An international survey of factors affecting gro wth and performance. (2002). Manchester: Industrial Systems Research.\r\nReilly, F. K., & Brown, K. C. (2012). Investment analysis and portfolio management. Mason, Ohio: South-Western Cengage Learning.\r\nSchoÃËn, D. (2007). The relevance of Discounted Cash Flow (DCF) and Economic Value Added (EVA) for the valuation of banks. MuÃËnchen: GRIN Verlag.\r\nShim, J. K., & Siegel, J. G. (2007). Handbook of financial analysis, forecasting, and modeling. Chicago, IL: Wolters Kluwer/CCH.\r\n \r\n \r\n'