BFA438/QHO422 Business Finance for Managers Assignment

 

Introduction to Business Finance for Managers

Finance is the most essential element for running any business. This is particularly because of the reason that when they are optimally utilised in the business, they assist in successfully running the business. For starting up a new business, the appropriate type of finances must be managed so that the overall work can be improved. Hence, for this, the finances must be managed effectively and optimally so that they can assist in handling the business effectively. The present report will outline the summary of the business idea along with the discussion of the different costs to be incurred while operating the business. Further, the forecasted cash flow and profit and loss will be outlined along with the evaluation of breakeven. Lastly, the Key Performance Indicator will be highlighted for managing the new business.

Main Body

Summary of business idea

According to the latest trend, the health consciousness among people is increasing to a great extent. The trend includes a focus emphasised by the people on maintaining sustainability and ensuring effective organic working. According to the recent reports, it was seen that the organic food retailing business is expected to have a revenue growth of 11.4% annually (Organic Food Retailing in the UK - Market Research Report (2014-2029), 2025). It is due to the reason that the consumer trends are changing, and their preferences relating to a healthy lifestyle are increasing. Hence, as a result of this, the present business idea will deal with the development of the organic supermarket, which will deal in all the organic and healthy food products. It will include the products which are healthier for people to consume, and as a result, this overall work will improve.

With the evaluation of the business idea it is clear that there are certain types of risk which might be faced by Fit Pro in starting the business. It includes the financial risk as the finances needed for the business might not be arranged, and it can result in a risk towards the company. In addition to this, another risk includes the operational risk as the working of the business can be affected by the different external environment changes. Along with this, the strategic risk and the technical risk are also present (Owen et al, 2023). There are many different types of Technical improvements taking place within the external environment, which can affect the working of the company. Along with these risks, there are different sources of funds as well through which the business can collect and gather the finance for managing the business. The different sources of finance include the following-

• Bank loan is the most common type of source which includes taking loan from the bank and the financial institution and against this the interest will be paid to the bank (Sweeting, 2022).
• Another source of finance is the crowd funding which includes raising the money with the help of large number of people by using internet and emphasizes on taking small amount of money from the large number of people so that a lot of Finance can be gathered.
• Another source of finance includes the venture capital which is a type of private equity financing where in the investors provide the money in exchange of the ownership within the company which is provided in form of equity.

Outlining the discussion relating to fixed and variable costs

For running the business, the most essential aspect is that a particular cost will be incurred for managing and operating the business. It is due to the reason that when the appropriate business needs to be managed, then the optimum cost must be implemented. For managing and using the resources and other aspects within the business, it is required that a cost is paid. Hence, for managing the business successfully, the cost will be incurred, and as a result of this, it might be possible that the profit is not generated effectively. During the initial years, the cost may be high because the business is new and managing it might be costly. With regards to the cost, there are two different types of cost, which include the fixed cost and variable cost. The fixed cost is the one which remains the same throughout the working of the business, whether the production is going on or not. On the other side, the variable cost is the one which varies by production, and it can also be stated as the direct costs that are incurred for managing the business's manufacturing. In the current case of Fit Pro, different costs are being incurred for managing the business.

The business includes both the variable and fixed costs, and it is necessary that the company can cover the costs so that the profit can be generated (Calabrese, Cowling and Liu, 2022). It is so because when the total cost is deducted from the sales, then only the profit is generated. In the current case of managing the organic supermarket, the variable cost includes 65000, and this depends on the manufactured product. In case the level of manufacturing is decreased, then the cost will also reduce, and in case the production is increased, then the cost will also reduce. Further, a total of fixed costs includes 21130. This is the cost which will remain fixed even if the production takes place or not. This is particularly because of the reason that even when the production will not be undertaken, the marketing will be done and the machinery will be operating (Dasilas and Karanović, 2025). Hence, as a result of this, the company has to bear the fixed cost in any condition.

Profit and loss and cash flow statement forecast

Expected profit and loss

	Year 1
Particulars	Amount ($)	Amount ($)
unit sold	600
Selling price	150
Sales Revenue		90000
Lower Cost of Sales	65000
Gross Profit		25000
Gross Profit Margin		28%
Expenses:
Payroll	5800
Sales and Marketing	3540
Depreciation	1500
Utilities	2350
Insurance	1050
Rent	4540
Payroll tax	2350
Lower total operating expenses		21130
Profit before interest and tax		3870
Less Interest		1150
Profit before tax		2720
Less Tax @ 20%		544
Net Profit		2176
Net Profit Margin		2%

 

Expected cash flow statement

Particulars	Year 1
Cash inflows
Sales	90000
Total cash inflows	90000
Cash outflows
COGS	65000
Payroll	5800
Sales and Marketing	3540
Depreciation	1500
Utilities	2350
Insurance	1050
Rent	4540
Payroll tax	2350
Interest	1150
Tax	544
Total cash outflow	87824
Total net cash flow	2176

 

With the evaluation of the projected financial statement, it is clear that the net profit margin of the company is two per cent and the gross profit margin is 28%. This simply employees that the indirect expenses of the company are higher, and they must manage them effectively (Hannon et al, 2022). The reason behind the factors is that when the fixed cost is managed effectively, it will assist the company in managing the net profit well. With the help of the cash flow statement, it is clear that the net cash flow is 2176, and it is less. This simply means that the company can save a little cash even after deducting all the expenses from the cash. With this, it can be stated that the current business idea will and will be earning a good amount of profit in case it will be running effectively.

Breakeven point and margin of safety

Particulars	Formula	Figures
Selling price per unit		150
Variable  cost per unit		108.33
Contribution per unit	Selling price per unit - variable cost per unit	41.67
Fixed cost		21130
BEP (in units)	Fixed cost/contribution per unit	507
BEP (in value or monetary terms)	BEP (in units) * selling price per unit	76068

 

Margin of safety

 

Particular	Formula
	(current sales-breakeven sales)/ Current sales *100	15.5 %
Current sales		600
Breakeven sales		507

 

After the analysis of the projected financial statements, the breakeven point was also calculated. The breakeven point is defined as the point up to which the company is in a profit no loss situation. This simply means that in case the company is producing till the breakeven point, then they will be in a no-profit-no-loss situation. Hence, for the company to be successful, it must perform above the breakeven point. It is due to the reason that at the point of BEP, the company can cover all the costs, but no profit is generated. Hence, when the company produces above it, then automatically the profit generation will start (Ziegler et al, 2021). To be successful, it is necessary for Fit Pro they produce above 507 units so that they can start earning a profit. In addition to this, the margin of safety is defined as the difference between the breakeven point and the gross revenue. The breakeven point is the one at which the revenue starts to cover the cost. Hence, the margin of safety is 15.5%. This simply means that the company is capable of earning a profit of 15.5% by producing the current sales unit.

Key performance indicators

For the successful management of the business, the appropriate indicators must be set to monitor the performance. The key performance indicator includes the setting up of different standards through which the performance is monitored and compared (Muryanto, 2023). The major indicator set for the current business is that the profit margin must be at least 10%. In the current case, the company is expected to earn a net profit margin of 2%, which is less than the standard. With this, it can be stated that the company needs to improve its work so that it can meet the standard of 10% profitability. In addition to this, the selling unit is proposed to be set at 650. But the actual profit and loss account highlights that 600 units are produced. This also implies that the company is not able to meet this target. Thus, it can be stated that Fit Pro need to work hard so that the overall predicted working can be improved and as a result of this working divisibility of the company increases. With this, it is clear that the appropriate indicator set will guide the company to manage the work well.

Conclusion

The above study highlighted that the appropriate finances must be managed in the business so that the business can operate successfully. While starting up the new business, the appropriate finances must be managed so that the work is effectively maintained. The study highlights that opening an organic store is a new business which will assist in increasing profits. The expected profit and loss account highlighted that the company will earn of profit in the first year and will also have a cash balance at the end of the year. This simply means that the business idea will be viable, and as a result of this, profits will increase. Lastly, it was stated that expected business financials highlighted that the standards were not able to be met, and it was mainly due to the changes in the external environment.

 

References

Books and Journals

Calabrese, R., Cowling, M. and Liu, W., 2022. Understanding the dynamics of UK Covid‐19 SME financing. British Journal of Management, 33(2), pp.657-677.

Dasilas, A. and Karanović, G., 2025. The impact of FinTech firms on bank performance: evidence from the UK. EuroMed Journal of Business, 20(1), pp.244-258.
Hannon, M., Cairns, I., Braunholtz-Speight, T., Hardy, J., McLachlan, C., Mander, S., Sharmina, M. and Hardy, J., 2022. Policies to unlock UK community energy finance. Available at SSRN 4109070.
Muryanto, Y.T., 2023. The urgency of sharia compliance regulations for Islamic Fintechs: a comparative study of Indonesia, Malaysia and the United Kingdom. Journal of Financial Crime, 30(5), pp.1264-1278.

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Owen, R., Botelho, T., Hussain, J. and Anwar, O., 2023. Solving the SME finance puzzle: an examination of demand and supply failure in the UK. Venture Capital, 25(1), pp.31-63.
Sweeting, R.C., 2022. UK venture capital funds and the funding of new technology-based businesses: Process and relationships. In Venture Capital (pp. 315-336). Routledge.

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Ziegler, T., Shneor, R., Wenzlaff, K., Wang, B., Kim, J., Paes, F.F.D.C., Suresh, K., Zhang, B.Z., Mammadova, L. and Adams, N., 2021. The global alternative finance market benchmarking report. Available at SSRN 3771509.

Online

Inflation and price indices. 2025. Online. Available through: <https://www.ons.gov.uk/economy/inflationandpriceindices#:~:text=Consumer%20price%20inflation%2C%20UK%3A%20March%202025&text=On%20a%20monthly%20basis%2C%20CPIH,the%2012%20months%20to%20February.>

Organic Food Retailing in the UK - Market Research Report (2014-2029). 2025. Online. Available through: <https://www.ibisworld.com/united-kingdom/industry/organic-food-retailing/5010/>