Finance and Operation plan

Answer

• Student Instructions - Assessment Task 3: Financial Plan

   

  THIS HAS TO BE THE SAME BUSNIESS WITH ASSIGNMENT 2, you can check the assignment2 for more details of the business.

  Using the business idea identified in the Business Proposal, students are required to research and prepare a formal business plan using the following template.

  Completion of this assessment will require you to:

  Prepare a Financial & Operations Plan

   

  Estimate revenue relevant to your proposed business idea

  Estimate expenditure relevant and appropriate to your business idea

  Estimate business start up costs

  Develop statements of personal and financial position

  Complete cash flow statements and projections

  Determine business start up costs

  Develop and interpret profit and loss statements

  Use financial reporting templates (Excel)

  Implement management structure and strategies to operate an efficient and effective business

   

  Assessment Task 3: Operations & Financial Plan

   

  Name:                                                   Student No.:

   

   

  Please provide a brief summary of your Business Idea (You may use the same description in the previous assignment)

  Dropship Online store

  The rise of e-commerce in the global business space provides significant opportunities for investment. Observation of trends in the world provide evidence of increased utilization of online market by consumers and traders. E-commerce offers advantages to start ups, especially in terms of reducing overhead cost, an idea that this business plan aims to implement. Dropshipping is a new model of e-commerce where online sellers act as retailers. It entails posting and selling wholesale products online but the seller only sends their shipping information to wholesaler. The dropship model involves a customer placing an order and the retailer forwarding it to the supplier who then directly sends the product to the customer.

   

   

   

   

   

  Operations & Financial Plan

  1. Recruitment

   

  Consider your recruitment policies – Detail the basis on which you intend to select your staff, and what you can do to ensure that the process is as successful as possible.  

  Tips：Choose one method each in internal and external sources

  I will utilize both internal and external approaches to recruit my employees for the dropship business. It is fair to establish that the business requires people who are proficient and experienced in retail, digital marketing and statistics (data analytics). Since the business is a start-up, the first recruitment strategy will be external. I will utilize social media platforms to seek employees. Noteworthy is the fact that the starting capital is quite limited, so this option appears wise as it will allow me to reach a significant number of potential workers without spending a lot of money. This external strategy will target professionals in digital marketing and software development.

  Internal sources will also be useful in the recruitment process, and it will be leveraged through word of mouth. Given the limited resources at the firm’s disposal, word of mouth will allow me, as the sole proprietor to find qualified people within my social circles. This technique usually involves sending out a particular message through friends, family and colleagues. It is a cost-efficient strategy that tends to deliver commendable outcomes.

  Five-Step Recruitment Plan

  Job Description

  AcyTex is an emerging e-commerce brand seeking creative and competitive talents to participate in its noble journey to global dominance. Come let’s serve clients in a fun and innovative way. Send your applications and résumés via email.

  Promotion Tool

  Facebook platforms will be used to find the right personnel. These platforms include Facebook.com Instagram, and WhatsApp Status/link sharing.

  Applicant Screening

  The first screening stage will involve background checks on applicants. This will allow the recruiter to determine whether information in their application is concurrent with their publicly available information on government and social media portals.

   Interview Process

  The interview phase will focus on the applicants’ characters and attitude towards e-commerce. Competent individuals will demonstrate passion in retail, e-commerce, and the digital economy at large.

  Job Offer

  Once the right people are distinguished, the recruiter will contact, and assign them convenient positions based on their proficiency and job openings within the business.

   

   

  2. Position Descriptions

   

  Describe the key responsibilities and skills required for two positions within your business, including your own. In addition, outline your obligations as a business under the National Employment Standards i.e. wages, taxation, superannuation and WorkCover. 

              You may include full-time or part- time staff, contractors, freelance employees or interns and work             experience students.

   

  These two boxes, first one for yourself, second one for another person in your business

  	Digital Marketer	Operations
  	Key Duties	Skills Required
  1	Landing page design and development	Soft-coding skills
  2	Search Engine Optimization	Keyword programming
  3	Content Generation	Writing, Visual editing,
  4	Customer support	Public relations skills
  5	Sales	Retail skills

   

   

   

   

   

   

   

   

   

   

  	Data Analyst
  	Key Duties	Skills Required
  1	Software Integration	Strong ICT skills
  2	Database management	Strong ICT skills
  3	Business Analysis	Structured  Query Language (SQL)
  4	Consultation	Critical thinking, presentation skills
  5

  \

  Tip: remember to include it in your financial cash-flow projection

   

  Type of employment (Full-time, part-time, fixed term or casual): _Part-Time________________

   

  Salary/Wages per month: $_____4,800______(can check fairwork.gov.au/ fair work info statement0

   

  Withholding tax per month: $____4300______（ato.gov.au)use withholding tax calculator

   

  Superannuation entitlement per month:  $___100_________

   

  Annual leave: ___500______

   

  Work-cover payment per month: __350_________

  3. Human Resource Management

  Identify two business objectives and demonstrate how you will meet those needs using human resources. Include the costs associated with the human resource strategy you have chosen.

   

  Business Objective	·                     Human Resource Strategies	·                     Cost
  Launch landing page in the first three months	secure freelance web designer who can continue web development and maintenance for at least 12 months	2,750
  Utilize operating capital to restock the store in six months so as to meet the increasing demand	Hire a competent data analyst Seek recommendations from analysts regarding the firm’s performance.	2,400

   

   

   

   

   

   

  4. Time Management
  1. How many hours do you intend to work per week on your business? 
     I intend to work at least 40 hours per week since the organization is quite small, and it needs me to partake in major management and oversight duties on a daily basis
  2. How many weeks do you intend to work in the year?
     I intend to work for 36 weeks in each year. This figure gives me a seven-day per month (12 weeks per year) allowance for periods when workflow will reduce to almost zero due to lack of sales. Also, the free time will be crucial as I will utilize the opportunity to engage in networking and other business events/seminars.
  1. There are a number of useful apps and software that can help improve your time management. Research three sources that will save you time (and perhaps even money too!) by streamlining tasks within your business.

  For the sake of this business, I will use Excel, Hootsuite, and Teamwork for project management.

  5. Productivity Timelines

              Choose one of the following which best suits your business.

   

  1. Outline the schedule for production of your product across a year. Include time to ideate, manufacture, send to retail, promote and sell.
     E.g. A fashion designer might develop ideas for designs in January, manufacture February, and send to retail in March ready for sale in March/April for an autumn collection.  This process would begin again in April.

   

  1. Outline the seasonal expectations of your service across a year. Include peaks and troughs in expected client numbers and what you will do during quiet periods.
     As evidenced in the financial projection charts, each of AcyTex products has peaks and troughs. It suffices to assert that the decision to have a broad range of products is to allow the business to maintain sustainable performance even when some products are not selling. Below is a graphical illustration of how operations will be implemented during peaks and troughs
  1. If you are seeking employment, identify key times during the year when employment might be more readily available in your industry and create a timeline of tasks to be completed prior to these dates.
     g. Update resume, update LinkedIn profile, etc.

   

   

  Month	Production Focus
  Example: Jan	School Holidays: No Students Focus on Marketing to students and parents
  Example: Feb	School Term 1: Peak enrolment time Focus on administration and bookings Begin tutoring classes
  Jan	Low laptops sales Focus on marketing and selling watches, sneakers, and necklaces
  Feb	Low laptops, watches, and necklaces sales Focus on diversifying and marketing the sneakers products
  Mar	Low watches, sneakers, and necklace sales Focus on marketing laptops Engage in a two-week business development program (conferences and seminars)
  Apr	Low laptops, watches, and necklace sales Focus on busting sneaker sales Engage in a two-week business development program (conferences and seminars)
  May	Low sales across all products Focus on business conferences and seminars for branding and networking (2 weeks)
  June	Low sales across all products Focus on business conferences and seminars for branding and networking (2 weeks)
  Jul	Low sales across all products Focus on business conferences and seminars for branding and networking (2 weeks)
  Aug	Low sales on laptops and necklaces Focus on boosting sneakers and watches sales Engage in a week-long business development program (conferences and seminars)
  Sept	Slight sales increase in all products except necklaces Focus on busting sales for the products Engage in a week-long business development program (conferences and seminars)
  Oct	A surge in sneakers sales Focus on boosting this product’s sales
  Nov	Demand increase for sneakers, watches, and necklaces Invest in marketing these products for increased sales
  Dec	Sharp surge in sneakers sales, and a huge increase in watches and sneakers Focus on meeting the heightened demand

   

  In addition, address how you would manage the following:

   

  What procedures will you utilize to suit a sudden increment sought after?

   

  1. What growth strategies will you utilize to accommodate a sudden increase in demand?
  • Temporary staff – This option will be highly convenient in December when the sales record a sharp increase. The temporary members will be in charge of quality control.
  • Drop shipping – This technique describes the underlying business model used by AcyTex, and it will be useful during sudden demand increase since the firm will not have to deal with extra inventory costs.
  1. What strategies will you employ to accommodate a sudden decrease in demand?
  • Embrace technology – marketing is a crucial part of sales, so, when demand decreases, products will still be marketed through digital avenues. It should be understood that priority will be given to the high-performance products to boost sales.

   

   

  7. Quality Control

              What processes and measures will you use to ensure consistent quality and improvement of your             product or service?

              Producers: how will you maintain product consistency on a regular basis? 

              Service providers: how will you ensure the quality of your service is delivered consistently? 

              Job seekers: what will you do to maintain and improve your skills until you find employment?

    On-site supplier evaluation – This phase will be conducted before the AcyTex store enters into any dropship supply deal with any manufacturer or wholesaler. Team members will visit the facility to ensure that products are of the desired quality. Eligible supplies will have high quality programs and reliable return-policies.

    After-service enquiries – The customer support personnel will reach out to clients after every purchase to ensure that products are satisfactory. AcyTex will offer a return policy for low-quality goods.

   

  8. Maintenance Plan

  Complete the table below listing the items requiring maintenance, and explain how you intend to manage this requirement. Include all equipment used in your business including plant, tools and office/computer equipment. Estimate the costs associated with carrying out these maintenance activities Tip: remember to include it in your financial cash-flow projection

   

  Item	Potential fault	Maintenance Plan	Associated Costs
  E.g. Vacuum cleaner	Breakdown or loss of suction	Empty, clean and store equipment daily according to business procedure. Test/Tag and service equipment every six months	$25
  Database system	Memory usage	Expand the database	$120
  Landing page	Outdated version	Upgrade the system	$120

   

   

  9. Monitoring Performance

              Complete the table below listing a minimum of 4 business key performance areas and identify the systems you would use to monitor and record necessary information for these areas. (EG: resource usage, product service output, wastage, profit, stock levels, stock turnover, debtor / creditor payments, market share, customer feedback, product returns, safety, efficiency, breakdowns).

   

  Key Performance Area	Monitoring	Resources & Recording systems to be used	Frequency
  Marketing	Monitoring of customer reactions and orders taken as a result of advertisements placed in local newspaper	Web analytics Order & Despatch report	Weekly
  Resource usage	Monitoring operating cost	Utility bills Supplier invoices	Monthly
  Customer feedback	Customer satisfaction levels, complaints and returns	Customer feedback surveys post service delivery Complaints register	Monthly
  Product Returns	Return rates	Product return report	Bi-annually

   

   

   

  10. Networks, Industry and External Business Environment
  1. Identify any current personal contacts and associations within your specific industry who could provide you with initial advice or mentoring while you set up your business or search for employment.

  As an already established entrepreneur, my business school instructor will play a crucial role as my mentor.

  1. List three industry networks you intend to be involved with. What is the cost of yearly membership to the network? Tip: remember to include it in your financial cash-flow projection
     Make sure you include attendance at these events in your timetable if you intend to go regularly.
  • Australian Information Industry Association (AIIA) – Annual membership fee of 150 dollars
  • Australian Retailers Association – Annual membership fee of 500 dollars
  • National Online Retail Association (NORA Network) – Zero Annual membership fee for retailers

   

  1. How will you stay informed of changes, trends and growth patterns of your industry?

  - Professional development workshop/seminars

   

  11. Workplace health & safety

              As an employer, you are responsible for providing a healthy and safe working environment for your employees.  List five potential hazards and detail procedures to be followed to minimise or eliminate risks to self, staff and customers (& general public). Include the estimated costs associated with these strategies Tip: remember to include it in your financial cash-flow projection

   

  https://content.api.worksafe.vic.gov.au/sites/default/files/2018-06/ISBN-Officewise-guide-to-health-and-safety-in-the-office-2006-01.pdf

   

             

   

  Potential Hazards	Strategies to minimise risk	Costs
  1 Optical damages	Monthly eye check-ups and mandatory off-work days (twice per week)	$20 per month
  2 Workplace stress	Team work and bi-annual counselling sessions	$200  per session

   

   

   

   

  12. Statement of Personal & Financial Position

  Sole proprietorships often face a huge challenge as their fiscal operations are directly linked to the owners’ personal finances. On this note, I intend to enhance my financial position through savings injection and venture capitalist funding. I will save the income I generate from external sources, then use the money to fund business processes. This approach will allow me to enhance the value of AcyTex while facilitating its daily operations. Venture capitalist funds will be sourced in the second year to separate the business from my personal finance. At that point, I will partner with a venture capitalist who will purchase some shares of the business at a price based on the firm’s value.

   

   

   

   

  13. Personal Income & Expenditure

  6.1.1   Personal Statement - Income & Expenses
  INCOME	$	EXPENDITURE	$
  (Average Monthly)		(Average Monthly)
  DRAWINGS	500	Credit Commitments -:
  Other -:		Mortgage
  Spouse Income	250	Other Loans -:
  Basic Family Payment	250	Personal Loans
  Interest / Dividends	100	Credit Cards -:
  Rent Received		Bankcard / Visa
  Part-time work	300	Other credit cards (Store)
  		Other Commitments -:
  		Rent / Board	50
  		Superannuation
  		Insurance -:
  		Life
  		House & Contents
  		Living Expenses -:
  		Home Maintenance	150
  		Food	150
  		Take-Away-Food
  		Motor Vehicle -:
  		Registration & Insurance	20
  		Fuel & Oil	30
  		Repairs & Maintenance	20
  		Utilities -:
  		Gas	10
  		Electricity	20
  		Rates (Council / Water)	10
  		Telephone	30
  		Education -: (Self & Children)
  		Fees, Uniforms, Excursions
  		Books, Stationery etc
  		Public Transport
  		Clothing (incl. Shoes)
  		Children's Pocket Money
  		Entertainment -:
  		Sport, Theatre etc
  		Pets
  		Cigarettes / Alcohol
  Total Monthly Income	1400	Total Monthly Commitments	490
  Deficit	0	Surplus	910
  TOTAL	1400	TOTAL	1400

   

   

  14. Personal Assets & Liabilities

  6.1.2  Personal Statement - Assets & Liabilities
  ASSETS	$	LIABILITIES	$
  Cash at Bank	18700	Mortgage -:
  Term Deposits
  Other Bank Accounts -:
  Building Societies
  Credit Unions
  Other Financial Institutions
  House & Land at -:
  Address
  Other Properties -:
  Address
  Motor Vehicle/s -:		Personal Loans
  Make Model Reg'n		Mastercard -:
  Furniture / Household effects	1000	(limit $
  Life Policies (Surrender value)		no.                                 )
  Superannuation		Visa -:
  Motor Bike		(limit $
  Caravan		no.                                 )	1700
  Boat		Other Credit Cards -:
  Jewellery	300	(e.g. Store Cards)
  Paintings	200	Current Bills (Total)
  Collections (Stamps, Coins etc)
  Shares / Investments	500
  Total Assets	20700	Total Liabilities	1700
  Deficit	0	Surplus	19000
  TOTAL	20700	TOTAL	20700

   

   

  15. Value of Business Assets Currently Owned

  The information contained here will provide the basis for your initial Balance Sheet.  List any asset(s) and their current value.

   

  Item	$
  Capital	18,700
  Office Equipment (Furniture)	1,000
  Shares/Investments	500
  Total	20,200

   

   

   

   

  16. Business expenses for the Next Two Years

  Think of your business expenses as two categories; your start-up expenses and your operating expenses.  All the cost of getting your business up and running should be considered as start-up expenses.

             

  1. List start-up expense items for business operations (these are not business assets)

   

   

  Item	$
  Business name registration Insurance Initial stock ( inventory) Licenses and permits Advertising and promotion	500 2,400 20,700 1,000 1,780
  Total – Start-up expense	$26,380

   

  1. Using the table below identify ongoing operational resource required for your business. The list should include any plant and equipment, fittings and tools needed for the business for the next two years.

   

  Item	$	Date *
  Website (Landing Page) Office Furniture & Equipment: ·         Desks ·           ·         Chairs ·           ·         Computers ·           ·         Fax, telephone	50   90 90 120 40	01/12/2020   01/12/2020 01/12/2020 01/12/2020 01/12/2020
  Total	$340	01/12/2020

   

   

  Tip: remember to include it in your financial cash-flow projection 

   

  17. Summary of Business Start Up Costs

  Most new businesses have a finance requirement. One of the main reasons for small business failure is under-capitalization. It is especially important therefore to carefully consider and realistically calculate your finance requirements.

  The cashflow forecast will indicate any deficiencies in funding requirements and, for the business to be viable, sources of finance to cover such deficiencies will need to be confirmed.

  Review cashflow to determine how long will it take for the business to start showing a cash surplus.  Many businesses take one or more months to establish before sales generate sufficient income to cover expenses.  Therefore, in addition to Resource Requirements and Start Up costs, it is prudent to have access to funding equal to 2 to 3 months operating costs to allow the business the necessary time to become established.

   

   

   

   

   

  Business Start Up Costs

   

  Cost of Goods Sold		350	330	330
  Payments
  Accounting		50	50	50
  Advertising & promotion		100	80	80
  Bank charges
  Furniture & Equipment		300
  Insurance		200	200	200
  Interest
  Lease / Rent
  Legal costs
  Utilities
  M.V.  -  Fuel & oil
  M.V.  -  Rego & insurance
  M.V.  -  Repairs & maintenance
  Printing, stationery & postage		40
  Professional development		54	54	54
  Consumables
  Rates
  Salaries & wages		200	200	200
  Superannuation
  Telephone  -  Landline, mobile, ISP
  Workcover
  Plant & Equipment (Capital)
  GST Paid on Inputs		0	0	0
  GST Paid to ATO			0	0
  Drawings
  Loan Repayments
  Total Payments		944	584	584

   

   

   

   

  Total Initial Expenses for the first three months                                                                                           

  $2,112

   

  Available Funds

  Do you have a Shortfall of cash?                    No (there is no shortfall of funds)                 

  The remaining balance is       =          $ 18,588

   

   

   

   

   

  18. Sources Of Finance

  Provide an explanation below of how you would source funds to cover total start-up expenses and additional funds identified as needed to support the start-up and first 2 to 3 months of business operation. Remember to show repayments of loans and interest in your cashflows.

  If no borrowings were needed, as an assessment requirement, you will need to provide detailed information as to how you would have sourced finance from an independent sources eg. ANZ bank.

              The Australian government is currently supportive of small and medium-sized enterprises. Such a bold position has inspired support from independent financial sources such as banks and other hedge fund sources (Yesseleva-Pionka 2019). As far as AcyTex is concerned, the ANZ bank’s business growth fund will be sourced to finance at least 2-3 months of the business operations in the first financial year. For this fund to be accessed, the business ought to be registered and operational (Yesseleva-Pionka 2019). Since the ANZ business growth fund is usually released in the form of grants, it appears more convenient than bank loan options, even when the rates are as low as 1.5 percent. Noteworthy is the fact that the loan option will be considered if the ANZ bank does not release this grant.

   

  19. Pricing Policy & Rationale

  This section requires you to calculate what you need to charge (refer to Unit 7 notes for methods). You already know from your market research what you are going to charge. Only complete sections applicable to your business pricing.

   

  1. Calculation of an Hourly Rate for Service Provided (if applicable)

  Explain how you calculated your hourly rate. Be very conservative about the hours you can actually charge for in the early stages of your business.

   

  1. Calculation of a Mark Up for a Retailer (if applicable):

  The mark up percentage for the AcyTex products is based on the general formula: ((sales price – minus unit cost) / unit cost)) x 100.

   

  1. Calculation of a Sale Price (Wholesale) for a Manufacturer (if applicable)

  If you are a Manufacturer explain how you calculated your wholesale price

   

  1. Calculation of a Sale Price for Online Sales (if applicable).

  While the mark-up retail price was also utilized to help define the price, AcyTex pricing is tethered to average sales price for similar products in other markets. Such a move makes perfect sense especially since the business operates as a middle-man

   

  20. Cashflows

   

  1. Summary of Cashflow Statements

   

   

  PROJECTED CASH FLOWS	YEAR  1 (Drawn from Financial Spreadsheets)	YEAR  2 Drawn from   Financial Spreadsheets)
  Total Revenue	$28,890	$62,130
  Cost of Goods Sold	$9,950	$16,130
  Total Payments	$8,168	$10,838
  Total (Revenue less COGS & Payments)	$10,772	$35,162
  Estimated Tax Savings	$4,270	$13,459
  Opening Bank Balance	$1,400	$20,211
  Closing Bank Balance	$20,211	$55,471

   

  21. Profit And Loss

   

  1. Summary of Profit & Loss Statements

   

   

  BUDGETED PROFIT & LOSS	YEAR  1 (Drawn from Financial Spreadsheets)	YEAR  2 (Drawn from Financial Spreadsheets
  Total Revenue	$28,890	$62,130
  Cost of Goods Sold	$9,950	$16,130
  Gross Profit	$38,840	$78,260
  Total Expenses	$8,168	$10,838
  Net Profit before Tax	$30,672	$67,422
  Less Tax	$4,270	$13,459
  Net Profit after Tax	$26,402	$53,963

   

   

   

   

   

  22. Balance Sheets

   

   

  1. Initial Balance Sheet (refer financial spreadsheets)                                              

   

  Proprietorship                         =          $ 20,700

  Total Assets                             =          $ 1,400

  Total Liabilities                                   =          $ 0.00

   

   

  1. Balance Sheet At End Year 1 (refer financial spreadsheets)

   

  Proprietorship                         =          $ 47,102

  Total Assets                             =          $ 32,072

  Total Liabilities                                   =          $ 4,270

   

   

  1. Balance Sheet At End Year 2 (refer financial spreadsheets)

   

  Proprietorship                         =          $ 101,065                   

  Total Assets                             =          $ 99,494

  Total Liabilities                                   =          $ 17,729

   

   

   

  23. Taxation

              Assistance may be found at www.ato.gov.au or www.business.vic.gov.au

   

  1. List the Taxation Obligations For Your Business
  • Personal Income Tax
  • Payroll Tax

   

   

   

   

   

  1. Source Documents

  List the source documents and records you will need to keep in your business. State where appropriate how long they must be kept.

   

   

  Source Documents	Duration
  Sales Receipts	Entire business life cycle
  Bills	Entire business life cycle
  Invoice Statements	Entire business life cycle
  Profit and loss statements	Entire business life cycle
  Asset Purchase records/receipts	Annually

   

   

  24. GST

                   At what level of Revenue does GST Registration become applicable?                   $ 75,000

   

                   Based on your projected revenue – will you be registering for GST?                   No      

   

  25. Payments – Taxation

   

  Year 1 $(From the P & L).  $(From the Cash Flow) per month has been provided. 

  The tax rate for year 1 is $ 356 per month. This amount is deducted from the company’s finances on monthly intervals.

   

   

  Year 2 $(From the P & L).  $(From the Cash Flow) per month has been provided.

  The tax rate for year 1 is $ 1,122 per month. This amount is deducted from the company’s finances on monthly intervals.

   

   

   

   

   

  26. Break-even

   

  The break-even point is the sales volume at which revenues and total costs are equal and so no profit or loss is made.  Break-even analysis helps you determine your fixed and variable costs so that you can set your prices appropriately and forecast when your business will be profitable.

   

  Carpe Diem produces a single product. The following cost data is given about its product:-

   

  Selling price per unit	$17
  Fixed expenses
  Selling & administration	$130,000
  Interest expense	$10,000
  Variable expenses
  Cost of goods sold	$4
  Selling & administration	$3

   

   

  Formula:

   

  Contribution margin   =                      Price per product – Variable cost per product                                                                                                                                              

   

  Breakeven                   =                                  Fixed Costs

                                                                                      Contribution

   

   

   

  1. What is Carpe Diem’s contribution margin? What is the business contribution margin for your business?

  Carpe Diem’s Contribution Margin = 17 – (4 + 3)

  Answer = $10

   

  AcyTex Contribution Margin = 450 – 360

  Answer = $90

  1. What is the break-even point in units for Carpe Diem? What is the break-even point for your business?

  Carpe Diem’s Break Even = 140,000/ 10

  Answer = $14,000

  AcyTex Break Even = 8168/90

  Answer = $90.75

  1. If Carpe Diem wants to earn a profit of $42,000 instead of break-even, how many products the company must sell?

  No. of Products = profit/contribution margin (42,000/10)

  Answer = 4,200 products

   

   

   

  27. Ratio Analysis – Postgraduate And Honours students only

   

  1. What does the liquidity ratio measure?

  Liquidity ratio measures an organization’s capacity to resolve its debt obligations while maintaining fair margins (Cockcroft & Russel 2018).

  1. Which ratio measure the income or operating success of a business?

  Profitability ratios measure the operating success of a business (Cockcroft & Russel 2018).

  1. What does the leverage ratio tell us about the business?

  It offers a glimpse on the amount of debt incurred by a business, and how it is bound to impact future operations (Cockcroft & Russel 2018).

  Bibliography

  Cockcroft, S. and Russell, M., 2018. Big data opportunities for accounting and finance practice and research. Australian Accounting Review, 28(3), pp.323-333.

  Yesseleva-Pionka, M., 2019. Australian Higher Education Sector and Small and Medium Enterprises (SMEs). In ICSB World Conference Proceedings (pp. 1-7). International Council for Small Business (ICSB).