Manage Finance assessment 1 (1) (1)
Manage Finances Part 1
Current Ratio: Current Assets
With the total cost of all equipment being $32,550, Charlie should give a lee way about $10, 000 in case any other equipment is needed or if there is a problem. The first few weeks will be difficult to find a large number of customers and therefore, it is often not good to think you will reach your expected performance in the first few weeks. Therefore, the running costs and wife salary should be taken into consideration as well.
What Charlie has not considered is that Charlie must apply for an Australian Business Number and register his business. He will need to pay certain taxes and legal insurances. These will not cause a serious affect but, the investment should also take into consideration, these requirements. About $2,000 for the government payments.
Charlie should give at least 10 weeks lee way for running costs and wife salary, because the business will not be performing straight away.
With about $500 per week, another $5,000 should be kept in case the business does not run well at the start.
$10,000 should also be used for advertising. Advertising is very important for early stages of a business. Advertising will include newspaper, websites and flyers.
All together I would advise Charlie to save at least $60,000 for the safety of the business. $32,550 raised up to $42,550 for the equipment and any other unexpected equipment expenses, $5000 for 10 weeks of running costs, and the $2,000 for government payments. When investing it is always important to allocate some money for emergency situations. Lastly $5,000 should be spent on advertising.
He will probably need a bank loan, to afford all of these additional expenses that he has not yet considered. This would be about $20,000 loan from the bank, it ensure that the business can start and grow fast.
Calculate: Fuel & equipment $200 p/w
200/6 = 33.33 per day 33.33/8=4.76 per hours......
Charlie is spending about $450 a week, not taking into consideration the initial investment.
$10 per hour x 45 Hours = $450 per week for Breakeven per week
With work 45 hours a week, Charlie would have $10 an hour and break even. However if Charlie wants to make a lot of money to pay for his children and get a good life, he must earn a lot more.
I would make Charlie budget $30 an hour for his services. This means, he earns $1125 a week. $30 x 45h = $1,350 per week. This means he makes a profit of $900 a week, taking out running costs and wife salary.
In one year or 48 weeks,
$900 x 48 weeks = $43,200 per year
Charlie will have earned about $43,200 which will mean he has almost paid off his initial investment in one year. This is a great achievement and he will be making a lot of money.
Sales in Jan were the lowest. Feb increased but still was not reaching satisfactory performance. In March the results and performance was satisfactory. The April performance was also very good. May seemed to be a poor month, however June performance extremely well.
Take into account that these profit figures have not taken into account the taxes required to pay.
This business is a very good business. Financially, the business will perform very well. It is expected that if Charlie can get a lot of business with the $30 per hour, Charlie can make a lot of money. If Charlie is not performing so well, Charlie must lower the price and this could lower profits. However if Charlie is perform really well, the price could even be raised to get more profits. The start of the business is the most important and Charlie must try as much as possible to get the business started.
Charlie should also invest some money in advertising, to get more customers. This business is one that customers only require every few weeks, and therefore Charlie must find a lot of customers. He must also try his best to satisfy their needs so they will hire him again.
Overall, Charlie has a good chance in this business venture. If the business goes to plan, Charlie could pay off his initial investment within the second year, and make more than $40,000 a year, including taxes. This is great for a job that Charlie enjoys.
Study online BS09 manage finances, AIPE...
You've reached the end of your free preview.
Want to read all pages?