Financial Analysis
A financial analysis exists in every business of any industry. Through this we can identify the feasibility, stability and profitability of any business. The financial finding assists the management’s decision process by providing adjectival information which could stabilize a firm decision. Our financial analysis is for the next three years. After through feasibility study and financial research. Our financial plan is made three different Scenarios as listed below,
· Base/ Most possible situation
· Best / Optimistic situation
· Worse / Pessimistic situation
When we look at are financial analysis we have some objectives for the next 3 years. They are to achieve 70 million revenue target, Achieve a net profit of 21 million and to serve a minimum of 4000 customers for the next 3 years. When we talk about are cash flows it will give the details of the movement of cash in and out of the business.
When you look at the worst case situation it can occur in off season, management will charge low prices relatively management will try to promote to locals. In the base case situation the management would relatively would charge competitive prices in the market. In the best case situation management would charge a premium for the products and services the hotel is offering, this could be because there is a high demand for the hotel.
When we look at are capital budget there is a property cost of 8 million. And as promotions play a major role for our business to get to know the hotel by the local and foreign tourist we have separated 5 million. Initial we will be using TV adverting and following that there will be billboards, social media, travel sites, reef lets, brochures, magazine and so on and so forth. We have separated 1 million for are cost of equipment as we will be needing to use latest technology and give our guest the best experience. As for are hotel building construction we have separated 5 million. To give our guest the best and quality service we are using well trained and experience stuff for the convenience and the safety of our guest, so to do this we have allocated 300,000 for training cost. When we look at all of these cost we will be getting an initial cost of 19.3 million.
Capital Budget
A financial analysis exists in every business of any industry. Through this we can identify the feasibility, stability and profitability of any business. The financial finding assists the management’s decision process by providing adjectival information which could stabilize a firm decision. Our financial analysis is for the next three years. After through feasibility study and financial research. Our financial plan is made three different Scenarios as listed below,
· Base/ Most possible situation
· Best / Optimistic situation
· Worse / Pessimistic situation
When we look at are financial analysis we have some objectives for the next 3 years. They are to achieve 70 million revenue target, Achieve a net profit of 21 million and to serve a minimum of 4000 customers for the next 3 years. When we talk about are cash flows it will give the details of the movement of cash in and out of the business.
When you look at the worst case situation it can occur in off season, management will charge low prices relatively management will try to promote to locals. In the base case situation the management would relatively would charge competitive prices in the market. In the best case situation management would charge a premium for the products and services the hotel is offering, this could be because there is a high demand for the hotel.
When we look at are capital budget there is a property cost of 8 million. And as promotions play a major role for our business to get to know the hotel by the local and foreign tourist we have separated 5 million. Initial we will be using TV adverting and following that there will be billboards, social media, travel sites, reef lets, brochures, magazine and so on and so forth. We have separated 1 million for are cost of equipment as we will be needing to use latest technology and give our guest the best experience. As for are hotel building construction we have separated 5 million. To give our guest the best and quality service we are using well trained and experience stuff for the convenience and the safety of our guest, so to do this we have allocated 300,000 for training cost. When we look at all of these cost we will be getting an initial cost of 19.3 million.
Capital Budget
Objectives of the next three years
• Achieve 70 million revenue target
• Achieve a net profit of 21 million
• Serve a minimum of 4000 customers for the next three years
At the first place there are some assumptions we consider in this investment. We assume that the tax increase because the income increases over the three years. Average revenue per customer will change assuming we get returning customers. Projected customers will be present in this hotel as we planned. And the currency used in this business is Sri Lankan Rupees. When we consider the base case scenario sales is calculated 1% from the total number of foreign and local tourists. And from that 30% are accommodating are hotel rooms, 25% are for Rafting and 15% for paintball. And the rest will be for our other entertainment activities like rainforest exploration, bike rides, hiking, safaris and so on. Are main cost of sales is hotel accommodations, rafting and local paintball tournaments. Our operating expenses are groceries, website maintenance, utilities, insurance, vehicle rental, salaries and wages etc. In the base case scenario there a positive net cash flow from 8 million to 10 million. There's a customer base around 4700, the total revenue is 79 million and after all the expenses the net profit is 27 million which is more than our initial objective which is 21 million.
Base scenario
• Achieve 70 million revenue target
• Achieve a net profit of 21 million
• Serve a minimum of 4000 customers for the next three years
At the first place there are some assumptions we consider in this investment. We assume that the tax increase because the income increases over the three years. Average revenue per customer will change assuming we get returning customers. Projected customers will be present in this hotel as we planned. And the currency used in this business is Sri Lankan Rupees. When we consider the base case scenario sales is calculated 1% from the total number of foreign and local tourists. And from that 30% are accommodating are hotel rooms, 25% are for Rafting and 15% for paintball. And the rest will be for our other entertainment activities like rainforest exploration, bike rides, hiking, safaris and so on. Are main cost of sales is hotel accommodations, rafting and local paintball tournaments. Our operating expenses are groceries, website maintenance, utilities, insurance, vehicle rental, salaries and wages etc. In the base case scenario there a positive net cash flow from 8 million to 10 million. There's a customer base around 4700, the total revenue is 79 million and after all the expenses the net profit is 27 million which is more than our initial objective which is 21 million.
Base scenario
Highlights- base case
• Customer base – 4788
• Total Revenue – 79.9 million
• Net profit – 27.9 Million > target
• Customer base – 4788
• Total Revenue – 79.9 million
• Net profit – 27.9 Million > target
Best scenario
Highlights- best case
• Customer base – 5320
• Total Revenue – 88.8 million
• Net profit – 33.9 Million > target
When we check the best case scenario the sales is made 10% more than the base case scenario. The is a positive net cash flow from 10 million to 12 million. We assume that the tax rate is a fixed amount for all the 3 years, material cost is at a lower level as we expected, no other changes has occurred and the depreciation rate is a fixed amount. The customer base is around 5000, the total revenue is 88 million and the net profit is more than 33 million
Assumptions,
• Tax rate is a fixed amount every year.
• Material cost is at a lower level
• No other changes
• Depreciation rate is fixed
Worst scenario
• Customer base – 5320
• Total Revenue – 88.8 million
• Net profit – 33.9 Million > target
When we check the best case scenario the sales is made 10% more than the base case scenario. The is a positive net cash flow from 10 million to 12 million. We assume that the tax rate is a fixed amount for all the 3 years, material cost is at a lower level as we expected, no other changes has occurred and the depreciation rate is a fixed amount. The customer base is around 5000, the total revenue is 88 million and the net profit is more than 33 million
Assumptions,
• Tax rate is a fixed amount every year.
• Material cost is at a lower level
• No other changes
• Depreciation rate is fixed
Worst scenario
Highlights- worst case
• Customer base – 4310
• Total Revenue – 71.9 million
• Net profit – 22.7 Million > target
When we check the worst case scenario the sales is made 10% less than the base case scenario. Even in the worst case scenario we have a positive net cash flow from 6 million to 8 million. In this scenario we assume that the tax rate is fixed for all 3 years, the depreciation amount has become double and there other various environmental changes like droughts, heavy rain so there will be difficulties for the entertainment activities and for the guest to do rafting, paintball, bike ride and so on and there will be high risk. There is a customer base around 4000, the total revenue is 71 million, and after all expenses, there's is still a positive net profit of 22 million which is more than our initial object which was 21 million.
Assumption
• Tax rate is a fixed amount every year.
• Depreciation amount doubled
• Other various environmental changes
• Customer base – 4310
• Total Revenue – 71.9 million
• Net profit – 22.7 Million > target
When we check the worst case scenario the sales is made 10% less than the base case scenario. Even in the worst case scenario we have a positive net cash flow from 6 million to 8 million. In this scenario we assume that the tax rate is fixed for all 3 years, the depreciation amount has become double and there other various environmental changes like droughts, heavy rain so there will be difficulties for the entertainment activities and for the guest to do rafting, paintball, bike ride and so on and there will be high risk. There is a customer base around 4000, the total revenue is 71 million, and after all expenses, there's is still a positive net profit of 22 million which is more than our initial object which was 21 million.
Assumption
• Tax rate is a fixed amount every year.
• Depreciation amount doubled
• Other various environmental changes
We expect an increase in the net profit over the years.
- Worst: positive 22.7 million
- Base: Positive 27.9 million
- Best: Positive 39.9 million
The time required recovering the initial investment in a project from operations.
- Worst: 2.7 years
- Base: 2.1 years
- Best: 1.5 years