Finance Coursework Example | Topics and Well Written Essays - 1250 words

Finance - Coursework ExampleThe only difference all the same is that we do our business concern online. This is an advantage to the business as an online presence elapses it an increased global presence at the same time helping it minimize operation costs to zero since there atomic number 18 no fixed costs to be paid out such as rent and other utilities. The chief(prenominal) reason why I chose this line of business was due to the fact that after intense grocery store research, I found out that there is always a demand for alcoholic beverage all year round. Alcoholics will always drink alcohol whether they have enough income or non. Although lack of income whitethorn mean reduced alcohol intake, it does not mean they will completely not drink. It with this conclusion that I decided to start this business as there was going to be steady cash inflows for the business throughout the year. Also, alcoholic drinks being fast moving consumer goods, there will always be a high demand for the products and extensive distribution networks and it is due to this reason that I chose to be a cybermediary as there will always be a demand for the goods and to gain access to a big(a) company. b) Analysis of crush even. Break-even point is the level of sales at which profit is zero According to Atrill and McLaney (2011) at break-even point sales are equal to fixed cost plus variable cost. In analyzing the break even, one normally needs the three pieces of information Fixed costs, variable costs and average expense per unit. Fixed costs are those minimum operating costs in a business that do not change no matter how many units one sells. They include rent, utilities, bank charges among others. Since Cape e- distributors is an online platform, it does not have any fixed costs as per now. Variable costs per unit-These are those costs that sidetrack and depend on sales volumes. total price per unit Since youre able to choose exactly where to piece your prices. Start b y looking at your competition, and how they price their products. Break Even Analysis Formula whence is BEQ = Fixed costs / (Average price per unit average cost per unit) Fixed cost =0 Average price per unit in year 1 is 55 Average cost per unit in year 1 is 11 Substituting into the formula = 0/(55-11) Therefore the break even measuring rod is zero. All the other break-even quantities for the subsequent years will be zero because there are no fixed costs for our firm. This is due to the fact that it is an online firm hence no operating costs are incurred. c) Analysis of business performance using financial ratios Profitability Ratios They use strand analysis to give an indication of whether a firm is generating enough returns on capital utilise. For Cape distributors the gross profit margin is 91%, the net profit margin is 91% while the return on capital employed is 103%.With such high profitability ratios, it means that the firm has really minimized on its costs and the sales are increasing steadily.A high profitability ratio means that the firm is really good at cost controlling Pandey (2008). Liquidity Ratios These are the ratios that show whether a firm is able to meet its ill-judged term obligations as and when they occur. I n other words they measure solvency of the firm. For our business, the liquidity ratios calculated are current ratio which is regarded as a test of liquidity for a company. It expresses the working capital relationship of current assets open to meet the companys current obligations. The other liquidity ratio is the creditor