Individual Project On Financial Mathematics Sun 51516 Numeri

Individual Project financial Mathematicssun 51516numeric2000see Assi

Starting Your Own Business Pretend that you are starting your very own business. Before you start the business, you need to determine and write the requirements of operating a successful business. Please focus on the dollars as you apply concepts covered in the course so far. You are writing an essay that captures all of your initial thoughts and projections for a business that you will start up.

Your essay should address everything in the six (6) sections outlined below. An ESSAY TEMPLATE that includes the EXCEL WORKSHEET, is provided to support you in organizing your assignment. NOTE: A separate version of the worksheet is provided in the Course Resources if you would like to experiment with preparation of the Balance Sheet. Please access the ESSAY TEMPLATE here.

Section #1 –Introduction of Business

Explain and describe the business you will start. What will your business sell? Why is this business interesting to you?

Section #2 – Revenue & Profits

Discuss how your business will generate money. What are your projected year #1 sales? Provide detail. What are your projected year #1 expenses and costs? Provide detail. What portion of your sales revenue will be consumed by expenses? Express in fractions and in percentages. What portion of your sales revenue will be profits? Express in fractions and in percentages.

Section #3 – Product Price & Costs

Explain the products/services that people will buy from your business. Provide detail on the prices you will charge (be specific for each product/service you will sell); Provide detail on the costs for each of your products. Explain your price mark-up in percentages and in dollars.

Section #4 – Investment Requirements

Discuss your banking and loans. What business accounts will your open? Explain your banking requirements? Describe the bank(s) you would use. Assume that you need to take out a business loan to cover your initial costs and expenses. The amount of the loan is equal to the amount of your projected year #1 expenses and costs (per item 1b above). Describe that loan and show your annual repayment schedule over 10 years with 6% compound interest. Then describe that loan and your repayment over 10 years with 8% simple interest. How will you reflect the expense or the value of this equipment, supplies and inventory on your BALANCE SHEET?

Section #5 – Balance Sheet Assessment

Prepare a BALANCE SHEET that reports your Year #1 business results in terms of ASSETS and LIABILITIES and EQUITY. Explain your greatest Asset (versus all other assets) and your greatest Liability (versus all other Liabilities).

Section #6 – Concluding Thoughts

Summarize your business desires, concerns and expectations based on your content above. Please use the ESSAY TEMPLATE provided for this assignment.

Paper For Above instruction

Starting a new business is an endeavor that combines entrepreneurial spirit with strategic financial planning. In this essay, I will outline my vision for a boutique coffee shop, detailing the operational, financial, and strategic aspects necessary for launching and sustaining the enterprise. This comprehensive plan is based on applications of financial mathematics covered in the course, emphasizing projections, analysis, and financial structuring.

Introduction of Business

The business I intend to start is a boutique coffee shop located in a busy urban neighborhood. The shop will offer high-quality, locally sourced coffee and tea, alongside light snacks and baked goods. The appeal of this business lies in my passion for specialty coffee and the rising consumer demand for premium, artisanal beverages. This niche market aims to attract young professionals, students, and coffee enthusiasts who appreciate both quality and ambiance.

Revenue & Profits

My projected first-year sales are estimated at $250,000, based on an average daily sale of $400 over 250 workdays. The primary revenue will come from various coffee and tea drinks, with additional income from snacks and merchandise. Expenses in the first year include rent ($50,000), salaries ($80,000), inventory ($30,000), utilities ($10,000), marketing ($5,000), equipment depreciation ($5,000), and miscellaneous costs ($10,000), totaling approximately $190,000. This indicates that about 76% of revenue will be consumed by expenses, leaving 24% as profit before taxes and other adjustments, which is roughly $60,000. Expressed as fractions, expenses are 76/100, and profits are 24/100; as percentages, expenses are 76%, and profits are 24%.

Product Price & Costs

Each coffee drink will be priced around $4, with a cost of ingredients and labor approximately $1.50, resulting in a markup of $2.50 per item, or a 62.5% markup. Specialty espresso drinks will be priced at $5 with costs around $2. This yields a markup of $3 and a percentage markup of 60%. Snacks and merchandise will be priced to ensure at least 50% profit margins. This pricing strategy aims to balance competitive market rates with sustainable profit margins, considering ingredient costs, labor, and operational expenses.

Investment Requirements

To start operations, I will open business checking accounts at a local bank known for supportive small business services. The initial startup costs, including equipment, inventory, and initial operating expenses, are projected to be $180,000. I will require a loan of this amount. Assuming a 10-year repayment schedule at 6% interest compounded annually, the annual payment will be approximately $24,607, calculated using amortization formulas. Alternatively, with 8% simple interest, the annual repayment would be $25,200 over 10 years. Equipment, supplies, and inventory costs will be reflected on the balance sheet under assets, categorized as current or fixed assets depending on their nature. Loan principal repayment reduces liabilities, while interest expense affects net income.

Balance Sheet Assessment

At the end of Year 1, assets will include cash reserves, equipment, inventory, and receivables, totaling approximately $180,000. Liabilities will include the outstanding loan balance, which reduces over time with repayments, initially set at $180,000. Equity will reflect the residual interest after liabilities are deducted from assets. My greatest asset will likely be the equipment and inventory, vital for daily operations. The greatest liability will be the business loan, which must be managed prudently to ensure smooth cash flow and ongoing operations.

Concluding Thoughts

Launching this boutique coffee shop aligns with my passion for coffee and community engagement. I am confident in the market potential and my ability to manage costs effectively. However, concerns include maintaining consistent quality, managing cash flow, and adjusting to market fluctuations. My expectations are optimistic; with careful planning and financial discipline, I aim to establish a profitable and sustainable business that offers value to customers and a rewarding entrepreneurial experience for myself.

References

  • Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management (15th ed.). Cengage Learning.
  • Damodaran, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset. Wiley.
  • Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2018). Corporate Finance (12th ed.). McGraw-Hill Education.
  • Gitman, L. J., & Zutter, C. J. (2015). Principles of Managerial Finance (14th ed.). Pearson.
  • Higgins, R. C. (2018). Analysis for Financial Management (12th ed.). McGraw-Hill Education.
  • Kaplan, R. S., & Norton, D. P. (2004). Balanced Scorecard: Measures that Drive Performance. Harvard Business Review.
  • Investopedia. (2023). Business Loans and Financing. https://www.investopedia.com/terms/b/businessloan.asp
  • Small Business Administration. (2022). Funding Options for Small Businesses. https://www.sba.gov/funding-programs
  • Halsey, R. F., & Newbold, P. (2017). Theory and Problems of Financial Management. McGraw-Hill.
  • Osterwalder, A., & Pigneur, Y. (2010). Business Model Generation. Wiley.

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