Financial Assessment and Analysis Essay

Introductionfiscal AssessmentInvestment is something that is each- classical(prenominal) in the life of any valet world and should thitherfore be taken very seriously (D have gotes, & Goodman, 2003). To make an coronation funds means that one is looking for a best future and as wellhead to receive returns defecate that particular investiture funds. It is important when an individual wants to make any form of investment that they fence a bundle of factors which allow affect the full operation and conducting of the investment (Downes, & Goodman, 2003). It is also important that an individual who wants to make an investment must ensure that they have sufficient entropy that provide jockstrap in fashioning the germane(predicate) decisions with regard to the investment that they have in mind.Without prior and name information, making decisions somewhat an investment is difficult and may result in disaster where one may lose all the get of hard bills or funds and w aste efforts put up in the calling investment (Downes, & Goodman, 2003). In the case of capital of South Dakota, having a clear pecuniary judging of the investment that he wants to engage in go out athletic supporter him in making the relevant decisions which bequeath ensure that he does not ope number the barter at a loss in the long run. This financial assessment leaveing make use of assumptions in the mental hospital of whether the investment capital of South Dakota is interested in is relevant and will be profit sufficient.In making an appropriate investment decision, in that respect be miscellaneous issues to be considered by capital of South Dakota which involves the analysis of the financial situation which the investment will require as well as the returns on investment which will be achieved by the pipeline (Gibson, 2012). The first step that capital of South Dakota will lead to do is to make a consideration of the financial investment which will be need to make the short letter fully functional. Financial appraisal of projects or investments is important since it helps in making the relevant decisions on what to invest in or not to invest in.When conducting a financial analysis, in that respect be various modes which dis bewilder be used in appraising a project which involves finance (Gibson, 2012). The method that would be used in apprai8sing the investment by capital of South Dakota is the Discounted capital flow analysis which will help to establish whether the investment which capital of South Dakota is interested in is worth the efforts or it should be abanthrough and throughd (Larrabee, Voss, & basin Wiley & Sons, 2013). Financial appraisal is also important to any individual or makeup which wants to make an investment since it helps in establishing the amount of returns to expect. This is done through the analysis of the expenses which the investment will experience and the revenues which the investment will be quali fied to raise within a sealed power point of sentence (Larrabee, Voss & John Wiley & Sons, 2013).Factors affecting the success of an investmentWhen wanting(p) to make an investment decision, there are various factors which need to be considered so that the decision to be do lot be considered to possible. The various factors which Pierre will need to consider will include issues such asAvailability of finance whatsoever investment that an individual or even an organization wants to get elusive in forever and a day requires finance. The finances which will be put up in the duty must be readily acquirable so that one can be able to know whether they can take up the investment or not (Shim, & Siegel, 2007). There must e enough finances which will cater for both put of the start up of the investment since every operation in the investment or headache will require sufficient funds (Downes, & Goodman, 2003).In the case of Pierre, he is retired and has an amount of CAD 500,000 , whereby he has already paid all the taxes which are tortuous in the retirement benefits. This is quite a sizableish enough amount which needs to be invested considering that he is no longer in active employment and so he will need something to gene locate finances for him, in terms of investment (Shim, & Siegel, 2007). Considering the amount which Pierre has available for investment, it can be considered that he is ready to take up any investment of his resource since he already has available funds which he can put up in business (Cherunilam, 2010). Human capitalThere is no business investment which can take place if there is no available human capital which will operate the whole investment and make it bet swell returns. Human capital is necessary and its availability is important for the success of any investment (Cherunilam, 2010). It is important to ensure that there is readily available human capital which will be able to trade the whole operations of the investment to be undertaken. The cost of human capital should also be considered when wanting to make an investment since human capital that is not affordable will mean that the investment will come up large amounts of cost in terms of the salaries which will be paid out to the employees of the business (Horiguchi, & International monetary Fund, 1992).In the case of Pierre, he will run the business on his own which is quite good since he will be able to set an affordable amount of coin for the remuneration which he will pay himself. As a sole owner and operator of the business makes it more convenient for him to make the relevant decisions concerning human capital since he does not have to confer with anyone on any matter concerning the number of people to have working in the business (Reilly, & Brown, 2012).In addition, Pierre will only have one advocateant in the business that will assist in conducting and carrying out the operations of the business. This means that he will not have a lo t of expenses with regard to the human capital that he will employ in the business (Downes, & Goodman, 2003). In addition, the human capital is readily available and can be considered affordable hence this is an encouraging factor towards the establishment of the business investment which Pierre is interested in (Kruschwitz, 2006). Government regulations and policiesIn every country, there are always regulations and policies which are laid down concerning the operation of business and investments. These policies range from the taxes which businesses need to pay, the regulation policies which all(prenominal) business needs to follow as a way of conducting the business within that country among galore(postnominal) other policies (Kruschwitz, 2006). The political sympathies policies and regulations gives the direction which business investments needs to follow and every business must be able to comply with those regulations and policies within the countries where they operate (Downe s, & Goodman, 2003).In the case of Pierre, political sympathies regulations that he needs to consider are the taxes which are charged on the multifariousness of business that he wants to establish, the tariffs involved in the importation, specially of coffee from Switzerland (Horiguchi, & International Monetary Fund, 1992). It will be important that Pierre ensures that he complies with all the government regulations and polices if he wants the investment that he has in mind to succeed. In some instances, the government regulations may require the prosperity of a business investment collect to the stringent rules that the business investment is required to reach in the long run and the tax rates also may have a disconfirming effect on the business (Downes, & Goodman, 2003). Availability of food securities industryEvery business investment needs a commercialise where it can be able to operate in and earn good returns. Without there being a ready market available for the pro ducts to be sold by the investor will mean that the business will not be able to progress in any way (Horiguchi, & International Monetary Fund, 1992).To know whether there is an available market which the business can be able to triumph good returns, conducting a market research is necessary. Market research is important because it helps in various ways. One, when an investor conducts a market research, they are able to establish the kind of customers available and their purchasing behaviors. This helps in formulating the operations of the business in such a way that it is able to meet the exact needs of the customers and hence obtain a greater market share (Cherunilam, 2010). Market research is important because it also helps the business investor to establish whether there is sufficient demand for the products that he/she wants to offer to the market.From the case study of Pierre, it can be noted that Pierre has taken the initiative to conduct a market research for the business t hat he wants to establish (Cherunilam, 2010). This has attached him the information regarding the kind of revenue that he will be able to make for a certain design. For example, from the market research results, Pierre knows that he will have a demand of 600kg per calendar month firearm for the first month he knows that he will have a demand of 100kg per month. This information obtained from market research helps in making a sound investment decision, whereby Pierre can choose whether to run with the investment idea or simply drop it depending on this information obtained from the market research conducted (Cherunilam, 2010).The market research is also important since it helps in establishing the demand and the supply of the product the investor wants to offer in the market. In addition, market research also helps in establishing the kind of competition the business investment is likely to face. penetrative the kind of competition to be faced helps an investor to formulate a s trategic plan that will be applied in overcoming the competition when the business investment is launch (Shim, & Siegel, 2007). Returns on investmentThe main causal agent that influences business investors to engage in any form of business investment is simply to obtain good returns on the finances that they have invested. An investment that is not capable of bring any form of good returns to the business investor cannot be considered to be practicable in the long run and hence should not be considered (Shim, & Siegel, 2007).The main objective that business investors have is to make profits and also to expand their businesses. The returns which an investor is able to obtain from his/her investment must be able to provide the investor with profits and also set off him/her with funds that can be used in the expansion of the business (Downes, & Goodman, 2003). In carrying out this investment of importing chocolate from Switzerland and selling in North America, Pierre needs to know what amount of returns will he be able to obtain after all the deductions from the business have been made (Shim, & Siegel, 2007).If the business will not be able to bring god returns, then there will be no need of Pierre getting involved in this kind of investment since he will just be wasting his resources. This can only be determined through the financial analysis of the whole investment that Pierre wants to undertake, which will enable him to make well informed decisions concerning the investment (Gibson, 2012).Costs of investment employment investments always involve a lot of costs which an investor must be able to cater for so that the business can be fully operational. Considering the costs to be incurred when undertaking any business investment is of great importance and any investor must be able to do so (Gibson, 2012). Determining and considering the costs will enable the investor to know whether the finances that the investor has are sufficient to cater for all the costs which the business investment will incur (Downes, & Goodman, 2003).When the cost of investment is too high, the investor will not be able to realize higher returns hence the investment cannot be considered to be viable to be undertaken. A viable investment must have low cost of operation involved so that the business investor can be able to remain with some finances which can be considered as profits (Gibson, 2012). Therefore, in making this investment decision, Pierre must be able to determine and consider the costs involved in the whole business through a financial analysis so as to come up whether the investment is viable or worth the risk or it is something that should be abandoned.The supra analyzed factors are important to be considered by any business investor who wants to put up their money or finances and efforts into a certain business investment. Pierre needs to make a consideration of all the above mentioned and discussed factors if at all he wants to establish a well o perating business investment (Gibson, 2012). As mentioned above, most of those factors can only be determined using real time data and information generated through a financial analysis and assessment of the kind of investment that Pierre wants to undertake. By conducting the financial analysis, it will be possible to identify the returns that the investment is likely to attract, the costs which the investor, Mr. Pierre is likely to incur in the process of opening and operating the business (Manufacturing and investment around the world An internationalistic muckle of factors affecting growth and performance, 2002). ValuationThe financial analysis that will be conducted in the case of Pierre will involve the verbal expression of a monthly cash flow for the whole business investment, and the formulation of an one-year cash flow for the whole yr. The best method of conducting this financial analysis is through the method of discounted cash flow (Kruschwitz, 2006).Discounted cash flow method is simply used to make a military rating and an estimation of the photogenicness of a certain investment opportunity that is available. This method of discounted cash flow (DCF) always makes use of the future free cash flow which has been projected and is discounted at a certain rate but mostly the weighted average cost of capital is used in this method (Damodaran, 2012). This is done so as to obtain the present value which is in turn is used in the military rating of a particular investment to find out if it is viable. After the advisement of the discounted cash flow, if the value obtained through this method is found to be higher than that of the current value or cost of investment, then the investment opportunity can be said to be a viable one (Schon, 2007). Monthly Cash FlowThe monthly cash flow that Pierre is expecting or will experience from the first, month of the investment is that, in the first month, he will be able to have a net cash flow of virtually CAD 2 9,193 while for the subsequent months starting from the second month, it is assumed that he will have a uniform cash flow of about CAD 102,243.This is expected to occur passim the social class until the end of the first year. The cash flow in the first month is expected to be less because from the market research conducted, it was observed that the amount of stock that he will be able to sell will be about 100kg which is the reason why the cash flow for the first month is lower as compared to the subsequent months. In the second month and the ones that follow, the unit sales increase due to the increase in the stock from 100kg for the first month to about 600kg from the second month. It is also assumed from the calculation of the monthly cash flow that the interest rates will be uniform throughout the year and no inflation will affect the interest rates. Furthermore, it is assumed that the demand for the products will be constant from the second month and there will be no any for m of decline or an increase in the demand throughout the first year. Yearly Cash flowThe p.a. cash flow that Pierre will experience when he starts the investment of selling the chocolates in Americas, the first year is expected to have a cash flow of about CAD 1,204,866 in entirety. This is the same amount which is expected to be the cash flow for the company or the investment that Pierre is expecting to start. This net yearly cash flow from the first year for a period of five years is assumed to be constant just as the case of the monthly cash flow in the second month of operation. The assumptions made in this case are thatThe interest rates will remain constant throughout the five years and there will be no inflation that will take place throughout that period of time.The demand for the products will remain the same throughout the five year period with no change in the prices which will be charged for the products.It is also assumed that the costs involved in the running of the business will remain constant throughout the five years with no increase or decrease on the expenses of the business investment which Pierre is expecting to undertake.The other assumptions which have been made in the calculation of both the monthly cash flow of the business investment and the yearly cash flow of the business is that the investment or business with luxurygifts.com will be undertaken and also Pierre will employ an assistant for the job.It is the assumption of this report and the calculations made that the exchange rate that is to be used to transmute the CHF to CAD is taken to be at the rate of 1 CAD is equivalent to about CHF 0.83. This is the rate which has been used to make a conversion of the purchasing price and air transport costs which Pierre is to incur when importing the products from Switzerland.The amount of cash that Pierre could be able to offer to EigerChoc SA as the upfront payment for the exclusive rights of having to sell the products for the period of five years and still leave him no interrupt off or worse if he made the investment decision of engaging EigerChoc in this kind of business would be a total of about CAD 200,000. The reason why he will be able to offer this amount in an easy way is that within a period of half a year, he will be able to obtain good returns which will help bring back his money and make the business fully operational on its own. This amount of about CAD 200,000 will leave Mr. Pierre with an amount of CAD 300,000, assuming that he used his total toughie sum amount to start the business. Considering the expenses which he will incur, the amount of CAD 300,000 will leave him more capable of handling all the expenses even if he offers a sum of CAD 200,000 to EigerChoc as an upfront fee.ConclusionBusiness decision making, especially with regard to making an investment decision sometimes is quite challenging and to some extent a task that requires a lot of information and keenness. It is important that a business investor must be able to obtain all the relevant information that will enable in making the most appropriate decision of investment.Pierre provided sufficient information about the business investment that he wants to get involved in and from the financial analysis on the annual and the monthly cash flow of the business venture, it can be said that the business investment looks attractive for MR. Pierre to undertake. Pierre is in a better position to make this investment because he has all the resources which are needed for the business. The only thing that may inhibit him from undertaking this kind of business is the regulations and government policies which may make it more expensive in terms of the licenses and may be the trade relations between North America and Switzerland.RecommendationsThe recommendations which Pierre should consider are thatConduct further research on government policies and regulations regarding the kind of business investment that he wants to und ertakeHe should make use of the lump sum funds that he has instead of borrowing a loon of about CAD 100,000 at an interest rate of 8%. This will increase the expenses of the business hence should not be undertaken at the start of the business.Do not engage luxurygifts.com at the moment. This should be done when the business is fully established to ensure that the expenses involved are not increased.Offer an amount of about CAD 200,000 to EigerChoc as an upfront payment for the business investment. This will leave him with sufficient amount to operate the business.From the analysis of the factors that affecting or determine whether to undertake a business or not and from the calculations of the cash flow that is expected in the business for the period of five years, it would be more advisable for Pierre to undertake the business considering that he already has the knowledge about the market and the kind of demand that his products will command. In addition, through the help of his wi fe, the business is expected to perform well in the long run and hence it is a viable investment to undertake.ReferencesCherunilam, F. (2010). International business Text and cases. New Delhi PHI Learning Private Limited.Damodaran, A. (2012). Investment valuation Tools and techniques for find out the value of any asset. (Investment valuation.) Hoboken, N.J Wiley.Gibson, Charles H. (2012). Financial Reporting and Analysis + Thomsonone Printed Access Card. 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