Analysis of Financial Proposal

Analysis of Financial Proposal(1) analyse financial data value the results and formulate conclusions(2) prepargon a figure and explain how it would be negotiated and monitored.(3) put up a financial proposal and present a sound clientele case to secure therequired financial resources. The figures keep be fictitious. fibre 1) Technique used Ratio AnalysisRefer to the auxiliary favor fittingness RatiosThese proportionalitys help us to judge how good the firms improvement performance is. The two key ratios to aim re free reinsability argon harvest-time on Capital EmployedThis measures the level of profit of the bank line comp ared to the amount of capital that has been invested in it. It is effectively the return the assembly line concern has made, and investors will exigency this to be full(prenominal)er than the rate of interest they could take for got elsewhere. The budget is wake a healthy 68% return on capital which includes proposed beach borrowings. lucre Margin This measures the level of profit compared to the turnover, it therefore shows the percentage profit on the sales. It can be measured as either a gross or net profit borderline. The Gross Profit margin is 66.5% but the Net Profit margin is only 11.3% due to high school wages and purchases costs. These could be reduced by bulk buying and negotiating specific terms.Liquidity RatiosThese are ratios that measure the liquidity of the line of merchandise. Business has to ensure that they are able to meet their commitments as when they f completely due by converting suitable assets into specie. A business should avoid a situation where a plenteousness of cash or capital is tied up in high levels of livestock. ongoing asset and Acid mental raveling ratio shows that the business has to a greater extent(prenominal) than enough assets to cover its liabilities and it is very liquid as the stock and debtors can be turned into cash quickly.Current RatiosThis ratio compares the author ized assets and original liabilities. Clearly a business needs to have more current assets than liabilities, and so at a minimum the figure should be more than 1. Here it is 1.54 which is slightly higher and thus ensures sufficient liquidity.Acid Test RatiosThis ratio takes a closer look at the businesss liquidity. One of the current assets is stock, and this clearly not ever easy to turn into cash. In fact the firm may have high stock levels because they cant sell all(prenominal) of it. So the acid test ratio takes the current assets and subtracts the stock. This is a test of immediate solvency. If the value of this ratio is much less than 1 the business may have a liquidity problem, as it may have insufficient assets to meet all its liabilities.Debtors and Creditors Payment accomplishmentThe debtors payment period shows how many days it takes on average for the debtors to pay back the owed m geniusy. The creditor payment period shows how many days it takes on average for the business to pay its creditors. Ideally the debtor period should be shorter than the creditor period for better efficiency. Here this is not the case and locomote should be taken to chase the debtors to pay quickly.Gearing RatioThis concerns the business long-term financial stability. It measures how much of the business is financed by debt. The higher the gear wheel percentage, the less secure it will be.Normal figure is 50%. fictional character 2)It is imperative that for any business to trade effectively and be able to grow, it needs to build up enough cash reserves. Therefore it is grand to ensure cash movements, that is the timing of cash in proceed and cash outflow, are managed in much(prenominal) a way that it results in an overall exacting cashflow position.The budget would be negotiated on the basis of forecasted sales revenue, expected spending and any planned capital expenditure. The Bank manager needs to be pursuaded that the cash forecast is realistic and not over optimistic.The budget would be monitored and reviewed on a regular basis and any material changes would be acted on. The negotiations would be based upon the fact such as reliability of the client and suppliers, location of the pub. excessively the fact that being a habitual house, the business is all year round and not seasonal and there are going to be peak seasons such as Christmas and other public holdiays. In addition, the pub would increase its takings by having superfluous events and offers.The budget should build a contingency fund for worst case scenario such as cost over-runs or loss of loyalty of its customers. It needs to show clearly that the owner has invested his/her money as a capital in the business and prepared to risk it, and has a strong track place down in this field and that the business plan is credible.A bank always demands a copy of current management accounts with a cash flow forecast in order to assess a businesss liquidity and then decides whether to grant the overdraft facility or not. Therefore, they are of utmost(a) importance when negotiating a loan from a bank.Cash budget gives an proceed warning of any liquidity problems. It is often a lack of cash that causes most businesses to fail. It will give you an opportunity to decide when and how to increase or decrease your overdraft with the bank.Part 3)The total amount required is 50,000 but the business does not need to draw down all of the money at once. It should be stressed to the bank manager that you have number of long time experience in the same business and you know the trade well. Also you have good interpersonal skills and the ability to get on with all types of people This is important for running a successful pub. You also have to stress that you have done your home work, prepared a business plan and have ideas to boost the business by holding special events throughout the year. You need to do some research about the foodstuff for a pub in that battleground. If there are only one or two pubs in the local area and nothing within, allege 15 mile radius, then an additional pub in that area is going to stand a very good chance of success.AppendixThe following table shows the ratios for the year 2005RatioProfitability ROCE68%Gross Profit Margin66.5%Net Profit 11.3%Direct Wages20%Debtor payment days28 daysCurrent Ratio1.541Acid Test1.11Gearing52%Bibliography1. www.qck.com/business-loans.html2. Cox, 0 and Farndon, M (1997) Management of finance (2nd Edition) WorcesterOsborne Books.3. Dyson, J (1998) Accounting for Non-Accounting Students London Pitman4. Http//www/bized.ac.uk Learning resources terminate summary notes on main topics.5. Management and Cost Accounting, 4th Edition, by Colin Drury, Thomson Business Press.6. Active Accounting by Brammer, Cox, Fardon, Penning. Osborne books.