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Managing Financial Resources and Decisions Assignment 3 BTEC Nguyen Huu Phong 2017

Contents
Introduction

2

LO3. Be able to make financial decisions based on financial
information

2

3.1 Analyze budgets and make appropriate decisions
3.2 Explain the importance of financial planning

2
4

3.3 Explain the calculation of unit costs and make pricing
decisions using relevant information

6


3.4 Assess the viability of a project using investment appraisal
techniques

8

Conclusion

10

References

11

1

1


Introduction
Today, the drinking coffee have gradually become a habit of everyone from everyone to
students, people of all ages. People who like speed and an aromatic essence of coffee, this has
gradually changed the way that people who sell coffee or do. Instead of content makers to
coffee now many places have espresso machine to do, you know those big coffee chain in the
world such as Starbucks uses espresso machine. Use the espresso for a delicious coffee and
tasty more, because of this reason that gradually more people like to drink in places with
espresso more than filter coffee . Capture this trend, I open a small shop selling coffee
espresso to serve everyone.

LO3. Be able to make financial decisions based on
financial information
3.1 Analyze budgets and make appropriate decisions
Project name: My coffee shop is named "COFFEE in BLACK" which sells espresso coffee
Location: On No.10 Street, District 6, Ho Chi Minh City. It then the next Kinh Duong Vuong
- Galaxy Cinema and in dining area of district 6. This place is very crowded in the evenings
and lasts until mid-late at night and during the day there are quite many employees work. The
ground we rent include a foothold to sell wide 10m2 in the middle of this bustling area.
Segment: With cheap prices, great and fast, becoming an expresso coffees for everyone
especially those who like the strong flavor of the coffee.
Task 1
Task 2

Task 3
Task 4
Task 5
Task 6
Task 7

Weekly
Ideas and concept
Market search

1

2

3

4

5

6

7

8

9

10

Search for supplier
Production
Search
for
location,
decorate
Buying equipment and tools
Training employees

Gantt chart: the chart above is the weekly Gantt chart, after this period I will be able to start
my own business.
Task description:
Task 1: Ideas and concept
2

2


I am a coffee lover and especially black coffee and milk coffee are the best coffee in Vietnam.
Vietnamese people sometimes like to drink coffee like that and have a little more modernity.
At present, there are many models selling coffee as fast as we do, but they use filter coffee
and instant coffee. These things take away the essence of coffee, so also with their business
model but we instead use espresso machines to make coffee. This will break the concept of
coffee taken in the morning that it will not be delicious. That is why "COFFEE in BLACK"
was born and brought the wonderful coffee to anyone at affordable prices.
Task 2 & 3: Market search and search for supplier
As mentioned above, we refer to surveys of some friends in community groups. We recognize
that morning workers tend to enjoy coffee, but they are usually in a hurry, and we rely on
them to bring them the best coffee in the mornings to bring to work place.
Black coffee and milk coffee are also the favorite drinks of a large segment of consumers in
Vietnam including young people. Another special thing is, the coffee takes away as we sell
very little in the evening although a large number of customers like to drink these kinds of
coffee in the evening. We will appear all day, all the time and in the future is everywhere so
people can enjoy the fastest, cheapest and best coffee.
Task 4: Production
Due to the quickest criteria, we will train employees to use espresso machines and make
coffee that are designed to meet the needs of our customers at all times while maintaining the
best quality. The next job is to add milk, sugar and ice. Customers just carry and enjoy. In
addition, we will give away our own ice cubes to keep our customers' best quality coffee
while on the road.
Task 5: Search for location, decorate
I have observed and visited many places around me live, luckily next to the place where I eat
every day there is an easygoing owner whom I know. They let me rent space and freely use
electricity and water from their homes, of course included in the 10m2 rental price that I
hired. On decor, we will decorate the simplest of the two colors WHITE and BLACK. This
represents the culture for us. "COFFEE in BLACK"
Task 6: Buying equipment and tools
Because my friends have opened cafes, they should introduce me to buy products and tools
from Khoinghiepcafe.com. The facilities and equipment for making coffee here are of good
quality and I choose them.
The other items I buy at the market and stores for convenience and maximum cost savings.
3

3


Task 7: Training employees
Because our menu is simple and they are drinks that any Vietnamese can make it. Of course, I
have individual formulas with appropriate levels so that the coffee is always delicious and
impressive. The training of staff took place quite quickly in 2 days
Week 1: Instruct the staff to use the Espresso machine, mix the coffee by the formula
available. Of course I will give them a try and the drinkers are me and my friends. If all
accepts more than 90%, then the employee meets the requirement.
Week 2: Learn how to greet and take care of your customers. Smile, talk briefly with them
and pay attention to the habits of frequent customers. I will supervise them in the later
working sessions. Absolutely not emotionless.

3.2 Explain the importance of financial planning
Cash shortage
situation in which the physical amount of cash on hand differs from the book recorded
amount of cash. When a business is involved with over-the-counter cash receipts, occasional
errors may occur in making change. The cash shortage or overage is revealed when the
physical cash count at the end of the day does not agree with the cash register tape. Assuming
that the count is $600 and the cash register reading shows $620, the cash shortage and
overage account would be charged for $20. It is shown in the income statement.
The reasons for cash shortage in my project is not enough capital to sustain operations. To
this project can work well I need some more money in reserve to handle the unwanted
happening such as fires, the equipment of the crash, theft, ... To prevent these issues, I will
install the camera, fire extinguisher, and the medical box.
Cash surplus
Cash surplus or deficit is revenue (including grants) minus expense, minus net acquisition of
nonfinancial assets. In the 1986 GFS manual nonfinancial assets were included under revenue
and expenditure in gross terms. This cash surplus or deficit is closest to the earlier overall
budget balance (still missing is lending minus repayments, which are now a financing item
under net acquisition of financial assets).
Cash surplus is the excess money that I have gained during the project operation. With this
money, I will send save and use to handle these situations unfortunately happen.
Cashflow problem
4

4


Cash flow problems mean a business spends more money than it earns. If you spend $4,000
on rent, supplies and payroll this month, for example, but only take in $3,500 in sales you
have a cash flow of negative $500. You also have projected cash flow problems. If your
expected expenses outpace anticipated sales, you have a projected cash flow problem.
Most businesses that have cash flow problems do so because they fail to look at their
financial statements until problems become too big to handle. Even a company that makes a
profit can have a negative cash flow because of the lag time shipping out products, when the
customer pays and the posting date of the funds.
This problem happens with my diner if has few customers. To solve this problem, I will take
out the promotions such as discounts, advertising or buying one meal get another drink free .
Overtrading
Overtrading takes place when a business accepts work and tries to complete it, but finds that
fulfilment requires greater resources - ie more people, working capital or net assets - than are
available. This is often caused by unforeseen events such as when manufacture or delivery
take longer than anticipated, resulting in cashflow being impaired.
Overtrading that I may encounter is when the number of parking space are not enough for
diner’s area served. Then the only workaround is to get food order over the phone so that
customer my diner won’t often out of parking space and the customers don’t have to go to my
diner to order meal.
Financial distress
Financial distress is a condition where a company cannot meet, or has difficulty paying off,
its financial obligations to its creditors, typically due to high fixed costs, illiquid assets or
revenues sensitive to economic downturns. A company under financial distress can incur
costs related to the situation, such as more expensive financing, opportunity costs of projects
and less productive employees. Employees of a distressed firm usually have lower morale
and higher stress caused by the increased chance of bankruptcy, which would force them out
of their jobs.
My project using capital borrowed from relatives and when Financial distress situations
occur. If this case happens only when my Gym business loss, then I will borrow more money
to pay for staff and other pay intervals. Fortunately, Thanks to my capital was borrowed from
relatives, so I will easily convince extends the repayment period.

5

5


3.3 Explain the calculation of unit costs and make pricing
decisions using relevant information
According to BusinessDictionary stated that: “In cost accounting, unit of product or service
for which cost is computed. Cost units are selected to allow for comparison between actual
cost and standard cost, or between different actual costs.”
Project size:
THINGS TO PURCHASE TO START THIS PROJECT
Quantity(unit,
kg)
BREVILLE BES 870XL – AUSTRALIA (Espresso
machine)
1
Specialized car for selling coffee and espresso
machine
1

Price
(VND)

Value

18.900.000 18.900.000
5.000.000

5.000.000

Sign

2

1.000.000

2.000.000

Knock Box

2

365.000

730.000

Hot cup (cover lid, logo)

500

3.000

1.500.000

Cold cup (cover lid, logo)

500

2.500

1.250.000

Drinking Straw

1000

50

50.000

30.000

30.000

Ice
Coffee Roasters

5

266.000

1.330.000

Milk

48

20.000

960.000

Sugar

3

16.000

48.000

6

6


Plastic Bag

1000

65

65.000

TOTAL

31.863.000

The total amount of money to buy related equipment is 31,863,000 VND
In addition, the space rent is 2,000,000 VND / month and we have to deposit 3 months is 6
million.
BUSINESS SPACE
Location: No.10 Street, District 6, Ho Chi Minh City
Space: 10m2
Rental deposit

3 months

2.000.000

6.000.000

I hired a bright employee from 5am to 8pm with a monthly salary of 1.500.000VND and an
employee working with a midday employee from 11am to 2pm with a salary of 1.500.000
VND. In the evening, I will stand for sale due to not busy learning, thus saving part of the
cost of hiring staff. So in total, I spend 3,000,000VND per month for 2 employees.
Salary for employees
Rental cost
TOTAL

2 employees

1.500.000

3.000.000
2.000.000
5.000.000

As a coffee shop, we will continue to operate all day except for big holidays. The total
amount calculated above is 5.000.000 VND.
Working capital in the first three months is 15,000,000 VND. In addition, because of the curb
sale, we need some small fees to be allowed to trade about 500,000 VND
TOTAL INVESTMENT
Cash
15.500.000
Equipment and tools
31.863.000
Costs incurred
5.000.000
TOTAL
52.363.000
This is my total investment cost for this project. The above cost will help my project to
operate in 3 months, 3 months is the time that I have to ensure the project operation smoothly
and smoothly.
Pricing strategy:

7

7


Prices of ice coffee and hot coffee are the same and milk coffee is higher than black coffee
2,000 VND. Milk coffee will cost 14.000 VND and black coffee is 12.000 VND. This is the
reasonable price for a cup of coffee in Viet Nam.

3.4 Assess the viability of a project using investment
appraisal techniques
CASHFLOW

Sales growth rate in the first 9
months: 20%

r=12%/year

Months

Q

Variable
cost

Price

Revenue

Fixed cost

0
1

600

2

720

3

864
1.03
7

4
5
6

1.244
1.49
3

7

1.792

8

2.150

9

2.580

10

2.580

11

2.580

12

2.580

13

2.580

14

2.580

15

2.580

16

2.580

17
18

2.580
2.580

8

12.00
0
12.00
0
12.00
0
12.00
0
12.00
0
12.00
0
12.00
0
12.00
0
12.00
0
12.00
0
12.00
0
12.00
0
12.00
0
12.00
0
12.00
0
12.00
0
12.00
0
12.00

Profit
52.363.000

Discount
cashflow

Accummulative CF

-52.363.000

-52.363.000

7.200.000

3.600.000

5.000.000

-1.400.000

-1.386.139

-53.749.139

8.640.000

4.320.000

5.000.000

-680.000

-666.601

-54.415.740

10.368.000

5.184.000

5.000.000

184.000

178.589

-54.237.151

12.441.600

6.220.800

5.000.000

1.220.800

1.173.165

-53.063.987

14.929.920

7.464.960

5.000.000

2.464.960

2.345.325

-50.718.662

17.915.904

8.957.952

5.000.000

3.957.952

3.728.570

-46.990.092

21.499.085

10.749.542

5.000.000

5.749.542

5.362.702

-41.627.390

25.798.902

12.899.451

5.000.000

7.899.451

7.295.010

-34.332.379

30.958.682

15.479.341

5.000.000

10.479.341

9.581.679

-24.750.701

30.958.682

15.479.341

5.000.000

10.479.341

9.486.811

-15.263.890

30.958.682

15.479.341

5.000.000

10.479.341

9.392.882

-5.871.008

30.958.682

15.479.341

5.000.000

10.479.341

9.299.883

3.428.875

30.958.682

15.479.341

5.000.000

10.479.341

9.207.805

12.636.680

30.958.682

15.479.341

5.000.000

10.479.341

9.116.639

21.753.319

30.958.682

15.479.341

5.000.000

10.479.341

9.026.375

30.779.694

30.958.682

15.479.341

5.000.000

10.479.341

8.937.005

39.716.699

30.958.682
30.958.682

15.479.341
15.479.341

5.000.000
5.000.000

10.479.341
10.479.341

8.848.520
8.760.911

48.565.218
57.326.129

8


19

2.580

20

2.580

21

2.580

22

2.580

23

2.580

24

2.580

0
12.00
0
12.00
0
12.00
0
12.00
0
12.00
0
12.00
0

30.958.682

15.479.341

5.000.000

10.479.341

8.674.169

66.000.298

30.958.682

15.479.341

5.000.000

10.479.341

8.588.286

74.588.584

30.958.682

15.479.341

5.000.000

10.479.341

8.503.253

83.091.837

30.958.682

15.479.341

5.000.000

10.479.341

8.419.063

91.510.900

30.958.682

15.479.341

5.000.000

10.479.341

8.335.706

99.846.606

30.958.682

15.479.341

5.000.000

10.479.341

8.253.174

108.099.780

Breakeven analysis is the analysis between price, revenue, profit and cost to calculate breakeven point and generate profit. Based on these calculations, we set up a table to find out the
breakeven point.
Based on this table, I can see the sales calculated by the formula (Revenue = Selling Price x
quantity). With each cup of coffee we make is priced at 6.000 VND, this is the cost of sales,
we have calculated the reasonable price for each cup of coffee sold 12,000 VND, suitable for
the majority of people in Vietnam.
It is estimated that we will sell 600 cups in the first month and reach sales of 7,200,000 VND,
then 9 months continuous will have a growth rate of 20%. By the third month, we sold 864
cups and achieved a turnover of 10,368,000 VND and profit of 184,000 VND, at which we
will maintain the operation without loss.
Quantity

850
10.200.00

revenue
fixed cost
variable

0
5.000.000

cost
profit

5.100.000
100.000

From statistics, it can be seen that if the growth rate of 20% is continuous for 9 months and
stopped at the highest level, then after 11 months, we will pay back in 12 months.
NPV = net
present value
IRR
Payback
9

107.029.485
9%
per months
12 months
9


Net Present Value (NPV) is the difference between the present value of cash inflows and the
present value of cash outflows. NPV is used in capital budgeting to analyze the profitability
of a projected investment or project.
Internal rate of return (IRR) is a metric used in capital budgeting measuring the profitability
of potential investments. Internal rate of return is a discount rate that makes the net present
value (NPV) of all cash flows from a particular project equal to zero. IRR calculations rely on
the same formula as NPV does.
Payback period: I reached the breakeven point of my project in 12th month when I sold 2580
cups per month with sales of 30,958,682 VND and profit of 10,479,431 VND
Thereby, we can see, my project has the potential to grow and be able to recover capital in
just 12 months with the standard set.

Conclusion
Through this report, we can realize that it can be seen that setting up a clear business plan
will tell us what needs to be done and what needs to be done to evaluate whether the project
is viable and potential. In addition, during project implementation, it is necessary to
continuously monitor and adjust deviations from the plan.

10

10


References




11

Khoinghiepcafe (2016) How to open Cafe Espresso, Available at:
http://khoinghiepcafe.com/tu-van-mo-quan-cafe-espresso-voi-30tr/?v=e14da64a5617
(Accessed: 29 April 2017)
Caphenguyenchat (2017) Coffee price, Available at: http://caphenguyenchat.vn/banggia-nguyen-chat-coffee (Accessed: 29 April 2017)
Dungcubarcafe (2017) Knock Box, Available at: https://dungcubarcafe.com/sanpham/knock-box-nhua-110mm/ (Accessed: 29 April 2017)

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