Business Analysis PDF

## Process of Assessing Potential New Business Ideas ### To generate monthly income, the business has to consider investing at the bank to gain interest. To achieve capital growth, the business needs to consider "return on investment" ×100. ### Feasibility Studies - Additional money generated -...

## Process of Assessing Potential New Business Ideas ### To generate monthly income, the business has to consider investing at the bank to gain interest. To achieve capital growth, the business needs to consider "return on investment" ×100. ### Feasibility Studies - Additional money generated - Investing money or amount invested ### Type Of Industry In Which The Business Operates In: - If a certain industry is known for strikes, productivity may suffer. ### Business Brand Strength: - Indicator of how people view the brand, and may be an indicator of customer support and future products. ### Management Team: - A strong management team will understand the dynamics of business and ensure the business gets publicity for the right reasons. ### Criteria to indicate success of business: - Helps determine possibility of success if a new idea is implemented. - Forces the entrepreneur to focus on facts. - Forces the entrepreneur to think critically. ### Financial Function: - **Point where the income generated from the sales is equal to the total costs (Break-even analysis)** - **This is the point where neither a profit nor a loss is made.** - **Refer to now, above the break-even point, the business has to perform (the business can safely continue to exist).** ### Income Statement - **Expenses are shown in the income statement** - **Examples:** - Water & electricity - Advertising - Repairs - Insurance - Telephone - Salaries and wages - **Income earned is showed in the income statement** - **Examples:** - Current income - Sales - Rent Income - Interest income ### Variable Costs - Increase when production increases - **Examples:** - Water and electricity - Raw materials (costs) - Wages/wages ### Fixed Costs - Remain the same - **Examples:** - Insurance - Rent expense - Salaries ### Total Cost: - Sum of the fixed costs and the variable cost. ### Cost per unit: - Calculated by dividing the total costs by the number of units produced. ### Safety Margin: - Refers to how now above the break-even point, the business has to perform (the business can safely continue to exist). ### The vehicle insurance can either be fully comprehensive or it may only cover third party, fire and theft insurance on vehicles. ### Insurance on Vehicles - **The business vehicle will not be repaired if it is damaged in an accident, but the other party's vehicle will be covered.** - **It is important to take out insurance in case inventory/equipment is stolen.** ### Theft, Burglary and Robberies: - **The Insurer will want to know how much stock was on hand and how much stock was stolen.** - **It is important that the business keeps accurate stock records.** - **This is easy to do if the business has an EPOS/SE system, where stock items are automatically subtracted from stock records.** ### Bad Debt: - **Often classified as a non-insurable risk.** - **Not true. It is possible for a business to take out insurance against bad debt.** ### Insurance on the Building: - **Any damage to a building is usually covered in this section of a policy.** - **Depends on how comprehensive the policy is.** ### Business Interruption Insurance: - **The insured person/company has to specify what type of insurance cover is required.** - **If a business experiences any loss/damage that results in a reduction in income, business interruption will cover the loss.** - **Depending on how comprehensive the policy is.** ### Fidelity Insurance - **Covers the business against theft by employees.** - **Will cover the business if the owner of an employee causes damage to a customer's property, someone gets injured or dies.** ### Public Liability Insurance: - **The greater the loss, the bigger the risk for the insurance company.** - **The policy will stipulate the max. loss that will be covered if a third party claims from the business.**