Healthy Life Group Case SolutionÂ
By calculating various figures for profit and loss account by using the provided data and making necessary adjustments, the amount of net income is calculated as $24,365.88. As per the requirement, the data is adjusted to reflect the effect if sales as it has decreased by 20%. As a result,this has affected the net profit, which has become$4,327.90.
For the balance sheet, the amounts are taken from profit and loss account and from the given data. Over here, the assumption is made which is the addition of a suspense account named accrued expenses, in order to make the assets side and liabilities side tally each other. The balance sheet amount shows total assets of $102,117 and it shows liabilities of $27,715. The shareholdersâ€™ equity is $74336, which includes capital investedand net profit for the year.
Cash Flow Statement
The cash flow statement was prepared by adjusting all cash related transactions. Moreover, the cash from operating activities consist of cash that is paid for different operations of the business and for raw material and day to day expenses. Investing activities shows any disposal of investments made, which brings in cash and any investment that is made which increases the assets but decreases the amount of cash. Financing activities show the finance that is brought in, whether capital or bonds and any finance source replenished through repurchase of stocks or repayment of loan. However, all of these involve cash. Lastly, at the end of the total cash balance it is shown as $57,386.
Over hereby changing the sales by reducing it by 20% brings this cash balance at the end of the year to $35,762.
In order to increase the profitability and growth, the company should target different market segments. Moreover, it can differentiate products for different age groups;such as it can target through nutritive snacks and treats for children, some nutritive drinks for teenagers and some cookies and milk related drinks for old people.
Moreover, the company is totally dependenton the Loblaws as its distributor. In addition to this, for effective distribution and to achieve growth,the company has to consider expanding its value chain and distribution channels so that its products reach to the potential consumers efficiently. It should target different market segments and with extensive marketing strategy. There is moderate competition in the industry therefore,the company has to use effective marketing and promotion techniques to make its product visiblein the market.
As per the income statement, it can be seen that the net profit is $24,365.88. However, Larsonâ€™s goals were to get at least a profit of $50,000. Therefore,this shows that the financial performance of the business will not be up to the mark. Moreover, the calculated figure might not reflect the situation and since it is uncertain then it is expected that the real value could be different.
Larson also wants to know the effect of the decrease in sales, thus this gives the net profit of only $4,327.90, which is worse than the previous one. Larson should consider if she is still sure to launch the new business. The profits are very low than what was being expected. Through the analysis, it is evident that the operating expenses are much higher as this is the cause for lower profits. One thing here should be borne in mind that the operating expenses might be higher because of the initial startup of the business. There are certain expenses such as incorporating fee, patent licensing and initial setup costs and etc., these all result in higher operating costs. Therefore, considering all these, it might still be feasible to start the business………..
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