Table of Contents

1. Introduction....................................................................................................................................1

2. Product Details...............................................................................................................................2

3. Financial Decision..........................................................................................................................3

4. Calculate the unit cost of a product and determine your selling price...........................................4

5. Calculate the break-even point.......................................................................................................5

6. Draw up the investment plan and the financing plan ending in a balance sheet on 1 January
2022.......................................................................................................................................................5

7. Draw up the estimated income statement for 2022, 2023 and 2024..............................................7

8. Draw up the forecast cash flow statement for 2022, 2023 and 2024.............................................7

9. Draw up the forecast balance sheet on 31 December 2022, 2023 and 2024..................................8

10. Determine and calculate the payback period, net present value and the internal rate of return of
the investment on 1 January 2022.......................................................................................................9

11. What is the effect of your recommendations (advise) on the financial statement of the firm
(balance, income statement and cash flow statement)?.......................................................................10

12. Determine and explain the liquidity (by calculation net working capital and current ratio),
solvency (by calculation of the debt ratio) and profitability ratios (by calculating ROA, ROE, ROD)
of this company at the beginning and at the end of the year (for at least three years)........................11

13. Recommendations........................................................................................................................14

14. Conclusion...................................................................................................................................14

Reference.............................................................................................................................................15

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 1. Introduction
We are going to establish a startup business in Bangladesh which is mainly focus on delivering
quality medicine to the door step of customer. Here our company name will be “Hello
Pharmacy” which will work as a supplier of medicine to Dhaka city people. We will establish an
online medicine supply chain that will help all class and every age people of Bangladesh. We are
five friends who will become partner of this business and it will be a private limited company. At
first our target location will be Dhaka metropolitan city area people who are strangling to manage
their prescribed medicine at their door step. Medicine is must needed product. So we will
provide it to everyone. Here in this report we try to conduct the financial estimation and
forecasted financial performance analysis.

2. Product Details

Company name: “Hello Pharmacy”

Goals: Deliver medicine to everyone

Slogan: “Medicine for Cure”

Product:

Our business is all about providing prescribed medicine to customer. We will receive
order via online and our delivery man will provide it on the door step of customer. Hello
pharmacy provides a wide range of medicine along with other healthcare products
including wellness products, vitamins, diet/fitness supplements, herbal products, baby and
mother care products, beauty care products, surgical supplies and all types of medicine
etc. Our supplier will be the different company’s agent and large Pharmacy who will provide
us required medicine.

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Price: Price will be market price of medicine
Place: Our business is fully online based and our initial target market is Dhaka city so
anywhere from Dhaka city, our product will available via online order and our product
will available with a 1 hour at every medical college hospital in Dhaka city which is our
premium service other than that Every buyer will able to place orders through our Hello
Pharmacy website and Hello Pharmacy apps. Orders can also be placed over a phone call or on
any other social media platforms.

Promotion: We will promote and advertised our service through poster online and via
television advertisement in Dhaka city. We want to register the entire chronic patient who
needs regular basis medicine like blood pressure, hurt disease or diabetic’s patient and by this
we will promote and make them our regular customer by offering free home delivery with
discount on medicine purchase. We will promote our service though our agent to every hospital
via poster and promoted in social media like Facebook and YouTube platform.

3. Financial Decision
As a startup business enterprise, our company name will be “Hello Pharmacy” which will
operate in Dhaka city through online medicine supply, so as a startup business we need to build
everything from greenfield, we need to establish our supplier, distribution network all over
the city and we need to establish a corporate office to monitor all the activity and make proper
decision we need to make an appropriate investment budget, For our new startup business, we
are going to invest BDT 50 million. Here we initially plan that we will establish the “Hello
Pharmacy” corporate office at Basundhara, Baridhara which is close to residential area like
Gulshan, Banani, Basundhara and Nikunjo area which our initial target area. The initial
investment for Office, equipment and software will require BDT 30 million and additional
BDT 20 million are needed for working capital that will be borrowed from Dhaka Bank who
like our startup business and want to a stakeholder of our business and they will give us BDT
20 million at 9% rate for 10 years and we five partner will equally invest for remaining BDT 30
million. So for our startup business plan, we are going to mixture financing project where 60%
of money come from owners and remain 20 million will finance by a private commercial Bank.
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Here our startup business Project will not be stopped it will continue even after the 3 years of
Capital budgeting. The life time of the project is 10 years and after 3 years the salvage value
will be BDT40 million. The Office equipment and software is worth of Bangladeshi taka 25
million. We estimate that the life span of our equipment and furniture is 10 years and we use
the straight line depreciation method to calculate it. And the deprecation in each year will be
BDT 2+ million. The corporate tax rate is 25% and our expected return is 11%.
The forecasted revenue, operating expense and cash flow of Hello Pharmacy for three years
Forecasted value 2022 2023 2024
Sales revenue 36832066.33 50744964 40043467
Operating expense 22892545 27900000 26432196
Cash flow 11979941 7991390 3029905

4. Calculate the unit cost of a product and determine your selling price.

We are online based pharmacy business organization and our main revenue will come
through commission of the sales. Medicine Price will be market price but we will
provide discount to our regular customer on the basis of their purchase. Hello pharmacy
will always try to give discount in every product on the basis of order. We will provide
product within 24 hours with no delivery charge for the customer over 500- t a k a order
but we will charge 50 takas to below 500- t a k a order customer but above 500 is free
home delivery. We don’t have direct unit cost because will do only carrier service to user.
But our income will be on an average 10% or price in every medicine.

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 5. Calculate the break-even point.

Here we calculate break-even by fixed expense divided by CM ratio of the years.

Break-even calculation
2022 2023 2024
Revenue 36832066 50744964 40043467
Variable cost 12542545 16500000 14356542
Contribution Margin 24289521 34244964 25686924
CM Ratio 66% 67% 65%
Fixed Expense 10350000 11400000 12075654
Break-even sales 15681818 17014925 18577929

Break-even means where the profit and loss are zero it the magical figure after that one unit sales
will increase the profitability of the company and here our company’s break-even sales will be
just an above 15 million to 19 million which is very easy to achieve because there very lower the
amount because fixed expense quiet low that’s why company need not spend more money to
recover fixed charged.

6. Draw up the investment plan and the financing plan ending in a

balance sheet on 1 January 2022.

January 1st is the begging time of our company when there was not any current debt and retains
earning for the company

Forecasted Balance Sheets

Hello pharmacy
Year Started at 1st January, 2022
      22-Jan
Current Assets  
Cash     $3,500,000
Account Receivable     $0
Inventory     $0
Supply     $500,000
Prepaid expense   $500,000

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 Total current Assets $4,500,000
Long term assets  
Equipment     $10,000,000
Accumulated- equip   900000 $0
Building     $15,500,000
Accumulated- Build   200000 $0
Car     $10,000,000
Accumulated- Mach   700000 $0
land     $10,000,000
Land improvement  
Accumulated-land impr    
Total Long term Assets $45,500,000
Total Assets     $50,000,000
       
Current Liability  
Account payable     $0
accord payable     $0
income tax payable   $0
short term loan payable   $0
Total current liability   $0
Long term Liability  
Note payable     $20,000,000
Total Long term liability   $20,000,000
Owners’ equity  
Owners capital     $30,000,000
Retain earning      
Total Owners capital $30,000,000
Total Liability and owners’ equity $50,000,000

In begging of Hello Pharmacy there were not any current liability there was only current assets
like inventory and supply only and they have just setup their factory and equipment for the
company. So in this period property plan and land was more important so they manage that and
on the other hand liability and owners’ equity sector owner invested 60% money as owner
capital and from a local bank finance of 40% was them at the initial level of company’s Balance
sheet.

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 7. Draw up the estimated income statement for 2022, 2023 and 2024.
Here we presented the forecast income statement of the company and we see a positive
net cash inflow
Forecasted Income statement
Hello Pharmacy
Year ended at 31 December
    2022 2023 2024
Revenue      
Total Revenue 36832066.33 50744964 40043466.67
Variable cost 12542545 16500000 14356542
Contribution margin 24289521.33 34244964 25686924.67
Fixed Cost 8500000 9200000 9725654
Depreciation expense 1850000 2200000 2350000
Earnings before
interest and tax 13939521.33 22844964 13611270.67
Interest expense (9%) 1800000 1800000 1800000
Earning before tax 12139521.33 21044964 11811270.67
Tax rate (25%) 3034880.333 5261241 2952817.667
Net Income 9104641 15783723 8858453
Net Cash flow from
operation 10954641 17983723 11208453
There will be lower turnover in 3 rd year because we repay some of our
loan in 2023 that lower our business capital but we hope that after
2024 it will come again when we will able to catchup up new market
and we enhance our capital and explore new market. So 2024 won’t be
impact us more.

8. Draw up the forecast cash flow statement for 2022, 2023 and 2024

Forecasted Cash Flow statement

Hello Pharmacy
Year ended at 31st December
  2022 2023 2024
Cash flow from operation      
Net Income 9104641 15783723 8858453
Addition to cash      
Depreciation 1850000 2200000 2350000
Increase in Accounts receivable -754000 -231645  

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 Decrease in accounts receivable     -165635
Increase in Inventory -645215    
Decrease in inventory   33694 -70266
Increase in Supply -457860 -88294 70
Increase in prepaid -320501 -130755 300889
Increase in Accounts payable -1548624 965628  
Decreased in accounts payable     -362098
Increase in accord payable 451500 393614  
Decreased in accord payable     -103099
Increase in tax payable   365425 90897
increase interest payable 1200000   30694
Decrease in interest payable   -585479  
Net cash from operating activity 8879941 19291390 10929905
Cash flow from Investment activity      
Purchase of equipment -10000000    
Purchase of building -15500000 -2000000  
Purchase of car -10000000    
Purchase of land -10000000 -3000000 -2000000
Purchase of land improvement equipment -1400000 -500000  
Total cash flow from investment activity -46900000 -5500000 -2000000
Cash flow from Financing      
Note payable 20000000 -5800000 -5900000
Owners capital investment 30000000 0 0
Total cash flow from financing activity 50000000 -5800000 -5900000
Net cash flow from the year ended 11979941 7991390 3029905
Here in our cash flow statement there will be positive cash flow in upcoming years and because
of loan payment net cash flow will be lower but it will do will in future.

9. Draw up the forecast balance sheet on 31 December 2022, 2023 and

2024

Forecasted Balance Sheets

Hello Pharmacy
End of the year
      2022 2023 2024
Current Assets      
Cash     2577189 3578459 2864524
Account Receivable     754000 985645 820010
Inventory     645215 611521 541255

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Supply     457860 546154 546225
Prepaid expense   320501 451256 752145
Total current Assets 4754765 6173035 5524159
Long term assets      
Equipment     9200000 8400000 7600000
80000
Accumulated- equip   800000 800000  
0
Building     15250000 17000000 16700000
25000
Accumulated- Build   250000 300000  
0
Car     13300000 12300000 1130000
70000
Accumulated- Mach   1000000 1000000  
0
land     10000000 13000000 15000000
Land improvement 1400000 1850000 1700000
10000
Accumulated-land improvement 150000 150000  
0
Total Long term Assets 49150000 52550000 42130000
Total Assets     53904765 58723035 47654159
           
Current Liability      
Account payable     1548624 2514252 2152154
accord payable     451500 845114 742015
income tax payable   0 365425 456322
short term loan payable   1200000 614521 645215
Total current liability   3200124 4339312 3995706
Long term Liability      
Note payable     20000000 14200000 8500000
Total Long term liability   20000000 14200000 8500000
Owners’ equity      
Owners capital     30000000 30000000 30000000
Retain earning     704641 12183723 5158453
Total Owners capital 30704641 42183723 35158453
Total Liability and owners’ equity 53904765 58723035 47654159

10. Determine and calculate the payback period, net present value and
the internal rate of return of the investment on 1 January 2022.

Year Cash flow per year Cumulative cash inflow

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 0 (500000000)
1 11979941 11979941
2 7991390 19971331
3 3029905+40000000 63001236
After 3 years’ salvage value 40000000

Unrecovered investment at start of 2nd year

= Initial outflow – Cumulative cash inflow at the end of 2st year

= 500000000 – 19971331

= 30028669

Payback period = 2 + (30028669/43029905)

= 2 + 0.69

= 2.69 years

Company’s profitability will be so high in 1st two years that reduction of profitability in 2024
won’t hamper their recover of their investment.

Net present value of the company’s cash inflow

11979941 7991390 3029905+ 40000000

NPV= (500000000) + 1 + +
1.09 1.092 1.093

= (500000000) + (10990772+ 6726193+33226982)

= (500000000) + 50943947
= 943947
Net present value of all cash inflow gives us a positive result about company’s future so we thing
we should continue our business because it will give our return within a very short time period. it
became a profitable venture for Hello Pharmacy company limited.

Loan repayment

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Hello Pharmacy repay their loan amount through their net income periodically after the 1 st fiscal
year and that we mention in cash flow statement of Hello Pharmacy that every year from 2023
will star to repay their loan amount.

11. What is the effect of your recommendations (advise) on the

financial statement of the firm (balance, income statement and cash
flow statement)?

So after calculating the NPV of Hello Pharmacy we found out that the value is positive. It means
that if we established the business in the budgeting way and supply the product as per demand
there is a huge chance of profit from establishing Medicine supply business. We will be in
positive position initial investment in 3 years of plant operation. As startup business owner, we
try to make capital investment by conducting country market analysis we believe that taking debt
finance will help us to minimize the business risk because company is going to become
profitable but in new market we should wait so take a reasonable debt help us to reduce tax
burden and help us to booming in this industry. In all three years’ analysis shows that Hello
Pharmacy will be going to upward their net income from the begging. From income statement
we saw a significant change because of higher profitability and lower liability. Here we mixture
of liability option with equity option because higher retain company’s assets are growing rapidly
and lastly in cash flow statement we see a positive cash flow in the company in all the year that
is good for the company it shows that company’s working capital was enough to operate their
business properly and finally as it is a new business investment it’s difficult to success in couple
of years but Bangladesh is a developing country and that give us the guarantee of the success of
the business. Because in developing country government give noticeable incentives for strut up.
So in according with this capital budget we can say that the business will be very successful.

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 12. Determine and explain the liquidity (by calculation net working
capital and current ratio), solvency (by calculation of the debt ratio)
and profitability ratios (by calculating ROA, ROE, ROD) of this
company at the beginning and at the end of the year (for at least
three years).

Liquidity analysis
Working capital, it means the capital available after paying all current liability and here in this
company’s working capital was quiet high because of their lower debt dependability.

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 Working Capital

1833723

1554641
1528453

2022 2023 2024

Working Capital

Working capital of the company was quiet good in this period. Here in the year 2022 to 2024
working capital change was positively 1.5 million almost every year and that quiet good but it
also gives us a good indicator that there are not a lot of idle money in company using working
capital properly.

Current ratio It means the current position of amount of current assets and current liability that
means how many times company can pay it current liability.

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 Current Ratio
1.5
1.48
1.46
1.44
1.42
1.4
1.38
1.36
1.34
1.32
2022 2023 2024

Current Ratio

Here in this analysis we saw that 1 st year current ratio was quite stable position and from that
next 2 years also was in stable position and the rate is higher means company have lots more
liquidity that also means that company have enough money to pay their current liability and it’s
gives working stability indication.

Solvency ratio

Debt to assets ratio means company’s debt portion in their total assets that give the idea how
much a company it dependent on their debt. Lower rate means better the company.

Debt to assets ratio

0.5
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2022 2023 2024

Debt to assets ratio

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Here in this analysis we saw that company has quiet moderate debt dependability in their
business the percentage of debt was only 40% to 25% percent that moderate and that will help
the company to create tax shield. So company will be more profitable.

Profitability:

Return on Assets It means how much profit company earns on their total assets use and here we
calculated through net income divided by total assets. Higher the rate means better the
company’s income is.

Return on assets
0.3

0.25

0.2

0.15

0.1

0.05

0
2022 2023 2024

Return on assets

Here the profitability analysis we saw that in terms of assets company’s profitability quite high.
it will be close to 20% in next three years. Higher profitability Means Company is capable of
returns their investment within a short period.

Return on equity Its means how much a company earns in terms of their equity investment and
here we calculate it through net income divided by total equity investment.

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 ROE
0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
2022 2023 2024

ROE

Here in this profitability analysis we saw ROE will be quite high and it will be more than 25% of
equity investment and as a startup business that rate is good position.

Return on debt ROD means the return in terms of debt finance and here in this company debt
finance was very little and here we calculate it through net income divided by total debt.

Return on debt
0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2022 2023 2024

Return on debt

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Here in this analysis we saw that the return on debt was quite high because of lower debt
dependability that means company have very high profitability in terms of debt that is a good
sign for the business.

13. Recommendations

After all financial analysis we can see that company have huge potential in near future and if it
able to continue the operation in this way. Bangladesh is huge market for quality Medicine
supply. So to do better in the future Hello Pharmacy need to focus on their business operation
and deliver quality service.

14. Conclusion

After all the analysis about Hello Pharmacy we find out that Bangladesh is potential market for
medicine business because medicine is must needed item so everyone wants it when it is
required. Hello Pharmacy’s current market is only Dhaka city but after five years of its establish
we want to expand the business in full country because everyone wants this service on their door
step and we want to make our service to the door step of the customer. Our initial investment
was only 30 million and other 20 million comes from partner bank Dhaka bank and we believe
that we will able to repay the debt within 5 years’ period with interest. Finally, we found that it is
a profitable business for us if we able to establish this business in Bangladesh with good
financing decision give better return to the investor. After lastly we analysis the business plan
with our forecasted data and if we able to work according to our forecast plan then company will
prosper in near future.

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 Reference
Lia. V. S, Sakni. Y, Soumare. I, (2005), JOURNAL OF FINANCIAL DECISION MAKING A
Simple Method for Computing Value at Risk using PCA and QMC, JOURNAL OF

FINANCIAL DECISION MAKING, Volume 1, Number 2.

Information about capital budgeting (2022) retrieved from

https://www.extension.iastate.edu/agdm/wholefarm/html/c5-240.html

Appendixes
working Capital
Year Current Assets Current Liability Result
2022 4754765 3200124 1554641
2023 6173035 4339312 1833723
2024 5524159 3995706 1528453

Current Ratio
Year Current Assets Current Liability Ratio
2022 4754765 3200124 1.49
2023 6173035 4339312 1.42
2024 5524159 3995706 1.38

Debt to assets ratio

Year Total Debt Total Assets Ratio
2022 23200124 53904765 0.43
2023 18539312 58723035 0.32
2024 12495706 47654159 0.26

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 Return on Assets
Year Net Income Total Assets Ratio
2022 9104641 53904765 0.17
2023 15783723 58723035 0.27
2024 8858453 47654159 0.19

Return on equity
Year Net Income Total Equity Ratio
2022 9104641 30704641 0.30
2023 15783723 42183723 0.37
2024 8858453 35158453 0.25

Return on debt
Year Net Income Total debt Ratio
2022 9104641 23200124 0.39
2023 15783723 18539312 0.85
2024 8858453 12495706 0.71

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