Scribd
Upload
132 views

Internship

The document provides information on the key assumptions needed for a financial model when opening a tea cafe in India, including revenue, expense, and tax assumptions. It explains that the financial model projects revenue, earnings, cash flows and balance sheet based on these assumptions. Revenue assumptions include expected daily tea sales and pricing. Expense assumptions include monthly rent, consumable costs per cup, and utilities. The corporate tax rate in India is 30%. It also describes the purpose and components of the income statement, balance sheet, and cash flow statement in a financial model. The income statement shows revenues, costs and profits. The balance sheet provides a snapshot of assets, liabilities and owner's equity. The cash flow statement shows how activities affect cash flow

Uploaded by

YASHASVI SHARMA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
132 views

Internship

The document provides information on the key assumptions needed for a financial model when opening a tea cafe in India, including revenue, expense, and tax assumptions. It explains that the financial model projects revenue, earnings, cash flows and balance sheet based on these assumptions. Revenue assumptions include expected daily tea sales and pricing. Expense assumptions include monthly rent, consumable costs per cup, and utilities. The corporate tax rate in India is 30%. It also describes the purpose and components of the income statement, balance sheet, and cash flow statement in a financial model. The income statement shows revenues, costs and profits. The balance sheet provides a snapshot of assets, liabilities and owner's equity. The cash flow statement shows how activities affect cash flow

Uploaded by

YASHASVI SHARMA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

Question 1) While preparing a financial model what are the assumptions we need to take.

Please list
down the list of assumptions with the values, assuming the project will be setup in India.

Answer :-

ASSUMPTIONS

A financial model is a set of assumptions about future business conditions that drive projections of a
company's revenue, earnings, cash flows and balance sheet accounts. ... Like financial statements,
one generally reads the model from the top to the bottom, or revenue through earnings and cash
flows. This can be better understood using an example.

Let’s say we use the commercial space for opening a tea café in India. As the purpose of opening the
cafe is to make profits, and profits are given by the difference between revenue and costs.

Revenue assumptions

Based on your study of other tea cafes in the area, you expect the following assumptions for your
business’s revenue:

 You’ll sell an average of 150 cups of tea per day throughout the year.
 Forty percent of tea sold will be in large cups; 60 percent will be in small cups.
 You’ll charge ₨ 150 for a large cup of tea and Rs 70 for a small cup of tea.

Expense assumptions

In your analysis, you’ve also researched the operating costs of running a cafe, which are the
following:

 The rent expense will most likely be Rs 40000 per month. This is just an estimate, though —
you’ll enter some potential fluctuations into the scenario analysis later on.
 Consumables — including tea brand, cups, filters, and so on — will cost you Rs 65 per cup.
This amount has been averaged over both large and small cups, so you won’t need to
distinguish between size for the purpose of this model.
 Monthly utilities, such as electricity, heat, and water, will cost Rs 5000 per month.
 The company income tax rate is 30 percent.

Question 2) Explain the function of revenue, cost and debt sheet of financial model.

The Financial Statements Area is comprised of three Types, representing each of the three financial
statements. Each of these financial statements has the purpose of summarising a different
component of an entity’s financial position. The three different Types within the Financial
Statements Area are:

1) Income Statement
2) Balance Sheet
3) Cash Flow Statement
Income Statement

Revenue on the income statement or others finances: the revenue is most important in the business.
Without revenue the business can’t survive. The revenue is calculated for the expenses made by the
business and to give salaries to the employees. If the company is able to made these expenses then
the surplus in the balance sheet is used. After that the company survival will be difficult. The revenue
tells about the position of the company so that the investor can invest in it.

 Provides a summary of the revenues, costs and expenses of an entity during an accounting
period.
 An Income Statement is generally used to calculate the Net Profit After Tax (NPAT) of an
entity.
 Also referred to as a Statement of Financial Performance or a “Profit & Loss Statement”.

Balance Sheet

 Shows the status of an entity’s assets, liabilities and owner’s equity at a point in time, usually
the close of a month.
 A Balance Sheet provides a snapshot of the entity‟s financial position, including the
cumulative results of the Income Statement and Cash Flow Statement, at a point in time. 
Also referred to as a “Statement of Financial Position‟.

Cash Flow Statement

 Shows how changes in Income Statement and Balance Sheet accounts affect cash and cash
equivalents during an accounting period.
 A Cash Flow Statement breaks the analysis down according to operating, investing and
financing activities.  Also referred to as a “Statement of Cash Flows‟.

Question 3) Explain in detail the various steps involved (with the importance) in the finflows
sheet. Why and what the bank need to check before financing the project.

•Determine the total revenue estimated by the company during the period.
•Calculate the total operating expenses which involve rent, insurance,payrolls etc.
•Determine non operating expenses for further approach which involves depreciation costs,
interest payments.
• Net income is calculated after deduction of the tax amount from the income before the
payment of interest and taxes.

The income statement is the first which is prepared by using the revenue and income of the
business. Preparing the net earning of the business as retained earning which the business
are having for their profit and dividend distribution.
The balance sheet is prepared for the management of liabilities and assets held by a
business. To know the correct financial position of the company.
The cash flow statement is prepared for the liquidity of the business. The business story can
be recognized by the statement.

Importance of fin flow sheet:-


 Financial statement as it provide the decision making for the business from which
area of the company having the greater returns.
 The shareholders get the information through the statement and how much
company is making profit is listed in this.
 Through the fin flow statement the liquidity and creditability of the business is
known by the lenders and creditors.

ROLE OF BANKS IN FINANCING A PROJECT


Project Financing is a long-term, non-recourse or limited recourse financing scheme that is
used to fund massive projects which can be repaid using the project cash flow obtained after
the completion of the project. This scheme offers financial aid off balance sheet, therefore,
the credit of the shareholder and Government contracting authority does not get affected.
In Project Financing, multiple participants are allowed to handle the project while the
ownership of the project is entitled according to the terms of the loan only after the project
is completed. This financial scheme offers better credit margin to lenders while shifting some
of the risk from the sponsors to the lenders.
As the Indian Government continues to investment on the infrastructure of the country, it is
expected that there will be massive developments in future in terms of power,
transportation, bridges, dams etc. Most of these projects will be using the Public Private
Partnership (PPP) method indicating a rise in Project Financing during the upcoming years.
This entire cycle will further help improve the economic condition of India.

You might also like