Jds Trucking Business Financial Analysis

Financial Analysis

        Jennifer White        

MT499 Unit 7

May 3, 2016

             The original investment to start the business is $250,000. This investment will be accomplished by private funding. The whole funding will be achieved by 4 partners who will share equal proportion of company. Each will contribute $62,500. We do not intend to have much of long term loans from outside sources. This is done to diminish the interest expenses and any outsider control on the company. This cost will be used for buying trucks and buildings, setting up the website, buying the property, and putting all the other required pieces of the business in place. Going on, the associates can keep on sharing the costs in same proportion or can liquidate their share moderately of fully after seeking the approval from other associates.

              Once the company gets a good established line of income and chooses to expand its operations, it will also be open for going public through equity market route. This route reduces the share of the original promoters but makes it is a stress- free way for them to raise money from the equity market. This choice is all going to depend on management’s decision.  (Stowell, 2010)

Pricing model used for the business is cost plus method. After buying the trucks or even listing what we do on our company’s website, the company expects 15- 20% margin to increase. The company management has reason to believe that an increase of truck fleet will assist the company in its effort to widen the market offering and increase sales also. The following is highlights that are important general assumptions to JDS Trucking. Interest rates, tax rates, and personnel burden are based on conservative assumptions. I have added an excel sheet in which lists these price for 3 years. This will clarify the pricing model of the truck driver salary. Here I will cover the wages paid which are not directly attributable to client’s job. This will also include training, repair work, returns from deliveries, and other required driving with empty trucks. Since the company does not sell products we move product from one place to another, it is hard to include a list of everything you may need to see.

 Breakeven analysis is pointed to identify the margin of safety and a point where costs are equal to sales. This analysis aids the possessors as well as the financers to project their future expectations from the business. The business will be able to break even when the gross sales reach around $ 200,000. This will happen in the first year of operations. Therefore, the business will have to keep the finances coming in strong that it can uphold itself until we can start turn a profit. JDS Trucking is going to be successful form this day forward and will be profitable. Therefore, the business will start to make it with in the first year. Looking at all this information is very important to all the associates that are putting their money within the business and the external stakeholders who are providing long term or short term money to JDS Trucking. When the business is making a profit, it will have enough credit merit so JDS Trucking can go further with their actions within their funds from the market. (Farris, Bendle, Pfeifer, & Reibstein, 2010)

               JDS Trucking Shows the first three year of what we made on the balance sheet. At the end of each of these three years, the business has a balance sheet worth of $629,970, $778,250, $1,226,328 individually. Therefore, JDS Trucking balance sheet register growth is about 67.44% within the second and 62% in the third year. JDS Truck did start off growing slow but by the fourth year we grew in sales by 80% and I think once we hit the firth year JDS Trucking will be at 100% in cash assets. JDS Trucking can say that we almost reach the full growth within the first year of opening. As our company starts to calm down and grab hold of the community, the growth of the business will also start to regulate. JDS Trucking’s Company’s balance sheet was made for the financial years 2016, 2017, and 2018. Financial years for the company ends on December 31st of every Calendar year. Looking at the year one it likely to make a net profit of  $6,178. In which case the net profit/sales would be about 6.18%.  Now looking at the business once the company has had a chance to settle down and become more part of the community and grow in terms of net profit. This year, JDS Trucking will be likely to make $111,606 net profit with profit growth of 27.90%. The business will need to understand that the profits will have to withstand for the long run. Normal profits can be realized either when the business is new and makes exceptional entry or when it differentiates itself significantly from the rest of the industry.

                  In this part of the paper, we studied the primary funding requirements and strategies to obtain these funds. This also exposes the initial ownership structure of the business. All though, this proprietorship structure may change in the future depending on the business needs. Next we analyzed the pricing model used by the company. The attached excel sheet gives prices and margins for first hundred miles and the weights of the load size. This pricing model is based on the weight of load hand how far the load will need to be moved from.  The next analysis is of the projection of financial statements for the first three years. These financials have been prepared on the basis of trend analysis. There can be some deviations to these statements. Both, the balance sheet and the income statement show that the performance in the second year of operations will be off on the right foot. With JDS Trucking starting to stabilize and perform like any other player in the industry. Last but not least, we have conducted the breakeven analysis which suggests that the company will be able to make itself profitable in the first year of its operation. A very important reason for this success is that the business is expected to maintain a strong cash flow right from the first year of its operations. In the next part, we will see the cash flow of the business for the first three years. A very important metric to understand the robustness of the business is to analyze its cash flow. Many successful businesses believe that cash is the real asset of a business and accounts created on the accrual basis can be really deceptive.