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French Bakery- Financial Documents (Balance Sheet, and Break –Even Analysis)

Kawtar Ben Hadouch

BUS480

Southern States University

5/29/2022

French Bakery- Financial Documents (Balance Sheet, and Break –Even Analysis)

French Bakery

Balance Sheet

December 31st 2021

Assets	Liabilities and Owner’s Equity
Cash $6940 Equipment and Machines $ 44500 Supplies $7000 Land; Rent $ 6700 Building $44500 Account Receivable Total $220700	Liabilities Notes Payable $74900 Salaries Payable $8900 Accounts Payable $16200 Total Liabilities $100000 Owner’s Equity Capital Stock $80000 Retained Earnings $40,700 Total $220700

Retained earnings is calculated as follows; Retained earnings= Total Assets- (Total liabilities+ capital stock.

=220700-(100000+80000)

=$40700

When entrepreneurs want to start a business, they will have to develop and utilize numerous financial documents during the planning stage. Such documents include the balance sheet, cash flow, and income statement ((Barrow & Barrow & Brown, 2021). Each of these documents has a critical role in planning and managing a new business. Some documents are used in the planning stage to determine if the proposed business is feasible or not. Other documents are useful during the operational stage because they provide information key to attracting consumers, investors, and partners. Building documents like a balance sheet, income statement, and cash flow requires the entrepreneur to make key assumptions. These assumptions include forecasted sale volume, cost of sales, and administrative expenses. In sale volume, the entrepreneur predicts the number of units they will sell over a pre-determined period. Cost of sale refers to the total accumulated cost of creating a product or service offered to the consumers. Administrative expenses refer to all expenses incurred by a firm tied directly to specific functions like manufacturing.

Break-Even Analysis

French Bakery (Pastries)

For the Period Jan 1st-June 30th 2022

Selling Price per Unit (P): $ 20

Break-Even Units (X): 15554

Break-Even Sales (S): $ 311080

Fixed Cost	Variable Cost
Advertising Depreciation Rent Payroll Interest Expenses Taxes Utilities Manufacturing Total $ 1500.00	Variable Cost Based on Cost of Dollar Cost of Pastries Sold $ 1.00 per unit Direct Labor Overhead Others Sum $1.00 Variable Cost Based on Percentage Commissions 5.0% per unit Others Sum 5.0% Total Variable Cost per Unit (V) $2.50 Contribution Margin per unit (CM)= P-V $17.50 Contribution Margin Ratio (CMR)= 1-V/P=CM/P =87.5%

Break-Even Units (X) =TFC/(P-V)

=$ 311080

Break-Even Sales (S) = XP = TFC/CMR

= $ 311080

Calculations of the cash flow show the entrepreneur must have between $10000 and $ 150000 before opening the French bakery. However, the startup cost will vary depending on other factors like the location of the business, size, and the number of employees to be contracted. This amount may be lower depending on the reduced need for employees. Increased inventory in the bakery businesses also reduces costs. Whether the French bakery will offer seating services and the food selection will look like are also key determiners of the startup cost. Bakeries that offer full menus and operate for long hours require larger capital to start.

The amount to start the bakery business will be generated from the following sources; personal savings, contributions from friends and family members, and also from the banks and credit unions (Barrow & Barrow & Brown, 2021). The primary source of a startup is personal savings; before starting a business, an entrepreneur must have a year of accumulating this capital. They can also work on issues like mortgage and insurance needs. Contributions from friends and relatives sum up the personal savings. However, before an entrepreneur follows this route, they must inform these people and put everything clear. Bank and credit unions are also other sources of capital to start businesses. However, banks have lending terms that are not easy to crack. Before accessing capital from these institutions, the entrepreneur must have a firm business plan.

Reference

Barrow, C. & Barrow, P. & Brown, R. (2021). The business plan workbook: a step-by-step guide to creating and developing a successful business, tenth edition