Financial and Business Plans for the Masters of Arts in Secondary Teaching - Statistics Project Example

Financial Plan Abstract A business plan describes what a person or a business entity anticipates executing. A financial plan is an essential tool in developing a business plan since it evaluates the current and future financial state of business by use of known variables to forecast income (Shah 2017). For the masters of Arts in Secondary teaching, employment income, student loans, grants, and a government scholarship are the most crucial sources of income. The Net income calculated from an effective rate of $19.5/hr. and a threshold time of 50hours per weak yields $26,400 after all expenses is deducted. The student loan is $15,000, grants and the government scholarship amounts to $11,000 and $15,500 respectively. Perhaps this project is an investment that will require time to recover all the cash invested. Delgado et al. (2018) succinctly define this time to repay the money spent as a payback period. Therefore, startup costs for four universities in comparison to owners' equity are assessed, and Hawaii Pacific University is chosen as the best after a cost-benefit analysis. Also, the ratio analysis and risk analysis associated with the project are necessary. For ratio analysis, computation of debt to equity ratio and a current ratio of the project are essential. Also, a risk of losing employment and also change in the price of startup costs has a significant effect on the planning and the implementation of the project. Financial Plan Chambers and Humble (2017) succinctly define a business plan as a written document that describes what a person plans to do, how he/she will execute the project and the financial implications of the drafted plan. Therefore, a financial plan serves as a tool of paramount importance when coming up with a business plan. A financial plan comprehensively evaluates a person's current pay and his/her future financial state through using the current known variables to forecast for the future income, withdrawal plans and the asset values (Shah 2017). Perhaps it is critical to developing a personal financial plan before enrolling in higher education, i.e., pursuing a masters of Arts in secondary teaching. The financial plan is crucial in making comparisons between my projected expenses, my current incomes, likely sources of income and the different universities' expenditures on tuition fee, accommodation fees, and other miscellaneous costs. Financing Sources Therefore, the chart showing the financial sources for the project is shown in the chart 1. The income from employment after all the expenses are deducted serves as the primary source of income for the project. Chart 1: The Finance Sources Payback Period Delgado et al. (2018) succinctly define payback period as the actual time required for the total amount of money invested in an asset or a service to get repaid by the net cash flow generated by the project. Therefore, for the Masters of Arts program's payback period relates to the actual amount of time required for the program to generate the total cash flow that was invested as either accommodation fee, tuition fee or other miscellaneous expenses as startup costs. Therefore, the payback period is calculated by a simple payback method and the period is expressed in actual years or fractions of individual years. For instance, if I will decide to pursue my master's degree in Argosy University, then my payback period will be the exact amount of time that will be required to repay an inclusive of $54,540 and general personal expenses of $20,400 after completion of the program. Startup Costs and Cash Flow Projections A cash flow projection refers to an estimate of the actual amount of money that an individual expects to flow in and out of a business or a project (Ayers, Call, & Schwab, 2018). Therefore, a cash flow forecast covers one year, but it can as well include a short period of a week or a month (Ayers et al. 2018). Startup costs refer to the actual amount of money that is spent in beginning the project. Therefore, for my Masters of Arts program, the following cash flow projections are of paramount importance. Startup Costs and Financial Expenses A comparison of the total startup costs for the four universities with my net income is crucial for selecting the actual startup costs for my project. After a financial analysis of the most appropriate university regarding the quality of their services and the value of their services, a decision ought to be made on which university to join. After selecting the most appropriate university, the costs of undertaking the program in that respective university will be the total startup costs for my program. Table 1.2: Startup Costs and Expenses University Name Total Costs Disposable Income Deviation Comment Argosy $54,540 $67900 ($13,360) Expensive University of Hawaii at Manoa $53,860 $67,900 ($14,040) Expensive University of Hawaii at Hilo $37,711 $67,900 ($30,189) Cheap Hawaii Pacific University $40,758 $67,900 ($27,142) Average Cost(Best option) Chart 2: Comparison of The startup Costs Four Universities For the cash flow statements, the expenses and the flow of income are projected within the first operational year or admission to the university. Since the Hawaii Pacific University has an average amount of startup costs, it serves as the best university for my entry. The decision made in choosing Hawaii Pacific University is based on an extensive cost and benefit analysis, whereby the more costly the project is, the more uneconomical it is and the cheaper the project option, the less quality it proves (Miura, 2018). Therefore, the cash flow projection is as follows;Table 3: Cash flow Projections Pro-forma Cash Flow Amount Projected yearly Employment 1 Year Total hrs. 2400 hrs. Ideal Working Rate $19.50/hr. Total Gross Income $46,800     Probable Expenses Yearly Rent & Other Utilities $13,200 Gas for Car $1,200 Food/Toiletries $3,600 Miscellaneous Expenses $2,400 Startup costs at Hawaii Pacific university $40,758 Total Expenses $61,158 Total Working Capital ($14,358) Working Capital c/d ($14,358) Student Loan $15,000 Student Grants $11,000 Government Scholarship $15,500     Net cash flow $27,142 Balance Sheet and the Income Statement for the Project A balance sheet is a statement of assets liabilities and the capital that a project or a business entity has for the operation of the business. An income statement/profit and loss account of a business refers to the financial statement that shows the revenues of a given project and the expenses during a particular period. These documents for my masters' project are as shown below;Table 4: Balance sheet Masters of Arts in Secondary school Teaching Project Balance sheet as at; 31st December, 2018 ASSETS Amount   LIABILITIES Amount Current Assets     Current Liabilities   Student Grants $11,000   Income Tax(2% p.m) $6,336 Government Scholarship $15,500   Rent & Other Utilities $13,200 Net Employment Income $26,400   Gas for Car $1,200       Food/Toiletries $3,600       Miscellaneous Expenses $2,400       Start Up Costs $40,758 Total Current Assets $52,900   Total Current Liabilities $67,494               Long Term Liabilities         Student Loan(Payable 10% P.a $1,500       Total Long-Term Liabilities $1,500         Total assets $52,900   Total Liabilities $68,994 Balance Carried Forward (c/f)   ($16,094)     Project's Ratio Analysis According to Weygandt, Kimmel, and Kieso (2015), ratio analysis refers to a form of a financial statement which is used to obtain a quicker indication of the financial performance of a given business or a project in several vital areas. Therefore, ratio analysis computations can be used to compare a firm's success and the general industry averages. Thus, ratio analysis for my master's program can be computed using the following ratios. Current Ratio Weygandt et al. (2015) define the current ratio as a liquidity ratio that is involved in measuring the organization's ability to pay long-term and short-term obligations. For instance, a current ratio incorporates all the current liabilities and current assets in measuring my ability to pay for my master's program at Hawaii Pacific University. Therefore, my current ratio can be computed as follows; Current Ratio= Current Assets/Current Liabilities Therefore for my project, Current Ratio= $52,900/$67,494 Current Ratio= 0.7838 or 78.38% Debt to Equity Ratio Debt to Equity ratio is a financial ratio that indicates the relative proportion of the business or project owner and the debt that was used to finance the business assets or the project. For instance, my debt to equity ratio analyses my employment income as owners' equity versus all the liabilities such as student loans. Debt to Equity Ratio= Total Liabilities to Finance the Project /Owners' Equity Debt to Equity Ratio=$15,000(Student Loan)/ $26,400(Net Income) Debt to Equity Ratio=0.5682 or 56.81% Risks Associated With Project Implementation According to Brigham et al. (2016), risk analysis and development of contingency plans during the creation of a business plan remains to be subjects of paramount importance to any entrepreneur or a project developer. Therefore, risk analysis is a procedure/a technique that a business person or a project developer adopts to identify and asses all the possible factors that most likely may jeopardize the success of the project or business agenda. Various risks have a direct impact on the performance and operation of my master's project. These risks as follows; Change in the Startup Costs and Expenses All the startup costs and expenses associated with the project are linked to a present financial analysis of Hawaii Pacific University. As Brigham et al. (2016) cite, issues relating to finances and the general economy are prone to changes such as the normal lapse in market prices of goods and services and also inflation. These changes in the economic orientation mays shift the price of the startup costs at any time within the fiscal year, thus forcing the project to undergo a financial crisis. Loss of Employment Employment income serves as the main channel that brings money to the project. Income from employment is used in meeting the startup costs and also in repaying the $15,000 student loan. Therefore, the significance of this risk to planning is that it helps the planner prepare a contingency plan to curb this issue in case the risk occurs. Also, the risk increases my awareness on the need of having subsidiary sources of income to help me pay my expenses in case of financial crisis. References Ayers, B. C., Call, A. C., & Schwab, C. M. (2018). Do Analysts' Cash Flow Forecasts Encourage Managers to Improve the Firm's Cash Flows? Evidence from Tax Planning. Contemporary Accounting Research. Brigham, E. F., Ehrhardt, M. C., Nason, R. R., & Gessaroli, J. (2016). Financial Managment: Theory And Practice, Canadian Edition. Nelson Education. Burtonshaw-Gunn, S. A. (2017). Risk and financial management in construction. Routledge. Chambers, I., & Humble, J. (2017). Developing a Plan for the Planet: A Business Plan for Sustainable Living. Routledge. Delgado, L., Shealy, T., Garvin, M., & Pearce, A. (2018). Framing Energy Efficiency with Payback Period: Empirical Study to Increase Energy Consideration during Facility Procurement Processes. Journal of Construction Engineering and Management, 144(5), 04018027. Miura, G. (2018). Cost-benefit analysis. Nature Chemical Biology, 14(10), 903. Shah, S. (2017). Comprehensive Personal Financial Planning (PFP) Process: An Empirical Study. Anvesha, 10(2), 22-30. Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Financial & managerial accounting. John Wiley & Sons. Read More