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Accounting and Finance Department

Accounting and Finance Department. Project Overview. Some of the goals of the Image FX Finance and Accounting department include:. Cutting costs of the company Increasing profits Establishing a solid budget

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Accounting and Finance Department

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  1. Accounting and Finance Department

  2. Project Overview Some of the goals of the Image FX Finance and Accounting department include: • Cutting costs of the company • Increasing profits • Establishing a solid budget • Providing management with information which will enable them to make sound decisions regarding the company

  3. Presentation Overview • Target Highlights • Financial Ratios • Corporate Budget • Break-Even Analysis • Financial Recommendations

  4. Target Highlights • Target wishes to acquire an ERP system and therefore it will fund our IT department annually • Target will grant Image FX $20 million to cover all start up costs • Additionally, Target will pay for marketing because Image FX is selling exclusively to Target • Image FX must decide if it will agree to merge with Target

  5. Financial Ratios

  6. Budget • Allocate funds throughout organization in an effort to make spending more effective. • All budgets are based upon the following assumptions.

  7. General Assumptions • Target purchases 150,000 Units at $30 each in Year One • Cost of Goods Sold will be $15 each unit in Year One • Quantities increase 10% per year • Sale price to Target increases 10% per year • Cost of Goods Sold decreases 10% per year. • Inflation Stays at 2%

  8. Risk Reduction Assumptions • 15% Overall Increase to Risk Reduction each year

  9. Risk Reduction Factors • Patent Attorney Salary Increase • Inflation • Patent Processing Increase • Licensing Fees Increase

  10. Total Patent Expenses

  11. Total Licensing Expenses

  12. Research and DevelopmentAssumptions • Overall 18% Decrease in Years 2 and 3 • Overall 3% Decrease in Years 3 and 4 • Overall 1% Decrease in Years 4 and 5 • Overall 2% Increase in Year 5 and Beyond

  13. Research and Development Factors • Inflation • Efficiency

  14. Total Small Scale Production Costs

  15. Information Technology Assumptions • Overall 3% Drop per Year • Funded by Target annually

  16. Information Technology Factors • Operating Cost Decrease • Hardware Cost Elimination • Software Cost Elimination • Implementation Cost Decrease • Training Cost Decrease • Maintenance Cost Decrease • Add-On Cost Increase • Upgrade Cost Constant • Inflation

  17. Total Information Technology Expenses

  18. Marketing Assumptions • Overall 12% Increase per year • Funded by Target completely

  19. Marketing Factors • Sales Increase • Inflation

  20. Total Selling Expense

  21. Finance Assumption • Overall 2% Increase Finance Factors • Inflation

  22. Break-Even Analysis • Profit first appears in Year 5 • Overall Break-Even in Year 8

  23. Gross Profit

  24. Total Department Expenses

  25. Payroll Analysis • Human Resources was responsible for the initial payroll. • Payroll accounted for the majority of our spending, and as a result needed to be trimmed.

  26. Payroll Analysis • The following cuts in personnel were made to the Financial division: • Budget Director • Director of Finance • VP of Finance • 8 Financial Analysts • The Financial division now stands at: • 1 Financial Analyst • 1 Bookkeeper

  27. Payroll Analysis • The following cuts in personnel were made to the Research and Development division: • 1 Assistant Director of Manufacturing • 1 Assistant Director of Research • 7 Research and Development Analysts • The Research and Development division now stands at: • 1 Director of Research and Development • 2 Research and Development Analysts

  28. Payroll Analysis • The following cuts in personnel were made to the Human Resources division: • 1 VP of Human Resources • 1 Recruiting Director • 6 Human Resources Analysts • The Human Resources division now stands at: • 1 Director of Personnel • 1 Benefits Manager • 2 Human Resources Analysts

  29. Payroll Analysis • The following cuts in personnel were made to the Risk Reduction division: • 1 Director of Licensing • 1 Director of Business Development • 9 Risk Analysts • The Research and Development division now stands at: • 1 Director of Licensing and Business Development • 1 Risk Reduction Analysts

  30. Business Partner Investment • As part of the merger between Target and ImageFX, Target will pick up the following expenses: • A 20 million dollar boost in Year 1 • Picking up Marketing and IT Expenses all following years

  31. Investment From Business Partner(Initial vs. Revised Projections)

  32. Cost of Goods Sold

  33. Total Payroll Expenses

  34. Total Administrative Expenses (Initial vs. Revised Projections)

  35. Net Profit / Loss (Initial vs. Revised Projections)

  36. Net Operating Income (Initial vs. Revised Projections)

  37. Total Operating Expenses For Year 1 (Initial)

  38. Total Operating Expense For Year 1 (Revised)

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