Create teams (max 3 members).
Main goal – to provide realistic and detailed data about your new development business/investment, that may serve as a base for the decision-making process of the top management of a mother company. You may choose whatever business you want to, however, the following conditions must be met:
- business is separated from the mother company i.e. you may identify cash inflows/outflows of the project
- you are a producer (no service company, no merchandise company)
- your production is not custom-made, products are the same/similar
- you can identify (and price) at least 3 raw materials needed for the production
- you have some work in process
The structure of your Word document assignment will be as follows:
- Cover page – name of your project, team members, date
- Budget introduction – description of the project
- Basic assumptions of your budget
- Opening balance sheet – period zero
- Master budget incl.
- Sales budget – description of the assumptions + financial data
- Production budget incl. direct material budget, direct labor budget, and manufacturing overhead budget – description of the assumptions + financial data.
- Selling and administrative expense budget – description of the assumptions + financial data.
- Budgeted income statement based on the above calculated master budget for the year ends (4 statements).
- Budgeted Cash flow for the year ends (4 statements)
- Breakeven point analysis methods (calculations for the end of the year 1 + comments! on results)
- Evaluation of the project using capital budgeting methods (calculations + comments! on results):
Payback period
Net present value
Internal rate of return
- Financial Analysis – calculate for all periods ROE, net profit margin, gross profit margin + closing DSO, DPO, DOH and CCC and comment on the results. You may ignore averages and use only the values at the end of the period.
- Assessment of the project, key highlights, key arguments.
Periods – your budget will be prepared for 8 semiannual periods i.e. in total for 4 years.
Assumptions – you have to present the source (in most cases probably an internet source), which is behind your assumptions. Assumptions must be logical, connected, and well thought-out. An assumption without a source/explanation will not be accepted!
Your analysis will consist of two documents – Word and Excel. Both documents will be graded (see the grading below).
Word document – detailed structure you may find above. All calculations needed will be calculated in Excel, however in a Word document you have to present at least a summary of financial data for each level described in the detailed information. The primary goal of the Word document is to provide detailed information about assumptions, comments on different levels of the budget, and also comments on evaluation methods (breakeven analysis and capital budgeting methods).
Excel document rules
- Excel file must be used as a calculation tool i.e. no side calculations on the calculator are possible.
- Excel is not a notebook! Excel file will consist of an assumptions list, where you aggregate all numbers, which you insert into the Excel. All the other lists will be connected to the assumptions list/other lists and there will be only formulas/connections.
- Your budget will be flexible i.e. it will be possible to change some assumptions and the whole budget will be automatically recalculated. Assumptions that must be AT LEAST flexible are – raw material prices, amount of sales, price of the product, number of direct workers, and labor costs (salary of the direct workers). During your presentation, you will present this ability of your model.
Please upload to the IS both Word and Excel documents!
Minimum length is not specified however the report must include all parts described above.
please note late assignment = no assignment
Chance to improve your grading
A lesson in week 12 will be dedicated to the discussion about your budget assignment. You are expected to bring your drafts and ask (classmates or teacher) any questions or help with the solution of any task. Therefore you have a chance to update your assignment based on the comments and improve your grade.
Budget Assignment Assessment Word
| Components | % of Grade |
| Reliable assumptions | 30% |
| Logical, valid, and clearly stated conclusions | 10% |
| Grammar, spelling, syntax | 5% |
| Professional graphics | 5% |
| TOTAL | 50% |
What is expected in each section of the grading (rubrics grading) :
Reliable assumptions
in-depth and high-quality sources and assumptions, that prove the reliability of the model, all major issues are addressed
Logical, valid, and clearly stated conclusions
reliable conclusions, that can persuade the investor
Grammar, spelling, syntax
no grammar/spelling/syntax mistakes, which would disturb the reader
Professional graphics
professional i.e. very good-looking graphics, which moreover helps the reader to go fluently through the text
Budget Assignment assessment Excel
| Components | % of Grade |
| Completeness of the analysis | 25% |
| Accuracy of calculations | 25% |
| TOTAL | 50% |
What is expected in each section of the grading (rubrics grading) :
Completeness of the analysis
all requirements have been fulfilled and no important facts have been omitted, methods used to evaluate the business were properly used
Accuracy of calculations
the presented model is reliable as it can be verified using the Excel built-in functions. there are no mistakes and therefore the reliability of the model is not disturbed.
