Strategic Financial Analysis and Design - Finance Report

1. INSTITUTE OF BUSINESS MANAGEMENT
COURSE
Strategic Financial Analysis and Design
Project on
Change & Evolve Private Limited
Submitted to
Sir. Faisal Dedhi
Submitted by
Shiza Arif 20192-25133
Sana Asim 20181-23830
Kubra Akbar 20181-23531
Abdul Aziz Afzal Siddiqui 20181-23465

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Contents
INTRODUCTION.............................................................................................................................................3
Need of this business................................................................................................................................3
Vision and Mission Statement ......................................................................................................................3
Goals of Change & Evolve Private Limited....................................................................................................4
What we offer? .............................................................................................................................................4
SWOT ANALYSIS............................................................................................................................................4
Strength ....................................................................................................................................................4
Weakness..................................................................................................................................................5
Opportunities............................................................................................................................................5
Threats ......................................................................................................................................................5
Marketing Strategies.....................................................................................................................................5
Promotional Strategy....................................................................................................................................6
Projected Balance Sheet ...............................................................................................................................7
Projected Profit & Loss Account ...................................................................................................................8
COGS Statement ...........................................................................................................................................9
Forecasted Depreciation Schedule ...............................................................................................................9
Forecasted Marketing Expense Allocation ...................................................................................................9
Revenue Assumption in 2020 .......................................................................................................................9
Revenue ......................................................................................................................................................10
Computation for Financial Cost ..................................................................................................................11
Detail of Cash at Bank.................................................................................................................................12
Projected Key Financial Ratios....................................................................................................................13
Ratio Analysis..............................................................................................................................................14
Stock Portfolio.............................................................................................................................................14
Weighted Average Cost of Capital..............................................................................................................15
Rationale for Investing in Stocks.................................................................................................................15
Conclusion...................................................................................................................................................16

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INTRODUCTION
Employees are invaluable assets of any company and ensuring their excellent mental and physical health
sets them up to perform well. The health and wellness of their employees usually have a direct effect on
the productivity and profits of a company. Many employers understand this and are ready to spend on
such programs.
Change & Evolve Private Limited is a Karachi based employee wellness training startup, whose objective
is to work for the wellness of employees in the organization so that they can be the fruitful resources for
their respective organization.
Basically Change & Evolve Private Limited offer enough services that may seem to be “one-stop shopping”
for employers where they can get the many services related to wellness for their employees.
Need of this business
The American Psychological Association (2018), proposed five factors that can create a healthy work
environment for employees:
a) Work life balance
b) Health and safety
c) Employee growth and development
d) Employee recognition
e) Employee involvement
Happy employees who are satisfied with their job stay motivated and give productive results. Employee
wellness is any workplace health promotion activity or organizational policy designed to support healthy
behavior in the workplace and to improve health outcomes. Organizations that offered more extensive
bundles of wellness programs has the highest outcomes. Employers who improve wellness programs for
worker are likely to have a competitive advantage in the market. Motivated by these factors we initiated
this startup to provide the wellness training to our clients (Corporate employees).
Companies who ignore their employees' well-being are losing money. The healthcare costs of a 60-year-
old with high well-being are lower than those for a 30-year-old with low well-being. Poor employee health
and wellbeing has an indirect effect on productivity through reduced employee engagement levels. The
target/focus of Change & Evolve Private Limited would be to;
a) Reduce the number of sick leaves an employee takes
b) Reduce the number of accidents & other health expenses
c) Reduce the stress level
d) Attract the employees
e) Retain the employees
Vision and Mission Statement
To support employees in making healthy choices with their work and home lives and Mission Statement
is to encourage Habits of wellness, Increase Awareness of factors and resources contributing to wellbeing,
Inspire Individuals to take responsibility for their own health.

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Goals of Change & Evolve Private Limited
As a company, our ultimate goals are to achieve the following milestones;
a) Employee’s weight reduction
b) Smoking cessation
c) Manage stress level of employees
d) Lower blood pressure or cholesterol levels
What we offer?
a) Fitness programs
b) Healthy eating counseling
c) Education on mental health
d) Education on stress management
e) Vaccination
f) Smoking cessation
g) Weight loss counseling
SWOT ANALYSIS
Strength
Our strength lies in our unique corporate wellness programs designed to suit our various clients. Our
business structure is well positioned to ensure that only competent employees are assigned by us and
that each understands the roles assigned to him/her.
Strength
•Unique Corporate Wellness programs
•Experienced Trainers & Nutritionist
•Best Customer Care Executives
•Focus on Feedbacks
•Motivational Sessions
•Certifications
Weakness
•Competitive Market
•Networking
Opportunities
•Fewer Restraints
•Employer's Awareness regarding
employees' wellness
•New Markets
Threats
•Donwturn of Economy
•Competitor with same product or services
in the same location
•Recessions & Layoffs
SWOT

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Our trainers & nutritionist have great experience in this kind of thing and are always ready to pass out this
to employees. Our customer care executives are second to none in providing excellent customer care to
our various clients and ensuring that complaints are promptly resolved before a certain period for a better
customer experience for our various customers. We would also plan Motivational sessions for our
customers, not only the employees but the employers also to keep them engaged and motivated. We
would also focus on the feedbacks provided by our customers and would issue certificate to all the
customers that may complete all our programs successfully.
Weakness
Karachi is a tough place to start a business because the city is bustling with different corporate wellness
businesses, and so it might be a bit difficult breaking into this competitive market. However, we have laid
down strategies that will ensure that our customers are aware of our entrance into the industry, plus our
publicity strategies are effective towards ensuring that we are in the spotlight always.
Opportunities
More and more businesses are coming to see the benefit of investing into a corporate wellness plan for
their employees, and so there are plenty of opportunities available for us in this industry. There are also
people who like to buy a customized corporate wellness plan, this is also another opportunity for us.
Threats
The threats that we would likely face while starting or running this business are a downturn of the
economy, as this would see several companies cutting back their investments into corporate wellness
programs for their employees. Another threat could be the likelihood of a competitor with similar
products and services starting up in the same location that we are operating from. In as much as threats
cannot be avoided in a business, we are confident, that we are going to optimize every opportunity that
comes our way.
Marketing Strategies
Every business needs marketing to be able to survive. Marketing allows a business generate revenue for
sustainability, growth and expansion. Marketing also enables a business to get noticed by those who
require the service and is therefore said to serve a dual purpose.
There are several factors that ensure that a business’ marketing effort pays off and these are location and
the kind of marketing strategies drafted. Any serious business knows that to be able to draft effective
marketing strategies, a research has to take place that will enable those in charge of drafting know and
understand the target market they intend to draft these strategies for.
In making sure that our corporate wellness business is preferred amongst the target market here in
Pakistan, we intend to ensure that our marketing executives are empowered to draft and modify
strategies that they feel will enhance their task of attracting the kinds of clients we seek.
We know and understand the importance of technology, and so we would use technology in deploying
our marketing strategies to be able to achieve our vision. Keep them updated on any news in the industry,
thereby allowing us to win a large percentage of the market.

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Therefore, the marketing strategies that we at Change & Evolve Private Limited intends to adopt for our
business includes.
a) Introduce our Change & Evolve Private Limited to our target customers by sending our
brochures and business cards and offering to meet with the management of our target
companies.
b) Advertise our corporate wellness business in relevant magazines, local newspapers and
on radio.
c) Throw a grand opening party that will attract the notice of our target customers
d) Ensure that our business is listed in online and offline directories
e) Use our social media platforms such as LinkedIn, Facebook, and Google hangout to
market and advertise our business
f) Advertise our business in popular blogs, forums and websites
g) Engage in direct marketing
h) Encourage referrals from our loyal customers
Promotional Strategy
Promotion is very important for a business as it allows the business to create an identity that will ensure
that the brand is projected in a positive manner. Every business no matter how highly placed needs
publicity that will enable it to be seen by its target customers and favorably compete with other similar
businesses. At Change & Evolve Private Limited, we intend to explore all means of publicity for our brand.
Due to the advent of the internet, publicity for businesses have been made easier and cheaper, and so we
would heavily explore all publicity strategies on the internet and mix these with conventional publicity
methods to achieve our intended vision.
The different platforms we intend to leverage on in promoting and advertising Change & Evolve Private
Limited are:
a. Creating a unique website and advertising our products and services there.
b. Creating a unique and attractive logo that will make us easily recognizable in public.
c. Use social media platforms such as Facebook, LinkedIn, Twitter, Email Marketing,
YouTube Channel, YouTube ads, live webinars, and Google Hangouts to promote our
business.
d. Write engaging and educative articles and send them to forums and blogs.
e. Ensure that our business is listed in online and offline directories.
f. Place our flexi banners in strategic locations so that our customers can see and patronize
us.
g. Pass out fliers and handbills in strategic locations.
h. Attending training & well-being sessions at workplace of potential clients & attract them
to acquire our services.
Now, moving towards Financial Data of Change & Evolve Private Limited.

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Projected Balance Sheet
% Amount % Amount
Cash at Bank 51% 1,964,200 77% 13,352,177 26%
Account receivables 29% 1,125,000 18% 3,060,000 -12%
Office Supplies 1.6% 60,000 0.9% 156,000 -0.7%
Total Current Assets 82% 3,149,200 96% 16,568,177 14%
Office Equipments 18% 700,000 4% 700,000 -14%
Total Assets 100% 3,849,200 100% 17,268,177
% Amount % Amount
Equity 52% 2,000,000 12% 2,000,000 -40%
Retained Earnings 11% 406,617 55% 9,529,521 45%
Total Equity 63% 2,406,617 67% 11,529,521 4%
Long-term Loan 10% 400,000 2% 300,000 -9%
Accumulated Depreciation 5% 175,000 2% 350,000 -3%
Account payables 23% 867,583 29% 5,088,656 7%
Total Equity And Liabilities 100% 3,849,200 100% 17,268,177
- -
Horizontal & Vertical analysis are also given for better understanding of financial
position of the Company.
2020 2021 Horizontal
Analysis
Equity And Liabilities
2020 2021 Horizontal
Analysis
Assets
CAPEX 2020
Nature Particulars Amount in PKR
One Time Laptops QTY 02 200,000
One Time Office Furniture 500,000
700,000

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Projected Profit & Loss Account
% Amount % Amount
Revenue 100% 11,250,000 100% 30,600,000
Cost of Revenue 50% 5,575,000 37% 11,224,000 -12.88%
Gross Profit 50% 5,675,000 63% 19,376,000 12.88%
Administrative Expenses
Office Rent 16% 1,800,000 7% 2,160,000 -8.94%
Marketing 13% 1,440,000 8% 2,400,000 -4.96%
Office staff salaries 12% 1,320,000 5% 1,518,000 -6.77%
Utilities 2% 180,000 1% 204,000 -0.93%
Depreciation 2% 175,000 1% 175,000 -0.98%
Company Registration Fee 1% 100,000 0% - -0.89%
45% 5,015,000 21% 6,457,000 -23.48%
EBIT 6% 660,000 42% 12,919,000 36.35%
Financial Cost 0.8% 87,300 0.2% 69,840 -0.55%
Profit Before Tax 5% 572,700 42% 12,849,160 36.90%
Tax @ 29% 1% 166,083 12% 3,726,256 10.70%
Net Income 4% 406,617 30% 9,122,904 26.20%
Horizontal & Vertical analysis are also given for better understanding of
financial statements of the Company.
Horizontal
Analysis
AMOUNT IN PKR
2020 2021Particulars

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COGS Statement
Forecasted Depreciation Schedule
Forecasted Marketing Expense Allocation
Revenue Assumption in 2020
Nature Particulars Amount in PKR Yearly Cost 2020 Yearly Cost 2021 Details
Yearly cost Cost of work-out accessories 500,000 500,000 550,000 Exercise accessories include small equipment, gear, music devices, dumbbell sets, fitness ball & uniforms etc.
Monthly cost Cost of Instructor 90,000 1,080,000 1,242,000 02 Instructors (12 Months in 2020)
Monthly cost Cost of Instructor 45,000 405,000 621,000 01 Instructor (09 Months in 2020)
Monthly cost Cost of Instructor 90,000 540,000 1,242,000 02 Instructors (06 Months in 2020)
Monthly cost Cost of Assistant Instructor 80,000 960,000 1,104,000 04 Assistant Instructors (12 Months in 2020)
Monthly cost Cost of Assistant Instructor 40,000 360,000 552,000 02 Assistant Instructors (09 Months in 2020)
Monthly cost Cost of Assistant Instructor 80,000 480,000 1,104,000 04 Assistant Instructors (06 Months in 2020)
Yearly cost Cost of Core Consultants 400,000 400,000 440,000 01 Nutritionist & Physician Consultant
Yearly cost Instructors Subscriptions-memberships Fee 350,000 350,000 350,000 Instructors are registered with The Institute of Mind Sciences & Classical Yoga.
Monthly cost Further Cost of Instructor 155,250 - 1,863,000 Further 03 Instructors will be hired in 2021
Monthly cost Cost of Assistant Instructor 138,000 - 1,656,000 Further 06 Assistant Instructors will be hired in 2021
Yearly cost Licenses & permits 500,000 500,000 500,000 As proper licenses and permits are necessary.
Total 2,468,250 5,575,000 11,224,000
2020 2021 2022 2023
Opening Balance 700,000 700,000 700,000 700,000
Accumulated Depreciation - 175,000 350,000 525,000
Add: Depreciation For The Year 175,000 175,000 175,000 175,000
Closing Balance 525,000 350,000 175,000 -
Particulars
Amount In PKR
2020 2021
Social Media (Facebook, LinkedIn, Twitter) 20% 288,000 480,000
Print Media (Magazines & Local newspapers) 15% 216,000 360,000
Webinars & YouTube ads 10% 144,000 240,000
Banners, brochures etc. 10% 144,000 240,000
Email,blogs,forums & websites ads 5% 69,980 120,000
Well-being Sessions 40% 576,000 960,000
1,440,000 2,400,000
Amount In PKR
%Marketing Exp. Allocation
Client
1 to 3 months -
3 to 6 months 5
6 to 12 months 10
Period

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Revenue
Clients Per Month in PKR Yearly Revenue
Engro Fertilizers Limited 150,000 1,350,000
Citi Bank 150,000 1,350,000
P& G 150,000 1,350,000
Byco Petroleum 150,000 1,350,000
Unilever 150,000 1,350,000
Sanofi-Aventis Pakistan Limited 150,000 900,000
TCS Pvt. Ltd 150,000 900,000
United Energy Pakistan Ltd 150,000 900,000
Shell Pakistan 150,000 900,000
National Foods Limited 150,000 900,000
Total 1,500,000 11,250,000
New clients shall be charged fixed amount per month i.e., 150,000 up to 50 participants.
Clients Per Month in PKR Yearly Revenue
Engro Fertilizers Limited 180,000 2,160,000
Citi Bank 180,000 2,160,000
P& G 180,000 2,160,000
Byco Petroleum 180,000 2,160,000
Unilever 180,000 2,160,000
Sanofi-Aventis Pakistan Limited 180,000 2,160,000
TCS Pvt. Ltd 180,000 2,160,000
United Energy Pakistan Ltd 180,000 2,160,000
Shell Pakistan 180,000 2,160,000
National Foods Limited 180,000 2,160,000
Philips Electrical Industries Limited 150,000 1,800,000
Draz 150,000 1,800,000
Faysal Bank Limited 150,000 1,800,000
Atlas Honda Limited 150,000 1,800,000
EFU General Insurance Limited 150,000 1,800,000
Total 2,550,000 30,600,000
2020
2021
Assumption: Each Client shall be charged fixed amount per month i.e., 150,000 up to 50
participants.
Assumptions: Each previous client has to pay PKR. 150,000 + 20% incremental amount
as per agreement so it would be PKR. 180,000/-

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Computation for Financial Cost
Amount of Loan 500,000
Interest Rate 17.46% Kibor+4% (13.46%+4)
Assumptions:
1- Loan is acquired for five years at Tenor 1- Year Offer rate.
2- Loan is acquired on 1st January, 2020.
Years
Outstanding
Loan Amount
Yearly Principal
Repayment
Yearly Interest
Expense
Total
repayment
2020 500,000 100,000 87,300 187,300
2021 400,000 100,000 69,840 169,840
2022 300,000 100,000 52,380 152,380
2023 200,000 100,000 34,920 134,920
2024 100,000 100,000 17,460 117,460
500,000 261,900 761,900
3- Each year interest expense would be calculated on the rate of 1st January, 2020 as
January 01 was not available so we took rate of 2nd January, 2020.

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Detail of Cash at Bank
Assumptions
Tax @ 29% is payable in current year and will be paid in next year.
2020 2021
Receipts
Opening Balance - 1,964,200
Loan 500,000 -
Capital Injection 2,000,000 -
Cash received From Revenue 10,125,000 27,540,000
10% cash received of Last year A/C Rec - 1,125,000
12,625,000 30,629,200
Disbursements
Expenses paid during the year 9,800,800 16,213,440
Expenses paid of last year 867,583
Yearly Principal Repayment 100,000 100,000
CAPEX 700,000 -
CA - Office Supplies 60,000 96,000
10,660,800 17,277,023
1,964,200 13,352,177
2020 2021
A/C Payables
Tax @ 29% 166,083 3,726,256
Vendors of COGS 10% 557,500 1,122,400
Vendors of Marketing Exp 10% 144,000 240,000
Total 867,583 5,088,656
A/C Receivables
10% of Revenue 1,125,000 3,060,000
Particulars
Amount in PKR
Particulars
Amount in PKR
90% of the revenue earned by the company is received in the year in
which it is accrued. The remaining 10% is receivable in the next year.
COGS & Marketing Expenses are paid 90% in cash in the current year &
10% are payable in the next year. Remaining all expense are paid 100% in
the current year.

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Projected Key Financial Ratios
2020 2021
Income Statement
Revenue 11,250,000 30,600,000
GOGS 5,575,000 11,224,000
Gross Profit 5,675,000 19,376,000
EBIT 660,000 12,919,000
PBT 572,700 12,849,160
NI 406,617 9,122,904
Balance Sheet
Cash & Equivalents 1,964,200 13,352,177
Account receivables 1,125,000 3,060,000
Total Current Assets 3,149,200 16,568,177
Total Fixed Assets 700,000 700,000
Total Assets 3,849,200 17,268,177
Current Liabilities 867,583 5,088,656
Account payables 867,583 5,088,656
LT Debt 400,000 300,000
Total Equity 2,406,617 11,529,521
Net Debt 400,000 300,000
Interest Expense 87,300 69,840
Key Ratios 2020 2021
Ratios
Gross Margin 50% 63%
EBIT Margin 6% 42%
Net Profit Margin 4% 30%
Times Interest Earned-Times 8 185
Current ratio 3.63 3.26
Receivable Turnover in Days 37 37
Payable Turnover in Days 57 165
Return on Assets 17% 75%
Return on Equity 17% 79%
Debt to Total Assets 10% 2%
Debt to Equity 17% 3%
Total Asset Turnover 2.92 1.77
Amount in PKR
Key Financials

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Ratio Analysis
To gain financial insights in the company, we will perform an analysis of the financial ratios. It is a
quantitative analysis of the profitability, liquidity and efficiency of the company. To analyze the
profitability of Change & Evolve Pvt. Ltd, we will evaluate the three ratios. Gross Profit Margin, EBIT Margin
& Net Profit Margin. The GP Margin has improved by 13% in 2021 which is mainly due to the increase in
revenue, as we project an 50% increase in the number of clients in 2021. The EBIT Margin has also shown
remarkable improvement in 2021. Even though there is an increase in operating expenses, but the high
volumes of revenue have kept us profitable. The NP Margin has also improved by 26% in 2021 as all
expenses are decreasing proportionately as well as loan installment has also decreased. Overall, the
profitability ratios show a very positive picture for our company as we can earn high profits with high
volumes of revenue. For a new company, the results of 2020 are also very encouraging.
For a new company like ours, it is unlikely to start a venture without any loans or borrowing. We have also
taken a 5-year bank loan of Rs. 500,000 at Kibor+4%. We are very fortunate that the loan installments can
be easily paid on time as our interest coverage ratio is 8 times in 2020 and will increase to 185 times in
the following year. This shows our strong capability to pay the loan on time. The current ratio of our
company is not favorable as we have Rs.3 of current assets for Re. 1 of current liability. This is mainly due
to the excessive cash at hand we have. This is always also a positive as we have running cash for our day
to day expenses.
Furthermore, we have a favorable Receivable Turnover of 37 days. This means that we can recover our
payments from our clients within 37 days. However, we expect delays in making payments to our debtors,
i.e. tax authorities and vendors. This has resulted in a Payments Turnover of 57 days. The 20 days gap
between the two helps us in maintaining our cash levels. Our assets are giving us a return of 17% on
operating profit. This shows efficient use of the assets. We expect this to increase to 75% in 2021 in the
ROA ratio. The ROE is also expected to increase by 62% in 2021, which is basically due to the remarkable
increase of 26% in our Net Income. Our debt portfolio is minimal, which is the key reason behind favorable
Debt to Total Assets and Debt to Equity ratios. They are to give a return of 10% and 17%, respectively.
Further, we even expect a fall in them in 2021. Even the TAT is favorable as it is expected to decrease by
1.15 times in 2021. This is mainly due to the high volumes of cash at hand.
Stock Portfolio
Assumption: Amount to be invested: PKR 500,000
Company Market Price (Po) Target Price (P1) DPS (D1) Dividend Yield Rate of Return No. of shares Market Value (eq) Dividend Weights
LUCK 436.98 530 3 0.69% 21.97% 500 218,490 1,500 25%
ENGRO 354.28 373 35 10.00% 15.38% 500 177,140 17,714 25%
FFC 102.35 115 10.8 10.55% 22.91% 1,000 102,350 10,800 50%
2,000 497,980 100%
2,020
(D1+P1-P0)/P0
LUCK - r1 22%
ENGRO - r2 15%
FFC - r3 23%
rB = 20%
wB = 20%
wBrB = 4%

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Weighted Average Cost of Capital
Rationale for Investing in Stocks
Due to our amateur experience in the stock market, we have decided to invest PKR. 500,000 in stocks of
the Companies. We believe that the current market situation provides us a good opportunity to invest in
the stock market as the share prices are currently low. The interest rates are also falling and are expected
to fall further, therefore, stock market is a viable option for investments. We tend to invest for the long
run and enjoy dividend payouts from this investment. Out of the 3 stocks chosen by us, only Lucky Cement
does not offer favorable dividend payouts, however, the company is Pakistan’s biggest cement producer
and has a debt-free balance sheet as compared to its peers – this gives it a huge advantage over its
competitors and we expect an increase of 21% in its share price by December 2020. This is the only stock
in our portfolio on which we tend to enjoy capital gains in the long run. Fauji Fertilizer and Engro
Corporation are both offering high dividend yields. They are a safe play as the fertilizer sector will be least
affected by the current crisis. Fertilizer is a necessary commodity for an agricultural economy like Pakistan.
The falling prices of crude oil will also be beneficial for our chosen companies and we expect that they will
use it to the best of their advantage. After analyzing our financial ratios, we are hopeful that our venture
will be profitable and a success for the whole team.
Debt 500,000
Equity 2,000,000
Total Captial 2,500,000
% of Debt 20%
% of Equity 80%
Investment in Business 2,000,000
Investment in Stock Market 500,000
Total Investment 2,500,000
% of Investment in Business - wA 80%
% of Investment in Stock Market - wB 20%
Return on Assets 46%
r = wArA + wBrB
wArA = 37%
wBrB = 4%
r = 41%
Total Return of Change & Evolve Private limited
WACC

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Conclusion
Startups tend to be risky, but it is said the more the risk, higher the profits. As 4 individuals trying to excel
in our respective fields, we decided to start this venture together in which we can use our current
experience and continue our learning curve. Yes, we have invested our savings into this venture, but we
predict that this business is the need of the hour. As the world evolves, companies treat employees not
only as a cost but as capital. To get the best results from them, they invest in their employees. In the
current situation, when the world economies are moving towards a recession, many employees will face
stress and anxiety of job loss and insecurity. We, at Change and Evolve Private Limited will offer products
which will help the employees to get rid of their worries and be more efficient, effective and hence, more
productive. We have also invested in the stock market, even though it’s a small amount now but we tend
to inject more as Change and Evolve Private Limited starts to reap in the profits.