1 | P a g e
Tony Guys Hairdressing
2 | P a g e
Tony and Guys is one of best hairdressing salons in the States, it provides top
notch beauty brands products such as TIGI to its clients. Company is really
progressing, but it has to keep an eye on the direct as well indirect costs. As
company is planning to invest heavily in the infrastructure and equipment, so it must
use investment appraisal techniques effectively
3 | P a g e
The purpose of this report is to do a company analysis of the Tony Guys hairdressing. It
discusses the direct and indirect costs of the company. It also studies the different types of
investment appraisal techniques and what are their advantages/disadvantages for the company.
At the end financial analysis of company has been done.
Give outline of their organization. Where do them trade-location. What is there main
business? How long have they traded? Copy a graphic of their website. Detailed description
of the direct and indirect costs to this organization
Tony Guys is an UK based hair salon formed some years ago, which also offers beauty
products in its salons. It was started is single salon with few employees , but now employing
5000 employees with salons located all over the United Kingdom. It offers beauty product and
salon services for both men and women. Another amazing thing about Tony Guys is that, they
use beauty products of well-known brands such as TIGI.TIGI products used by the Tony Guys
are the following:
Bed Head (including B for Men)
4 | P a g e
Tony Guys has one of the best hair dresser, who use the TIGI products in best way and
they are one of the best hairdressers in the country. They use products such as shampoos, curl
enhancers, mousses, and gels to conditioners, texturizers, shine enhancers in very effective way
through their professional hairdressers working in their salons.
According to the various experts the main costs of salons are mostly related to their
equipment. So direct costs of the Tony Guys includes equipment used in daily salon
operations ,TIGI beauty products used in the daily operations and also the professional
services of professionals. The indirect costs includes Salon employees, telephone
expenses, mobile expenses,lighting,heating,rent,utilities,advertising,marketing,insurance ,
Income taxes, Sales taxes and wealth taxes.
Classification of Fixed and Variable costs
It is true that costs can be easily classified into fixed and variable costs.
Direct costs are the types of costs, which are directly traceable to the products. For
example: Direct labor, direct material etc. (Steven A. Finkler, 2007)
Various sources for finance available. Where finance can come for day to day
activities and where it can be generated for large expenditures?
Tony Guys has following sources of finance available.
Credit unions comprises of democratically elected members, who are chosen by votes of
other members. Its membership doesn’t depend upon investment, like other financial
5 | P a g e
organization. Credit Unions were launched in1992 in Scotland and till now more than 2000
credit unions are working all over the world with more than 2.2 million members (Balkenhol,
Venture capital is a very important source of funding for small and medium businesses
like Tony Guys. Venture capitalists provide easy funding to firms and businesses. Money
invested by investors in the new or old businesses with expectations of good future earnings.
This is a very important source of funding for startups that do not have access to capital markets.
Mostly it involves high risk for the investor, but it has all the ability to get excellent earnings.
An angel investor or angel is a wealthy person, who offers capital for a business start-up,
usually in exchange for convertible debt or ownership equity
Angel Investing is a really popular all over the world, especially UK and USA.
Entrepreneurs, as it consists of educated and experienced professionals. They can help them
great deal making their business a success.
Banks are also very good source of funding. Companies who want to buy latest
equipment or want to invest more in the venture needs bank financing. Companies have to pay
interest on the loan monthly or annually.
6 | P a g e
Discuss some key data from the balance sheets. What does the term current
assets mean? Give examples from accounts i.e. how much stock do they have?
What does the term current liabilities mean? Give an example from the
Current assets are one of the most important balance sheet items, and they are
very important for the decisions makers and investors. Current assets are the assets
which can be easily converted to the cash in less than one year.
According to financial experts, current assets contains currency, accounts
receivable, bonds, stocks, prepaid costs and other fluid assets. It also shows the
financial strength of any company.
Current liabilities are one of the most important balance sheet items, and they
are very important for the decisions makers and investors. Lenders such as banks and
other financial institutions, mostly use this ratio to assess the financial strength and
credit worthiness of any company. Current liabilities are the liabilities, which are due
in less than one year and business has to pay them on every cost.
According to financial experts, current assets short term debt, accounts
payable, accrued liabilities and other debts. It also shows the financial strength of
7 | P a g e
Suggest some ways of assessment of investment appraisal techniques, making
reference to the effectiveness of net present value and payback. What is
investment appraisal and why do we need it? Explain and reference your
source. Why might your company organization need to use it? Explain and
reference your source.
Investment appraisal is a very useful technique used to gauge the
attractiveness of the investment for the business. It helps in setting future financial
goals and then achieving them through proper planning.Net present value and IRR
are the two most popular investment appraisal techniques.
Net Present value
Net present value is very important measurement used for investment
appraisal. Actually it is calculated by taking difference between the present value of
cash inflows and the present value of cash outflows. (Röhrich, 2007) It is frequently
used to calculate the usefulness of a capital investment or large project.Most of
financial experts prefer it over the payback period ,because its uses time value of
money which is very important for investment proposals.
It can be easily calculated by the following formula:
Net Present Value (NPV)
8 | P a g e
Payback period is also very important investment appraisal technique,
frequently used by the financial experts. It is the time duration required by an
investment to cover its cost. (Röhrich, 2007)The longer the time duration, the most it
should be avoided. According to most financial experts, it is a important tool to
determine the profitability of an investment, but still it has some drawbacks because
it neglects the time value of money.
Payback Period = Cost of Project / Annual Cash Inflow
Explain briefly the main content financial statements-ie income statement and
balance sheet. What does your income statement show? What is the top line? Has revenue
increased? Work out % from previous years. Profits. Have the profits increased?
Calculate% change. What is gross profit?
Financial Statements is a very useful and effective tool, to calculate the performance of a
company .They are very beneficial and vital for investors and all the major stakeholders of the
business, because it gives a comprehensive overview of the performance of the company.
(Spurga, 2004) Following are the three most important financial statements, which are used all
around the world.
(a) Income Statement
(b) Balance Sheet
(c) Cash Flow Statement
9 | P a g e
(a) Income Statement
Income statement is a type of financial statement that calculates business’s financial
performance during a financial period. It provides details about the sales, that how they are made
by the company and what were expenses incurred while earning those revenues. At the end we
calculate the net profit/net loss, which is an exact representation of the financial performance of
the company .Net profit/net loss is calculated by subtracting the costs incurred from the revenue
earned by the business. (Warren, 2010)
Revenue and costs included in the statement are through accrual basis accounting, which
means revenue and expenses are recognized in the period, in which they occurred. In British
accounting, this statement is also knows as Profit and loss statement.
(b) Balance Sheet
Balance sheet is a type of financial statement that abridges business's assets, liabilities
and owner’s equity at the end of a financial year or quarter. Balance sheet information provides
enough information to the investors and business stakeholders for decision making puposes.
Although balance provides very limited information, but still it is a quite useful for getting an
overview of the business.
Actually whole balance sheet is based on the following accounting equation
Assets = Liabilities + Shareholders' Equity
Gross profit is an important measure of a company’s profitability. It is calculated by
subtracting the cost of goods sold from the revenue. It is actual shows how
successful the business in covering its direct costs and expenses.
10 | P a g e
Income Statement (Little scissors Hair saloon)
For The Year 2012 and 2013
Licenses fees taxes
$262,080.00 $ 300000
$3,000.00 $ 4500
$9,000.00 $ 10000
$6,000.00 $ 7000
$5,000.00 $ 6000
$112,260.00 $ 107500
Net Profit Ratio 42 % 35 %
11 | P a g e
What is the top line growth?
According to financial experts top line means the year by year increase in the
revenue by the company
Tony and Guys is one of the top most salons in the United States, which
offers beauty products of TIGI. If it has to progress and develop, it should have
control its costs such as direct and indirect costs. They also have to employ
investment appraisal techniques such as net present value and payback period to its
12 | P a g e
Balkenhol, B., 1999. Credit Unions and the Poverty Challenge: Extending Outreach, Enhancing
Sustainability. s.l.:International Labour Organization.
David Gladstone, L. G., 2004. Venture Capital Investing: The Complete Handbook for Investing in Private
Businesses for Outstanding Profits. s.l.:FT Press.
Röhrich, M., 2007. Fundamentals of Investment Appraisal: An Illustration Based on a Case Study.
Spurga, R. C., 2004. Balance Sheet Basics: Financial Management for Nonfinancial Managers.
Steven A. Finkler, D. M. W. J. J. B., 2007. Essentials of Cost Accounting for Health Care Organizations.
s.l.:Jones & Bartlett Learning.
Warren, C. S., 2010. Financial Accounting. s.l.:Cengage Learning.