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 Providing management with information which will enable them to make sound decisions regarding the company

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

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

Financial Ratios Year 1Year 2Year 3 Gross Profit Percent50.00%59.09%66.62% Net Profit Margin296.51%5.15%21.95%

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

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%

Risk Reduction Assumptions 15% Overall Increase to Risk Reduction each year

Risk Reduction Factors Patent Attorney Salary Increase Inflation Patent Processing Increase Licensing Fees Increase

Total Patent Expenses

Total Licensing Expenses

Research and Development Assumptions 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

Research and Development Factors Inflation Efficiency

Total Small Scale Production Costs

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

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

Total Information Technology Expenses

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

Marketing Factors Sales Increase Inflation

Total Selling Expense

Finance Assumption Overall 2% Increase Finance Factors Inflation

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

Gross Profit

Total Department Expenses

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.

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

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

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

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

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

Investment From Business Partner (Initial vs. Revised Projections)

Cost of Goods Sold

Total Payroll Expenses

Total Administrative Expenses (Initial vs. Revised Projections)

Net Profit / Loss (Initial vs. Revised Projections)

Net Operating Income (Initial vs. Revised Projections)

Total Operating Expenses For Year 1 (Initial)

Total Operating Expense For Year 1 (Revised)