Executive Summary
Clothing business is one of the few businesses that will always be in the market. People wear clothes every day. The only question to answer is to know if the business can become the source of their clothing. Fashion Clothing business should engage the market through intensive marketing strategies. The plans will help the business to sell many clothes and hence make a profit.
The cash flow projections and income statements reveal potential growth in the industry. Fashion Clothing has an investment of £200,000. The £150,000 the owners invested in the business went into the purchase of tangible assets. It uses the £50,000 as cashflow.
Introduction
Fashion Clothing is an online and mail-order clothing business. The financial requirements are capital, efficient production financial records, and good management of the same. The report indicates the forecast records for the business and its growth potential.
Main Financial Findings
Summary of the First 6 Months Business Operations
Fashion Clothing needs to use five very essential records to the business. The opening statement of financial position helps to identify capital intensity, the availability of cash to run the business, assets, and the tools available for the firm to continue smoothly. The monthly cash flow forecast will help to indicate the expected monthly capital and expenses (Debrulle & Maes 2015). It also points out the availability of capital or the lack of it.
Fashion Clothing management can make a decision on how to raise the capital for the following month. The projected income statement will provide information about the net sales, the cost of sales including purchases, and the expenses. It also shows the owners the operating margin of profit or loss and how it changes each month. The projected statement of financial position gives a record of all the business’s assets and liabilities. Projected cash flow shows the owners where the cash is in the business.
Financial Accounting Statements
The business owners have £200,000 to invest. By the month of July, they had bought the tangible non-current assets for the business worth £150,000. The remaining £50,000 was in the bank for further use as working capital. All the transactions go through the same bank (Krakel 2015). The opening statement in July 2015 at the start of business for the financial position would be as follows:
The company has enough tangible assets to proceed with the business. The only liability available is the accrued expenses for depreciation. The statement helps the business to determine its strength at the beginning and to make financial decisions that are dependent on the report.
Projected Statement of Financial Position
Analysis
Initial Analysis in the Context of the Three Financial Statements
The business requires a lot of capital from the first month. It will have to negotiate with the bank for the provision of an overdraft (Morrison 2015). In this case, it will need an overdraft of £200,000. It will take overdrafts for four consecutive months as illustrated in the cash flow statement above. They will help to pay suppliers and get more materials as the business grows. By November and December, it will have gained stability. The income statement reveals potential growth.
However, it requires more capital to support this strategy. Fashion Clothing financial position during the six months of business indicate that the initial tangible asset will be depreciating each month with a deduction of £15,000 per month. It will close with £105,000 in December (Debrulle & Maes 2015).
Investigations to Increase Efficiency
Efficiency can increase through aggressive marketing strategies and capital injection. The business needs to reinvest the profits into the business. It should stop relying on the bank overdrafts because they are taxing to the business. The shareholders can increase their investment or source for more shareholders.
Projected Cash Flows
Conclusion
The statement of cash flows shows that there were no investing activities in the period. The business closed with £1,440,000 cash and cash equivalent. The owners can reinvest in the business the proceeds from the business activities. The business owners can expand the business through diversification of the product range and opening more stores.
References
Debrulle, J & Maes, J 2015, ‘Start-ups’ internationalization: the impact of business
owners’ management experience, start-up experience and professional network on export intensity’, European Management Review, vol. 12, no. 3, pp. 171-187.
Krakel, M 2015, ‘Human capital investment and work incentives’, Journal of Economics & Management Strategy, vol. 25, no. 3, 627-651.
Morrison, R 2015, From the chair of the business valuation committee: draft reports, oral reports, record keeping, and USPAP’, Business Valuation Review, vol. 34, no. 1, 39-41.