A group of friends have formed a new business called Fashion Clothing, an online and mail order clothing business, in which they have invested £200,000 of their own capital. They intend to manufacture and sell quality clothes. They have set the business up and are selling direct to the final consumer, using a combination of aggressive marketing across a range of different media and also with the use of an automated web site that accepts online orders. To support this, they also have a department of telephone sales and support staff ready to help customers. The sales staff work in teams and receive a basic salary plus commission for each successful sale. By the start of July 20X5, they have spent £150,000 on tangible non-current assets, and they currently have the remaining £50,000 in their business bank account. They provide you with the following forecasted figures for their first 6 months of trading: Required: (a) Prepare an opening statement of financial position at the start of July 20X5. (b) Prepare a monthly cash flow forecast, showing the bank balance at the end of each of the 6 months and indicating what level of overdraft facilities the friends need to negotiate with their bank manager. (c) Explain what additional expense they should take into account as a result of needing the financial assistance (overdraft) referred to in (b).
A group of friends have formed a new business called Fashion Clothing, an online and mail order clothing business, in which they have invested £200,000 of their own capital. They intend to manufacture and sell quality clothes. They have set the business up and are selling direct to the final consumer, using a combination of aggressive marketing across a range of different media and also with the use of an automated web site that accepts online orders. To support this, they also have a department of telephone sales and support staff ready to help customers. The sales staff work in teams and receive a basic salary plus commission for each successful sale. By the start of July 20X5, they have spent £150,000 on tangible non-current assets, and they currently have the remaining £50,000 in their business bank account.
They provide you with the following forecasted figures for their first 6 months of trading:
Required:
(a) Prepare an opening statement of financial position at the start of July 20X5.
(b) Prepare a monthly
(c) Explain what additional expense they should take into account as a result of needing the financial assistance (overdraft) referred to in (b).
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