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Business Report of Fashion Clothing and Financial Statements

Question

A group of friends have formed a new business called Fashion Clothing, an online and mailorder clothing business, in which they have invested £200,000 of their own capital. They intend to manufacture and sell quality clothes. They have set up the business 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 noncurrent 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:

 

£

 

Sales for the next 6 months

1,350,000

 

Cost of the materials used up in sales

390,000

 

Labour costs for the 6 months

480,000

 

Other expenses for the 6 months, including marketing costs and £15,000 depreciation of tangible noncurrent assets

 

345,000

 

Materials purchased during the 6 months

520,000

 


Their projected cash receipts and payments are estimated to be as follows:

Month

(20X5)

Sales

Receipts

Payments for

Materials

Labour and Other Expenses

 

£

£

£

July

150,000

120,000

These payments are divided equally over each of

the 6 months

August

120,000

100,000

September

150,000

60,000

October

210,000

60,000

November

260,000

60,000

December

285,000

60,000

Totals

1,175,000

460,000

 


In addition to the above, they expect to have to pay a tax bill of £20,000 in December 20X5 and also plan to buy (and pay for) £30,000 additional tangible noncurrent assets in that same month. All transactions will go through their business bank account.

Prepare a Business Report for the friends who have invested in Fashion Clothing, commenting on the business’ prospects and including the following five financial statements.

Summary

This question belongs to finance and discusses about preparing a business report for friends who invested in Fashion clothing.

Word count: 1339

 

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