Provide a Business Report (1,000 words for the main body of the report) for the friends who have invested in Fashion Clothing, commenting on the business’ prospects and including the following five financial statements:
An opening statement of financial position at the start of July 20X5.
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. Explain what additional expense they should take into account as a result of needing this financial assistance (overdraft).
A projected income statement for the first 6 months of trading.
A projected statement of financial position for Fashion Clothing at the end of its first 6 months of operations.
A projected statement of cash flows for the first 6 months of trading and using the indirect method.
Since none of the investors have a background in accounting and finance, you should also explain what each of these statements means as a part of your report.
Keep the following in mind:
Using a spreadsheet may help you to produce your cash flow forecast. Remember here that £150,000 of the initial £200,000 has already been spent. Hence, your opening bank balance should be £50,000. Your closing bank balance should be included in your statement of financial position as at 31.12.20X5.
Think carefully about the £15,000 depreciation charge when working out your monthly cash outflows for labour and other expenses.
Also think carefully about the figures for closing stocks (inventories), creditors (payables) and debtors (receivables).
Please remember that your qualitative analysis and explanation of your five statements are just as important as the calculations themselves. These, together with your presentation of a professional report, will contribute towards your grade for this assignment.
Please be sure to re-visit the Key Concept Overviews for Weeks 1 and 2, as well as Week 3. These should serve as a reminder of the accruals concept, plus the difference between a cash flow forecast and a statement of cash flows. They also include detailed numerical examples that should assist with your calculations for your financial statements.
Ideally a business report should be produced with a suitable structure and quality of discussion around the following key areas:
Executive summary
Table of contents
List of figures
Introduction
Main financial findings.
2.1 Summary of the first 6 months business operations
2.2 Financial accounting statements
Analysis
3.1 Initial analysis in context of the three financial statements.
3.2 Investigations to increase efficiency
Conclusion
References
ANNEX I: Statement of financial position Fashion Clothing – 01.07.20X5 and 31.12.20X5
ANNEX II: Income statement Fashion Clothing – 6 months to 31.12.20X5
ANNEX III: Statement of cash flows Fashion Clothing – 6 months to 31.12.20X5
ANNEX IV: Projected cash flow forecast for the first 6 months of trading
