Summary Of Fashion Clothing

Introduction

The name of the business is Fashion Clothing. It is an online and mail-order clothing business. The company’s strategy is to cater directly to the final consumer. To achieve this, the company is using a combination of aggressive marketing across a range of different media and also it has employed the use of an automated website that accepts online orders. The business is meant to commence on the first of July 20x5.

Summary of the first 6 months business operation

The business performance for the first 6 months of Fashion Clothing is viable and encouraging. To avoid liquidity problem the company would have to take a bank overdraft of at least 250,000 pounds. The bank overdraft is to aid payment of suppliers and operating expenses

It focuses on the sources and uses of cash through operating, investing and financing activities. Activities that result in the receipt of cash are cash inflows, and activities that result from the spending of cash are cash outflows. SEE APENDIX III

STATEMENT OF FINANCIAL POSITION also known as the balance sheet presents the financial position of an entity at a given date. It is comprised of three main components: Assets, Liabilities, and Equity. Statement of financial position helps users of financial statements to assess the financial soundness of an entity in terms of liquidity risk, financial risk, credit risk and business risk. The amounts reported on the statement of financial position are the amounts as of the final moment of an accounting period.

INCOME STATEMENT: which is also called a profit and loss account is a financial statement that measures a company’s financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenue and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically a year. One important thing to note about an income statement is that it represents a period of time like the Cash flow statement. This is contrast with

This gave an overview of the status of the business at the first day of operation. Cash at bank was 50,000 pounds while non-current tangible asset was purchased at 150,000 pounds making a total of 200,000 pounds which was introduced as capital at the beginning of the business.

After drawing up the cash flow forecast statement it was deduced that a bank overdraft of 250,000 pounds was needed so to avoid liquidity issues as the months progresses. The introduction of the bank overdraft came at an estimated cost of 3% monthly. After deducting the monthly outflows from the inflows a positive balance is available for the 6 month duration.

From the income statement prepared it can be seen that a total sales of 1,350,000 pounds was made at a cost of 390,000 pounds. The gross profit for 6 month is 960,000 pounds. The gross profit margin was calculated as GROSS PROFIT/SALES which gave us 71%. The gross profit margin is good as regards to the volume of sales made for 6