Arden University Intrroduction to Finance Management Worksheet – Description
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:
£
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 non-current 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 this six month period
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
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 non-current assets in that same month. All transactions will go through their business
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