Business Plan – toy merchandise sales Invest $150,000 cash savings for capital e

Question

Business Plan – toy merchandise sales

Invest $150,000 cash savings for capital equipment and "working capital. "

Buy Capital Equipment (vehicle of transportation, computer, storage unit) during organizing period for business $50,000

Buy toy units (1 type only) for cash on delivery - $3/unit after receiving bulk order for toy units

Additional variable cost per unit for fuel, labor, packaging, transportation, etc to deliver toys to retailer is $2/unit

Average time from order to delivery is 1 month

Rent, Utilities, Insurance, Bookkeeping, etc (fixed costs) - $12,000/month

Sell packaged, and delivered toy units to retailer for $9/unit

Average time from delivery until when retailer pays is 3 months (Typical "Net 90" Payment Terms)

Sales prediction:

Assume steady orders and sales of 1000 units per month, first sale in January, first delivery in February, first payment received in May, and so on.

Required:

Prepare monthly preliminary income statement and cash flow statement for the first year in spreadsheet (feel free to use any spreadsheets we developed during the class)

Determine if there are any external funding requirements

What are the business’s profit margin, return on assets, debt to assets, debt to equity, and asset to equity ratios?

According to the integrated reporting framework, what kind of capitals are the most relevant in this business context?

Calculate the sustainable growth rate for the business at the end of year 1

Recommend two dynamic metrics for this business and explain briefly why.

Explanation / Answer

1. Monthly income statement January Feburary March April May June July August September Octomber November December For year Incomes Sales (1000*9) $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $108,000 Expences Fixed cost ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($144,000) Purchase cost (3*1000) ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($36,000) Additional variable cost (2*1000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($24,000) Profit/(Loss) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($96,000) 2. Cash flow statement January Feburary March April May June July August September Octomber November December For year Cash inflows Investment $150,000 $150,000 money received from sales $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $9,000 $72,000 Cash outflows Buy capial eqipments ($50,000) ($50,000) Fixed cost ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($12,000) ($144,000) Cash pay on delivery ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($3,000) ($33,000) Variable cost for delivery ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($2,000) ($22,000) Net cash inflow/outflow $88,000 ($17,000) ($17,000) ($17,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($8,000) ($27,000) 2. Yes. Company need to facilitate loan fund. Because company Asset

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