Wednesday, December 4, 2019
Question: Write an essay onFashion clothing. Answer: Introduction Fashion clothing is a clothing company who is planning to set up the business with the business with the initial investment of $200,000. The company is looking to invest its funds and start its operation by dealing in clothes. The current information about the basis of issue of financial instruments is prepared in accordance with the policies and procedures. The report also represents the additional set of information that which is not disclosed elsewhere in the report presented to the owners of fashion clothing but it is relevant in the understanding of issue of any such financial statement. Main financial findings: Fashion clothing presents a complete set of financial statements, which consists of information regarding the issue of various financial statements for the financial year of 2015. Fashion Clothing presents its report in the reporting period, which discloses the period covered in the issue of the financial statement and its findings. The report is prepare with the view of keeping in mind that the financial findings is presented with the review assuming that Fashion clothing is going concern and will continue to exists in operation for the foreseeable course of future (Hoskin et al 2014). The report is consists of presentations and classification of items in the financial findings which are used during the financial year of 2015. The report also defines that any materiality changes and commitments which affects the financial position of the Fashion Clothing which have incurred during the course of financial year to the financial statement which is related to the financial statement of the report. This discloses the amount of the capital and the reason for such investment. The company established with the initial funds establish its functions of operations. The statement of income states that the company plans to presents a projected cash flow of fashion clothing. As per the statement of income , the first item is the revenue that is approximated for the next six months with December as the actual end year. five years with 2015 as the actual end year. The revenue refers to the amount acquired by the company from sales. The actual figure for the revenue during the month of July is recorded to be $225,000 which remains constant for the remaining period from august to December. Therefore, the financial projection for the year 2015 assumes increase in revenue if the company initial investments increases as currently due to its huge cost of investment in materials most part of the revenue are under accounts receivable. The revenue approximations for the subsequent months from the month of August to December forecast the same revenue because the cost of raw materials issued remains constant with the figure of $65000 for the rest of the financial year (Barton and Simko 2012.). Financial accounting statements: The list of line items concerning the business report demonstrates the face of the financial position, which are as follows. Cash Tangible assets Capital Additional purchase of assets Purchase of materials Sales considerations Sales considerations Next object, which is approximated in the statement of income for the first six months, is the expenditure of sale of goods. The expenditure of sale of goods refers to the cost obtained during the purchase or else procuring the goods along with the services of the business. The expenditure of sale of goods obtained during the year 2015 stands at 145,000 for the month of July and remained constant for the rest of the month from July to December. There for the cost of goods sold does not shows any signs of upward rise. Gross profit is usually catalogued after deducting the cost of goods sold from the revenue. In the year 2015, the tangible number of gross profit is recorded to be $80,000 Consequently, this number too is projected to ultimately remain constant for the rest of the period. However according to the financial terms such figures need to increase with the increase in sales (Mills and Yamamura 2013). The operational expenses for Fashion Clothing mainly include the marketing expenses as well as the general in addition to with the depreciation charge of 15000. Analysis: Analysis in context of three financial statements: Profit earned after tax that is the PAT is obtained by deducting the costs of operating expense and provisions for tax as the share from the profit from diverse business operations of the corporation. The profit after tax stood for the month of July was 19167 and remained constant for the remaining period of financial year 2015. This number is not usually the procedure of listing up the quantity of cash generated by a particular company during a specific period. This is for the reason that the statement of profit and the loss also include diverse non-cash expends. . However, amount of tax to be paid by the company is also expected to increase with increase in the entire proceeds of the corporation in the subsequent periods. Investigation to increase the efficiency: The report also represents the additional set of information that which is not disclosed elsewhere in the report, which is relevant in the understanding of issue of the overdraft facilities. The business needs to consider the cash flow statement by deducting the available cash, which means that business with low capital investment will be overburdened with the repayment along with the risk profile. If the business is prepared to take higher risk and it will be able to perform well with the high gearing ratio (Aghion et al 2014). As the business approaches for over draft facilities, bank may charge the fixed rate over the assets of the company. It will also the asks the owners to lent a personal guarantees and may implement a floating charge over the assets. Floating will be charged on the stock which is constant sold or replaced by the business. Conclusion: The owners of the business on receiving the report for information approves for negotiation of overdraft facilities for long term basis which will carry certain amount of the interest rate. The owners of Fashion clothing on the other hand approves that the profit and revenue earned after a period of six months on the parameters as indicated in this report. In weighting this factor is has been considered that these financial statement be issued prior on the approval of owners of Fashion clothing. Annex I Statement of financial position For the month of 1.7.2015 to 31.12.2015 Particulars Amount Amont Tangible Assets 1,50,000 Less; Depreciatyion 15000 1,35,000 Intangible Assets Other Non Current asserts 30000 Total non-current assets 1,65,000 Cuurent Assets stocks Purchase of Material 460000 Less Cost of materials 390000 70000 Debtors Total sales 1350000 Less cash receipt 1175000 175000 Total Current assets 245000 Total Assets 4,10,000 Non-current Liabilities 0 Current Liabilities Trade Creditors Bank Overdraft 95000 Total Currentrr Liabilities 95000 Total Liabilities 95000 Capital and Reserves Capital 2,00,000 Porfit brought forward for current year 115000 Total equities and liabilites 4,10,000 Profit for current Year Annex II Statement of Income Statement From 1.7.2015 to 31.12.2015 Particulars July Aug Sept Oct Nov Dec Total Sales 2,25,000 2,25,000 2,25,000 2,25,000 2,25,000 2,25,000 13,50,000 Cost of Materials 65000 65000 65000 65000 65000 65000 390000 Wages 80000 80000 80000 80000 80000 80000 480000 Total Cost of Sales 145000 145000 145000 145000 145000 145000 870000 Gross Profit (A) 80000 80000 80000 80000 80000 80000 480000 Other costs 55000 55000 55000 55000 55000 55000 330000 Depriciaions 2500 2500 2500 2500 2500 2500 15000 Total operating Expenses (B) 57500 57500 57500 57500 57500 57500 345000 Operating Income (A-B) 22500 22500 22500 22500 22500 22500 135000 Less: Provision for Tax 3333 3333 3333 3333 3333 3333 20000 Net Income after tax 19167 19167 19167 19167 19167 19167 115000 Annex III Statement of cash flow for fashion clothing From the month of 1.07.2015 to 31.12.2015 Particulars July Aug Sept Oct Nov Dec Total CASH FROM OPERATION ACTIVITIES Sales 150000 120000 150000 210000 260000 285000 1175000 Less: Cost of materials Purchased 120000 100000 60000 60000 60000 60000 460000 Other Exxpenses 55000 55000 55000 55000 55000 55000 330000 Labour Cost 80000 80000 80000 80000 80000 80000 480000 Tax Paid 20000 20000 Net Cash inflow from operational activity -105000 -115000 -45000 15000 65000 70000 -115000 Cash flow from investment activity Purchase of assets -30000 -30000 Net cash inflow from investment activities 0 0 0 0 0 -30000 -30000 Cash flow from financing activity 0 0 0 0 0 0 0 Net cash increase / decrease -105000 -115000 -45000 15000 65000 40000 -145000 opening balance 50000 -55000 -170000 -215000 -200000 -135000 50000 Closing balance -55000 -170000 -215000 -200000 -135000 -95000 -95000 Annex IV Projected cash flow from fashion clothing From 1.07.2015 to 31.12.2015 (i) Cash flow from operating activities July Aug Sep Oct Nov Dec Total Profit After Tax 19167 19167 19167 19167 19167 19167 115000 Add : Depreciation 2500 2500 2500 2500 2500 2500 15000 Cash received from Sales 150000 120000 150000 210000 260000 285000 1175000 Cost of Material 65000 65000 65000 65000 65000 65000 390000 Less : Total Sales 2,25,000 2,25,000 2,25,000 2,25,000 2,25,000 2,25,000 1350000 Purchase of Material 120000 100000 60000 60000 60000 60000 460000 C. Cash generated from operations -108333 -118333 -48333 11667 61667 86667 -115000 Cash flow from investment activity Purchase of assets -30000 -30000 Net cash inflow from investment activities 0 0 0 0 0 -30000 -30000 Cash flow from financing activity 0 0 0 0 0 0 0 (iv) Net increase/decrease in cash and cash equivalents -108333 -118333 -48333 11667 61667 56667 -115000 Add: Cash and cash equivalent in the beginning of the year 50000 -58333 -176666 -224999 -213332 -151665 50000 Less: Cash and cash equivalent in the end of the year -58333 -176666 -224999 -213332 -151665 -94998 --115000 Reference list: Aghion, P., Bacchetta, P. and Banerjee, A., 2014. A corporate balance-sheet approach to currency crises.Journal of Economic theory,119(1), pp.6-30. AUDITED, U., 2008. Cash Flow Statement.Notes,2015. Barton, J. and Simko, P.J., 2012. The balance sheet as an earnings management constraint.The accounting review,77(s-1), pp.1-27. Benavente, J.M., Johnson, C.A. and Morande, F.G., 2013. 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