Natalie Watch - New Wrist Watch Product

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In Appendix D, we have prepared a forecast income statement. Forecast income statement is very important because it is one of the financial statements of a company and shows the company’s revenues and expenses during a particular period. It also shows the net profit or loss incurred over a specific period. The total of cash and credit sales are £800,000, the sales revenue that we forecast to own in the first year which the trade receivables have been included, as in line with the marginal costing statement in Appendix A. Cost of goods sold is the cost of purchasing materials and preparing goods for sale during a specific accounting period. Since we are a new company, so we did not have opening inventory. By including the trade payables, it will bring the total purchases become £450,000 since we have received the goods. Closing inventory is the amount of inventory a company has in stock at the end of the year. According to our case, cost of sales comes to £400,000 and shows us the gross profit of £400,000 which is a gross profit margin of 50%. Hence, we will wisely use the gross profit like contribution to cover our operating expenses, £256,000. We forecast our machinery will be depreciate by 20% on a straight line basis and the motor vehicle which has the residual value of £6000 and estimates that it should has a useful life of 4 years. It comes with the depreciation of £6000 over the year. Besides, there is also maintenance of machinery of £4000 which will be carrying on twice in a year. Eventually, we are conducting a healthy profit of £144, 000, which is also equivalent to the marginal costing statement.

In Appendix E, we have prepared a statement of financial position. It shows the assets, liabilities and capitals that we have in our business. Since assets have depreciated over a year, depreciations are deducted from the original price to get a net book value of £60,000. The total of trade receivables is the credit sales we made in December less the provision for doubtful debts. Therefore, it brings a forecast total asset of £649,500. The estimated capitals of £500,000 add the net profit from Appendix A, then less the drawings and bring £638,000 to our closing capital. Then, we did not have non-current liabilities in the first year. Trade payables are the only current liability that we have in our business. At the end of the year, the forecast total capital and liability are £649,500 which balances with the total assets.

The gross profit margin of our company is 50%. This means that for every pound that we earn, it really has £0.50 at the end of the day. This shows that our company is efficient. Besides, the current ratio is 51.3:1. This means that our company had £51.30 in current assets for every pound of current liabilities. Our company appears to be able to easily service our short-term debt obligations. The day’s sale of inventory is 45 days. This means that our inventory levels always be sufficient to meet demand. The trade receivable days of our company is 36 days. This shows that our company able to collect debts as quickly as possible so that the amount of funds tied up in trade receivables can be minimized.

- Conclusion

As you can see that, Natalie Watch Sdn Bhd shows a good investment plan. At the end of the first year, we have a healthy profit that leads us to reinvest in our business. Thus, we have the outmost confidence in our products, so we are able to spread our brand name and hence, maximize our profits for every investor.