Formulate a Budget - Assignment Example

Since our store is located in the main shopping hub in the downtown area therefore, we strongly believe that this factor would help us grow and to achieve success on the longer run (Longenecker, Petty, Palich, & Hoy, 2013; Ray, 2010). Furthermore, the company also aims to receive a 15% growth in the sales and 50% gross profit margin is also expected by the end of the third year. Since, our major assets are residing in the inventory therefore we have to come up with a budget plan that helps us to survive in the market for at least three years (Shapiro, 2008; Longenecker, Petty, Palich, & Hoy, 2013).

Although there have been numerous issues related to the business as the on-hand cash for apparel was very low, the company has decided to formulate a fresh budget plan focusing on all the key elements and factors that may or may not become an obstacle for the company in the coming future (Atrill & MacLaney, 2011; Gibson, 2010). The purpose of this budget plan is to ensure that the $50,000 loan is secured. The purpose of this loan / supplemental financing is necessary as it is required for the decoration of the outlet and its furniture and other operational expenses.

The investment by the owner includes $60,000. It is forecasted that if the company works as per the expectation then the budget plan would allow the company to become profitable by the end of the first year. The budget plan that has been formulated for the coming three for ABC contemporary couture is presented as below. Thus, it can be concluded that if the aforementioned budget plan turns successful than the company can easily generate an increase of 10% in the second year and 25% increase in sales by the end of the third year.

However, if the company plans to expand then the net income may increase as per the demand and expansion. It should be noted that once the