Moyou financial projection - Essay Example

The information is based on forecasts. Forecasting is used in estimating future performance of the business (Shim and Siegel 2007). It is useful in the financial planning process which entails assessing future financial needs. Investors use forecasting to value a company and determine its security. Pro forma statements show forecasts for periods ranging from 1-5 years. This report will assess the financial viability of MoYou by carrying out financial projections. The projections are based on the data obtained from the entrepreneur of the organization during an interview.

According to the entrepreneur, annual sales add up to ?1 million. The Cost structure is as follows: The average cost is 3-5 USD per bundle unit. plate - 1$, nail polish 0.9$; Moyou is paying manufactures for labor according to their supply as mentioned above; variable- delivery and dispatch cost varies according to speed of delivery, and its range is from 0.3- 0.7 USD per unit. Service cost- Moyou customer service is based in Brent cross; fixed cost- ?900 per month, variable cost- ?150 per month, staff wages- ?

2750 per month. Media and Public relations cost; Exhibitions cost- ?750 annual and cost Marketing and brand development cost- ?2150 annual cost Income statement projections In the income statement forecast as shown in appendix 1 we assume: Sales grow at 10% annually Variable costs vary with the number of units sold All units produced are assumed to be sold Fixed costs remain constant throughout except the marketing, and product development costs Tax rate of 24% is to remain constant Marginal costing method has been used in projecting the income statement.

Appendix INCOME STATEMENT FORECAST           2013 2014 2015 2016 2017 Number of units sold 100,000 110,000 121,000 133,100 146,410 sales 1,000,000 1,100,000 1,210,000 1,331,000 1,464,100 Less variable costs:   Variable service costs 1,800 1,980 2,178 2,396 2,635 variable delivery & dispatch costs 50,000 55,000 60,500 66,550 73,205 Direct labor costs:   Plate 90,000 99,000 108,900 119,790 131,769 Nail 100,000 110,000 121,000 133,100 146,410 Total Variable costs 241,800 265,980 292,578 321,836 354,019 Less overheads costs:   Fixed service costs 10,800 10,800 10,800 10,800 10,800 Staff wages 33,000 33,000 33,000 33,000 33,000 Media and Public relations:   Exhibitions costs 9,000 9,000 9,000 9,000 9,000 Marketing and brand development 25,800 28,380 31,218 34,340 37,774   78,600 81,180 84,018 87,140 90,574 Net Profit Before Tax 679,600 752,840 833,404 922,024 1,019,507 Tax @24% (163,104) (180,682) (200,017) (221,286) (244,682) Operating income 516,496 572,158 633,387 700,739 774,825             The operating income is a projection of financing the company needs.

Projected balance sheet BALANCE SHEET FORECAST           Fixed Assets 2013 2014 2015 2016 2017 Property, plant & Equipment 1,200,000 1,080,000 972,000 874,800 787,320     Current Assets   Inventories 300,500 301,500 301,500 301,500 301,500 Cash 500,000 730,658 600,000 650,000 730,000 Accounts receivables 215,996 150,000 450,887 524,439 557,905 Total Assets 2,216,496 2,262,158 2,324,387