Preston started his own taxi business Fermium Taxis in 1999 in a rural part of the country. Over

the last 20 years, he has built up this sole trader business so that it now provides a comfortable

living for Preston and his wife, Lucy.

The profit and loss account extract for the 2019 financial year is as follows:

$

Sales turnover 90,000

Cost of sales 24,000

Gross profit 66,000

Total expenses 21,000

Net profit /loss 45,000

Petrol prices had averaged $1 per litre over the year.

Included within cost of sales are petrol expenses of $7,500

There were on average 30 journeys a day for Fermium Taxis in 2019. Many of these customers

were regular bookings, including schoolchildren going to school, older people going into the

neighboring villages during the day time, as well as less frequent users for social trips in the

evenings.

Preston was excited about the future of the business and put forward a business report to expand the

business as a discussion document. Towards the end of 2019, before Preston had an opportunity to

discuss this report the economic climate unfortunately changed dramatically. On the global scale,

national economies were heading towards recession as GDP in many countries fell by 0.5% in the

month of October 2019. There was also a negative impact on customer confidence and spending, as

people became more cost-conscious with many looking at how best to make savings.

In the light of these changing economic circumstances, Preston decided that, while it was still a

good idea to go ahead with their analysis, he would have to take account of these changed

economic circumstances in his discussions and future proposals.

Required:

In the first part of his report, Preston conducted a SWOT analysis, an analysis of the strengths,

weaknesses, opportunities and threats for Fermium Taxis.

The major changes that he referred to in this part of his report were as follows:

a) The recent rise in petrol prices - these prices had risen by 20% in the last few weeks before

the report was written.

b) The proposal to open a new airport 30 miles from where Fermium Taxis is located.

c) Recently two Post Offices have been closed in the area.

d) A rival taxi business was being sold in a neighboring village; the present owner was retiring.

With reference to any future expansion of the business, and the current economic climate, evaluate

the opportunities and threats that any TWO of these changes listed above present to Fermium Taxis

and its financial position. (8 marks)