You are a budding entrepreneur, looking to further your financial literacy

skills. A sole trader with an apparel company with the following sales data below has approached you:

UrbanApparel Vogue $-$ Financial Data

Part One: Cash Flow and Break$-$even Analysis

$1.$ Cash Flow Forecast:

Month Sales Revenue $($$$)$ Expenses $($$$)$ Net Cash Flow $($$$)$

Jan $50,00035,00015,000$

Feb $55,00038,00017,000$

Mar $60,00040,00020,000$

Apr $48,00032,00016,000$

May $52,00036,00016,000$

$2.$ Break$-$even Analysis:

Fixed Costs: $$25,000$

Variable Cost per Unit: $$15$

Selling Price per Unit: $$30$

Break$-$even Point $($Units$)=$ Fixed Costs $/($Selling Price per Unit $-$ Variable Cost per Unit$)$

Break$-$even Point $($Units$)=$ $$25,000/($$$30-$ $$15)=1,667$ units

$3.$ Risks Identification:

a$.$ Increase in Fixed Costs: Potential impact on break$-$even point and overall profitability.

b$.$ Reduction in Selling Price: May affect profit margins and break$-$even point.

c$.$ Decline in Sales Revenue: Directly impacts cash flow and profitability.

$4.$ Risk Mitigation:

Diversify product offerings to increase sales.

Negotiate with suppliers to control variable costs.

Implement cost$-$cutting measures to address increased fixed costs.

Part Two: Analysis of Performance

$1.$ Statements of Comprehensive Income:

Item Amount $($$$)$

Sales Revenue $275,000$

Cost of Goods Sold $140,000$

Gross Profit $135,000$

Operating Expenses $80,000$

Net Profit Before Tax $55,000$

Tax Expense $15,000$

Net Profit After Tax $40,000$

$2.$ Statements of Financial Position:

Asset$/$Liability Amount $($$$)$

Current Assets $120,000$

Non$-$Current Assets $180,000$

Current Liabilities $75,000$

Non$-$Current Liabilities $50,000$

Owner's Equity $175,000$

$3.$ Ratio Calculations:

Profit Margin $=($Net Profit $/$ Sales Revenue$)*100$

Current Ratio $=$ Current Assets $/$ Current Liabilities

Return on Assets $=$ Net Profit $/$ Total Assets

They

want you to analyse the performance of their business, identifying the

current business risks and suggest ways that their business performance

could be improved.

You realise this is a great opportunity for you to truly understand how

financial information can help a business monitor and improve their

performance including how to prepare a formal financial report.

Your report should include the following:

$$

$$Title

$$

$$An introduction of the details that are included in the report

$$

$$Part One: Cash flow and break

$-$

even calculations and analysis,

risks faced by the business

$$

$$Part Two: Analysis of performance, conclusions and

recommendations

Choose a sole trader of your choice, but ensure you can have access to

the appropriate financial data.

You will need to present your findings in a financial report to the sole

trader.

Write a title for your report and an introduction to the business.

Part One of your financial report must include:

$$

$$An explanation of the purpose of:

o Cash flow forecasts and statements

o Break even analysis

for the selected sole trader

$$

$$An accurate cash flow forecast and statement and a break

$-$

even

chart and calculation

$$

$$Calculations and in

$-$

depth analysis using data from the sole

trader

$$

s cash flow forecasts and statements and break even, to

identify risks to the business. You should demonstrate your

understanding of common risks e

$.$

g

$.$

$$an increase in fixed or

variable costs, a reduction in selling price, decline in sales

revenue etc

$$

$$A detailed examination of the factors that impact on the business

risks.

$$

$$A broad range of conclusions and actions that the business could

take to address these risks, based on the analysis of your

calculations.

Part Two of your financial report must include:

$$

$$An explanation of the purpose and the main components for sole

traders of:

o Statements of comprehensive income

o Statements of financial position

$$

$$Using the financial data from the sole trader, you must prepare

an accurate:

o Statement of comprehensive income

o Statement of financial position

These must be professionally accepted and in a vertical

format

$$

$$For both of the above statements, you need to make adjustments

for:

o Depreciation

o Prepayments

o Accruals

o Changes in capital

$$

$$Accurate ratio calculations

$($

measuring profitability, liquidity and

efficiency

$)$

$,$

$$using data you have extracted from the above

statements

$$

$$An analysis of the business

$$

s performance i

$.$

e

$.$

$$a detailed

examination of the ratio calculations

$$

$$A wide range of justified recommendations for improving the

business

$$

s performance, based on the outcomes of the ratio

analysis.

Part Two of your financial report must include:

$$

$$An explanation of the purpose and the main components for sole

traders of:

o Statements of comprehensive income

o Statements of financial position

$$

$$Using the financial data from the sole trader, you must prepare

an accurate:

o Statement of comprehensive income

o Statement of financial position

These must be professionally accepted and in a vertical

format.