Section B6: Case Study

Read the following case study.

For One Stop Variety, use the forms provided to prepare the following:

  1. Cash Flow Statement
  2. Income (Loss) Projection

CASE STUDY: ONE STOP VARIETY

Jane Ward has worked for the last 10 years as a bookkeeper for a small manufacturer. Due to a downsizing in the company, she has found herself without a job. Recent attempts to find employment have been unsuccessful. Jane has decided to start a new business, One Stop Variety. Before she can approach a bank for the required financing, financial projections must be prepared.

Jane has made the following assumptions:

1. Monthly sales will remain constant at $30,000. per month. 90% of sales are paid in cash when the sale is made, 10% are paid in 30 days.

2. Cost of goods sold has been estimated at 80% (based on current industry average). Purchases are paid for when goods are received.

3. Inventory levels will remain fairly constant at $15,000.

4. Depreciation on assets has been estimated at $150. per month.

5. The following expenses are paid during the month incurred:

     Rent $1,000 / month
  Wages and Benefits $1,500 / month
  Drawings $2,000 / month
  Vehicle Expenses $100 / month
  Inventory Purchases $24,000 / month

6. The following expenses are not paid during the month incurred, but are paid in 30 days:

    Advertising $200 / month
  Utilities $300 / month
  Office Expenses $100 / month

7. Start-Up costs, which will be paid in full before business opening, estimated as follows:

     Inventory $15,000
  Cash Register 4,000
  Fixtures 4,000
  Leasehold Improvements 5,000
  Utility Deposits 500
  Rent Deposit   1,000
29,500

8. Jane has $10,000 in cash to invest in the business.

9. It is not known at this time how much financing is required.

One Stop Variety – Projected Income (Loss) for first 12 months of operation – Part 1

One Stop Variety – Projected Income (Loss) for first 12 months of operation – Part 2

One Stop Variety – Projected Income (Loss) for first 12 months of operation – Part 1 Answers

One Stop Variety – Projected Income (Loss) for first 12 months of operation – Part 2 Answers

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