Entrepreneurial Finance Assignment 1 - Products, Income Projections, Cash Flow and Funding Sources

This assignment covers the products/services offered by a new business venture, three scenarios for income and expenditure projections, projected cash flow, and funding sources. It includes subject BBE604 and is relevant for students studying Entrepreneurial Finance.

BBE604: Entrepreneurial
Finance assignment 1

Contents
INTRODUCTION...........................................................................................................................................3
MAIN BODY.................................................................................................................................................3
(a) The products / services offered by the new business venture...........................................................3
(b) Three scenarios for income and expenditure projections, to include................................................4
(c) Projected cash flow for the venture.................................................................................................10
(d) Detail of funding sources, including amounts, terms and draft term sheets for any share issuance
...............................................................................................................................................................19
CONCLUSION.............................................................................................................................................20
REFERENCES..............................................................................................................................................22

INTRODUCTION
The method of producing economic choices for new ventures is known as entrepreneurial
finance (i.e. startups). Entrepreneurs are fundamentally distinct from traditional top management,
just as new businesses are significantly different from people that decide. Each must make
financial judgments that are vastly different. Finance issues for entrepreneurs are substantially
different from those faced by major corporations. The most visible is “financing,” which most
businesses are accustomed with." To the ordinary businessperson, this essentially means
"locating funds.” Most businessmen devote virtually all of their attention to the selecting and
recruiting financing.
MAIN BODY
(a) The products / services offered by the new business venture.
People are more than happy to wear new and trendy attire, according to research. In the
United Kingdom, the fashion sector is booming. The sector is valued £26 billion and employs
800,000 people. The garment sector in the United Kingdom is innovative. It's worth noting that
"Finer Threads" will be based in London, United Kingdom. It will sell men's, women's, and
child's fashionable clothing. Because there are numerous options available. There is also a
demand for talented individuals who can contribute to the area's economic situation. On the
sidewalks, there is a good throng, which increases the likelihood of excellent sales. The system is
highly advanced, which is one of the reasons for choosing London as a location to start a new
firm. Additionally, while working in London, the company organisation has a variety of
development prospects. The accessibility of personnel is not an issue. There are experienced
professionals prepared to invest with possibility. It will be a retail store that sells the most up-to-
date things at a reasonable price. The store has a large selection of clothes to choose from, which
will assist to provide complete. Consumers can get high-quality clothing from "Finer Threads."
The company will also be active on social media platforms such as Facebook and Instagram. At
the moment, social media is very popular. A system that sells social media platforms can reach a
larger customer base.
Retail Price % of Wholesale Cost of

Collection Price Production
Jackets 227.00 17% 117.98 58.93
Dresses 220.00 22% 114.23 54.92
Tops 134.00 31% 68.43 36.23
Bottoms 167.00 25% 86.88 48.45
Scarves 78.00 3% 39.53 24.03
Accessories 75.00 3% 38.25 24.75
“Finer Threads” offers clothing for men, women, and children in a range of styles. The business
will ensure customer satisfaction and employ the greatest natural resources available. Consumers
should use items, which are then swapped for cash. As a result, the corporation must deliver the
finest service to clients in order to bring benefit to the company. The firm's raw materials are of
excellent quality, and as a result of their utilization, the business is capable of providing high
products to its customers. This will assist the organisation in providing the best possible service
to its clients.
(b) Three scenarios for income and expenditure projections, to include
Income statement for the scenario reasonable case
Projected Profit & Loss
2020 2021 2022
Revenue 664,200 805,000 1,060,000
Direct Costs 352,026 426,650 561,800
Gross Margin 312,174 378,350 498,200
Gross Margin % 47% 47% 47%

Operating Expenses
Salaries & Wages 131,600 188,000 238,000
Employee Related Expenses 26,320 37,600 47,600
Rent 36,000 36,000 36,000
Telephone / Internet 1,440 1,440 1,440
Leased Equipment 2,004 2,004 2,004
Utilities 2,100 2,100 2,100
Office 6,600 6,600 6,600
Security 348 348 348
Repairs 600 600 600
Accounting Fees 1,500 1,500 1,500
Postage 600 600 600
Printing 1,200 1,200 1,200
PR 9,600 10,000 10,000

Insurance – Workman’s + Property
Liability 9,576 9,576 9,576
Miscellaneous 3,600 3,600 3,600
Advertising 4,800 4,800 4,800
Education 1,200 1,200 1,200
Traveling 8,500 10,000 10,000
Startup expenses in Use of Funds 50,000
Total Operating Expenses 297,588 317,168 377,168
Operating Income 14,586 61,182 121,032
Interest Incurred 4,590 4,070 3,032
Depreciation and Amortization 4,880 4,880 4,880
Gain or Loss from Sale of Assets
Income Taxes 512 5,223 11,312

Total Expenses 659,596 757,991 958,192
Net Profit 4,604 47,009 101,808
Net Profit/Sales 1% 6% 10%
Income statement for high performing case
Profit and Loss (Income Statement) 1 Year 2 Year 3 Year
Sales 187,500 288,118 384,736
Direct Cost of Sales 28,500 28,500 28,500
Production Payroll 0 0 0
Other 0 0 0
Total Cost of Sales 28,500 28,500 28,500
Gross Margin 159,000 257,818 356,236
Gross Margin % 84.80% 90.04% 92.59%
Operating expenses:
Sales and Marketing Expenses
Sales and Marketing Payroll 0 0 0
Rent 12,100 13,200 13,200
Travel 2,000 2,000 2,000
Burglar Alarm 1,188 1,188 1,188
Total Sales and Marketing Expenses 0 0 0
Sales and Marketing % 0.00% 0.00% 0.00%
General and Administrative Expenses

Profit and Loss (Income Statement) 1 Year 2 Year 3 Year
General and Administrative Payroll 0 0 0
Payroll Expense 13,200 13,200 13,200
Payroll Burden 1,980 1,980 1,980
Depreciation 0 0 0
Office Supplies 220 220 220
Utilities 10,080 10,080 10,080
Insurance 876 876 876
Telephone 1,080 1,080 1,080
Total General & Administrative Expenses0 0 0
General and Administrative % 0.00% 0.00% 0.00%
Other Expenses
Other Payroll 0 0 0
Advertising 5,027 5,484 5,784
Loan Repayment 6,820 7,440 7,440
Inventory 28,500 28,500 28,500
Accounting/legal 4,800 4,800 4,800
Total Other Expenses 0 0 0
Other % 0.00% 0.00% 0.00%
Total Operating Expenses 87,871 90,048 90,348
Profit Before Interest and Taxes 71,129 167,570 265,888
Interest Expense Short-term 3,544 3,544 3,544
Interest Expense Long-term 0 0 0
Taxes Incurred 16,896 41,006 65,586

Profit and Loss (Income Statement) 1 Year 2 Year 3 Year
Extraordinary Items 0 0 0
Net Profit 50,688 123,019 196,758
Net Profit/Sales 27.03% 43.00% 51.14%
Income statement for the low performing case
Particulars Details Amount
Revenue 30,300
Less: COGS (16,220)
Depreciation on plant 2560
Gross profit 14,080
Selling and Administration Expenses:
Distribution Expenses 2,160
Administration expenses 2,920
Dividends paid 560
Debenture interest paid 240
Insurance fees 500
Income tax 1600
Depreciation on Building 320
Debt (240+ 2% of 8240) = 404.8 approx. (405) 405 (8705)
Net Profit 5375

(c) Projected cash flow for the venture
The great proportion of persons are aware that cash flow or cash modelling techniques
relates to inwards and outer motions of an organization's financial resources defined by a set of
real outcomes or goals (and also refers to budget, and forecasts, over short and long-term
periods). It depicts the effects of generating tax (include selling, mortgages, and investment) and
paying expenses (such as salaries, property costs). Many people seem to agree that inadequate
cash flow is the most prevalent cause of business bankruptcy, thus understanding both the
present and predicted cash inflows position, as well as the forces that influence it, is critical in
every firm.
Year 2021 Jan Feb Mar April May
Cloths Sales amount 42,152 42,563 43,526 43,568 44,124
Fabric Sales 19,751 12,451 12,456 13,452 14,528
GROSS SALES (Total) 61,903 55,014 55,982 57,020 58,652
COGS
Cloths 14,525 14,046 14,364 14,377 14,561
Fabric 6,515 3,113 3,114 3,363 3,632
GRAND TOTAL 21,040 17,159 17,478 17,740 18,193
GP 40,863 37,855 38,504 39,280 40,459
General and
Administrative
Workers Salaries 15,476 13,754 13,996 14,255 14,663
Management Salaries 3,400 3,400 3,400 3,400 3,400

Employer
Taxes/Benefits (15%
Wages) 2,265 2,058 2,087 2,119 2,168
Employees
Compensation (6%
Wages) 1,133 1,029 1,044 1,059 1,084
Advertisement 800 800 800 800
800
Bookkeeping 150 150 150 150 150
Credit Card Charges
(1%) 619 550 560 570 587
Insurance 250 250 250 250 250
Legal and Professional
Fees 100 100 100 100 100
Misc. Other 250 250 250 250 250
Office Supplies 175 175 175 175 175
Rent 3,200 3,200 3,200 3,200 3,200
Repair and
Maintenance 300 300 300 300 300
Small Equipment 200 200 200 200 200
Telephone [phone]
Garbage 200 200 200 200 200
Utilities 1,200 1,200 1,200 1,200 1,200
Total Gen. and Admin.
(Fixed) 29,867 27,766 28,062 28,378 28,876
NET PROFIT OR LOSS 10,996 10,089 10,443 10,901 11,583

SBA Loan 3,582 3,582 3,582 3,582 3,582
Cash Flow After
Financing 7,414 6,507 6,861 7,319 8,001
Draw 4,000 4,000 4,000 4,000 4,000
Net Cash Flow 3,414 2,507 2,861 3,319 4,001
Accumulated Cash
Flow 5,921 8,782 12,101 16,102
Average Daily Sales /
22 days 2,814 2,501 2,545 2,592 2,666
Year
2015 June July Aug Sept Oct Nov Dec
YTD
2020
Food
Sales
amount 44,325 44,658 45,210 45,325 46,251 46,325 47,125 5,35,152
Bevera
ge
Sales 15,574 15,487 16,421 16,251 17,452 17,245 17,845 1,88,913
GROSS
SALES
(Total) 59,899 60,145 61,631 61,576 63,703 63,570 64,970 7,24,065
-
COGS
Food 14,627 14,737 14,919 14,957 15,263 15,287 15,551 1,77,215

Bevera
ge 3,894 3,872 4,105 4,063 4,363 4,311 4,461 48,806
GRAN
D
TOTA
L 18,521 18,609 19,025 19,020 19,626 19,599 20,013 2,26,021
-
GP 41,379 41,536 42,606 42,556 44,077 43,972 44,958 4,98,045
- - - - - - - -
Genera
l and
Admini
strative
Worker
s
Salaries 14,975 15,036 15,408 15,394 15,926 15,893 16,243 1,81,016
Manage
ment
Salaries 3,400 3,400 3,400 3,400 3,400 3,400 3,400 40,800
Employ
er
Taxes/
Benefit
s (15%
Wages) 2,205 2,212 2,257 2,255 2,319 2,315 2,357 26,618
Employ
ees
Compe
nsation
(6%
Wages) 1,102 1,106 1,128 1,128 1,160 1,158 1,179 13,309
Adverti
sement 800 800 800 800 800 800 800 9,600

Bookke
eping 150 150 150 150 150 150 150 1,800
Credit
Card
Charge
s (1%) 599 601 616 616 637 636 650 7,241
Insuran
ce 250 250 250 250 250 250 250 3,000
Legal
and
Professi
onal
Fees 100 100 100 100 100 100 100 1,200
Misc.
Other 250 250 250 250 250 250 250 3,000
Office
Supplie
s 175 175 175 175 175 175 175 2,100
Rent 3,200 3,200 3,200 3,200 3,200 3,200 3,200 38,400
Repair
and
Mainte
nance 300 300 300 300 300 300 300 3,600
Small
Equipm
ent 200 200 200 200 200 200 200 2,400
Teleph
one 150 150 150 150 150 150 150 1,800
Garbag
e 200 200 200 200 200 200 200 2,400
Utilities 1,200 1,200 1,200 1,200 1,200 1,200 1,200 14,400
Total
Gen.
29,256 29,331 29,784 29,768 30,416 30,376 30,803 3,52,684

and
Admin.
(Fixed)
-
NET
PROFI
T OR
LOSS 12,122 12,205 12,822 12,788 13,661 13,596 14,155 1,45,361
SBA
Loan 3,582 3,582 3,582 3,582 3,582 3,582 3,582 42,984
Cash
Flow
After
Financi
ng 8,540 8,623 9,240 9,206 10,079 10,014 10,573 1,02,377
Draw 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000
Net
Cash
Flow 4,540 4,623 5,240 5,206 6,079 6,014 6,573 54,377
Accumu
lated
Cash
Flow 20,643 25,266 30,505 35,712 41,791 47,804 54,377
Averag
e Daily
Sales /
22 days 2,723 2,734 2,801 2,799 2,896 2,890 2,953
Cash flow statement for 5 years

Year1 Year2 Year3 Year4 Year5

CASH FLOW FROM OPERATIONS
Net Income (Loss) (80,431) 83,568 79,583 110,210 144,693
Change in working capital (11,340) (1,625) (2,350) (2,133) (2,409)
Depreciation 36,960 36,960 36,960 36,960 36,960
Net Cash Flow from Operations (54,811) 118,902 114,193 145,037 179,244
CASH FLOW FROM
INVESTMENTS
Investment (246,450) 0 0 0 0
Net Cash Flow from Investments (246,450) 0 0 0 0
CASH FLOW FROM FINANCING
Cash from equity 0 0 0 0 0
Cash from debt 317,971 (45,424) (45,424) (45,424) (45,424)
Net Cash Flow from Financing 317,971 (45,424) (45,424) (45,424) (45,424)
SUMMARY
Net Cash Flow 16,710 73,478 68,769 99,613 133,819
Cash at Beginning of Period 0 16,710 90,188 158,957 258,570
Cash at End of Period 16,710 90,188 158,957 258,570 392,389
Profit and loss statement for 5 years
Year 1 Year 2 Year 3 Year 4 Year 5
Revenues
Product/Service A 151,200 333,396 367,569 405,245 446,783
Product/Service B 100,800 222,264 245,046 270,163 297,855
Total Revenues 252,000 555,660 612,615 675,408 744,638

Expenses & Costs
Cost of goods sold 57,960 122,245 122,523 128,328 134,035
Lease 60,000 61,500 63,038 64,613 66,229
Marketing 20,000 25,000 25,000 25,000 25,000
Salaries 133,890 204,030 224,943 236,190 248,000
Other Expenses 3,500 4,000 4,500 5,000 5,500
Total Expenses &
Costs
271,850 412,775 435,504 454,131 473,263
EBITDA (19,850) 142,885 177,112 221,277 271,374
Depreciation 36,960 36,960 36,960 36,960 36,960
EBIT (56,810) 105,925 140,152 184,317 234,414
Interest 23,621 20,668 17,716 14,763 11,810
EBT (80,431) 85,257 122,436 169,554 222,604
Net Operating Loss (80,431) (80,431) 0 0 0
Income Tax Expense 0 1,689 42,853 59,344 77,911
NET INCOME (80,431) 83,568 79,583 110,210 144,693
Net Profit Margin (%) - 15.00% 13.00% 16.30% 19.40%
Balance sheet for 5 years
Year1 Year2 Year3 Year4 Year5
ASSETS
Cash 16,710 90,188 158,957 258,570 392,389

Accounts receivable 0 0 0 0 0
Inventory 21,000 23,153 25,526 28,142 31,027
Total Current Assets 37,710 113,340 184,482 286,712 423,416
Fixed assets 246,450 246,450 246,450 246,450 246,450
Depreciation 36,960 73,920 110,880 147,840 184,800
Net fixed assets 209,490 172,530 135,570 98,610 61,650
TOTAL ASSETS 247,200 285,870 320,052 385,322 485,066
LIABILITIES & EQUITY
Debt 317,971 272,546 227,122 181,698 136,273
Accounts payable 9,660 10,187 10,210 10,694 11,170
Total Liabilities 327,631 282,733 237,332 192,391 147,443
Share Capital 0 0 0 0 0
Retained earnings (80,431) 3,137 82,720 192,930 337,623
Total Equity (80,431) 3,137 82,720 192,930 337,623
TOTAL
LIABILITIES &
EQUITY
247,200 285,870 320,052 385,322 485,0
(d) Detail of funding sources, including amounts, terms and draft term sheets for any share
issuance
Selecting the perfect sources of funding is critical for a business's success as well as the
management's ability to make sound decisions. A corporation's source of finances decision has a
significant impact. If a decision is made incorrectly, the cost of finances rises, which has a direct

impact on the viability of commercial programs and projects. A good combination of sources of
funding and business needs can help a company make more money and run more smoothly.
The money that a firm needs to carry out its commercial activities is referred to as business
finance. To run, numerous firms generate massive amounts of fixed and operating capital. There
are two primary types of company raising capital:
 Debt finance: This type of financing is borrowing money from a lender and committing
to repay it in full, amount owed. This could be in the form of a one-time or revolving
company financing. They don't have to give up any shares or control in the company,
however unlike equity. Business loans, overdraft fees, and asset finance are all examples
of debt financing.
 Equity finance: This strategy entails selling shares in a company to investors in order to
raise funds. Because the worth of their shares is based on the organization's growth, these
shareholders are concerned in its productivity and expansion. They may contribute
talents, experience, and relationships to the company that will help it expand. Angel and
venture capital are two instances of equity financing.
 Personal finance: Numerous people may deposit their own money and use personal
assets, such as taking out a mortgage their home, to establish a business. This has the
advantage of putting in charge, and it may be the only choice offered whenever you
initially start off. Internally sources of funding become restrictive (for most) for even
more established companies and then when the company starts growing and additional
sources must be employed. They can include the following:
 Overdraft: An overdraft facility is adaptable and can be a valuable backup option. It's
commonly seen as a short-term finance solution that's simple to set up. Unfortunately, it
is often for lesser sums and can be an efficient material of borrowing due to fees and
charges. Other crucial consideration is that overdrafts are vulnerable to bank recalls.
 Bank loan: A bank loan is frequently one of the first types of funding that consumers
consider. It's a simple and well-known method of borrowing money, typically in the form
of a lump payment for a defined length of time. On the borrowing, interest is paid, which
might be depending on fixed or floating interest rates. The funds can be utilised for any
reason and can help with working capital. There is no influence on firm ownership. A

benefit is that banking business loans are frequently available to fledgling businesses if
proper security or assurances are provided. A bank loan, while straightforward to grasp,
may not always be adaptable, and the registration process can be lengthy and difficult.
 Friends and family: Friends and family understand you and your company, they are
generally inclined to assist, and a credit from friends or family can be one of the simplest
forms of finance for smaller companies. Addition to the problem in obtaining financing
before establishing a financial background and credit score, it is typically employed by
people who are just beginning out in company. This type of loan can be quite
advantageous in the proper situations, but it isn't for everybody.
 Business credit cards: One of the more practical forms of financing, which may be used
for purchasing and everyday activities. It's especially handy for this type of expense
because it may be shared among several individuals. A company credit card is great for
short-term expenditure on minor things and is often not suitable for significant
investments due to the high cost of financing. While there are instances when 0% sales
promotions are accessible, credit card lending is usually associated with finance charges.
To qualifying, company must have a financial background and a good credit rating.
CONCLUSION
It's important to think about fundraising, which would be the means of collecting money for
a specific reason, once a new marketing strategy has been formed or a prospective purchase has
been discovered. The goal in this scenario is to start a small company. For those that can give
funding generally would like to know that they will be reimbursed in a short amount of time,
which necessitates a mechanism for owners and business proprietors to explain how that
financing will take place. This leads us to accountancy, which is a method used by business
owners to summarise, monitor, and explain the economic effectiveness and activities of their
company.