Accounting Case Study Assignment: Financial Planning for a New Store

This accounting case study examines the financial planning for a company's expansion through the opening of a new store. The study identifies the business opportunity within the Australian retail and apparel market, focusing on a unique product with medical science integration. It details product analysis, market research, and a marketing strategy, including pricing, promotion, and operational strategies. The financial plan outlines fund resources, including venture capital and bank loans, with a comparison of loan options. The case study analyzes profitability and recommends fund acquisition strategies based on the advantages of different resources, offering a comprehensive overview of the financial considerations for launching a new retail venture. The assignment covers topics like market analysis, business opportunities, product analysis, and marketing mix, providing a comprehensive overview of launching a new store and its financial requirements.

Running head: ACCOUNTING CASE STUDY ASSIGNMENT
Accounting case study assignment
Name of the Student:
Name of the University:
Author’s Note:

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ACCOUNTING CASE STUDY ASSIGNMENT
Executive summary
The study sheds light on the financial planning for starting a new store as the company’s
expansion plan. The study identifies the financial resources for generating capital to start off
the store. Further the study identifies the business opportunity through analysing the
Australian retail and apparel market. This identifies the business opportunity through
identifying the product’s capability and the USP. However the study also finds the rationality
into the business process and into the idea of starting off the store through explaining the
profitability into the forecasted period. However the rationality into the fund acquisition has
been described through evaluating the various capital resource options. Lastly the
recommendation has been made depending the judgement and the choice of capital resources.
The decision has been made depending the analysis of advantage of available resource.

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ACCOUNTING CASE STUDY ASSIGNMENT
Table of Contents
Introduction................................................................................................................................3
Report Background....................................................................................................................3
Business opportunity and rationality..........................................................................................4
Product analysis.....................................................................................................................4
Market analysis......................................................................................................................5
Marketing strategy.................................................................................................................6
Operational strategy...................................................................................................................8
Rationality..................................................................................................................................8
Financial plan.........................................................................................................................8
Fund resources.......................................................................................................................8
Compression of loan capital and venture capital.................................................................10
Recommendation & rationality for the fund resource..............................................................12
Conclusion................................................................................................................................13
References................................................................................................................................14

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ACCOUNTING CASE STUDY ASSIGNMENT
Introduction
A company or a business entity expands into their business life through following
different strategies for expanding their business. The expansion strategy depends on the
business process that the company is having and the amount of liquidity position is the
company is associated with. This means the company invests more with the increase in
available cash balance into the company’s hand. However, the cash balance can be checked
through identifying the periodical cash flow. Therefore analysis of the cash flow statement is
necessary while searching for an investment opportunity or investment for expansion. Hence,
the report identifies an investment opportunity of a previously established company through
analysing the previous year’s cash flow statement. The cash flow statement has been analysed
for developing a business plan depending on expansion through a new store open by the
company. The report identifies the business opportunity through launching a new product
into the competitive market in Australia. The study identifies the opportunity through
analysing the market and industry in Australia retail segment. Further, the source of finance
has been identified into this report. However analysing different sources of finances a
recommendation has been formulated as to arrange the capital to start off the store.
Report Background
The company has assumed to be into the health product manufacturing industry where
their team of scientist and doctors are constantly working for the betterment of their clients.
The company has been into the health and medical industry since 10 year however now they
have planned to open a clothing store which would provide the facility to buy clothes that are
unique in nature. These means the company manufactures and sales cloths which would
provide high comfort to their customers compared to the other brands. With this innovative
idea the company plans to sell their product initially in the Australian market. The company
plans to use Smart skin fabric for bringing comfort into their products.

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ACCOUNTING CASE STUDY ASSIGNMENT
Business opportunity and rationality
The business opportunity has been identified through recognizing the USP of the
product and the prospective of the selling the product into the Australian market (Grayson
and Hodges 2017). However the rationality in choosing this business option and the
opportunity into this business has been judged through identifying the apparel/ clothing
industry into the Australian market. The opportunities further discussed below.
Product analysis
Depending on the medical science the company plans to develop their apparels which
would reduce the sweat. At the initial stage the company plans to combine the medical
science with the retail industry. Hence the company plans to launch this product. Further all
the cloths that will be sold into their store will be manufactured with the innovative fabric
which would reduce the itching problem in addition to reducing the sweat issue. The material
which will be used into the manufacturing process are highly examined and suitable for all
aged people, especially for kids. Following the manufacturing process trough using smart
fabrics, the company plans to sale their products in 3 categories, such as Men’s wear,
Women’s wear and kid’s wear. All the cloths are to be made of light weight, highly
breathable, temperature regulating skin smarteczema and psoriasis fabric with the help of
rayon or lyocell and viscose from Bamboo blended fibers that are encapsulated with calming
anti-inflammatory, Zinc Oxide and are perfect for wet wrapping treatments. Hence, all the
products or the cloth would provide high comfort to their customers as this uses “Tencel
fabric” into their cloths. The cloths will be made with the sense of style and combined with
the health care element (Bio-based News. 2019).
Product identification or brand / USP: All the cloths or the apparels which have been planned
to sell into the market through the newly open store, will be sold with the identification of its
uniqueness and comfort to the body. Since all the cloths promises to provide extreme comfort

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to their customers, the cloths or all the products are highly supported by the medical science
(Khanna, Jacob and Yadav 2014). The fabric which will be used in producing the cloths are
named as smart fabric. Further, the benefits have been identified to evaluate the product’s
uniqueness.
Benefits:
1. Superior to 100% cotton eczema garments.
2. Ultra-soft, form-fitting would help in treating common symptoms of itching, red
blotchy skin from atopic dermatitis and the continuous burning or stinging feeling
from a plaque psoriasis outbreak.
3. Materials which are to be used into the production process all are certified to be skin
safe for severeskin sensitivities and broken skin.
4. All the cloths will have “Safe skin” printed on the cloths which would increase the
branding for the company.
5. All the cloths promises to reinforces the skins barriers by helping in preserving the
skin natural moisture and improving its protective function.
6. All the cloths are stylish and therefore this gives an option to their customer to be
stylish while being sensitive towards their skin at the same time.
7. The cloths are made of Tencel fabric.
8. The Tencel with the chitosan fabric acts as the skin moisturizer and skin protector
which makes all the cloth to be good generator of skin elasticity.
Market analysis
Although the company is into the medical health care segment but since the company
is planning to sell the retail product with having the combination of medical science, the
company falls into the category of retail business. The company identifies the Australians

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ACCOUNTING CASE STUDY ASSIGNMENT
market at the initial stage for opening a cloth store. The Australian market reflects a total
population of 25,010,000 with the growth rate of 1.96% in the year 2018. Along with that the
expected population in Australia at the end of 2019 is 25145 million. This has also been
identified that over 85% of total population leaves in urban area while over 70% leaves in
capital cities which stimulates the company’s opportunity of selling into direct market
(Statista, 2019). This means the company gets more opportunity to sell their product directly
into the competitive market and this would enhance their customer base (Grubb 2015). With
the Australian population analysis, the retail industry has also been analysed for identifying
the business opportunity. This has been recognised that the Australian retail industry has
shown a growth of 2 % into their retail sales into the recent year. The approximate turn over
into this segment has been recognised at $320.8 billion in the year. The clothing industry has
recorded an annual turn over $16.21 billion in the year 2017. In the recent time till 2019, the
revenue in the apparel market has been recorded at 19775 AUD. Along with that the market
is expected to grow by 2.3 % in the coming year. However the largest market has been
identified in the women and girl’s segment. In this segment the market volume has recorded
at $7651 million in the year 2019. The market size has been recognised at $5078 million in
the year 2019 for the apparel market (Statista, 2019).
Competitors
The company has planned to sell a unique product which is having less presence into
the global market. Hence the company realises an advantage over the competitors in the
Australian market. However the company is still having some competitors in Australia such
as Maaidesign and Tencel Inc.
Marketing strategy
Marketing mix

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ACCOUNTING CASE STUDY ASSIGNMENT
The marketing mix identifies the marketing strategy for the company through
identifying different elements of the business process (Londhe 2014). Such as:
Product: There are 3 categories of product will be sold such as men’s wear, Women’s wear
and kids wear. The product line will be followed as: Sensitive skin protective base layer,
sleepwear and Nightsuits/ Night wear (Fan, Lau and Zhao 2015).
Price: price will be set through using competitive pricing strategy. However at the initial
stage a discounting pricing strategy will be adopted to acquire more customers (Khan 2014).
Place: The place has been recognised at the Sydney. Since Sydney has been a growing
population market this would provide more opportunity to sell into a competitive market.
Promotion: with having a 64700 AUD for the promotional budget, the company plans to
promote their product through social media. A direct marketing strategy will be followed
through telemarketing, sms marketing and pamphlets distribution (Huang and Sarigöllü
2014).
Opportunities
 Unique by nature
 Less competitors in market
 Medical science integration
 Superior to 100% cotton eczema
garments.
 Helps in reducing skin problem
 Growth in Australian population.
Threats
 New product with less market
knowledge.
 Less experience in customer
acquisition.
 Few but presence of competitors into
the market.

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ACCOUNTING CASE STUDY ASSIGNMENT
Operational strategy
Manufacturing: the manufacturing department would be allocated with the responsibility of
producing the Tencel fabrics and along with that they are being allocated with the
responsibility to produce retail apparels and cloths as their finished goods. These will be sold
into the market directly through the departmental store.
Team development: at the initial stage a 5 person team will be developed for the store
management and a 10 people team will be allocated for producing the fabric and the apparels
as their finished good. For this this the annual salary has been allocated at $22200.
Rationality
The rationality has been identified through identifying the business profitability and
source of finance (Boswell 2014). The profitability shows the how much the new business or
the store can earn depending on the capability of the product. Further, the profitability has
been shown below through describing the financial plan.
Financial plan
The financial plan includes the financial performance analysis and the fund planning
at the initial stage. This means the arrangement of money through which the business can be
started off.
Fund resources
The source of fund has been planned to arrange through two types of arrangements,
such as: venture capital and the bank loan which would be called as the long term debt for the
company would be arranged at the equal basis so that, the debt does not cross the equity
portion (Wagemans, Witschge and Deuze 2016).
Bank finance: an amount of 282237 AUD will be arranged from bank loan to finance the
50% portion of the total capital for the company. At the initial stage the company has planned

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ACCOUNTING CASE STUDY ASSIGNMENT
to source their debt capital for from ANZ bank. However the company would first compare
two banks for understating the EMI rates. This has been shown below:
(Source: https://bankaust.com.au/tools/calculators/principal-and-interest/)
(Source:
http://www.businessloans.anz.com/calculator/step-2.html)

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ACCOUNTING CASE STUDY ASSIGNMENT
Venture capital: for the venture capital the company would look for an equal venture
partnership. For the same the venture partner has been identified as “Brandon capital”.
However, this has been planned that the company would provide $5644.74 as their own
capital and the amount of $5644.74 would be arranged through the venture capital. The
company would offer equity portion to their venture partner (Brandoncapital.com.au, 2019).
Compression of loan capital and venture capital
Venture capital
1. Low interest rate
2. Portion of ownership given to the
venture partner.
3. Possibility of losing ownership and
decision making opportunity.
4. No possibility of losing position and
insolvency for the non-payment of
venture partner.
5. Risk of investment reduces as the
venture partner acts as the responsible
partner.
6. Support in decision making process
as the venture partner is experienced
into the market.
Loan/ Debt fund
1. High interest rate
2. No ownership is given to the debt
holders or to the banks
3. Owner ship and decision making has
been kept into the hand of owner.
4. Possibility of realising insolvency due
to over debt for the non-payment of
bank loan or EMI
5. Bank or loan generates risk of
investment as the debt fund requires a
regular repayment.
6. Does not provide any support to the
investors into the decision making
process. Only interested on
repayment.
Budget: the company has estimated an amount of 564474 AUD as their required cost for the
business at the initial stage this has been identifies as the investment at the initial stage. The

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fixed cost has been estimated at 62804 AUD and the variable cot has been estimated at
501670 AUD (Idawati and Wahyudi 2015). The insurance has been estimated at 137600
AUD. Cost for store or leased space to open the store has been estimated at 21518 AUD.
(Source: https://www.realcommercial.com.au/property-retail-nsw-sydney-503148214)
Sales forecasting
The forecasted sales has been estimated at 670202 AUD for the 1st year. However this
has been estimated that the cost less gross profit would generate an amount of 234857 AUD
at the 1st year.
Profit and loss statement: The profit and loss statement has been estimated the EBIT at
$112045, 112910 and 124030 for the respective 3 years of forecasted period. The assumption
has been made on the variable cost as the increase in the variable cost has been assumed