Financial Plan Report: Auto Trader's New Product Launch Analysis

This report provides a comprehensive financial plan for Auto Trader, an automotive trading company founded in 1975. It analyzes the financial viability of a new product launch, including break-even analysis, projected profit and loss statements, cash flow projections, and balance sheets for a three-year period. The report details key financial strategies and forecasts financial ratios to assess the product's potential. The financial plan includes detailed projections of revenue, cost of goods sold, operating expenses, and net profit, along with a projected balance sheet that presents the company's assets, liabilities, and equity. The analysis also includes a cash flow statement that highlights the inflow and outflow of cash, and discusses various strategies to increase sales. The report concludes with an interpretation of the financial data, offering insights into the company's financial performance and future growth prospects. This report is available on Desklib for students to study and learn.

FINANCE IN MANAGEMENT
AND LEADERSHIP

EXECUTIVE SUMMARY-
Auto Trader automotive trading industry. It was founded in 1975.The company is specialized in
sales of new and second hand vehicles. The headquarter of company is located in Manchester,
United Kingdom. The key peoples of company are Trevor Mather etc. The Report will outline
financial plan of the new product that Auto Trader will launch. The Report will describe break
even analysis, projected cash flow, projected income statement, balance sheet and forecasted
ratios and their analysis for three year .to determine the viability of new product. It also describe
various strategies that company will use to increase the sales of product in future.

Table of Contents
EXECUTIVE SUMMARY-............................................................................................................2
INTRODUCTION ..........................................................................................................................4
MAIN BODY ..................................................................................................................................4
Financial plan.........................................................................................................................4
Projected profit and loss.........................................................................................................5
Projected Cash Flow...............................................................................................................6
Projected balance sheet...........................................................................................................9
Financial ratios-....................................................................................................................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Financial planning for a new business involves the work of determining the ways in which a
company will achieve its objectives. Auto Trader is founded in 1975. The company is specialized
in automotive sales. Headquarter is located in Manchester, United Kingdom. The Report will
describe the financial plan of Auto Trader. This will include break even analysis, projected profit
and loss, cash flow analysis and balance sheet etc.
MAIN BODY
Financial plan
Financial plan is the tool of Financial planning it helps to achieving the task of the company. It is
help to achieving the goal of the Auto trader organisation, which determining that how to
business will use the different strategy for achieve its strategic goals and objectives of Auto
trader organisation. Manly a financial planning is described the profitably and financial position
of the company, So Auto trader organisation would be follow and determines its future planning.
The financial plan of Auto trader organisation contains a break even point of company as to
represent the sale amount of the company, which determine the total cost and total revenue are
equal. That means this is help to achieving the objectives of company (Hunjra, Faisal, and
Gulshion, 2018). In addition, also includes the different statements and budgeted which help to
forecast the financial reports such as profit and loss account, balance sheet, cash flow statement
etc. these all statements would provide the brief information of the Auto trader organisation like
future growth, profitability, assets and liabilities, etc. Further with the help of all projects.
Company would assess the data and finding that what areas is beneficial for company, and where
the funds are mandatory for invest which it could increase the cash as to manage the cash flows
in the company (Hewison, and Holden, 2016).
Break even analysis
Break even analysis 2020 2021
Fixed cost 8000 8000
Variable cost 150 125
Sale price 200 200

Break even analysis = Fixed cost/ (Sale price-variable
cost) 160
106.666666
6667
Interpretation
Break even analysis is the tool used by production department, Accountant management for
measuring the unit of sales (Hewison, and Holden, 2016). This is the tool that measure the
financial position of the company which help to define the number of product (goods and
service) to be sold buy the company for achieving the future goal of the business. Auto trader
organisation will use the break even analysis in order to identify the sale units of the product, that
how many units company can sale in specific time period. This analysis helps the accountant
manager that they can use this analysis for identify the financial position of the company, they
develop the new strategies for increase the sale, and use the different promotional and pricing
strategy for attract the customer towards the product. So this analysis helps to achieving the
objective of the company (Gottschalk, 2016).
After the analysis it can be seen the yearly analysis. It is help to company for develop the
production process, also develop the product and services to increase the sale in new market. It is
allowing the company for launch the new product in the different segment market which helps to
increase the future growth of the company (Gottschalk, P., 2016). Variable cost is declined in the
next year which is described the positive impact on the business because of cost is reducing in
the year that means company measure the performance and achieve the goal.
Projected profit and loss.
Projected income statement
Particulars Year 2020 Year 2021
Income (Amount in £) (Amount in £)
Revenue from sales 200000 250000
Other revenue 1000 15000
Total income 201000 265000
Cost of goods sold 100000 110000
Gross profit 101000 155000

Expenses
Salary of employees 2500 3000
Rent 1000 1100
Advertisement 10000 8000
Insurance 3000 3100
Depreciation 2500 2000
Utilities 1500 2000
Bad debts 1200 1800
Interest 12000 12000
Office supplies 50000 55000
Total expenses 83700 88000
Net profit before tax 17300 67000
Less tax @ 15% 2595 10050
Net profit/loss 14705 56950
An income statement of an organization is also known as profit and loss statement, statement of
revenue etc. Income statement represents the income and expenses of a company for a particular
period. The objective behind preparing income statement is to analyse whether the organisation
has generated profit or loss during the period. It provides information to investors about the
profitability and liquidity of a business. An income statement is different from balance sheet and
cash flow statement. Balance sheet presents the financial position of the company at a particular
point of time. Income statement of a particular period helps creditors and investors to analyse the
financial position of the company and it also helps in determining the ability and capacity of a
business to generate income in the future. The income statement of Auto Trader has been
projected for two years that is year 2020 and 2021(Herman, 2016).
The above projected income statement has shown the income that will be generated and expenses
that will be incurred by Auto Trader during year 2020 and 2021.
The projected income statement represents the income and expenses for the coming years. Auto
Trader is expecting that sales in year 2020 will be £200,000 and £250000 in year 2021. The
overall cost of goods sold during year 2020 will be £100000 and in year 2021 it will be £110000.

The expected gross profit during year 2020 is £110000 and £155000 in year 2021. The operating
profit before tax during year 2020 will be £17300 and £67000 in year 2021. The net profit after
deducting tax will be £14705 in year 2020 and £56950 in year 2021.Auto Trader should cut the
expenses so that, net profit during year 2020 will increase (Morden, 2016).
Projected Cash Flow
Cash flow is the basic objective of company. This is the essential tool of company that they
measure the financial position by the use of cash flow, helps to assessing a flexibility and
liquidity of the company also help to identify the financial performance (Hunjra, Faisal, and
Gulshion, 2018).
Positive cash flow define that company increase the revenue and incomes, Which Means
company generate the high liquidity due to high cash flow. Also indicate that company incensing
assets as well increase the profit which directly impact on the company future growth. Positive
cash flow indicates that bad debts and liabilities are reduces, so company able to settle all the
debts and reinvest in the business. So company can take advantage with strong financial position
that means company increase their profitability (Bryce, 2017).
Forecast cash flow
Particular £2020 £2021
Auto mobile services
Number of passengers 2500 2640
Sale price 200 200
Total revenue
Sales revenue 200000 250000
other 1000 15000
Total revenue ( Cash inflow) 201000 265000
Operating expenses
Staff salary 2500 3000
Depreciation 2500 2000

Rent 1000 1100
Advertisement 10000 8000
Insurance 3000 3100
Utilities 1500 2000
Bad debts 1200 1800
Interest 12000 12000
Office supplies 50000 55000
Total operating expenses (cash outflow) 83700 88000
Net cash flow 117300 177000
Interpretation
This analysis is described the cash flows of the company. When company increase the
revenue and incomes, Which Means company generate the high liquidity due to high cash flow.
Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a
business. At the most fundamental level, a company's ability to create value for shareholders is
determined by its ability to generate positive cash flows, or more specifically, maximize long-
term free cash flow (Boyd and 2017). Cash flow helps the company in finding out the inflow
and outflow of the cash. The inflow and outflow of the cash is presented in the form of receipts
and payments. Cash flow determines the change in cash of the period in the beginning and end of
the accounting year.
While summarizing the amount of cash and cash equivalents flowing in and out of the
company, also measures to manage company’s cash position. The cash flow statement mainly
consists of the three parts that includes cash from working activities, cash from investing
activities and cash from financing activities (Hewison and Holden 2016).
This analysis is described the cash flows of the company. When company increase the
revenue and incomes, Which Means company generate the high liquidity due to high cash flow.
The cash in flow from the number of passengers has been increased from 2500 to 2640. This
means the organization is gaining profit. The selling price in both the years which is 2020 and
2021 has remained consistent (Gottschalk, 2016). The revenue generated in the sales is 2 pounds
in the first year and 2.5 lakhs in the year 2021. The company is having the constant cash inflow,

it determines that the company is earning a good amount of profit (Hunjra, Faisal and Gulshion,
2018).
The company has also incurred various types of expenses which has been increased in the
present year from the previous year. The expenses on salary has been raised from 2500 to 3000.
It means that company is spending a lot of money on the salary of the staff members. The
depreciation has been decreased from the previous year to present year (Boyd, and 2017). Bad
debts of the company have been increased from 1200 to 1800. This means the Auto-trader
organization has also gone through some types of loss. The net cash in flow in the year 2020 is
117300 while in 2021 is 177000 which means the organization Auto-trader has earned the
sufficient amount of profit (Bell and Ellis, 2016).
Projected balance sheet.
Projected Balance sheet
Particulars (Amount in £) (Amount in £)
Assets Year 2020 Year 2021
Current Assets
Cash 2000 5000
Current Investments 30000 20000
Debtors 13500 42000
Inventory 20000 40000
Supplies 50000 55000
Prepaid expenses 1500 3000
Total current assets 117000 165000
Fixed assets
Land 200000 250000
Equipments 40000 42000

-depreciation 10000 10000
30000 32000
Machinery 25000 35000
Total fixed assets 255000 317000
Total assets 372000 482000
Liabilities
Current liabilities
Creditors 12000 20000
Outstanding wages 32000 35000
Interest payable 10000 10000
Outstanding tax 10000 15000
Unearned income 8000 12000
Total current liabilities 72000 92000
Non current liabilities
Equity share capital 300000 390000
Total non liabilities 300000 390000
Total liabilities 372000 482000
A balance sheet an organization represents the overall financial position at a particular
point of time. It provides detail information regarding the value of assets and liabilities of the
business at a particular date. The balance sheet of a business is prepared at the end of the period
which can be a year, month or a quarter etc. Through comparison between the balance sheets of
different periods, investors, owner, creditors, financial institutions such as banks and government
agencies can determine the financial position of the business. Balance sheet plays an important
role when owner of the business applies to financial institutions for getting loan, for influencing
the investors to invest their funds in the company. There are various parts of the balance sheet of
an organization. Assets are of two types current or non current they help a business in generating
revenue. Liabilities are the amount owed by the business from various sources such as from
creditors, outstanding expenses etc. Liabilities are divided into current and non current liabilities.

A balance sheet helps in assessing the solvency and profitability of the company at a particular
point of time.
The projected balance sheet of Auto Trader has been prepared for year 2020 and year
2021. The projected balance sheet of the company for two years represents the total assets and
liabilities at a particular date (Li, 2017). The current assets of Auto trader includes cash, debtors,
inventory etc. At the end of year 2020, the total current assets of the company will be £117000
and in year 2021 it will be £165000. Auto Trader should implement proper strategies to manage
the current assets of the company. So that, it will improve the profitability and financial position
of the company. Total fixed asset of the company at the end of year 2020 will be £255000 and
£317000 at the end of year 2021. Fixed assets includes machinery, land and equipments. Total
assets at the end of year 2020 will be £372000 and £482000 at the end of year 2021. Company
should pay its outstanding liabilities on time otherwise it will impact the profitability of Auto
Trader company.
Financial ratios-
Heading Year 2020 (amount in £) Year 2021(amount in £)
Gross profit 101000 155000