LOMOFY: Financial Report - Profit Forecast, Cash Flow, KPI Analysis

This report outlines a business plan for LOMOFY Manufacturing and Services, a cell phone manufacturing business. It includes a market analysis, highlighting the demand for smartphones and the competitive landscape. The report details key fixed and variable costs, a budgeted profit and loss statement, a cash flow forecast for the first year, and a calculation of the break-even point and margin of safety. Key Performance Indicators (KPIs) are identified to monitor the business's progress. The analysis concludes with recommendations based on the financial results, emphasizing the importance of managing financial risks, optimizing resource utilization, and carefully considering location and leasing agreements. Desklib offers a platform to explore similar business and finance documents for students.

Business Finance for
Managers

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
I. Summary of the Business Idea.................................................................................................3
II. Discussion related to the key fixed and variable costs...........................................................5
III. Budgeted Profit forecast for the first year of operations.......................................................6
IV. Budgeted Cash Flow for the first year of operations ...........................................................6
V. Calculation of Break even point and Margin of Safety..........................................................7
VI. Key Performance Indicators to check progress of business .................................................7
VII. Recommendations based on results above..........................................................................8
CONCLUSION ...............................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Business finance refers to the financial assets that are accessible for the business person
to invest in the business. These are speculations done in the business by the proprietors of the
business. Strategy assists the business people with having a definite knowledge on the assets that
are required by them to begin a business. Strategy refers to a composed defined arrangement
about the business that the proprietors are wanting to begin. This planning contains the drawn out
visions, missions, procedures and points of the businessperson that would assist them with
accomplishing the predetermined goals (Arjaliès, and Bansal, 2018). Business plan is generally
made for 3 to 5 years. This planning likewise incorporates every one of the necessities in regards
to the administration staff, trading technique and working and monetary requrements. This report
discusses the business plan that the proprietors are intending to bring in the market. The business
fundamentally engages in assembling of cell phones. The report highlights the costs, projected
profit and loss statement, break-even point and other necessities that the owners need to consider
before starting the business.
TASK
I. Summary of the Business Idea
Business Idea: The business idea continued in this report will be examined underneath. In the
realm of developing innovation, individuals who are well informed are acquiring significantly
greater profits over the people who follow the conventional frameworks. Technological
innovations are available in pretty much every area. The use of cell phones is increasing day by
day and that too the cell phones which are smarter and more advanced. Keeping this in mind, the
assembling and production of cell phones is possibly a valuable business to begin. Cell phones
are a sort of cheap gadget which are produced in a manner to cater the necessities of the clients.
Cell phones predominantly helps the people or organizations in dealing with their day to day
workings. They have turned into a significant product of the general public as individuals are
subjected to use them for various exercises like business, entertainment or schooling (Dharani,
Guntern, and April, 2022). Cell phones have seen an extreme popularity in the extended period
of pandemic as practically all the learning and working have gone inside/from the home.
Providing advanced technologies at a generally low costs would come off as tremendously

profitable for the venture. The name for the business picked by the administration is "LOMOFY
Manufacturing and Services".
Conducting Market Research: Analysing the market and the investigations done in the field of
cell phone market guarantees that the trend and demand shows a positive pattern and very huge
requirements for innovation and phone gadgets. The development of cloud computing platforms
and different advancements have made the requirements for cell phone gadgets increased in the
private sector as well as in public sector too. Artificial Intelligence is another rising innovation
which is likewise adding to the demand for cell phones.
Location: The proprietors currently needs to decide where the organization will work and make
the items. The portable creation unit is beneficial to be set up in an industrial area as the land is
given at a less expensive rate and from that point the organization can deliver and collect the
items and afterwards transport them to the nearby business markets. For this the Industrial park
chosen is Edmonton Industrial Park, London that have been taken up where the business will set
up its production and assembling plant. The London down town area is the market where the
business will supply its products. The business at Edmonton Industrial Park offers 10-20000
square feet of region, enough for setting up an assembling unit.
Competitors: There are essentially two neighbourhood sellers in cell phone supplies and
assembling businesses. These are Bullitt Group and Wileyfox; these competitor businesses are
not able to bring any advancements in the market and their products are considered somewhat
outdated. The business of LOMOFY Manufacturing and Services will provide more better and
progressed products in the marketplace.
Customers: The major customers of the business of LOMOFY are the general public of the UK.
The significant commercial centre will be the market where business will sell its products. UK is
one of the developed economies with well off occupants having an enormous population of
regular workers and students. The objective of the business is to give these individuals better
quality smartphones which would help them in learning and performing out their everyday
undertakings.
Why customers prefer these products and services: The clients of the business will incline
towards purchasing from the business due to its innovative items, technological progressions and
its after sale services (Fiedler, and et.al., 2021). The marketing of the business will be done in a
way that provides detailed insight about what it is like to use the products of LOMOFY and how

they will be assisted even after the sale of the products. The primary focus is given to the
transportation of items to clients and after sale services like assisting client complaints and so
forth.
The Major risks that can be looked by the organization while assembling and selling cell phones
are:
Financial Risk: The fundamental risks that could be looked by new manufacturing unit is the
risk related to the inflow of financial funds. The business can confront slowdown in the market if
the vital assets are not provided in right amount and at the right time. The monetary risk likewise
emerges in the business if the assets are not utilized ideally in the working. The business must be
affordable with the assets and the monetary funds that have been owned and provided to them.
Mismanagement of Resources: New production units can not utilize the assets at their ideal
effectiveness. This diminishes the productivity of the organizations and furthermore perishes the
capability of assets. This is known as mismanagement of the assets. Producing and assembling
industry need to ensure that they are utilizing the assets with most extreme proficiency and not
confronting any wastages of these assets.
Location and Leasing Agreement: Another risk emerges when the organization needs to set up
the business for the creation of various Mobile supplies to be utilized in gathering in the
smartphones. The business will go for rent choice as the business would rather not buy the land
and machinery for the creation in the very first year of the business (Kong, Jiang, and Zhu,
2022). They may confront chances in rent and arrangement related issues and with the risk of
utilizing the hardware which were rented out to others. To protect this the business will make up
fundamental steps like figuring out how to work the machinery and saving the significant dates
of instalment of rent add up to the lessor.
II. Discussion related to the key fixed and variable costs
In the wake of making a basic arrangement, the primary thing to choose is costs that would be
looked by the business plan. Assembling of mobiles and its parts require enormous assets of
setting up the business as the majority of the assets would be utilized in buying the hardware and
the software to deliver (Yang, and Wu, 2021). the business is expected to sell 450 units of cell
phones in first year. The assets would be needed to submit to the innovative work group as
extensive research is needed to be taken up because of changing innovation in the field of

programming and cloud computing. The two fundamental costs that would be looked by the
business are examined beneath:
Fixed cost: These costs make up most of costs that are incurred in any business. These costs
refers to those which the organization face regardless of whether they are delivering any products
or not (Lisboa, and Teixeira, 2021). These expenses are like the rent, employee expenditure,
monthly instalments, taxes and insurance. Cell phone manufacturing unit such as LOMOFY need
to manage these expenses regardless of whether the business is producing or not.
Variable cost: These costs refers to the costs which are connected with production. The
organization faces these expenses while producing the products. These costs changes with the
adjustment of the degree of creation in the business. On account of Mobile assembling
organization like LOMOFY, the firm needs to address the expenses connected with the
technology, programming creation, innovative work, assortment, assembling and transportation.
III. Budgeted Profit forecast for the first year of operations
Budgeted Profit and Loss Statement
Particulars Amount Amount
Sales revenue 40000
Less: Cost of Sales 11468
Gross Profit 28532
Operating Expenses:
Salaries 5000
Rent 1150
Rent of Machinery 500
Assembling 400
Promotion & Advertisement 852
Legal 600
Transport 596
Vehicles 295
Insurance 980
Maintenance 1400
Interest on Loan 70
Miscellaneous 310 12153
Net Profit for the year 16379
IV. Budgeted Cash Flow for the first year of operations
Budgeted Cash flow (for year 1)
Particulars Amount

Cash flow from Operating Activities
Cash Sales 40000
Less: Operating Expenses 12153
Salaries 5000
Rent 1150
Rent on Machinery 500
Assembling 400
Promotion & Advertisement 852
Legal 600
Transport 596
Vehicles 295
Insurance 980
Maintenance 1400
Interest on Loan 70
Miscellaneous 310
Net cash from Operations 27847
Cash Flow from Investing Activities
Purchase of Machinery -13500
Net cash from investing activities -13500
Cash Flow from Financing Activities
Capital Investment -4000
Net Cash Flow from Investing Activities -4000
Net Cash flow 10347
V. Calculation of Break even point and Margin of Safety
Break-even point refers to that point where the income and expenses are equal for the business
and there is no profit-no loss situation. Margin of safety refers to the difference between the
stock value and the market price of that stock. Calculation is as under:
Break even point = Fixed costs / contribution per unit
= 8300 / 80.3 = 103.3 or 103 ut
Contribution margin = price of product – variable cost
= 89 – ( 3853 / 103.3 ) = 2.38
Margin of safety= (Current Sales – Break even sales) / Current Sales *100
= ( 450 – 103) / 450 * 100 = 77.11%
Working notes:
 Contribution = Sales – variable cost
= 40000-3853
= 36147

 Contribution per unit = Contribution / Unit of sales
= 36147 / 450
= 80.3
VI. Key Performance Indicators to check progress of business
Key performance indicators refers to a pointer or a metric which estimates the working of a
business and assesses the presentation over the time period. The assembling of cell phone items
take utilization of these performance indicators to check and investigate its tasks and compare
the productivity with that of the competitors. Following are the KPIs that can be utilized by the
organization of LOMOFY to check its business.
 Manufacturing Cycle Time: In any business, time is cash. Assuming an organization
can convey the item on time, it can definitely produce more cash. Production Cycle Time
KPI estimates the time taken for an item to go through every one of the machines, cycles,
divisions, and cycle to be called as the end result. This permits the floor chief to improve
and advance the cycles to improve yield from the industrial facility.
 Overall Equipment Effectiveness: A production floor is supposed to be proficient when
each machine, hardware and work are working at their best. Overall Equipment
Effectiveness (OEE) KPI gives the producer about the general knowledge of the
manufacturing plant (Rasheed, and Siddiqui, 2019). This is a basic, yet most significant
KPI to screen the effectiveness of a production ans assembling floor. OEE is equivalents
to Availability X Performance X Quality, and it very well may be utilized to show the
general adequacy of a piece of creation gear or a whole presentation line.
 Quality: To have long -term business achievement and benefits, keeping up with the
nature of production is vital. Keeping up with the quality all through various assembling
process in the production floor prompts ideal nature of the eventual outcome. Quality KPI
can assist the producer in screening the nature of cycles on the creation floor (Sless,
2022). It addresses the level of product count out of the genuine creation count for the
items.
VII. Recommendations based on results above
It tends to be suggested from the above report that the extended financial plan of the business is
in general, great. The business of LOMOFY is focusing on acquiring profits beginning from the

first year. The primary interest of the entrepreneurs ought to be on the innovative work as the
organization is working in an industry which is exceptionally unstable market where the
mechanical and technical progression can cater the business in its progress or make an expected
risk to the organizations.
CONCLUSION
From the above mentioned report it very well may be presumed that business plan is a significant
device for directors to deal with the working needed to begin a business all the more effectively.
The planned income and statement of profits shows that the business have a brilliant future
assuming the business works productively. The report closes with a proposals for the
entrepreneurs that would help the business in understanding the need of innovative work.

REFERENCES
Books and Journals
Arjaliès, D.L. and Bansal, P., 2018. Beyond numbers: How investment managers accommodate
societal issues in financial decisions. Organization Studies. 39(5-6). pp.691-719.
Dharani, B., Guntern, S. and April, K., 2022. Perception Differences in Burnout: A Study of
Swiss-German Managers and Subordinates. Journal of Occupational and
Environmental Medicine.
Fiedler, T., and et.al., 2021. Business risk and the emergence of climate analytics. Nature
Climate Change. 11(2). pp.87-94.
Kong, X., Jiang, F. and Zhu, L., 2022. Business strategy, corporate social responsibility, and
within-firm pay gap. Economic Modelling. 106. p.105703.
Lisboa, I. and Teixeira, N.M., 2021. The Impact of Working Capital Management on Firm
Operational Performance Through Business Cycles: Evidence From Portugal.
In Handbook of Research on Financial Management During Economic Downturn and
Recovery (pp. 199-217). IGI Global.
Rasheed, R. and Siddiqui, S.H., 2019. Attitude for inclusive finance: influence of owner-
managers’ and firms’ characteristics on SMEs financial decision making. Journal of
Economic and Administrative Sciences.
Sless, H., 2022. Financial Context. In Merchant Princes and Charlatans or Makers of
Money? (pp. 11-33). Palgrave Macmillan, Cham.
Yang, S. and Wu, C., 2021. Do Chinese Managers Listen to the Media?: Evidence From Mergers
and Acquisitions. Research in International Business and Finance, p.101458.