Financial Analysis: Profit Forecast, Risk, KPIs - The Trial Swerve

This report presents a financial analysis for a new business idea called "The Trial Swerve," which aims to provide VR/AR services to online fashion retailers and shoppers. The report outlines the business idea, market research, and potential risks, including financial risks associated with technology investments and competition from established corporations. It details fixed and variable costs, prepares a budgeted profit forecast statement, and presents a forecasted cash flow statement. Furthermore, the report computes the break-even point and margin of safety, discusses the applicability of Key Performance Indicators (KPIs) for performance monitoring, and provides recommendations for the business to consider, such as focusing on cost reduction and accounting for technical costs in the profit forecast. The analysis concludes that the online fashion retail business leveraging VR/AR technology has potential, but careful financial planning and risk management are crucial for success.

Business Finance for Managers

Contents
INTRODUCTION.......................................................................................................................................................................................4
TASK...........................................................................................................................................................................................................4
1. Summarise the business idea and the risks which the organisation can face......................................................................................4
2. Outline the fixed and variable costs.....................................................................................................................................................5
3. Prepare the budgeted profit forecast statement....................................................................................................................................7
4. Cash flow statement forecasted...........................................................................................................................................................8
5. Compute the break – even point and margin of safety......................................................................................................................12
6. Discuss how the KPIs of the management theory will be applicable to check the performance of the firm....................................12
7. Write down the recommendation business can take into consideration............................................................................................13
CONCLUSION..........................................................................................................................................................................................14
REFERENCES..........................................................................................................................................................................................15

INTRODUCTION
Business finance is used for managing the resources of the business of the start – ups and existing running business for
maintaining the funds. The business plan is made with the idea by doing the market research and using the customer’s preferences and
tastes (A’an, 2021). In this report a business idea is made which is named as The Trial Swerve. In the report, using the VR and the AR
technology online shopping can be done is explained. Further, the variable and the fixed cost which is identified for the business.
Moreover, the profit and the cash flow forecast statement is made with benefit from the organisation for the prediction of the cost
estimated. Also, break – even point and margin of safety is calculated. With addition to this the KPIs for the business plan and idea is
discussed also the recommendation is being given according to the forecasted statements at the end.
TASK
1. Summarise the business idea and the risks which the organisation can face.
Business Idea: The idea of the business is to provide a VR-AR service to the online shoppers and the online retailers who are working
in the fashion industry. This service will help the buyers to get a view of the products that they are hoping to buy and check their own
level of preference with the product in hand. This business is new and interest for people as it is very difficult to order the clothes
online. Because a thought process goes on in the mind that the clothes will fit or not and it will look good on wearing or not (Alfatoni,
2018).
Market Research: This itself is a new idea in the market. Many researchers have concluded that the online buyers have some level of
dissatisfaction after getting the fashion product in hand as it does not look as good on them as they thought. This service will provide
the buyers with a level of clarity about how the product will look on the buyers as fashion products are all about how they would look
on the diversified customers. Due to the COVID-19 the demand of the online shopping and increased so much and the international
market for the fitting room will also elevate.

Location: The firm is situated in London at the Unit LMNO, Arial Way, London W127GD, United Kingdom.
Competitors: For this the technology of VR and AR is introduced by this business. The major competitors for the firm can be Zara,
H&M, GUCCI and any more. As these corporations are well – established and recognised in the industry, it will be a risk for the firm
to enter in the market by putting the capital.
Customers: The customers will be the online shopper who prefer to shop online. Considering the age group, mostly will be the adults
and the youths. It will enable the customers to purchase the product which will best fit and provide good results which is be beneficial
for the company (Andayani, Hariani and Ain, 2018).
Why do customers prefer these items and services: It will be majorly preferred because it is a technology which will help the
customers to best fit them in the fashion or clothing they are going to purchase by utilising the technology of AR and VR. It will also
help in giving the clarity to the consumers about the sustainability of the items and will be an effective solution to the problems of the
consumers.
Financial Risks: For this the financial risk will be investing in a technology – prone business by taking a loan of £ 40000. Because of
the high range of customers, it can prove a financial risk for the company to invest the money in the firm. As the development and
purchase of this technology will require higher funding.
Initial Funds needed: Every new business needs the capital to invest in the firm by taking the borrowings from the bank. It is a
considerable factor of risk for the enterprise.
2. Outline the fixed and variable costs.
Costs are the expenditure which the firm does for expanding and operating its business activities. The cost is described in two type of
the major heads:

 Fixed Costs: These are the expenditure which occurs in the business by not considering the production and selling units. These
are the costs which are fixed for an organisation and has to be borne by the firm (Barillas Blanco, 2021). In this the fixed costs
are: Rent, utilities, Stationary, Maintenance, Loan repayment, interest on loan and many more.
 Variable Costs: These cost are determined on the basis of the production units which are manufactured or sold by the
organisation. Here, the variable cost can be the transport, vehicles, postages and so on.

3. Prepare the budgeted profit forecast statement.

4. Cash flow statement forecasted.
Cash flow Statement
Particular Janu
ary
Fe
b
Ma
rch
Ap
ril
M
ay
Ju
ne
Ju
ly
Aug
est
Septe
mber
Octo
ber
Nove
mver
Dece
mber
Total(
Year 1)
Yea
r 2
Yea
r 3
A. Cash flow from
operating activities
Sales/Revenue 3060 45
90
612
0
61
20
61
20
91
80
91
80
918
0
9180 1224
0
12240 12240 99450 220
320
220
320
Payment of salary -
3000
-
30
00
-
300
0
-
30
00
-
30
00
-
30
00
-
30
00
-
300
0
-3000 -
3000
-3000 -3000 -36000 -
330
00
-
330
00
Rent Paid -216 -
21
6
-
216
-
21
6
-
21
6
-
21
6
-
21
6
-
216
-216 -216 -216 -216 -2592 -
259
2
-
259
2
Staff Wages -
1000
-
10
00
-
100
0
-
10
00
-
10
00
-
10
00
-
10
00
-
100
0
-1000 -
1000
-1000 -1000 -12000 -
120
00
-
120
00
Payment of Utilities -100 - - - - - - - -100 -100 -100 -100 -1200 - -

10
0
100 10
0
10
0
10
0
10
0
100 120
0
120
0
Phones -
3007
-
10
-10 -10 -
10
-
10
-
10
-10 -10 -10 -10 -10 -3117 -120 -120
Fright and postage -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -5 -60 -60 -60
Stationary -2 -2 -2 -2 0 0 -2 -2 -2 -2 0 0 -16 -14 -16
Promotion and
advertisement
-
9000
0 0 0 0 0 0 0 0 0 -9000 0 -18000 -
180
00
-
180
00
Legal Expenses -50 0 0 0 0 0 0 0 0 0 0 0 -50 -50 -50
Transport -50 -
50
-50 -50 -
50
-
50
-
50
-50 -50 -50 -50 -50 -600 -600 -600
Vehicle running -250 -
25
0
-
250
-
25
0
-
25
0
-
25
0
-
25
0
-
250
-250 -250 -250 -250 -3000 -
300
0
-
300
0
Insurance -20 -
20
-20 -20 -
20
-
20
-
20
-20 -20 -20 -20 -20 -240 -220 -220
Maintenance -100 -
10
0
-
100
-
10
0
-
10
0
-
10
0
-
10
0
-
100
-100 -100 -100 -100 -1200 -
120
0
-
120
0
Misc. Expense -20 -
20
-20 -20 -
20
-
20
-
20
-20 -20 -20 -20 -20 -240 -220 -220

Setup cost -
1460
0
0 0 0 0 0 0 0 0 0 0 0 -14600 0 0
Net cash flow from
operating activities:-
-
2836
0
-
18
3
134
7
13
47
13
49
44
09
44
07
440
7
4407 7467 -1531 7469 21135 148
044
148
042
B. Cash flow from
financing activities:-
Repayment of Loan -10 -
10
-10 -10 -
10
-
10
-
20
-20 -20 -20 -20 -20 -180 -200 -200
Interest Payment -50 -
50
-50 -50 -
50
-
50
-
50
-50 -50 -50 -50 -50 -600 -550 -550
Net Cash flow from
financing activities:-
-60 -
60
-60 -60 -
60
-
60
-
70
-70 -70 -70 -70 -70 -780 -750 -750
C. Cash flow from
Investing activities:-

Initial investment made -
4000
0
0 0 0 0 0 0 0 0 0 0 0 -40000 0 0
Net cash flow from
investing activities:-
-
4000
0
0 0 0 0 0 0 0 0 0 0 0 -40000 0 0
Total cash
inflow/outflows(A+B+C
)
-
6842
0
-
24
3
128
7
12
87
12
89
43
49
43
37
433
7
4337 7397 -1601 7399 -19645 147
294
147
292

5. Compute the break – even point and margin of safety.
Break-even point (in units) = Fixed Cost / (Selling price per unit – Variable Cost per Unit)
= 7453 / (994.5 – 716.42)
= 7453 / 278.08 = 26.80
Margin of Safety: (Current Sales – Break Even Sales) / Current Sales * 100
= (50 – 26.80) / 50 * 100
= 45.4 %
6. Discuss how the KPIs of the management theory will be applicable to check the performance
of the firm.
Key Performance Indicators refers to the quantifiable measures that the business can use in
its operations which helps the management of the business to check the performance of the
different operations of the business (Busenitz, 2020). It helps the business in checking if they are
able to meet the milestones to check the progress and also help the people to take better
decisions.
Following are the KPIs which are useful for the AR-VR trial business:
 Critical Bugs: This KPI checks how regularly the IT department is encountering the
bugs that may come up in the operations with the application or the software. The main
focus of the business is to keep a check of the overall number of bugs in the system to
avoid any deep issues or potential damage to the brand.
 New Developed Features: This KPI check whether the IT team of the business is able to
bring new features and characteristics to the services and products they provide in the
market. The main focus of this KPI is to develop new features with time and see the
progress of the business.
 Mean Time to Repair: This KPI of the IT business measures the time that is being taken
by the business to start of an issue which is being reported by the clients and the time
which the business has taken to resolve the issue. The main focus of this KPI is to
develop standard process and strategies to tackle the problems (Prabowo, 2021).
 IT Support Employees Per Thousand End Users: This KPI of the business checks the
ratio of the employees that are there to tackle an issue or provide support to the end users