QUESTION #1 | |||||||||||||||

Assumptions | |||||||||||||||

M. Sunshine | |||||||||||||||

the business you all are dreaming to build ! | |||||||||||||||

Initial Funds requirement assessment | |||||||||||||||

March | You have decided to set up a company called M. Sunshine , dedicated to men's wear - You own 100% of the 10000 shares of 20€ each - You put the corresponding amount at the bank as a first deposit | ||||||||||||||

April | You register the trade mark worldwide: M. Sunshine TM that costs 50 K€ -you have a decided a start date the 1st of january N+1 | ||||||||||||||

April | You have identified that there is a market for well design outdoor men's wear - around 1 000 000 pieces a year - we expect to reach 10% market share the first year | ||||||||||||||

Your experience have also taught you that there is a the following seasonnality for such clothes | |||||||||||||||

You are expecting to sell T-shirts, shirts and pants | |||||||||||||||

Jan | 15% | Jul | 10% | T shirts are accounting for 60% for the sales except in May, June ,Nov, Dec, when it goes down to 20% | |||||||||||

Feb | 5% | Aug | 0% | shirts are accounting for 20 % of sales except in May. June when it reaches 60% | |||||||||||

Mar | 5% | Sep | 5% | Pants are accounting for 20%, except in Nov and Dec when it reaches 60% | |||||||||||

Apr | 10% | Oct | 5% | T shirts are bought on the shelves | |||||||||||

May | 15% | Nov | 5% | Shirts are bought half finished and are finalized in your own workshop (customized garnments) | |||||||||||

Jun | 15% | Dec | 10% | Pants are entirely sewed in your workshop | |||||||||||

May | you order and implement a state of the art e-commerce web site - 50 K€ paid in 2 installments , upfront and at 90 days after delivery - the project is to be completed by december, amortized over 3 years | ||||||||||||||

May | You look for a warehouse (1050m2), a workshop (100m2) and a head office (100m2) building and find it - 1250 m2 - 400€ per year per m2. you have to pay a deposit of 6 month. you move into the building 1st of june | ||||||||||||||

June | you hire a sourcing specialist 120 K€/year- | ||||||||||||||

June | You have identified three different suppliers for each product. Considering that you have a lead time of 4 month, how many product of each kind do you need to order at first | ||||||||||||||

HK Ltd is supplying the T shirts - the cost price is 5€ per T shirt - FOB - 15% down payment - the rest 60 days after delivery | |||||||||||||||

China look is supplying the shirts half finished at 10€ per dress - FOB - 30% downpayment - the rest 90 days after delivery | |||||||||||||||

Italian Fabric Sarl is supplying the pants fabric at 10€/sqm - FOB- 50% downpayment - Rest is paid at 90 days upon delivery - each pant is requiring 1.5sqm | |||||||||||||||

customs and transport cost are up to 10% of the order - paid upon delivery | |||||||||||||||

When do you place the order ? | |||||||||||||||

July | We are now in the process of setting up the warehouse, the workshop and ready to buy the logistic equipment | ||||||||||||||

we can have all the shelves, picking places and trolleys for 35K€, and 5 sewing machines for 50K€ -Assume they will have to be replaced after 5 years | |||||||||||||||

but one of the supplier is offering us to lease the equipement rather than to buy it - he offers a leasing for 5 years of 20K€/year, assuming an interest of 5% . | |||||||||||||||

what would you do ?? | |||||||||||||||

September | we are hiring the rest of the team - 2 warehouse persons (25K€ per year yearly salary each) , one webmaster (76K€/year), 3 workers (30K€/year each) | ||||||||||||||

Set up the financial statements for this business at the end of the year (december), before the launch …. Balance sheet and Profit & Loss Statement | |||||||||||||||

Do you have enough money to finance this beginning of activity ? How much do you need ? what would be the installment table for a loan of 500 K€ , at 3% for 10 years | |||||||||||||||

What would be your financial positions and cash requirement iif the penetration rate would be 5%, 15% ? | |||||||||||||||

Full costing | You need to assess the full cost of your products in order to assess each product margin considering the prices the market can accept | ||||||||||||||

You have gathered the following informations | |||||||||||||||

the T shirt requires 0.5 sqm storage for 100 t shirts | |||||||||||||||

The Shirt requires 1 minutes man hour and 5 minutes sewing machine and 1 sqm strorage for 100 Shirts | |||||||||||||||

The Pant requires 12 minutes man hour and 15 minutes machines sewing machine and 2 sqm storage for 100 pants | |||||||||||||||

The workshop is working 8 hours a day 47 weeks a year | |||||||||||||||

the 500 m2 of building are divided in 100 m2 workshops, 100 m2 offices and 300 m2 warehouse | |||||||||||||||

if she was asked, the webmaster would tell you that she is spending 25% of her time on the T shirts, 25% on the shirts and 50% for the pants | |||||||||||||||

Finally there are some other G&A expenses (accounting,HR, order process, direction) | € 50 000 | ||||||||||||||

What is the full cost using the traditionnal approach ? | |||||||||||||||

What is the full cost using the ABC approach ? | |||||||||||||||

Total Profit and margin % , the 2nd year end balance sheets in the three instances of penetration rate 5%, 10% and 15% penetration rate ? | |||||||||||||||

Based on a competition and market analysis you are setting the following selling prices | |||||||||||||||

Price | |||||||||||||||

T shirt | € 8,00 | ||||||||||||||

Shirts | € 20,00 | ||||||||||||||

Pants | € 45,00 | ||||||||||||||

What is the profit for next year and the margin% with both calculation Traditional and ABC full costing | |||||||||||||||

what is the balance sheet at the end of this first year in the three instances 5%, 10% and 15% penetration rate | |||||||||||||||

your comments ? | |||||||||||||||

Five year plan . | |||||||||||||||

Finally the market assumptions are the following | |||||||||||||||

Outdoor men's wear : | 1000000 | pieces year #1 | |||||||||||||

the product portfolio mix have proven to be accurate | |||||||||||||||

market size projected yearly growth | 3% | ||||||||||||||

Penetration rate assumptions | Marketing cost % of revenue | ||||||||||||||

year #1 | 5% | 10% | |||||||||||||

year #2 | 7% | 10% | |||||||||||||

year #3 | 9% | 9% | |||||||||||||

year #4 | 11% | 9% | |||||||||||||

year #5 | 10% | 8% | |||||||||||||

Build the P&L statements for the next 5 years | |||||||||||||||

QUESTION #2 | |||||||||||||||

In 1000 words, can you analyse the latest financial statements (except cash flow) of GAP and Fast Retailing | |||||||||||||||

build the appropriate ratio, comment and compare GAP and Fast retailing respective financial strategy. | |||||||||||||||

GAP financial reports will only be available for the year 2012. 2013 has not yet been released | |||||||||||||||

http://www.gapinc.com/content/gapinc/html/investors/fin_news_events.html | |||||||||||||||

http://www.fastretailing.com/eng/ir/library/annual.html | |||||||||||||||

financial analysis focused mostly on finance position ratios (blance sheet ratios) , | |||||||||||||||

profitability ratio taken out of the Profit & loss statement analysis (margins ) | |||||||||||||||

and efficiency ratios that bridges resources (balance sheet) and outcomes (P&L) to measure | |||||||||||||||

how efficient the business is in the use of the resoucres available (return on equity, return on assers, DSO account receivable, inventory turnover …) |

Subject | Business |

Due By (Pacific Time) | 05/02/2014 12:00 am |

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