ESTABLISHING A BUSINESS : FINANCE

TABLE OF CONTENTS
Acknowledgement iii
Executive Summary iv
Purposes for which finance is needed v
Organizational Chart vi
Cost of producing goods vii
Capital Goods vii
Sources of finance viii
Collateral viii
Capital Instruments ix
Implication of capital mix selected ix
Projected Performance x
Use of technology to enhance a business xiii
Government regulations impacting the business xiii
Ethical Issues xiv
Bibliography xv
Appendix xvi

ACKNOWLEDGEMENT
I wish to express my sincere gratitude to Ms. Morris for providing me an opportunity to do this School Based Assessment on “Establishing A Business: Finance”. I wish to express a sense of gratitude and love to my friends and beloved mother for their moral support invested into helping me complete this task. Last but not least, I wish to avail myself of the opportunity to sincerely thank God for giving me the strength both mentally and physically to complete this.

EXECUTIVE SUMMARY
The name of the business will be “Luxe Fashion” owned by the partnership of Davae Walters and Anatasia Delfosse. It will also be a service industry as it distributes goods to the consumers. We will offer consumers with new and innovative attire for any occasion whether casual or formal. Our styles will attract females of 18 years and older. We plan to use psychological pricing, skimming and creaming. We will ensure that all products are obtained from the best designers at our factory. The business will promote an enhancing strategy by way of providing premiums (free gifts) and price discounts. Along with these various methods of advertising will be used such as sound cars and posters. The basic purpose of “Luxe Fashion” is to provide women with access to modern styles in clothing, shoes and handbags.

GOODS TO BE OFFERED

PURPOSES FOR WHICH FINANCE IS NEEDED
Finance is required for a business to fund its operations. For example to purchase plant machinery and raw materials, and to pay wages to workers. A business also needs finance to meet daily running expenses, and to meet maintenance costs. For example to transport lunch daily for employer and employees.

ORGANIZATIONAL CHART OF LUXE FASHION

This is a line and staff relationship. This structure will allow for growth of the business to take place with the help of specialists. Line and staff structure will be appropriate for this business because we will expand over a period of time.

COST OF PRODUCING GOODS
There are prime and overhead expenses in business. Prime expenses are the total expenses that relate directly to the manufacture or state of a good. These include the total of direct material costs, direct labour costs and direct expenses. Overhead expenses are ongoing expenses of operating a business (rent, gas, electricity). These are necessary to continue functioning of the business.
CAPITAL GOODS
Capital goods are important to businesses in general. The capital goods for this business will be factory and the machinery used to make the clothes, shoes and handbags. These items are very important because they make the goods for the consumers. If it becomes necessary to increase our output of any good, we would simply communicate with the factory to carry out this procedure. Therefore allowing the store to supply goods that meet consumer’s demands.

SOURCES OF FINANCE
Sources of finance also referred to as financial capital are important to our business. For example capital borrowed from a bank or some financial institution, savings of the entrepreneur(s), capital from private sources like family and from suppliers in the form of trade credit, credit sale or hire purchase or capital raised by the sale of shares in the business. Our store will need these sources in order to be opened for business.

COLLATERAL
Assets that the bank may redeem for non – payment of loans are known as collateral. It is important for our business to be able to present collateral to the bank. These may be in the form of property deeds, insurance policies that have cash value and certificates of deposits. If in the event that the business does not repay the debt, the item of collateral is sold.

CAPITAL INSTRUMENTS
Equity instruments are papers that demonstrate an ownership in the business. In our business the equity instrument is stock. We will offer common stock to our investors. The business has no obligation to pay back the amount invested if anything should happen.
Debt instruments are typically agreements where a financial institution agrees to loan a borrower money in exchange for set payments of principal and interest over a set period of time. Loans and a lease are the business’ debt instruments.
We use these instruments to raise financial capital for the business.

IMPLICATION OF CAPITAL MIX SELECTED
The owners of “Luxe Fashion” plans on using personal savings along with loans borrowed from financial institutions to attain capital. By attaining capital, the business will be able to lease the place chosen to carry out our transactions.

PROJECTED PERFORMANCE
Luxe Fashion
Trading and Profit and Loss Account for the year ended December 31, 2011. SalesCost of goods sold:Opening StockAdd Purchases Add Carriage InwardsLess Returns OutwardsNet PurchasesCost of goods available for saleLess closing stockGross ProfitAdd Discounts ReceivedTotal RevenuesLess Expenses:AdvertisingStaff PayRentTelephone charges InsuranceElectricityGeneral ExpensesNet Profit | $85 0005 50090 500(4 500) | $10 00086 00096 000(15 000)5 00020 00010 000 5008 0004 0001 000 | $175 000(81 000)94 0005 00099 000(48 500)50 500 |

Luxe Fashion
Balance Sheet as at December 31, 2011. FIXED ASSETSPremisesFixtures & FittingsFurnitureTOTAL FIXED ASSETSADD CURRENT ASSETSStockBankCash TOTAL CURRENT ASSETSLESS CURRENT LIABILITYCreditorsWORKING CAPITALLESS LONG TERM LIABILITYLoan from bankNET ASSETSFINANCED BY:Capital at startAdd Net ProfitLess DrawingsClosing Capital | $ | $15 00070 00010 00095 000(15 500)150 00050 500200 500(11 000) | $90 00050 00020 000160 00079 500239 500(50 000)189 500189 500 |

USES OF TECHNOLOGY TO ENHANCE EFFICIENCY OF BUSINESS
Computers enable the business to communicate with suppliers and operate globally at any time period. This paves the way for expansion of the business which can lead to economies of scale. Also commercials can be used to make the public aware of the goods provided by “Luxe Fashion”. It is a very effective way to increase demand which then increases sales and profits.

GOVERNMENT REGULATIONS THAT IMPACT BUSINESS
The business must be registered with the Registrar of Companies and a fee must be paid. A partnership deed must be drawn up which sets out the guidelines for the operation of the business. The name, type and address of the business, the partners’ names, citizenship and the date of partnership agreement must be included in the partnership deed or registration document. By abiding by these regulations the business becomes legal and avoid having a court settlement.

ETHICAL ISSUES
The creation of false documents is an ethical issue which arises in the financial aspect of the business. The documents are used to show decreased or increased profits. It shows decreased profits to avoid paying government taxes. It shows increased profits to ensure banks that the business is certified to receive a loan and able to repay. The superiors have to be vigilant to the running of the business to avoid a situation like this which would result into a scandalous outcome.

BIBLIOGRAPHY * (n.d.). Retrieved from irs.gov. * (n.d.). Retrieved from businessdictionary.com. * (n.d.). Retrieved from wikipedia.org. * (n.d.). Retrieved from investorwords.com. * eHow.com. (1999 - 2011). Retrieved from Demand Media Inc. * Hosein, D. R., & Stanlake, G. F. Longman Economics for CXC. In D. R. Hosein, & G. F. Stanlake, Longman Economics for CXC. Pearson Longman. * Robinson, K., & Hamil, S. CXC: Principles of Business - with SBA, Study Guide & Exercises. In K. Robinson, & S. Hamil, CXC: Principles of Business - with SBA, Study Guide & Exercises. Carlong Publishers. * Whitcomb, A., & Hamil, S. Essential Principles of Business for CXC 2nd edition. In A. Whitcomb, & S. Hamil, Essential Principles of Business for CXC 2nd edition. Longman. * WiseGeek. (2003 - 2011). Retrieved from wisegeek.com.

APPENDIX
Luxe Fashion: Customer Survey 1. Please indicate your age. 2. 18 – 25 26 – 35 36 – 50+
2. How often do you do personal shopping? Frequently Sometimes Seldom
3. What type of attire do you mostly shop for? Casual Formal Casual Formal
4. Which word most describes your fashion style? Conservative Modern Flashy
5. What type of shoe do you prefer? Flats Heels Slippers
6. What is your favourite dress? Party Dress Evening Gown Sun Dress
7. Which bag would you prefer? Oversized Bag Carry – on Clutch
8. Which pair of jeans are you most comfortable in? Flared Jeans Skinny Jeans Jeggings
9. Which type of blouse would you most likely wear? Cropped Top Tank Top Cami Top
10. Which do you feel is a necessary accessory? Belt Scarf Sunglasses
11. Is good customer service important to you? Yes No Not Really

12. Are changing rooms important assets for a clothing store? Yes No Not Really
13. Would you appreciate if the store opened on Sundays? Yes No Not Really
14. Do you shop on a budget? Yes No Sometimes
15. Would you like to dress in the latest fashion at reasonable prices? Yes No I don’t care