Business plan or Management and accounting

Business Plan

Coffee Club

We created a business plan for our business, Coffee Club. We also created a breakeven chart, which showed us that we were going to have difficulties to breakeven because of our fixed costs and total costs being much higher than our revenue. However once we altered the business plan and chart we saw that we were hitting a positive outcome on each section.

Break even

Taking a more realistic look at the sales figures of other businesses and comparing them to our business, we decided that it would be logical to increase the sales we make, now our business is breaks even and makes a profit.

Balance Sheet

From our balance sheet we can that we are able to balance assets with our capital. They balance at £89,860. We applied the matching principles to get to this figure.

Cash flow forecast

Our cash flow shows that we are making a loss but we are still in positive cash. We are able to apply the Matching principles into this section, due matching the payments and receipts.Most of the Cash comes from our Capital investment.

Profit And loss

With the profit and loss sheet we can see that we are making a profit of £19860 a year, as all of are sales are instant, we record the revenue when the sales according to the Accruals principle.

The difference between profit and loss and Cash Flow

Although on our Profit and loss sheet we are making a Profit of £19860, on our cash flow we still have £88,834 of cash in our business. This shows that there is a clear difference between profit and cash in the business. The difference between profit and cash is what keeps the business running, whilst profit how much money the business makes after all expenses have paid.

Ratios

The ROCE is 22%.This is still a reasonable amount of return, but this could be subject to change, currently the business has too much invested for the first year, with £89,860. which the cash made within the first year is more than enough to sustain the business, meaning we could potentially reduce the loan that’s part of the capital meaning the return would increase to 33% but the business would still have £58,834 cash at the end of the year.

Ratio

With the current ratio it should generally be around 2:1So with this been 35.9:1 the business has too many assets, primarily this been the cash the business has.To resolve this we could start taking drawings from the business or reduce the loan and capital invested.The Liquid ratio shows the businesses ability to cover its liabilities as our business has accumulated too much cash, this ratio is too high.Although this generally isn't a bad thing, the cash the business has accumulated Should generally be used to reinvest.

As it’s a coffee shop and currently all our transaction take place with cash, we don’t have any debtors, so there shouldn’t be any debtors

Currently it takes us 35.1 days to pay off our suppliers. Although with our businesses having a lot of cash, we would be able to stick to the suppliers payment terms of 30 days rather than waiting the extra 5 days.

Currently our business is highly geared – 33% Meaning that 33% of our equity is debt, which isn't too bad but also not great, but could be better.From the large amount of cash within the business it is something that can be paid off rather fast.