The amount of capital I will need to start up JB Fitness is £9000. I will need to take out a bank loan of £5000 and £1000 from my sleeping partners. I will also be contributing capital be putting in £3000 of owners capital. This is the way I will obtain the money, especially as in the first year of running, there are many expenses such as payment for gym equipment, computers, desks etc from looking at my cash flow forecast.
By having some capital invested into the business it will help paying the cash outflows, which shall reduce the amount of dept significantly in year one as the cash outflow and much more higher than the inflows. This is way the capital from the bank loan, owner’s investment and sleeping partners will help balance the cost and reduce the net cash flow. I will obtain the £5000 in a form of a short term loan from HSBC, which is payable over the first year of running JB Fitness so they can clear their depts and focus on increasing profit margins.
The cash flow forecast from year one to year three shows that the closing bank balance in December was increasing significantly. In year one, the closing bank balance for year one was £21,826, year two was £54,303 and in year three was £66,744. This shows that from year one to year three the closing bank balance for December had increased by £44,918, which shows that year upon year my closing balance was increasing that mean that I had high amount of capital to take over to the new year.
In year one the reason as to why my net cash flow was -13,985 was because of high expenses made in January as the outflows made were very costly. For example, paying for gym equipment, computers, chairs, desks etc. as my net cash flow in January for year one was showed minus figures meant than my cash outflows were higher than my cash inflows, however this was expected due high start-up costs. In year two my cash outflows were reduced considerately to a low amount, as there were no start up costs and minimum expenses such as payment for stock, wages, rent, gas and electricity, website etc. This meant that for each month in year two there was a higher net cash monthly flow in comparison to year because of lower cash outflows. For example, in year one for December the net cash monthly was £538 and in year two for December it was £1,343, which had increased by £807 in year two. In year three, the closing balance for December was £66,744, which shows the capital remaining in the bank was outstandingly good because the closing balance from year two to year three had increased by £12,441 for December. This shows that the overall cash flow position was improving from year one to three as the net cash monthly flow was increasing rapidly, which indicates that the cash inflows were greater than the cash outflows which shows great importance.
From analysing the profit and loss accounts from year one to year three, I can confirm that the profit from year one to year three are increasing which suggested that JB Fitness have made a significant amount of profit to survive. In year, there was a lower amount of profit being made in comparison to year two and three.
The net profit made in year one was £12,848 whereas in year two the net profit made was £54,325. The reason as to why there was a smaller amount of net profit being made in year one was because of the long list of costly expenses such as gym equipment, Jacuzzi, showers etc. In year two the net profit made is almost five times as much net profit made in year one, which shows that JB Fitness profit was increasing. In year one, the sales revenue made was £156,220 and in year two, the sales revenue made was £171,988. Form year one to year two the sales revenue increased by £15,768. In year three the net profit made was £66,766, which shows that the net profit was increasing year upon year as it increased by £12,441 from year two to year three. In addition, the sales revenue in year three was