Btec Business Level 3 Unit 2 Essay
Opening Balance Overdraft – Looking at the opening balance in January on MJM’s cash flow forecast, I can see that the business started with an overdraft of £185,001, and an explanation is needed as to why. Why did the business start with a £185,001 overdraft? MJM may have started with the £185,001 overdraft for several reasons; MJM could have had the overdraft because they wanted to purchase extra materials to use and make the ladies’ underwear. The overdraft could have been used to purchase the company’s opening stock; the owners may have not had enough money to …show more content…
The company’s materials may be irregularly increasing and decreasing simply because the company’s supplier may have had very few of the materials requested by MJM, which may had lead them to increase the price of their materials. For example, MJM purchased materials for a total of £600,000 in April, but then purchased materials for a total of £1,200,000 in May. This may have been because MJM’s supplier may have had only a few materials left to sell to MJM, and had to increase their prices in order to collect more of them.
Business’ Confidence on Future Predictions – Looking at MJM’s twelve month cash flow forecast, I can see that the business has ended with a £5,225,007 profit. This allows me to pose the question, how confident are the business about their future predictions? Considering the fact that the company had various fluctuating figures such as its materials and its labour costs, it still managed to end its first year with a profit of