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Business - Finance and SWOT Analysis

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Introduction

Task 7 Ratio's Profitability In my business I am going to look at some accounting ratios to discover whether or not my business is profitable or not. It also shows the level at which the business is making money. Gross profit margin Gross profit / sales x 100 494,910 / 733,200 x 100 = 67.5% For every �1 of sales I am making 67.5p gross profit. Net Profit Margin Net Profit / Sales x 100 352,198 / 733,200 x 100 = 48.03% For each �1 of sales I am making 48.03p of net profit before tax. This is a very generous amount of profit, but is 19.47p lower than the gross profit margin which means my expenses are fairly high. Return On Capital Employed Net Profit / Owners Capital x 100 352,198 / 75,000 x 100 = 469.59 For every �1 of capital employed the owner is making �4.69. What If Analysis What would happen if the business only opened 5 days a week instead of 7? To work this out I will reduce the variable costs by dividing them by seven and multiplying by five. However I will not change the fixed costs though. Sales �523,714 - Purchases �157,114 + Opening Stock - Closing Stock �13,092 Gross Profit �353,508 - Expenses Salaries 35,508 Depreciation 1,000 Rent and Rates 44,000 Loan Repayment 20,000 Extra Expenses 20,000 Promotion/Bonuses 8,000 �128,508 Net Profit �225,000 What would happen if the shop only drew in 60% of the expected custom for the whole of the year. Sales 439,920 Purchases 131,976 + Opening Stock 0 - Closing Stock 18,330 Gross Profit 289,614 - Expenses Salaries 49,712 Depreciation 1,000 Rent and Rates 44,000 Loan Repayment 20,000 Extra Expenses 12,000 Promotion/Bonuses 8,000 �134,712 Net Profit �154,902 Evaluation of my Business Plan SWOT Analysis Strengths > The business proposal is practical and will make a good profit if it was to be produced. ...read more.

Middle

Locals of Muswell Hill will often travel to the stores by a car or public transport, but our aim is for our store to fill the hole in the market, meaning they shop with us rather than the retail stores. > Another issue will be our first year, frequently the hardest year for new businesses. With little experience it will be hard to establish a name for ourselves. However with a effective advertising campaign, which appeals to our target audience, I believe that we should be able to establish the business and attract the crowds of Muswell Hill, it will be important to create a good name for ourselves, as well as making sure all our customers are pleased with our service, therefore they're more likely to recommend us to their friends and colleagues. > In winter people may be less likely to go out in the cold weather and exercise, this could potentially lead to a drop in sales, however our stock will vary to the weather, so in the winter we will stock products suitable for the climate. > The availability of low-cost sourcing in the Far East, and potentially in other regions, is a constant threat to manufacturers in the UK. > The globalisation aspect (also a strength) means that the industry is vulnerable to new entrants from foreign markets. > For performance specialists, sports are increasingly prone to come and go out of fashion rapidly in the media-driven climate. > Non-sports related designer brands are increasing their advertising and high-street presence. > Retailers face the possible threat of more vertical integration by manufacturers (e.g. Nike Town). > In the event of a severe recession, there is a danger of a retail price war breaking out on sportswear, with too many stores competing for the same customers. > PEST Factors Political CONSUMER PROTECTION ACT 1987 > Prohibits the supply of goods not in accordance with the general safety requirement or are unsafe. ...read more.

Conclusion

Make sales estimates as accurate as possible. Re-calculate the sales figure. Use money from bank loan if necessary. Ordering wrong quantity of stock Medium Would affect income and sales. Use accurate historical data to base our decisions on. Re-calculate stock, if there is excess stock which need to be sold, use reductions. Selling un-appealing products Very Low Low sales figures. Research into the target audience to find out their needs and preference of products. Review product selection, change unwanted items for different products. Current Issues PRICE FIXING ALLEGATIONS Sports multiples are more exposed to the fashionable sports wear market than to the equipment sector, but their role in selling equipment is also influenced by general issues in retailing. In 2003, the Office of Fair Trading (OFT) issued fines against companies that were alleged to have engaged in the price fixing of football replica kit. The fines varied in size but peaked at �6.6m payable by Umbro, a manufacturer, and �8.4m payable by JJB Sports, the largest sports retailer. The fined companies lodged appeals against the OFT's decision with the Competition Appeal Tribunal, but the matter was unresolved in late November 2003. THE HEATWAVE OF SUMMER 2003 Spring and summer 2003 brought exceptionally good weather conditions to most of the UK, including some heatwave weeks. These conditions encourage people to take part in outdoor pursuits and activities such as golf, stimulating the demand for new equipment. For example, the leading outdoor retailer, Blacks Leisure Group, reported strong sales at its Millets stores during 2003, particularly for surfing and board wear. Sales of Sports Clothing/Footwear and Equipment. % Change 2004 2005 2006 2007 2008 2004-2008 Clothing� 3,250 3,400 3,500 3,550 3,700 13.8 Footwear� 1,250 1,300 1,300 1,350 1,450 16.0 Equipment� 1,000 1,100 1,100 1,250 1,300 30.0 Total 5,500 5,800 5,900 6,150 6,450 17.3 % change year-on-year 6.3 5.5 1.7 4.2 4.9 This tables shows me that sports clothing is still the most profitable medium in the sports industry, however Footwear and Equipment are still expected to increase year by year so its important we sell products for everyone's needs. ...read more.

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