Forecasting Techniques

With the increasing ramified economic changes and complex business structure, each and every organization needs proper level of finance to run the business effectively. This report reflects the forecasted budgeted financial plans and business functioning for raising the funds from the banks.

The name of the business is Royal fashion limited which will be operated at domestic and international level to sell all stuff through its online dashboard cyber computing mechanism.

It is an online marketing channel created through online dashboard cyber computing mechanism. This company helps other business owners to sell products through dashboard mechanism. This system provides assistance in grasping clients in virtual worlds and helps other business owners to increase their turnover. This Royal fashion limited provides business to business services through its online dashboard cyber computing mechanism

There are several Forecasting techniques such as qualitative, quantitative drift method, time serious method, econometric forecasting method and trend analysis method.

The most suitable Forecasting techniques which would be further used are trend analysis. This analysis will allow Royal fashion limited to estimate future turnover on the basis of last year data. However, in the first year qualitative and quantitative methods will be used

It is considered that future is uncertain so the outcomes in the future are also not stable. However, after collecting internal and external factors of the business, these forecasted data will be analysed through capital budgeting tools such as discounted cash flow methods, profitability index and time series investment methods. In addition to this, project escalation methods and profitability margin would be the most important point to include in forecasted data which will assist company in sluggish market conditions. Furthermore, scenario and sensitivity analysis will also be used to support the forecasted data (Jordà, Schularick, and Taylor, 2017) 

Budget is the forecasted data which is prepared to estimate the future outflow and inflow of cash in business. It helps company to prepare proper strategies to invest capital in business and implement strategic planning in effective manner. There is several required information which will be required to prepare budget.

• Current market information
• Internal and external factors of business
• Market share of other rivals and existing demand of the clients
• Breakeven point of business
• Use of capital and financial budgeting tools
• Existing market players’ turnover and competitive advantages in market
• Total cost and profit of business
• Trend of products offering and services provided in market
• Strategic alliance and other plans of the business

These all above information are the key data which will be used to prepare the budget for the organization. These are the basis which is used to prepare the required level of budget for the business. This information will be gauged by the banks before granting loan to organizations owners (Jordà, Schularick, and Taylor, 2017).

Budget Preparation

These comparative and trend budget will be prepared on the basis of data collected from the secondary sources (Rupasingha and Wang, 2017).   It will includes the process or sources such as annual report of rival companies, use of web information and images, graphs and evaluating the demand of the market and supply of other rivals for the same products and services in market. The Royal fashion limited has unique business idea which is offered by only selected companies in market. Therefore, demand of this online dashboard cyber computing mechanism in market is very high and supply is very low. In addition to this, due to high profitability of this industry, Royal fashion could easily have more than US $ 1 million in the starting year of business. Therefore, use of annual report of other companies and market information circulated in the official public gazette of government will be the most useful sources to collect the data for comparative and trend budget (Gross and Venditti, 2017).

The main negotiation strategy would be to showcase the facts and outcomes of business. If proper facts and potential of growing in market is shown to bank manager then it will be easy to take loan from the bank. However, Royal Fashion Company could offer higher interest rate and can ask banks to create charge on its assets. This level of lucrative offers will help company to pursue banks to lend money to organization. In addition to this, if company perform well in market and earn more than US $ 2 million in coming year then it will pay back more than 30% of its lending amount in just one year (Axelrod, et al. 2017).

Company will use resources allocation budgeting technique to identify the true cost of the particular process. However, use of costing technique such as LIFO and FIFO method will be highly useful to identify the true cost of the business.  Prepared financial statement and other invoices will be the great use to have up to date information (Lusardi and Mitchell, 2017).

It is considered that evaluating budget performance and expenditure is the key intent of managing cash in business. It is evaluated that Royal Fashion Company could have regular internal control mechanism then it will increase the transparency of business and strengthen the reporting framework of business. Company needs to file cost sheet with the management department on each every 7^th day of following month to keep the control over the expenditure and estimated budget of the business (Maynard, 2017 ).

Negotiation Strategy

There are several risk factors which will be faced by Royal Fashion Company while running its business in market.

This planned budget of Royal fashion reflects all the turnover, breakeven point and cash flow of business in coming years. However, Project escalation and deviation amount factors are the key success shield which will be used in case of sluggish market condition. This level of business functioning will help Royal fashion company to encounter all the associated problems and shortage of capital in case of loss in determined approach (Dahlhaus, 2017).

As per the Australian security investment commission, it is evaluated that company has prepared its financial statement and other entries as per the GAAP rules and Australian security investment commission’s accounting rules. This has shown that company has managed its business as per the required terms and will comply with the all corporate governance. ASIC’s role is as company regulator. It is not ASIC’s role however, to ensure the financial soundness of an entity. Royal Fashion Company has managed its business for the betterment of its business and prepared its financial statement by establishment of harmonization in its GAAP and IFRS accounting standards ((Mwamba, Hammoudeh and Gupta, 2017). This has shown that company has also increased its overall functioning 

Horizontal and vertical analysis methods are used to evaluate whether company is performing up to the set mark of the promoters or not (Baruch and Gregoriou, 2017).

After evaluating the market factors and other outcomes of the business, it is evaluated that Royal Fashion Company will need at least US$ 38, 60,000 amount to run its business effectively. Break- even analysis of the company reflects the at least points of sales at which company will have no profit no loss in its business. It is set yearly $ 4, 41,000 and monthly $ 36,750. This level of unit sell is easy to achieve (Patil and Mohanthy, 2017). It is observed that if company could increase its overall sales then it will increase its profit by 25%. In addition to this, ratio analysis reflects the profitable business of Royal Fashion Company (Winston, and Winston, 2014). The current ratio of company is 19.8 which has been kept very high due to start up business functioning. Debt to equity ratio is also .2 which is set average to keep the financial leverage managed. Profitability of the Royal Company is also very attractive. Gross profit margin of company is 66.7 which are more than half of its sales. Net profit margin of company is 27.5% which reflects that company will grow stronger and will have high earning. Return on equity provided by company is also 278% which not only attracts equity shareholders but also increase its brand image on international level. After evaluating the efficiency ratio of company it is considered that account receivable turnover is 564 times which shows the chain of payment of receivable in years. In addition to this, inventory turnover of company is also 14.6 which are kept low due to no requirement of stocks in business. Now in the end, it could be inferred that company has been running its business effectively with a view to keep earn high amount of profit. Project escalation amount has been added to keep the company safe from the sluggish market condition (Hurdman, 2008).

Resources Allocation

Vertical analysis method

It is a method of financial statement in which all the entries of major categories such as accounts assets, liabilities and equities are taken into consideration. This analysis is implemented to evaluate the amount blockage of funds in assets and equity funding of company. It is analysed that company has 20% of its total assets invested in current assets and 29% portion of total assets is constructed of fixed assets. In addition to this, equity investment is done to cover at least 60% part of total assets of company. Furthermore, debt funding and efficient management functioning of organization is done to handle at least 40% part of the business (White, Sondh and Fried, 2015).

The main financial decision is to raise loan from the banks for financing its business functioning. It is considered that company has proposed to raise at least US$ 38, 60,000 from banks. Furthermore rest of the capital required for business will be covered from the equity financing of the business. This level of business functioning of company has shown that company has been managing its business efficiently. In addition to this, only 50% of its required capital is raised from the banks and financial institutions which will lower down its cost of capital of business. Now in the end, it could be inferred that if company could lower down its capital more then it will increase its overall capital employed in determined approach (Penman and Penman, 2007).

This business idea is to start an online marketing channel created through online dashboard cyber computing mechanism. This company helps other brand owners of cloths to sell their cloths and products through dashboard mechanism. If banks finance this business idea then it will put the society one step ahead from the existing knowledge. In addition to this, if this organization is set up on international level then it will help in fetching the foreign exchange currency and will increase the GDP of the country for sure. Furthermore forecasted financial performance of company is also very profitable which increase the overall performance and increase the business functioning on international level. This has shown that if banks will provide the finance then company could easily complete the payment within just five years. In addition to this, all the further transactions and flow of cash will be done through the bank account opened in the particular bank. Therefore, it will be profitable for the banks to finance the new business either in monetary term or promotional terms of organization (Taffler, 2012).

Conclusion

After evaluating all the data and information of the market and business factors, it is evaluated that if company could manage its business or implement its strategies as per the required information then it will surely have same results as estimated at the time of starting of its business. Now in the end, it could be inferred that bank will surly give loan to Royal fashion due to its high profitability condition.

Reference

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