Save:
Favorite
Share:
Calculator Allowed: Yes

Question

Answer

Transcription of this question: Nails by JoominJoomin Kim runs a beauty shop called Nails by Joomin specializing in manicures and pedicures.The business operates as a sole trader. Joomin wants to take advantage Of the growth of the businessand its good reputation by opening a second store in a shopping centre about 10 kilometers from theoriginal location.A friend suggested to her that she could develop the business by franchising and increasing hereconomies of scale, but Joomin wants to own the new store and maintain control. She is consideringrestructuring as a private limited company. Joomin will finance the new store using $25 000 from hersavings and $50 000 from a bank loan.She anticipates revenues and expenses for the first 6 months Of the new store (January to June 2010)as follows:• initial balance: S75000 (savings and bank loan)• initial start-up expenses: Sl 5000• monthly rent: S2000• store manager monthly salary: S2000 (increasing by 6% in month 3)• monthly loan payment: S 1000• monthly expenses for additional labour: S 1000 for the first month, increasing by 20% per month• initial revenue: S2000 a month, increasing by 20% each month.She was able to obtain this loan because Of the strength Of her personal financial position (she ownsher own house and has no mortgage).She was able to obtain this loan because Of the strength Of her personal financial position (she ownsher own house and has no mortgage).(a)(b)(c)Define the following terms:(i)(ii)(i)(ii)franchiseeconomies of scale.Prepare a monthly cash flow forecast for the first 6 months Of operation Ofthe new store.Comment on the projected cash flow forecast Of the new store.Examine two difficulties that small businesses like Nails by Joomin face Inobtaining sources Of finance for expansion.[2 marks][2 marks][6 marks][4 marks][6 marks]

Leave a Reply