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Posted on March 18th, 2013, by

The development of the Asian restaurant network raises a number of problems because the company has to maintain the high quality of its products and services along with the authenticity of its products and food offered by the restaurant to its customers. At the same time, one of the major challenges for the company is the adequate financial forecasting and planning. What is meant here is the fact that the company should elaborate the financial forecast and budget to define clearly the financial goals the company wants to reach and develop mechanisms with the help of which the company can reach its financial goals. At the same time, the company should be aware of the fact that the financial forecast and financial budgeting is the basis on the ground of which the company should build up its business.

On analyzing the current position of the company in the market and its prospects in its business development, it is worth mentioning the fact that the company should focus on the development of its network and its primary goal should be to reach the target customer group and to form a loyal customer group. In this regard, the company should begin with the starting-up business. What is meant here is the fact that the company should find the major source of funding of its project to develop a network of restaurants. In this regard, it is worth mentioning the fact that the company can use bank loans to raise funds for the development of its business. Even though raising funds through bank loans will need paying off interests to the bank but still this source of rising costs is more efficient compared to partnership, for instance, because the company will not share its business with its partner or partners. Alternatively, the company can find an investor, who can invest into the development of the network but this approach is also imperfect because it also raises the problem of sharing business with investors or providing investors with the share in the business. In case of bank loans, the company will just have to pay off its debt and interests to the bank and the company will own its business and be able to develop it, according to its business plan.
At the same time, the further development of business needs the efficient financial management. In this regard, the company should rely on the financial forecast, which defines the financial framework, within which the company can operate. At this point, it is possible to refer to the Table 1, which shows the basic financial forecasts concerning the three years of the company’s operations:

Table 1. Financial forecasts
2011 2012 2013
Sales $461,900 $484,735 $508,712
Direct Costs of Goods and Services $277,140 $282,620 $288,210
Hidden Row $0 $0 $0
———— ———— ————
Cost of Goods Sold $277,140 $282,620 $288,210

Gross Margin $184,760 $202,115 $220,501
Gross Margin % 40.00% 41.70% 43.35%

Expenses
Payroll $86,240 $88,840 $92,840
Marketing/Postage/Other $6,000 $6,000 $6,000
Depreciation $2,500 $2,500 $2,500
Legal $1,200 $1,200 $1,200
Books/Accounting $1,200 $2,400 $2,400
Licenses/Permits/Memberships $900 $900 $900
Delivery/Transportation $4,800 $4,800 $4,800
Insurance $3,600 $3,600 $3,600
Rent $30,000 $30,000 $30,000
Utilities $12,000 $12,000 $12,000
Equipment/Supplies $4,800 $4,800 $4,800
Building/Equipment Maintenance $1,200 $1,200 $1,200
Payroll Taxes $12,936 $13,326 $13,926
Other $1,200 $1,200 $1,200
———— ———— ————
Total Operating Expenses $168,576 $172,766 $177,366

Profit Before Interest and Taxes $16,184 $29,349 $43,135
EBITDA $18,684 $31,849 $45,635
Interest Expense $5,997 $5,107 $4,179
Taxes Incurred $3,056 $7,272 $11,687

Net Profit $7,131 $16,969 $27,270
Net Profit/Sales 1.54% 3.50% 5.36%

Thus, the company can count for the steady business development and financial performance. Even though revenues and profits of the company are not supposed to be high but they will grow steadily. At the same time, the main point of the company within the three following years is not to maximize its profits but to take its market share and to gain a better position in the market. As a result, the company should enter the market and start competing with its major rivals, whereas the further market expansion will be a long-run goal for the company. If the company survives, then the company can improve steadily its marketing position but the company should always pay a close attention to its financial performance and forecasting.

 

 

 

REFERENCES:
Alison, E. and S.J. Heymann. (2004). “Work, Family, and Social Class In How Healthy Are We?”¯ A National Study of Well-Being at Midlife. OG. Brim, C.D. Ryff, and R.C. Kessler, eds., Chicago: The University of Chicago Press: 485-513.
Brief, A.P. and H.M. Weiss. (2000). “Organizational Behavior: Affect in the Workplace.”¯ Annual Review of Psychology, 25, p.34-41.
Holcombe, R. (2006). Public Sector Economics: The Role of Government in the American Economy. New York: Allyson and Beacon.
Friedman, M. (Spring 1997). “John Maynard Keynes,”¯ Federal Reserve Bank of Richmond Economic Quarterly. 83(2), p. 84-99.
Piketty T. and Saez, E. (Winter 2007). “How Progressive is the US Federal Tax System?”¯ Journal of Economic Perspectives, 21(1), p. 155-162.

 

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