angle on earth asked:


One of your friends, Waleed has found out you are studying accounting and that you have acquired basic spreadsheet skills. He has thought of a good business idea but needs to produce a business plan for the bank manager in order to raise a loan. Waleed has already formed a company and had introduced OR 15,000 in to the business bank account. OR 200 are to be the initial share capital and the balance is a short-term interest free loan. It is his intention to start trading as from 1 January 2009. You have agreed to produce the financial projections for based on the information Waleed has provided.

REQUIRED:
1.Using Excel, construct a financial model that shows the projected cash flow, profit and loss account and balance sheet figures for the year. The statements should show quarterly figures with annual totals where appropriate.
2.The spreadsheet file on a floppy disk clearly labeled with your identification number.
3.Write a short report to Waleed to include the following:
a)Relevant printouts of spreadsheet along with formulae sheet.
b)A concise explanation of the model you have developed.
c)Explain to Waleed the advantages and disadvantages of using Excel to produce the financial projections as compared to producing them manually using “pen and ink”

Information provided by Waleed
1.The first quarter’s sales are expected to be OMR 4,000 doubling every quarter.
2.The gross profit margin on sales in expected to be 30%
3.Of each quarter’s sales, A%
4.Bad debts are on credit sales, and are anticipated to be B%
5.65% of the credit sales are paid in the quarter in which the sale is made. The remaining debtors, after bad debts, are collected in the following quarter
6.Sufficient stock is purchased to cover the next quarter’s sales. In the first quarter’s assume the first two quarter’s purchases are made ( assume the final quarter’s purchases are OR 10,000)
7.Purchases are paid for in the quarter bought
8.Gross staff salaries are OMR 3,000 per quarter and paid in the quarter incurred
9.Distribution costs are 10% of sales and are paid in the quarter of the sale
10.Bank interest is 3% per quarter on the balance at the end of the previous quarter and in payable in the following quarter
11.The company buys machinery OMR 12,000 in the first quarter
12.A car costing OMR4,500 is purchased in the third quarter
13.The company depreciation policy is to depreciate assets at C% per annum on a straight-line basis
14.The company pays quarterly telephone bill of OMR 800. However, the fourth quarter’s bill will not be paid until January 2010
15.Ignore taxation and inflation
16.Include any other expenses Waleed has obviously omitted from the above information

Registration numberCash SalesBad DebtsDepreciation
IS325114

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