Answer To: King Edward VII College has been operating since 2015. The College is based in Melbourne CBD and has...
Tanmoy answered on Jul 08 2021
King Edward VII College – Business Expansion Briefing Report
Introduction
King Edwards VII commenced its operation in the year 2015 as a RTO – registration and trading organization imparting training and development skills to the students in the business management segment. It has performed quite well since its operation as per the information received from the students and the staffs. The college now wants to expand its operation by increasing the course fees, admitting more students and hiring new staffs. Based on the 2016, 2017 and 2018 actual financial records we will prepare a forecasted financial record of 2019 and 2020 to roughly estimate the potential future growth opportunities of the college.
Business Performance
Income:
2016
2017
2018
Sales
8,00,000
12,70,000
18,60,000
Expenses:
59%
46%
Electricity and gas
6,000
6,000
6,600
Internet
2,200
2,200
2,420
Office supplies
2,400
2,400
2,900
Rent
4,40,000
4,40,000
4,40,000
Stationary
2,600
2,600
2,600
Wages and salaries
2,50,000
3,50,000
8,00,000
Superannuation
23,750
33,250
76000
Travel and accommodation
5,600
5,600
6,150
Water
5,300
5,300
5,830
Work cover insurance
4,000
4,000
4,400
Total cost of sales:
7,41,850
8,51,350
13,46,900
Gross Profit before tax
57,550
4,18,650
5,13,100
As per the above financial records, the growth in sales in 2017 and 2018 were 59% and 46% respectively. As per the exception report it was 58% increase in 2017. But the actual record shows a 1% more increase than the previous year. All the sales figure were based on the number of students admitted in the year multiplied by the fees per student which is $10000 till 2018. With the increase in sales there was also increase in total cost of sales from 2016 till 2018. The gross profit after tax has increased formidably in 2017 to a mammoth 627% compared to 2016 but declined slightly due to rise in cost to 23% in 2018. The exception report of 2018 states 10% increase in all the cost expect for rent and wages. But, since wages is a part of salaries it has been distributed on a pro-rata basis.
Financial Forecast
The financial overview of the various forecasting process, key assumptions, parameters, relationships to business plans and external trends are in accordance with the information provided by the marketing and sales department and are as follows:
1. For financial forecasting of sales of 2018-19 we have considered the Sydney and Melbourne expected students (100+120) and calculated it based on the increased fees of $12000 per student. Similarly, for 2019-20 we have considered the expected student figures of Sydney, Melbourne, Adelaide and Brisbane (150+180+44+50) and multiplied it with $12000 to derive the expected sales figures.
2. The cost figures in 2018-19 were considered for Sydney and Melbourne as $685575 and $795575 respectively whereas for 2019-20 it was Sydney, Melbourne, Adelaide and Brisbane figures of $754132, $875132, $330000 and $330000 respectively.
3. The key assumptions taken in order to adjust the cost figures for 2018-19 with the individual expenses, there was an increase of 14.5% increase for each items except for Rent as it is same for all the years. Similarly, for 2019-20, we have considered all the individual items to increase at $15000 in order to match with the expected cost barring Electricity charges, superannuation, wages and salaries and work cover insurance.
4. The parameter considered were the growth in student admission, rise in college fees and increase in staff hiring over the forecasted years due to which the projected sales and cost of the college have increased in 2018-19 and 2019-20.
5. The estimated financial statement has been commensurate with the expected growth of the college and is in accordance with the external factors like high demand for education and skill developmental program and quality of the education.
Forecast for 2019
Forecasted Profit & Loss FY2019
Sales
Income from courses
$26,40,000
Net Sales
EXPENSES
Electricity and gas
$7,557
Internet
$3,000
Office supplies
$3,321
Rent
$4,40,000
Stationary
$3,000
Wages and salaries
$9,16,000
Superannuation
$87,020
Travel and accommodation
$7,042
Water
$7,000
Work cover insurance
$7,211
TOTAL EXPENSES
$14,81,150
Profit or Loss before Tax
$11,58,850
The forecast of 2019 states that there is an increase in sales by 42%, 10% increase in the cost and 126% increase in profits over the previous year. This is basically due to increase in the sales due to rise in expected students’ admission and the fees of the college from $10000 to $12000. All these figures are based on the data provided...