FINANCIAL CREDIBILITY OF TRAJECT COMPANY

Posted: August 26th, 2021

FINANCIAL CREDIBILITY OF TRAJECT COMPANY

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Financial Credibility of Traject Company

Financial credibility is a crucial element in a startup business and will form the basis of Traject Company that is manufacturing a tissue that destroys viruses within a minute. The tissue is produced using the photocatalysis process. It can eliminate 100% of viral load when it comes in contact with ultraviolet rays and destroys many bacteria microbes and viruses. Jerome Blanc, the company president, has noted that this will be a profitable opportunity, especially during the Covid-19 crisis, as there is a need to reopen public places, such as cinemas. Additionally, the tissue will guarantee customers safety and simultaneously cut costs for theaters from social distancing and daily sanitization of all seats and common areas that are expensive and time-consuming. Furthermore, the product will offer a solution by installing self-sterilizing seats in public transport, cinemas, and overall public places. Besides, the company is targeting 1.5 million visitors to Qatar from the 2022 FIFA World Cup and the large number of daily commuters using the metro transport system. Therefore, the tissues are a profitable opportunity as the company is the only self-sterilizing fabric provider in Qatar with no competitors in this segment.

The company’s financial credibility will provide financial projections for the next three years in the balance sheet and income statement items. The projected balance sheet will indicate the business’ net worth by showing assets, liabilities, and capital allocation (Bauman and Shaw, 2016). The forecasted balance sheet will form a benchmark to compare the projected and actual results at the end of the financial period after considering sales, marketing, and inventory forecasts. Additionally, the business will take a long-term loan in 2022 to meet the production of tissues from high demand due to the 2022 FIFA World Cup. The financial credibility of Trajet Company indicates the business is a viable idea from the assets, liabilities, and capital analysis, as shown in Table 1 below.

Table 1: Forecasted Balance Sheet

Furthermore, the projected income statement will provide cost structure and revenue mainstreams of the business. It will also analyze the business revenues, expenses, and profits in a specific financial period (Vemić, 2017). Table 2 below indicates the feasibility of the business idea and shows that Traject Company will generate income after deducting expenses from revenue. The cost of producing tissue is $0.75, with a sales price of $2.00 per unit. Additionally, the sales are projected to improve at 60% from the year 2021 after product awareness, and the company is offered tax relief for the first three years of operation. However, the production cost will reduce by 20% from the second year due to economies of scale.

Table 2: Forecasted Income statements

Reference List

Bauman, M.P., and Shaw, K.W., 2016. Balance sheet classification and the valuation of deferred taxes. Research in Accounting Regulation, 28(2), pp.77-85.

Vemić. (2017). Optimal management strategies in small and medium enterprises. Hershey, PA: Business Science Reference.