Barbara Thomas
Applied Business Math
IP5
April 26, 2015
Abstract
There will be a discussion about the type of banking and loan arrangements to start the business. There will be a discussion about the different types of taxes that we will need to consider paying. There also will be an explanation on how we will use pricing, discounts, markups and markdowns. There also will be a discussion about how technology and internet will be used and the risks for using these for banking and financial aspects.
There are several banking and loan information that we would use to collect the funds to launch the business. We would apply for the Small Business Administration (SBA) loan. The SBA offers several different loans programs that will help the company to meet the financial needs (SBA, 2015). We would apply for the conventional bank loans. These loans will give the company freedom on what to do with the money. It does not have stringent use terms like SBA loans do. Conventional bank loans offer good interest because there is not federal agency involved. We would also use the money that we have saved for launching this new business. We will also get money from our friends and family to help with the startup costs. This is the best options since the approval process is faster. These accounts would be monitored by using the balance sheet and I will request financial statement when I borrow the loan. This is an example of how a loan can be obstructed.
Loan Amount
1,000,000
Rate (per period)
0.583%
Annual Interest Rate
7.00%
Number of Payments
172
Term of Loan in Years
15
Total Payments
157,184.43
First Payment Date
5/25/2015
Total Interest
57,184.43
Compound Period
Monthly
Est. Interest Savings
4,604.66
Payment Type
End of Period
Monthly Payment
898.83
There are different types of taxes that will be considered. Income tax withholding is one of the taxes. These taxes are computed by the employee wage level, the number of exemptions, marital status and length of the payroll period. There will be social security tax withheld. The employee will have to match and pay the same amount of Social Security Tax as the employee does. We will have to pay income tax (Balle, 2015). We will have to file a Schedule C form with the IRS so that we will be able to determine the total business profit or loss for the year. Based on the information that is on the Schedule C form, we may have to pay federal and state taxes. We will have to pay self-employment tax. This will cover social security and Medicare costs. The total tax is a percentage of the net earnings from the self-employment activities. We will determine the tax by filling out the IRS form Schedule SE. Our organization will use price skimming strategy. Our organization are using this strategy so that we will be able to quickly recoup and advertising costs. The company will not have access to much business expenditures. This will help the company to increase market share. We will price products low to achieve a high business volume. We will start focusing on producing high quality products to keep those customers. We would also offer occasional price reductions for new products. The company will use discounts to obtain or to increase the sales. These discounts are referred to as markdowns (Retail, 2014). The company will be using markup by adding a set amount to the cost of the product and this will result in the price changed to the customer. For example, if the cost of the product is $80 and the company selling price is $120 than the markup would be $40. The company will use markdowns for overbuying, poor pricing and for sales policies. These strategies will affect the company income because if we are markdown our prices and the customers are purchasing these products, we are generating income but we will have to use that money to purchase more of that product. We use discounts so that customers can purchase more of that product so that we
