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POTATO FRITTERS

BUSINESS PLAN

Muhammad Hayat Qureshi
Business Feasibility Term Project

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S.no. Table of Content Pg no.
1. Executive Summary ................................................................................................................. 1
2. PRODUCT................................................................................................................................ 2
Concept ..................................................................................................................................... 2
3. Location .................................................................................................................................... 3
4. STRATEGY ............................................................................................................................. 3
5. SUSTAINABLE COMPETITIVE ADVANTAGE............................................................... 5
6. SWOT Analysis........................................................................................................................ 6
Strengths ................................................................................................................................... 6
Weaknesses............................................................................................................................... 6
Opportunities ............................................................................................................................ 6
Threats....................................................................................................................................... 6
7. Marketing Plan ......................................................................................................................... 7
Product ...................................................................................................................................... 7
Place .......................................................................................................................................... 7
Price .......................................................................................................................................... 7
Promotion ................................................................................................................................. 7
8. Human Resources Plan ............................................................................................................ 8
9. Production Capacity ................................................................................................................. 9
10. Financial Plan .........................................................................................................................10
11. Conclusion ..............................................................................................................................11
12. Appendixes .............................................................................................................................12
A: Data and Assumption ........................................................................................................12
B: Product Costing .................................................................................................................13
C: Sales Forecasting ...............................................................................................................17
D: Fixed Asset Schedule ........................................................................................................18
E: Operating Expense Schedule ............................................................................................19
F: Financing Required – Balance Sheet Year 0 ...................................................................20
G: 1st Years Monthly Profit & Loss Account ......................................................................21
H: 3 Years Profit and Loss Account and Balance Sheet (Yearly) ......................................23
I: 3 Years cash Budget, NPV, IRR, and PI ...........................................................................26
J: Reciepts & Payment Schedule...........................................................................................30
K: Scenario Analysis ..............................................................................................................34
L: Ratios Analysis ..................................................................................................................37

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M: Amortization Table for the long term Loan....................................................................38
N: Operating Cylce

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Executive Summary
Potato Fritter proudly presents its first product named as ‘Potato Fritter’. It is a snack made of
circle shaped potato slices coated in our special batter of spices, served with tempting dips. At
the introduction stage the dips are available in four different flavors and our consumer will be
able to enjoy two different dips at a time in our one serving. The targeted location gives strength
to target all age group segments throughout the year in all seasons. We have selected two stall to
place at Par tower shopping Mall and Forum. The location has advantages that we can easily ca-
ter all the age group and the target audience has the affordability level for our product as well as
there is a high acceptability of this sort of snacks. We designed our business strategy based on
differentiation because we are offering a new product in the Pakistan’s snack industry with our
own invented recipe. We have product and service differentiation in this way we are giving our
customer more benefit in slightly high prices as compared similar product. We foresee with the
time our concept can be adopted and imitated by many others, we aim and challenge to maintain
the recipe as our sustainable competitive advantage. We prepare all the semi-prepared ingre-
dients ourselves such our own prepared bread crumbs and other coating dips and sauces with our
own innovative recipes to maintain a sustainable competitive advantage. Our strength supports
us with our innovative product, process, customer, and targeted segment. We will have opportun-
ities to grow in a view that end user positive response towards innovation, high profitability,
market development, continues innovation (product development). Project does not require an
aggressive advertisement because the location gives us the advantage to make aware our custom-
er about our product. So, that marketing expense is constant throughout the year. We have the
spare production capacity as well as we will try practice best human resources policy as we tar-
get 10% and 15% increment regardless of any extra ordinary sales performance. Moreover, our
profitability is increasing on yearly base with the high cash inflows. Financial success can be
analyze from the present value of the project which positive at rate of 60%. The project implicit
rate of return is 62.56% and on the profitability scale it has the value 1.016.

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PRODUCT

Concept

We are introducing “Potato Fritters” exclusively offering potato fritters as a snack made of circle
shaped potato slices coated in our special batter of spices, served with tempting dips. Potato frit-
ters is purely a new and original concept in snack meals with a variety of four different dips to
enhance its taste.

Potato fritters are made from thin slices of potatoes which are marinated in the batter of baking
powder, corn flour, mustard powder, black pepper, white pepper, and salt. Then they are coated
with hand made fresh bread crumbs. These well marinated and coated potato slices are then deep
fried in oil to get crispy and golden color. We serve Potato Fritters with any of two dips of our
customer’s choice from a range of four mouth watering dips. Dips include deep mints which are
made of Tamarind, mint, and coriander, Mustard dip, Chili Mayo Dip, and Garlic Mayo Dip.

Potato Fritters is nutritious and healthy as its made in highly hygiene conditions and cooking
process. We take special care of our customers to serve them in disposable and easy-to-carry
plates to help them easily revolve and enjoy their food while shopping as we have our stalls out-
let at renowned food courts of shopping malls.

Potato Fritters are served hot and crispy with any of two dips in our designed plates with our
unique logo embossed on it. We serve 12 slices of fritters in each plate. Order time takes 3 to 5
minutes to serve.

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Location

Park Tower shopping Mall & Forum Shopping Mall

 Easy to target all age groups
 Audience has affordability for product
 Positive attitude for having wispy delicious snacks while shopping
 People want something different with different taste
 Target market is used try new stuff and always ready to accept superior products
 Audience are used to have luxurious appetite

STRATEGY
We have the strategy of ‘product differentiation’. As our product is a different concept in snacks
we have emphasized on its differentiation. On the basis of product differentiation, we can charge
the premium price by following the differentiation product strategy. Also adopting the psycho-
logical pricing we sell each pallet for Rs. 95 to keep the price in two-digit figure. As our product
is at introduction stage so we cannot charge high prices however we plan to focus on cost recov-
er strategy with maintaining our unique selling preposition as well.

We have differentiated our product based on;
 Product Differentiation – Our Taste, recipe, pioneer to introduce in this sort of snack
 Service Differentiation – We have direct customer interactive process, that shows our
hygienically care and real time process.
 Personnel Differentiation – It’s our own invented recipe that is our mutual creativity

Moreover, Karachi has a developed and fast growing food market with dynamic competition
among the different food chains. But market has great potential for new entrants for their innova-
tive ideas. So we can differentiate our product based on:

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 Innovation in snacks: we have unique and innovative idea in snacks as fries have been
very common snacks for decades so we have come up with a new idea for potato lovers.
Snacks have limited range in Pakistan as in fries, pasta, desi chats etc.
 Quality food: we provide quality in food as well as serving our customers in hygienic
pallets made from quality paper. We use high quality oil and fresh spices to enhance the
taste and maintain quality. We aim to deliver high quality and delicious taste within rea-
sonable price.
 New taste in snacks: we differentiate our product with its different taste. We have our
own invented recipe with aromatic blend of spices and we have expertise and cooking
tactics to develop new taste for our customers.
In all way, we are trying to serve our customer with better product with slightly high price that
more for more as compared to our similar product competitors:

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SUSTAINABLE COMPETITIVE ADVANTAGE

We believe and challenge our recipe is our sustainable competitive advantage. Firstly it’s the
first time ever Potato Fritters are being launched in the market but as we foresee with the time
our concept can be adopted and imitated by many others, we aim and challenge to maintain the
recipe as our sustainable competitive advantage.

We use a number of different tips to create unique taste through our recipe. We use homemade
bread crumbs from bakery bread which are used partly soaked rather than dry bread crumbs as
commonly used by others.

We use double coating for potatoes, firstly a powder coating of mustard powder, black pepper,
white pepper, and baking powder. Then again potato slices are coated with the same ingredients
as batter.
For our deep mints dip, we heat the Deep Mint-mint paste for few minutes as it would never af-
fect the throat and gets less tangy.

From time to time, we will be introducing new flavors of dips to provide our customers with a
broader choice of dips to enjoy with potato fritters.

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SWOT Analysis
Strengths Weaknesses

 End-user sales control and direction  Customer lists not tested.
 Right products, quality, and relia-  Some gaps in range for certain sec-
bility tors.
 Spare manufacturing capacity.  We would be a small player.
 Have customer lists  No direct marketing experience
 Direct delivery capability.  Limited budget
 Product innovations ongoing  No pilot or trial done yet
 Product (what are we selling)  Customer service staff needs train-
 Process (how are we selling it) ing.
 Customer (to whom are we selling  Lack of competitive strength
it)  Reputation and presence
 Management is committed and con-  Financials
fident  Timescales, deadlines and pressures
 New Product in the market an USP
 Cooking expertise, own invented
recipe
 Difference of taste
 Our Human Resource
 High quality, delicious taste within
reasonable price
 ISO – Quality Certification
 Hygienic cooking process with cus-
tomer interaction
 Cultural support, and increasing
trend of snacks & fast food

Opportunities Threats

 Can develop new products  Environmental effects would favor
 Profit margins will be good. larger competitors.
 End-users respond to new ideas.  Market demand
 Could extend to other cities  Retention of key staff critical
 New specialist applications  Could distract from core business
 Could be a better supplier for cater-
ers
 Market development
 Industry or lifestyle trends
 Business and product development

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Marketing Plan

Product

Potato fritters a snack made of potatoes coated in our special batter of spices, served with tempt-
ing dips. Potato fritters is purely a new & original concept in snack meal with a variety of four
dips to enhance its taste. There are many varieties in dips to give the maximum varieties in taste
which includes Deep Mint, mayo, Garlic and Mustard etc.

Place

We planned to open our outlet in a form of stall at:
 Park Tower
 Forum
Those people who come for shopping usually they need some sort of delicious appetizer that
must be slightly healthy. In this way we are catering all segment of the market and segment have
the affordability and acceptability for the expensive, delicious taste.

Price

The fritters is only available in 250gms disposable paper box with two different dip just for
Rs.95. the price is slightly high as compared to other snacks which are available in our targeted
segments. But we have come up with absolute new idea with our differentiated taste and product
recipe so in this sense we are giving our consumer “more for more.”

Promotion

We market our brand with sensational opening ceremony in which we make trail of our products
in the whole mall and we will place standees and buntings. We will play games with kids and
make aware all the age group about our snacks and we will also take their suggestion to enhance
or customize our dip taste.
Then, on quarterly basis we will introduce some discount offers against our marketing budget or
as per the sales performance.

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Human Resources Plan

Year 2009 Year 2010 Year 2011
Workers
Monthly Yearly Monthly Yearly Monthly Yearly

Chef 1 10,000 120,000 11,500 138,000 13,800 165,600

Chef 2 10,000 120,000 11,500 138,000 13,800 165,600

Helper 1 6,000 72,000 6,600 79,200 7,590 91,080

Helper 2 6,000 72,000 6,600 79,200 7,590 91,080

Manufacturing 32,000 384,000 36,200 434,400 42,780 513,360

Salesman 1 9,000 108,000 10,350 124,200 12,420 149,040

Salesman 2 9,000 108,000 10,350 124,200 12,420 149,040
Manager Operation &
Finance 12,000 144,000 14,000 168,000 16,000 192,000

Operating 30,000 360,000 34,700 416,400 40,840 490,080

Total Annual Salaries 744,000 850,800 1,003,440

Here, we have allocated salaries over the period of the 12 months and every year our employees
getting the increment regardless of the extra ordinary performance. In case of good performance
they get the one month salary as bonus at the end of semi-annually period. In year 2010 and 2011
the increment will be 10% and 15% respectively.

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Production Capacity
Potato Fritter Pvt Ltd
Production Capacity Planning
Per 12 Hrs Shift Per Year
Normal Capacity Units 1400 511000

Capacity Utilization 2009 600 219,000

Capacity Utilization 2010 780 284,700

Capacity Utilization 2011 1092 398,580

In year 2009, we allocate fixed cost over the utilize capacity which will remain same until our
normal capacity. So, in the next years we will have the favorable capacity variance that indirectly
lower per unit cost of the product.

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Financial Plan
As Potato Fritters is a food business therefore its main factor of cost is material costing in overall
the product analysis. Product cost is slightly high but as the capacity utilization will increase the
cost of overhead will also decrease. The profitability of the business solely depends upon the
turnover of the business. It has direct relationship with turnover because the profitability is being
played a significant role through per unit profit. Since, the turnover start increasing we will have
more contribution margin to cover operating expense. In year 2009, sales is 21900 units which is
contributing Rs. 3,066, 727 in volume (Rs. 14 per unit), in year 2010 and 2011 contributions are
Rs. 4,258,754 in volume (Rs. 15 per unit) and Rs. 6,333,310 in volume (Rs. 16 per unit) respec-
tively. It is expected that at 95% capacity utilization this contribution margin will be contributed
Rs 22 per unit.
Operating expense is based on the cycle of the business which is not related sales in a sense they
are showing a fixed behavior. So that, these a very rare probability in increase of operating ex-
pense until the attainment of the 95% capacity.
Financial charges affected a significant burden in the starting years but after the 3 years we will
pay off loan amount than we will have high profitability with dual affect. From one side our sales
volume and on second the expenses like financial charge and other operating expense will be
lower.
We will have the flawless operating cycle due to our efficient process; we will have 100% ability
to pay off our short term debt and to maintain inventory level on cash basis. Our cash flows are
very good throughout the year.
Annual profits are Rs. 1,024,873 in year 2009, Rs. 1,810,586 in 2010, and Rs. 3,149,205 in 2011
respectively.
Ongoing economic condition does not support the bad cash flows that further lower the Implicit
Rate of Return. So, our cash Inflows are Rs, 2,158,682 in year 2009, Rs. 2,063,919, and Rs.
3,652,577 in years 2011. If we discount our cash inflows @60% still we are getting positive Net
Present value against the Investment of Rs. 3,000,000. It shows the viability of the project and its
current implicit rate of return is 62.56% and on the profitability index it has the 0.984.

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Conclusion
The project idea has a great potential in terms of profitability and growth. There is definite
chance to build an industry in hard snacks. On the base of the product idea and its strong pillar in
a form of:
 Product USP
 Highly sustainable competitive advantage
 Increasing returns
 Growing business opportunity
 Itself sustainable financial support
 Targeted segment (Consumer Need)
 Continues product development and new market expansion

We can conclude the 100% percent viability of the project in all the way around.

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Appendixes

A: Data and Assumption

Sale price
The introductory price of the fritters packet is Rs 95 which is available in four delicious
dips.
Inventory level
The level of stock is to be maintained for the 30 days normally which is consist 20 days
normal consumption; 5 days lead time and 5 days safety stock. Stock would order 20th day
of every month that will be receive by the 25 th day of the same month.
Payment Mode
The payment of the stock will be made in 30 days credit period from the date of the order to
the next order. All other manufacturing and operating expenses will be made on 30 days
credit period. However, the labor cost and salaries will be paid until the 10 th of the next
month which includes:
 Labor wages
 Salesperson and staff salaries

Receipt Mode
The revenue collection is totally based on the cash basis as per the nature of the business.

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B: Product Costing

Potato fritter (Pvt) Ltd
Product Cost Sheet
Material Costing
Recipe
Cost per kg / ltr PKR
Ingredients /Platter

Potato 17 250 gms 4.25
Maida 30 120 gms 3.60
Corn flour 40 120 gms 4.80
Bread Crumbs 20 4 pcs 6.67
Beson 53 100 gms 5.30
Mustard Powder 20 25 gms 5.00
Black paper 45 10 gms 4.50
White pepper 25 10 gms 2.50
Water 7 500 ml 3.50
Butter / Corn Oil 140 200 /ltr 28.00
Salt 13 10 gms 0.13
Dip Cost 5
Material Cost per Platter 73.25

Cost/unit
Packing Material Costing Cost/box (PKR) No. of pcs
(PKR)
Butter Papers 200 1000 0.2
Paper box 2000 1000 2 2.2
75.45

Monthly salary
Labor Costing Volume Cost/unit
(PKR)

Chiefs (2 persons) 10000 120,000 0.548
Waiter (2 persons) 6000 72000 0.329

16000 192,000
Labor per platter 0.8767
Prime Cost 76.3234

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FOH Costing Monthly expense Per unit

Fixed

Depreciation 7556 90,667 0.414

Rent 50000 600,000 2.740

57,555.6 690,667 3.154
Variable (W-1)

Supplies 2,614 31,286 0.143

Heat & Power 5,143 62,571 0.286

Maintenance & Repairs 3,857 46,929 0.214

11,614 140,786 0.643

69,288 831,452
FOH per unit 3.797
Miscellaneous 0.000
Cost per unit 80.120

Sale Price 95
W-1
10 hrs Shift
Variable FOH Rates (PKR) Daily Units Per Unit
Supplies 200 1400 0.143
Heat & power 400 1400 0.286
Maintenance 300 1400 0.214

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Dips Costing per 100 ml

Serving Dips
Deep Mint Dip Cost
Ingredients Cost/kg or ltr Recipe/Platter PKR

Mint 4 40 gms 0.8
Fresh Coriander 3 40 gms 0.6
salt 15 8 gms 0.12
Red chili powder 25 8 gms 0.2
Cumin 25 8 gms 0.2
Pulp (Tamarind) 32 100 gms 3.2
Garlic 30 24 gms 0.72
Sugar 23 8 gms 0.184

5.224

Chili Mayo Dip Dip Cost
Ingredients Cost Weight Recipe/Platter PKR

Chili Garlic Sauce 90 90/kg 32 gms 2.88
Mayonnaise 100 100/kg 32 gms 3.2

6.08

Garlic Mayo Dip Dip Cost
Ingredients Cost Weight Recipe/Platter PKR

Garlic 30 30/kg 16 gms 0.96
Mayonnaise 100 100/kg 32 gms 3.2

4.16

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Mustard Dip Dip Cost
Ingredients Cost Weight Recipe/Platter PKR

Garlic 30 30/kg 16 gms 0.96
Mayonnaise 100 100/kg 32 gms 3.2

4.16
Weight Average Dip Cost

DEEP MINT DIP 5.224
Mayo Dip 6.08
Garlic Mayo Dip 4.16
Mustard Dip 4.16

19.624
Weight Average per unit Dip Cost 4.906

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C: Sales Forecasting

Potato Fritter Pvt Ltd
Sales Forecast
Year 2009 Year 2010 Year 2011
Da
Month Sales/ Sales
ys Sales Sales
Day Sales Sales/
Units PKR /Day Units PKR Day Units PKR

Jan 31 600 18,600 1,767,000 780 24,180 2,297,100 1,092 33,852 3,215,940

Feb 28 600 16,800 1,596,000 780 21,840 2,074,800 1,092 30,576 2,904,720

March 31 600 18,600 1,767,000 780 24,180 2,297,100 1,092 33,852 3,215,940

April 30 600 18,000 1,710,000 780 23,400 2,223,000 1,092 32,760 3,112,200

May 31 600 18,600 1,767,000 780 24,180 2,297,100 1,092 33,852 3,215,940

June 30 600 18,000 1,710,000 780 23,400 2,223,000 1,092 32,760 3,112,200

July 31 600 18,600 1,767,000 780 24,180 2,297,100 1,092 33,852 3,215,940

Aug 31 600 18,600 1,767,000 780 24,180 2,297,100 1,092 33,852 3,215,940

Sep 30 600 18,000 1,710,000 780 23,400 2,223,000 1,092 32,760 3,112,200

Oct 31 600 18,600 1,767,000 780 24,180 2,297,100 1,092 33,852 3,215,940

Nov 30 600 18,000 1,710,000 780 23,400 2,223,000 1,092 32,760 3,112,200

Dec 31 600 18,600 1,767,000 780 24,180 2,297,100 1,092 33,852 3,215,940

219,000 20,805,000 284,700 27,046,500 398,580 37,865,100

Sales Forecast 219,000 20,805,000 284,700 27,046,500 398,580 37,865,100

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D: Fixed Asset Schedule

Potato Fritter Pvt Ltd
Fixed Assets Schedule
Life
in Annual Depre- Monthly Depre-
units Cost PKR yrs Salvage value ciation ciation
Fryers 2 150,000.00 5 20,000.00 26,000.00 2,166.67
Crockery & Cutlery 4 120000 3 - 40,000.00 3,333.33
Stalls 2 100000 10 20,000.00 8,000.00 666.67
Cooking Supplies 2 50000 3 - 16,666.67 1,388.89
Van 400000 5 50,000.00 70,000.00 5,833.33
Advance 600000
warehouse 500000
Depreciation 160,666.67 13,388.89
Total Fixed Assets 1,920,000.00

Continue
Monthly

Book Value 31, Book Value 31, Book Value 31, Manufacturing De- Operating Depre-
Dec,09 Dec,10 Dec,11 preciation ciation
124,000.00 98,000.00 72,000.00 2,166.67
80,000.00 40,000.00 - 3,333.33
92,000.00 84,000.00 76,000.00 666.67
33,333.33 16,666.67 - 1,388.89
330,000.00 260,000.00 190,000.00 5,833.33
600,000 600,000 600,000
500,000 500000 500000
1759333.333 1598666.667 1438000.000 7556 5833

Yearly 90666.66667 70000

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E: Operating Expense Schedule

Operating Expense Schedule
Direct Labor and Salaries

Year 2009 Year 2010 Year 2011
Workers
Monthly Yearly Monthly Yearly Monthly Yearly
Chef 1 10,000 120,000 11,500 138,000 13,800 165,600
Chef 2 10,000 120,000 11,500 138,000 13,800 165,600
Helper 1 6,000 72,000 6,600 79,200 7,590 91,080
Helper 2 6,000 72,000 6,600 79,200 7,590 91,080
Manufacturing 32,000 384,000 36,200 434,400 42,780 513,360
Salesman 1 9,000 108,000 10,350 124,200 12,420 149,040
Salesman 2 9,000 108,000 10,350 124,200 12,420 149,040
Manager Operation &
Finance 12,000 144,000 14,000 168,000 16,000 192,000
Operating 30,000 360,000 34,700 416,400 40,840 490,080
Total Annual Salaries 744,000 850,800 1,003,440

Marketing Expense
50,000 600,000
Supplies
10,000 120,000
Miscellaneous
10,000 120,000

Total 70,000 840,000

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F: Financing Required – Balance Sheet Year 0

Potato Fritter Pvt Ltd
Balance Sheet As on
1,Jan,2009
Fixed Assets PKR Equity & Liability PKR

Net 1,920,000 44% Share Capital 2,000,000 45%

Current Assets 0% Long Term Loan

Cash 1,080,000 25% Bank loan @ 22% 1,000,000 23%

Inventory 1,403,308 32% 0%
Account Payable 1,403,308 32%

4,403,308 100% 4,403,308 100%

Potato Fritter Pvt Ltd
Balance Sheet As Year O
Fixed Assets PKR Equity & Liability PKR

Net 1,920,000 64% Share Capital 2,000,000 67%

Current Assets Long Term Loan

Cash 1,080,000 36% Bank loan @ 22% 1,000,000 33%

3,000,000 100% 3,000,000 100%

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G: 1 st Year Monthly Profit and Loss Account

Month Jan Feb Mar April
Sales 1,767,000.00 1,596,000.00 1,767,000.00 1,710,000.00

Less: Cost of Goods Sold (1,490,231.35) (1,346,015.42) (1,490,231.35) (1,442,159.37)
Gross profit 276,768.65 249,984.58 276,768.65 267,840.63
Less: Operating Expenses
Salaries 12000 12000 12000 12000
Depreciation 5833 5833 5833 5833
Supplies 10000 10000 10000 10000
Marketing expense 50000 50000 50000 50000
Miscellaneous 10000 10000 10000 10000
(87,833.33) (87,833.33) (87,833.33) (87,833.33)
Operating profit 188,935.31 162,151.25 188,935.31 180,007.29
less: Financial charges (18,333.33) (18,333.33) (18,333.33) (18,333.33)
Profit before tax 170,601.98 143,817.92 170,601.98 161,673.96
less: Taxation (@35%) (59,710.69) (50,336.27) (59,710.69) (56,585.89)
Profit after tax 110,891.29 93,481.65 110,891.29 105,088.07

Month May Jun Jul Aug
Sales 1,767,000.00 1,767,000.00 1,710,000.00 1,767,000.00
Less: Cost of Goods Sold (1,490,231.35) (1,490,231.35) (1,442,159.37) (1,490,231.35)
Gross profit 276,768.65 276,768.65 267,840.63 276,768.65
Less: Operating Expenses
Salaries 12000 12000 12000 12000
Depreciation 5833 5833 5833 5833
Supplies 10000 10000 10000 10000
Marketing expense 50000 50000 50000 50000
Miscellaneous 10000 10000 10000 10000
(87,833.33) (87,833.33) (87,833.33) (87,833.33)
Operating profit 188,935.31 188,935.31 180,007.29 188,935.31
less: Financial charges (18,333.33) (18,333.33) (18,333.33) (18,333.33)
Profit before tax 170,601.98 170,601.98 161,673.96 170,601.98
less: Taxation (@35%) (59,710.69) (59,710.69) (56,585.89) (59,710.69)
Profit after tax 110,891.29 110,891.29 105,088.07 110,891.29

Continue...

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Month Sep Oct Nov Dec

Sales 1,710,000.00 1,767,000.00 1,710,000.00 1,767,000.00

Less: Cost of Goods Sold (1,442,159.37) (1,490,231.35) (1,442,159.37) (1,490,231.35)
Gross profit 267,840.63 276,768.65 267,840.63 276,768.65
Less: Operating Expenses
Salaries 12000 12000 12000 12000
Depreciation 5833 5833 5833 5833
Supplies 10000 10000 10000 10000
Marketing expense 50000 50000 50000 50000
Miscellaneous 10000 10000 10000 10000
(87,833.33) (87,833.33) (87,833.33) (87,833.33)
Operating profit 180,007.29 188,935.31 180,007.29 188,935.31
less: Financial charges (18,333.33) (18,333.33) (18,333.33) (18,333.33)
Profit before tax 161,673.96 170,601.98 161,673.96 170,601.98
less: Taxation (@35%) (56,585.89) (59,710.69) (56,585.89) (59,710.69)
Profit after tax 105,088.07 110,891.29 105,088.07 110,891.29

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Business Feasibility Term Project

H: 3 Years Profit and Loss Account and Balance Sheet

Potato Fritter (Pvt)Ltd
Profit and Loss Account
For the Period ended 31, Dec, 09
PKR per Units Units Sold

Sales 20,805,000.00 95 219,000

Less: Cost of Goods Sold (17,738,272.38) (81.00)
Gross profit 3,066,727.62 14.003
Less: Operating expense
Salaries 360,000
Depreciation 70,000
Supplies 120,000
Marketing expense 600,000
Miscellaneous 120,000
(1,270,000.00) (5.799)
Operating profit 1,796,727.62 8.204
less: Financial charges (220,000.00) (1.005)
Profit before tax 1,576,727.62 7.200
less: Taxation (@35%) (551,854.67) (2.520)
Profit after tax 1,024,872.95 4.680

Balance Sheet
Potato Fritter Pvt Ltd
Balance Sheet As on 31,Dec,2009
Fixed Assets PKR Equity & Liability PKR
Net 1,759,333 25.79% Share Capital 2,000,000 29.32%
Stall Advance Retained Earning 1,024,873 15.02%

Current Assets Long Term Loan
Cash 3,238,682 47.47% Bank loan @ 22% 730,342 10.71%
Inventory 1,824,300 26.74% Short term Liability
Account Payable 2,025,588 29.69%
Loan Payable 269,658 3.95%
Accrued Interest 220,000 3.22%
Accrued Tax 551,855 8.09%

Total 6,822,316 100% Total 6,822,316 100.00%

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Business Feasibility Term Project

Year 2010
Potato Fritter (Pvt)Ltd
Profit and Loss Account
For the Period ended 31, Dec, 09
Units
PKR per Units Sold

Sales 27,046,500.00 95 284,700

Less: Cost of Goods Sold (22,787,754.10) (80.04)
Gross profit 4,258,745.90 14.96
Less: Operating expense
Salaries 416,400
Depreciation 70,000
Supplies 120,000
Marketing expense 600,000
Miscellaneous 120,000
(1,326,400.00) (4.659)
Operating profit 2,932,345.90 10.300
less: Financial charges (160,675.22) (0.564)
Profit before tax 2,771,670.68 9.735
less: Taxation (@35%) (970,084.74) (3.407)
Profit after tax 1,801,585.94 6.328

Balance Sheet
Potato Fritter Pvt Ltd
Balance Sheet As on 31,Dec,2010
Fixed Assets PKR Equity & Liability PKR
Net 1,598,667 16.91% Share Capital 2,000,000 21.15%
Retain Earning 2,826,459 29.89%

Current Assets Long Term Loan
Cash 5,302,601 56.08% Bank loan @ 22% 401,359 4.24%
Inventory 2,554,021 27.01% Short term Liability
Account Payable 2,767,728 29.27%
Loan Payable 328,983 3.48%
Accrued Interest 160,675 1.70%
Accrued Tax 970,085 10.26%

9,455,289 100% 9,455,289 100%

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Business Feasibility Term Project

Year 2011
Potato Fritter (Pvt)Ltd
Profit and Loss Account
For the Period ended 31, Dec, 09
Units
PKR per Units Sold

Sales 37,865,100.00 95 398,580

Less: Cost of Goods Sold (31,531,789.07) (79.11)
Gross profit 6,333,310.93 15.89
Less: Operating expense
Salaries 490,080
Depreciation 70,000
Supplies 120,000
Marketing expense 600,000
Miscellaneous 120,000
(1,400,080.00) (3.513)
Operating profit 4,933,230.93 12.38
less: Financial charges (88,299.00) (0.222)
Profit before tax 4,844,931.94 12.16
less: Taxation (@35%) (1,695,726.18) (4.254)
Profit after tax 3,149,205.76 7.90
Balance Sheet
Potato Fritter Pvt Ltd
Balance Sheet As on 31,Dec,2010
Fixed Assets PKR Equity & Liability PKR
Net 1,438,000 11.11% Share Capital 2,000,000 15.45%
Retained Earning 5,975,665 46.15%

Current Assets Long Term Loan
Cash 8,955,577 69.17% Bank loan @ 22% (0) 0.00%
Inventory 2,554,021 19.73% Short term Liability
Account Payable 2,786,549 21.52%
Loan Payable 401,359 3.10%
Accrued Interest 88,299 0.68%
Accrued Tax 1,695,726 13.10%

12,947,598 100% 12,947,598 100%

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Business Feasibility Term Project

H: 3 Years cash Budget, NPV, IRR, and PI

Potato Fritter Pvt Ltd
Cash Flow Statement

Year 0 2009 2010 2011
Cash Flow From Opera-
tions
EBIT 1,796,727.62 2,932,345.90 4,933,230.93
Changes in Inven-
tory (420,992.40) (729,720.16) -
Changes in paya-
ble 622,280.10 742,139.80 18,820.71
Less Interest - (220,000.00) (160,675.22)
1,998,015.32 2,724,765.55 4,791,376.42
Less Tax - (551,854.67) (970,084.74)
1,998,015.32 2,172,910.88 3,821,291.69
Add Depreciation 160,666.67 160,666.67 160,666.67
Operating Cash
Flow 2,158,681.98 2,333,577.55 3,981,958.35
Cash Flow from Invest-
ments (3,000,000.00) - - -

Cash Flow after
Investing (3,000,000.00) 2,158,681.98 2,333,577.55 3,981,958.35
Cash Flow From Financ-
ing
Repayment of
Loan - (269,658.07) (328,982.85)
Net Cash Flow (3,000,000.00) 2,158,681.98 2,063,919.47 3,652,975.50
Opening Cash
Balance 1,080,000.00 3,238,681.98 5,302,601.46
Closing Cash
Balance 3,238,681.98 5,302,601.46 8,955,576.96

Net Present value
DF @ 35% 0.740740741 0.548696845 0.406442107
Investment (3,000,000.00) 1,599,023.69 1,132,466.10 1,484,723.06
DCF 4,216,212.86
NPV 1,216,212.86

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Business Feasibility Term Project

DF @ 40% 0.714285714 0.510204082 0.364431487
Investment (3,000,000.00) 1,541,915.70 1,053,020.14 1,331,259.29
DCF 3,926,195.14
NPV 926,195.14

DF @ 50% 0.666666667 0.444444444 0.296296296
Investment (3,000,000.00) 1,439,121.32 917,297.54 1,082,363.11
DCF 3,438,781.98
NPV 438,781.98

DF @ 55% 0.64516129 0.403225806 0.252016129
Investment (3,000,000.00) 1,392,698.05 832,225.59 920,608.75
DCF 3,145,532.39
NPV 145,532.39

DF @ 60% 0.625 0.390625 0.244140625
Investment (3,000,000.00) 1,349,176.24 806,218.54 891,839.72
DCF 3,047,234.51
NPV 47,234.51

DF @ 65% 0.606060606 0.378787879 0.236742424
Investment (3,000,000.00) 1,308,292.11 781,787.68 864,814.28
DCF 2,954,894.07
NPV (45,105.93)

IRR 62.56%

PI @ 60% 1.016

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Business Feasibility Term Project

Cash Budget
Potato Fritters (Pvt) Ltd
Cash Budget For the Year 2009
Jan Feb Mar Apr May Jun

Receipts 1,767,000 1,596,000 1,767,000 1,710,000 1,767,000 1,710,000

Less :
Payments (1,403,308) (1,468,792) (1,604,596) (1,559,328) (1,604,596) (1,559,328)

Cash balance 363,692 127,208 162,404 150,672 162,404 150,672
Add : Opening Cash Bal-
ance 1,080,000 1,451,248 1,586,011 1,755,971 1,914,199 2,084,159

Add Depreciation 7,556 7,556 7,556 7,556 7,556 7,556

Net Cash Balance 1,451,248 1,586,011 1,755,971 1,914,199 2,084,159 2,242,387

Continue
Potato Fritters (Pvt) Ltd
Cash Budget For the Year 2009
Jul Aug Sep Oct Nov Dec
Receipts
1,767,000 1,767,000 1,710,000 1,767,000 1,710,000 1,767,000

Less :Payments
(1,604,596) (1,604,596) (1,559,328) (1,604,596) (1,559,328) (1,604,596)
Cash balance
162,404 162,404 150,672 162,404 150,672 162,404
Add : Opening Cash Bal-
ance 2,242,387 2,412,347 2,582,307 2,740,534 2,910,494 3,068,722
Add: Depreciation
7,556 7,556 7,556 7,556 7,556 7,556
Net Cash Balance
2,412,347 2,582,307 2,740,534 2,910,494 3,068,722 3,238,682

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Business Feasibility Term Project

Year 2010 & 2011

Potato Fritters (Pvt) Ltd
Cash Budget For the Year
Year 2010 Year 2011
Dec Dec
Receipts 27,046,500 37,865,100

Less : Payment (25,073,014) (34,301,015)
Cash Balance 1,973,486 3,564,085
Add : Opening cash Balance 3,238,682 5,302,834
Add : Depreciation 90,667 90,667

Net Cash
Balance 5,302,834 8,957,586

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Business Feasibility Term Project

Receipts and Payments
Potato Fritters (Pvt) Ltd
Receipts & Payments For the Year 2009

2009 Jan Feb Mar Apr May

Sales 1,767,000 1,596,000 1,767,000 1,710,000 1,767,000

Total Cash Receipts 1,767,000 1,596,000 1,767,000 1,710,000 1,767,000

Raw Material Con-
sumption 1,403,308 1,267,504 1,403,308 1,358,040 1,403,308

Material Purchases 1,267,504 1,403,308 1,358,040 1,403,308 1,358,040

Payments

Material 1,403,308 1,267,504 1,403,308 1,358,040 1,403,308

Labor 32,000 32,000 32,000 32,000

FOH 69,288 69,288 69,288 69,288

Salaries 30,000 30,000 30,000 30,000

Operating expense 70,000 70,000 70,000 70,000

Total Payments 1,403,308 1,468,792 1,604,596 1,559,328 1,604,596
Continue

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Business Feasibility Term Project

Jun Jul Aug Sep Oct Nov Dec

1,710,000 1,767,000 1,767,000 1,710,000 1,767,000 1,710,000 1,767,000

1,710,000 1,767,000 1,767,000 1,710,000 1,767,000 1,710,000 1,767,000

1,358,040 1,403,308 1,403,308 1,358,040 1,403,308 1,358,040 1,403,308

1,403,308 1,403,308 1,358,040 1,403,308 1,358,040 1,403,308 1,824,300

1,358,040 1,403,308 1,403,308 1,358,040 1,403,308 1,358,040 1,403,308

32,000 32,000 32,000 32,000 32,000 32,000 32,000

69,288 69,288 69,288 69,288 69,288 69,288 69,288

30,000 30,000 30,000 30,000 30,000 30,000 30,000

70,000 70,000 70,000 70,000 70,000 70,000 70,000

1,559,328 1,604,596 1,604,596 1,559,328 1,604,596 1,559,328 1,604,596

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Business Feasibility Term Project

For year 2010 & 2011
YEAR 2010 Year 2011 Year 2012
Jan Dec Jan Dec Jan
2,297,100 2,297,100 3215940 3215940

2,297,100 2,297,100 3,215,940 3,215,940

1,824,300 1,824,300 2,554,021 2,554,021 2,554,021

1,824,300 2,554,021 2,554,021 2,554,021

1,824,300 1,824,300 2,554,021 2,554,021 2,554,021
32,000 36200 36200 42780 42780
69,288 72,807 72,807 78,908 78,908
30,000 34700 34700 40840 40840
70,000 70,000 70,000 70,000 70,000
2,025,588 2,038,008 2,767,728 2,786,549 2,786,549
Summary at Year End

2010 Total
Sales 27,046,500

Total Cash Receipts 27,046,500

Raw Material Consumption 21,467,014

Payments
Material 21,467,014
Labor 434,400
FOH 873,688
Salaries 416,400
Operating expense 840,000
Taxes 551,855
Installment 489,658
Total Payments 25,073,014

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Business Feasibility Term Project

2011 Total
Sales 37,865,100

Total Cash Receipts 37,865,100

Raw Material Consumption 30,050,935

Payments
Material 30,050,935
Labor 513,360
FOH 946,897
Salaries 490,080
Operating expense 840,000
Taxes 970,085
Installments 489,658
Total Payments 34,301,015

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Business Feasibility Term Project

I: Scenario Analysis

Potato Fritter (Pvt)Ltd
Profit and Loss Account
Worst Case by 10% For the Period ended 31, Dec, 09
Units
PKR per Units Sold

Sales 18,724,500.00 85.5 219,000

Less: Cost of Goods Sold (19,300,899.62) (88.13)
Gross profit (576,399.62) (2.63)
Less: Operating expense
Salaries 120000
Depreciation 70000
Supplies 120000
Marketing expense 600000
Miscellaneous 120000
(1,133,000.00) (5.174)
Operating profit (1,709,399.62) (7.81)
less: Financial charges (220,000.00) (1.005)
Profit before tax (1,929,399.62) (8.81)
less: Taxation (@35%) 675,289.87 3.084
Profit after tax (1,254,109.75) (5.73)
Units
Best Case by 10% PKR per Units Sold

Sales 22,885,500.00 104.5 219,000

Less: Cost of Goods Sold (15,791,645.14) (72.11)
Gross profit 7,093,854.86 32.39
Less: Operating expense
Salaries 120000
Depreciation 70000
Supplies 120000
Marketing expense 600000
Miscellaneous 120000
(927,000.00) (4.233)
Operating profit 6,166,854.86 28.16
less: Financial charges (220,000.00) (1.005)
Profit before tax 5,946,854.86 27.15
less: Taxation (@35%) (2,081,399.20) (9.504)
Profit after tax 3,865,455.66 17.65

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Business Feasibility Term Project

Potato Fritter (Pvt)Ltd
Profit and Loss Account
For the Period ended 31, Dec, 2010
Units
Worst Case by 10% PKR per Units Sold

Sales 24,341,850.00 85.5 284,700

Less: Cost of Goods Sold (25,091,169.50) (88.13)
Gross profit (749,319.50) (2.63)
Less: Operating expense
Salaries 248400
Depreciation 70000
Supplies 120000
Marketing expense 600000
Miscellaneous 120000
(1,274,240.00) (4.476)
Operating profit (2,023,559.50) (7.11)
less: Financial charges (160,675.22) (0.564)
Profit before tax (2,184,234.73) (7.67)
less: Taxation (@35%) 764,482.15 2.685
Profit after tax (1,419,752.57) (4.99)

Units
Best Case by 10% PKR per Units Sold

Sales 29,751,150.00 104.5 284,700

Less: Cost of Goods Sold (20,529,138.69) (72.11)
Gross profit 9,222,011.31 32.39
Less: Operating expense
Salaries 248400
Depreciation 70000
Supplies 120000
Marketing expense 600000
Miscellaneous 120000
(1,042,560.00) (3.662)
Operating profit 8,179,451.31 28.73
less: Financial charges (160,675.22) (0.564)
Profit before tax 8,018,776.09 28.17
less: Taxation (@35%) (2,806,571.63) (9.858)
Profit after tax 5,212,204.46 18.31

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Business Feasibility Term Project

Potato Fritter (Pvt)Ltd
Profit and Loss Account
For the Period ended 31, Dec, 2011
Units
Worst Case by 10% PKR per Units Sold

Sales 34,078,590.00 85.5 398,580

Less: Cost of Goods Sold (35,127,637.31) (88.13)
Gross profit (1,049,047.31) (2.63)
Less: Operating expense
Salaries 298080
Depreciation 70000
Supplies 120000
Marketing expense 600000
Miscellaneous 120000
(1,389,292.00) (3.486)
Operating profit (2,438,339.31) (6.12)
less: Financial charges (88,299.00) (0.222)
Profit before tax (2,526,638.30) (6.34)
less: Taxation (@35%) 884,323.41 2.219
Profit after tax (1,642,314.90) (4.12)

Units
Best Case by 10% PKR per Units Sold

Sales 41,651,610.00 104.5 398,580

Less: Cost of Goods Sold (28,740,794.16) (72.11)
Gross profit 12,910,815.84 32.39
Less: Operating expense
Salaries 298080
Depreciation 70000
Supplies 132000
Marketing expense 600000
Miscellaneous 132000
(1,232,080.85) (3.091)
Operating profit 11,678,734.99 29.30
less: Financial charges (88,299.00) (0.222)
Profit before tax 11,590,435.99 29.08
less: Taxation (@35%) (4,056,652.60) (10.178)
Profit after tax 7,533,783.40 18.90

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J: Ratios Analysis

Potato Fritter Pvt Ltd
Ratio Analysis
Ratios Year 2009 Year 2010 Year 2011

Current ratio 1.651 1.858 2.315

Quick ratio 1.056 1.254 1.801

Working Capital ratio 9.6% 13.4% 17.3%

Cash ratio 0.475 0.561 0.692

Receivable T/O 0.000 0.000 0.000

Inventory T/O 9.723 times 8.922 times 12.346 times
37.024 days 40.348 days 29.159 days

Fixed Asset T/O 11.826 times 16.918 times 26.332 times
30.443 21.279 13.672

Total Asset T/O 3.050 times 2.860 times 2.924 times
118.050 days 125.854 days 123.098 days

Debt ratio 0.107 0.042 0.000

Debt-Equity ratio 0.241 0.083 0.000

Equity Multiplier 2.255 1.959 1.623

Interest Coverage ratio 8.167 18.250 55.870

Fixed Charge ratio 3.222 5.262 9.383

Profit margin 4.9% 6.7% 8.3%

Operating Profit ratio 9% 10.8% 13.0%

Return on Assets 15% 19.1% 24.3%

Return on equity 34% 37.3% 39.5%

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Business Feasibility Term Project

K: Amortization Table for the long term Loan

Potato Fritter Pvt Ltd
Loan Amortization Table

Loan
Amount 1,000,000
Tenure 3 years
Interest rate 22%

Installment 489,658.07

Principle Principle
Date Installment Interest
Repayment Outstanding

1-Jan-09 1,000,000

1-Jan-10 489,658.07 220,000 269,658.07 730,341.93

1-Jan-11 489,658.07 160,675 328,982.85 401,359.08

1-Jan-12 489,658.07 88,299 401,359.08 (0.00)

1,468,974.22 468,974 1,000,000.00

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Business Feasibility Term Project

L: Operating Cycle

Date Stock in hand
units PKR
Inventory Level Maximum
1-Jan 18600 1426006 Units Stock in hand level
2-Jan 17900 1372339 25000
3-Jan 17200 1318672 Re-Order
20000 Level
4-Jan 16500 1265006 Lead
5-Jan 15800 1211339 15000 Time
6-Jan 15100 1157672 10000
7-Jan 14400 1104005
8-Jan 13700 1050338 5000
9-Jan 13000 996671 0
10-Jan 12300 943004 1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627282930
11-Jan 11600 889337
Days Minimum
12-Jan 10900 835670
level
13-Jan 10200 782003
14-Jan 9500 728337
15-Jan 8800 674670
16-Jan 8100 621003
17-Jan 7400 567336
18-Jan 6700 513669
19-Jan 6000 460002
20-Jan 5300 406335
Order
21-Jan Point 4600 352668
22-Jan 3900 299001
23-Jan 3200 245334
24-Jan 2500 191668
Min
25-Jan Level 1800 138001
Max
26-Jan Level 22100 1694341
27-Jan 21400 1640674
28-Jan 20700 1587007
29-Jan 20000 1533340
30-Jan 19300 1479673
31-Jan 18600 1426006

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