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Every year end, the following items are accrued:



- PhilHealth

- Utilities Expense

- Rent Expense

- Withholding Tax on Rent and Percentage Tax

- Interest Expense

2. The useful life of the depreciable assets without salvage value:

3. Depreciation expense is allocated as follows:

4. The following expenditures are alloted as follows:

5. Fuel Expense will be P250.00 monthly.

6. Repairs and Maintenance will be P300.00 on the first year operation and will

increase by 5% in the second year. On the third year, it will increase by P1, 000.00

and will continue increasing by 5% in the succeeding years.

7. Insurance Expense will be P2, 000 annually and will stay constant in the succeeding


8. The owner of the business, who is a resident citizen with no dependent, has no other

sources of income.

Financial Statement Analysis

Financial statements are reports of a companys financial results, financial

conditional, and cash flows. These statements are necessary for the company to

determine its ability to generate cash and to know its capability to pay back its debt.

Also, it is important to track the financial standing on a trend line to recognize any

profitability issues.

Financial statement analysis deals with the analyzation of the balance sheet and

the income statement of a business using ratios for financial representations, business

evaluation, and financial forecasting. Moreover, it helps investors decide whether or not

to invest their funds in a particular company. This analysis is a quantifying method for

the company to know its performance over a span of time.

Current Ratio

Current Ratio is a liquidity ratio that measures a companys ability to pay short-

term and long-term obligations. It considers the total amount of current assets of a

company in relation to its total liabilities. The formula is as follows:

Current Ratio = Current Assets / Current Liabilities

The table above indicates that within the five- year projection, the proposed

business has current ratios above 1:1 the ideal current ratio which means that it is

financially liquid since the current assets are more than enough to cover the currently

maturing liabilities.

Acid Test Ratio

Acid Test Ratio is a huge indicator of whether a firm has sufficient short- term

assets to cover its immediate liabilities. It is more robust than the current ratio since it

ignores illiquid assets such as inventory.

Acid Test Ratio = Quick Assets / Current Liabilities

The table above tells us that the proposed business is financially liquid on the

last three years because it is above the ideal acid test ratio of 1:1. On the first two years

of operation, the acid test ratio is below the ideal ratio because of payment of currently

maturing obligations. The current asset of the business in the first two years is mostly

composed of inventory which is the main reason of the low acid-test ratio. The usage of

acid test ratio is more reliable as compared with the current ratio because it helps in

assessing the liquidity of the business without the consideration of inventory and

prepaid assets since quick assets are highly convertible into cash.

Return on Equity

It is the most common profitability ratio that measures the overall efficiency of the

business in managing its total investment in asset and generating a profit to the owner.

It is calculated by this formula:

Return on Equity = Net Income / Average Owners' Equity

The table above indicates that the returns of investments from the first year to the

fifth year are increasing because of the increasing trend of net income. The returns on

equity for the first three years are negative because of the net losses the business

incurred. However, the return increases due to increase in the projected sales that

resulted in improvement in the financial performance. The operating expense has

minimal increase which helps in the continuous progress in the operations. A Du Pont
Analysis is shown on the next page to further understand the components of return on

equity of the business.

Present Value Payback Period

Present value payback period is a capital budgeting procedure used to determine

the length of time required for the project to recover the initial cost of an investment

using the present value of future cash flows. The shorter the period is, the better.

The table above indicates that the proposed project will not be able to recoup the

investment within five years. The approximate time cannot be determined because the

proponents estimated the financials of the proposed project for five years only.

Nonetheless, it is in a period more than five years. The information warns the

prospective implementer of the risks he has to bear in undertaking the proposed project.

However, to approximately determine the payback period of the investment, the

proponents computed the average increase of net cash flow from operations and used

this trend or percentage to calculate for the following years net cash flow.

Contribution Margin

Contribution margin indicates the percent of margin after considering variable

cost compared to the company sales in pesos. It represents the total earnings available

to pay for the fixed expenses and generate a profit. The formula is:

Contribution Margin = Sales - Variable Cost

The table above shows that the proposed projects contribution margin is

increasing because of the increased selling price as stated in the financial assumptions

and the increase in production which decreases variable cost per unit. Therefore, the
business is more capable of coping up with its fixed cost and that there is an increasing

profit per year.

Break-even Point Analysis

This analysis determines the minimum amount of peso sales or number of items

to sell to cover up the expenses during the period. An amount over the break-even point

would result in a profit while the opposite would result in a loss. An amount equal to the

break-even point would result in neither profit nor loss but break even.

The table shows how much sales in peso and in units is needed to break even.

Furthermore, the year 2021 had the highest break-even point that resulted from its

lesser contribution margin. On the first three years of operations, the business

continuously increases its contribution margin per unit due to the increases productivity

of the production process. The break-even point increases on the fourth year because

of the additional cost of labor which is necessary to increase the production capacity

and to maximize the possible sales the company could take. It decreases again on the

5th year which could signify that the increase is temporary and is solely because of the

increase in variable labor cost.


Sensitivity analysis is a technique useful for the business in identifying in which

instance it is very sensitive or in what independent variable change does the business is

materially affected. It determines the impact it gives to the entity when particular

variable differs from what was previously assumed. The proponents can determine how

changes in one variable will affect the target variable and the business through

sensitivity analysis.
The entity should consider its actions when the project is shown to be sensitive to

the value of a variable that is uncertain. It can include project level conduct like long-

term supply contracts, sector level actions like price changes or national level actions

like a change in tax. The project may have to be redesigned or implemented first on the

initial basis when there is exceptional uncertainty.

Listed on the next page are the scenarios assumed that may happen during a

business endeavor.

The data gathered is from the Philippine Statistics Office.


The proposed business is most sensitive to decrease in sales rather than an

increase in expenses in the production process and operations. Due to the increase in

sales volume, the business is still expected to progress in the succeeding years. The

proposed venture has also shown that the productivity increases and, therefore,

decreases the cost per unit of the produced goods. Based on these analyses, the

business will be at the optimal situation if it declines its cost of production and operating




Businesses engages with the objective of gaining maximized profit. However,

business developments cause a relative impact on different sectors of the community,

thereby creating social responsibility. Businesses have a huge share in contributing to

the countrys economic growth and development of the society.

Ideally, there must be an even consideration of the generation of maximized

profit, and the undertaking of its social responsibility. The sectors that will be the

beneficiaries of the business upon its operation, with their respective benefits, are

highlighted in a schematic diagram on the next page.


The government is responsible for the regulation of national policies, contributing

to the growth of the economy, taking care of the environment, and providing a healthy

and safe nation for its citizens. However, the government cannot do these without


In line with this, entrepreneurial activity such as the realization of the proposal will

lead to the generation of more revenues for the government through their payment of

business taxes, employee taxes, licenses, permits and other fees.


Business developments give way for opportunities to people in society,

particularly employment. Unemployed community residents especially those who have

not reached college level will be given opportunities. On top of that, the employees will

earn additional income to provide for their needs and eventually improve their lives.

There will be a decrease in the unemployment rate in the country, and it will also

directly improve the standard of living for those in the community where the business is


Ultimate Users
The quality of the product Pandan Massage Oil is considered better as compared

to chemically-based ones. It can be used to relieve stomach cramps and spasms. Its

natural components are commonly conventional in mitigating pain like arthritis, chest

pains, earaches, and headaches. Also, healing rheumatisms and nerve weaknesses.


Customer satisfaction is also one of the objectives of businesses other than the

maximization of profit. The spas will be able to provide their patrons with an organic,

innovative, high quality and affordable product. The clients are given another option to

choose from or an alternative from the usual massage oil used to make a variety of their



Competition is but normal in business. Varieties of products of the same nature

compete to attract almost the same market with their homogeneous products, as such

that it is challenging for one to survive.

On the other hand, the existence of competitors in the industry promotes the

improvement of its competencies that promotes sustainability in business. For one, it

will help them identify their comparative advantage and edge as to the other

competitors. Their strengths and weaknesses are identified as a basis for them to

leverage its strength and overcome its vulnerability. Lastly, the competitors will be

propelled and influenced to innovate new products or improve their existing products for

market competence.

Related Industries
The realization of the proposed project will help in promoting other related

industries. These include the suppliers of raw materials such as pandan leaves, mineral

oil and eucalyptus oil, as well as the manufacturers of the tools, equipment, and

machinery. They will be benefitted by the generation of additional income from being the

suppliers of the proposed project.



A standout amongst the essential parts of planning entrepreunership is deciding

and dissecting its strengths, weaknesses, opportunities, and threats. It helps the

implementer know the inside and outside variables that will impact the achievement or

failure of the business. SWOT analyses are frequently utilized during strategic planning.

They can serve as an antecedent to any organization activity, for example, exploring

new activities, settling on choices about new approaches, recognizing conceivable

zones for change, or refining and diverting endeavors in the middle of planning.

A SWOT analysis concentrates totally on the four components incorporated into

the acronym, permitting organizations to recognize the forces impacting a system,

action or activity. Knowing these favorable and negative aspects can help organizations

adequately impart what parts of the plan should be perceived. With the use of SWOT

Analysis, the management is directed to the achievement of its objectives by figuring

out how to change over its weaknesses and threats to strengths and opportunities

individually. Also, this guarantees the abilities and strengths of the business to be

boosted with a specific end goal to work successfully in a focused market.

Use of natural components

The proposed massage oil is composed of natural elements such as Pandan

leaves extract, mineral oil, and eucalyptus essential oil. It provides assurance to the

user that the product is not harmful and does not contain the harmful chemical

substance. The massage oil produced using Pandan leaves has a similar relieving

impact with the other massage oils, however the main contrast is that it has its kind of

unique refreshing smell.

Similar massage oils are more costly

The proposed product is cheaper compared to the established massage oils

used by the spas. Pandan massage oil is composed of a base oil and essential oil. The

massage spas do not need to incur additional cost for other essential oil to provide a

delightful smell.

Requires minimal training of workers

The production of the proposed massage oil is easy; the unskilled workers can

do this efficiently with minimal training.


Established Competitors

Many varieties of massage oils have already been on the market. They come in

different forms, sizes and packaging. Competing products are supplied from both

foreign and local sources. Furthermore, the spas may refuse to shift to another kind of

product due to their patronage to the massage oils that they have been accustomed


Product Reputation Requires Extensive Promotion

The product being new in the market would need elaborate and comprehensive

marketing schemes to penetrate the market and provide awareness to the people that

this product is a better option both quality and price.


Workers today are more stressed due to extensive work pressure

Nowadays, the factors that can trigger stress to people are increasing work

pressure which pushes them to resort to having a body massage. This tension,

pressure and strain factor which is becoming a trend in our present work environment

would increase the customers in a massage spa, which consequently would increase

demand for the product by the spa establishments.

Increasing number of foreigners patronizing traditional massage services

The nations natural tourist spots are one of the reasons why many foreigners

visit the country and learn some bits of its culture. One of the cultures which are highly

patronized is the traditional body massage, which is more expensive in their countries.

The affordability encourages the tourist massage services in the country and is an

opportunity to increase the products demand.


Fast Changing Preference of the Customers

At present, there are several types of massage oil products existing in the

market, customers will be provided with more options to try other products and would

not patronize the proposed product.

Prevalence of Massage Machines

The invention of massage machines was made possible by the advent of

technology and as people came to know its existence they prefer to have some

relaxation using the massage equipment as commonly promoted in the malls. This

technology development may prevent the customers to visit the massage spas and

instead have their massage at home with the use of massage machines.


Established Competitors

Having competitors with established reputation with massage spas could prove

to be a weakness but as a strength as well. The product may be new to the industry, but

this can provide them an alternative to shifting to a better quality product, which is

organic and likewise much cheaper. Changing to an affordable product allows them to

save on their service cost and higher profits.

Product reputation requires extensive promotion

The product being new to the market and practically having no demand and

supply gap, it needs detailed product development like sampling and direct selling which

is costly. This can encourage customers of the spas to demand the proposed oil

because of its stress-relieving effect with gentle and refreshing aroma or smell.


Fast changing preference of customers

Customers are fickle minded- they tend to shift from one product to another fast

once they feel that the product does not satisfy their needs and wants. The fast

changing minds of the customers is a threat to every business. This threat can serve as

an avenue for the entity to be more innovative. The implementer of the proposed

product may consider selling Pandan Massage oil with freebies for example or using

other selling strategies like buying one take one or giving discounts for every 10-gallon

purchase and the likes.

Prevalence of massage machines

Technology and tradition always are on different sides of a coin. The number one

threat to every traditional business is technology. The fast development of technology

nowadays always put the traditional business at a disadvantage. Entities that use

traditional methods are often disregarded when an alternative technology is offered in

the market. The implementer can make this as an opportunity to improve its quality. The

implementer must see to it that the relaxing effect of the proposed product is lasting,

that it can more than compete with the relaxation the massage machine can offer which

is very mechanical, with no gentle touch.


The workers needed in the production only requires a minimal training which

would certainly be of great help to save time and cost during the operational activities of

the business. Also, the basal component of the product being the Pandan leaves has its

natural aroma; this does not need other essential oil compared to the competing

products. In effect, the proposed product selling price is much lower but can provide the
needed stress relief after its application with its refreshing and soothing aroma. This

feature will enhance the market patronage and increased profitability to the business.




This study was designed to determine the feasibility and viability of The

Proposed Production of Massage Oil from Pandan Leaves (Pandanus Amaryllifolius)

and its Distribution to Spas in Cebu City.

The study answered the following queries:

1. Is the proposed production and distribution of Massage Oil from Pandan Leaves

feasible regarding the following aspects:

1.1 technical;
1.2 marketing;
1.3 management;
1.4 legal and taxation;
1.5 financing;
1.6 financial;
1.7 socio-economic desirability and
1.8 SWOT analysis?
2. Based on the finding of the study, what recommendations may be formulated

for the project proposal?

The study covers the massage spas located within Cebu City. The proponents

used purposive sampling method in finding the sample size employed in the survey,

In gathering the data, the Descriptive Survey Method was used as the data

gathering instrument utilizing the questionnaire made by the proponents. Other sources

such as the periodicals and internet were also applied to get the information needed for

the whole study.

Based on the data gathered and presented in the previous chapters, the

following based on the proposed business are discovered:

Technical Aspect

The proposed product is massage oil that contains oil extracted from Pandan

leaves and mix with mineral and eucalyptus oil for additional benefit. Pandan leaves

contain laxative properties that serve as the pain reliever. It is also used to treat

arthritis, chest pains, earaches, headaches, and reducing stomach cramps. The

business will rent a space in Osmena Boulevard, Cebu City for the office and production

site. The production capacity for the first year are 312 gallons, and an estimate that

there will be 10% increase each year and in the fourth year an additional worker is hired

causing another 50% addition in the production capacity.

Marketing Aspect

There is no demand-supply gap for the proposed product for the reason that

massage oils are prevalent in the market. In spite of the abundance in the market, the

proposed product can still compete because it is organic and cheaper. The results of the

survey showed that there are two (2) leading brands in the market which composed

70% of the supply. Consequently, the proponents determined that the potential market

share of the proposed product is zero, but with an extensive marketing strategy, it can

penetrate 10% of the annual demand. This market share increases by 5% yearly.

Management Aspect

The proponents concluded that the organization structure of the proposed study

be sole proprietorship considering that the amount of initial capital requirement is only

P196, 464.00 which could be raised or financed by a single person. Furthermore, the
proposed project only needs a simple organizational structure composed of a few


Legal and Taxation Aspect

For the business to commence, th following are required: DTI Registration,

Business Permit, Barangay Clearance, Police Clearance, Sanitary Permit, Mayors

Permit, Fire and Safety Clearance, BIR Registration and Clearance, SSS Membership

and Clearance, Philhealth Registration, Pag- ibig Registration, and LTO Registration.

The business will be subjected to taxes such as Income Tax, Percentage Tax,

Expanded Withholding Tax, and Documentary Stamp Tax.

Financial Aspect

The proposed venture is not found to be profitable based on the projected loss

for the first three years of operation, (P86, 813.25) for the first year, (P45, 339.59) for

the second year, and (P5, 858.03) for the third year. However, during the fourth year

and fifth year of operation, it resulted in net income of P21, 128.47 and P104, 964.68

respectively because of the increase in sales and minimal increase in production cost.

The return on equity from first year to fifth year is -57%, -34%, -4%, 13% and 61%

respectively. The payback period of the business is more than five years. Therefore, the

proposed business does not have sufficient profit to recoup the implementers

investment. It should also be pointed out that despite the great losses of the business, it

is still improving its performance.

Socio-Economic Desirability

Through the implementation of the proposed project, different sectors will be

benefited such as the government, community, ultimate users, spas, competitors, and
related industries. The project will give job opportunities to those unemployed ones and

improve their quality life. The community will also be introduced to a new product of

satisfactory quality to be offered by the market.

SWOT Analysis

The strengths of the proposed product are the use of natural components; it

requires minimal training of workers and that similar massage oils are pricey. One of the

weaknesses is the presence of established competing products. The product, being

new to the market, requires extensive promotion. Workers today are more stressed due

to extensive work requirement and the increasing numbers of foreigners patronizing

traditional massage are its opportunities. The threats are the fast changing preference

of customer and prevalence of massage machines.


Based on the preceding, the proponents conclude that The Proposed Production

of Massage Oil from Pandan Leaves (Pandanus Amaryllifolius) and its Distribution to

Spas in Cebu City is technically feasible, socially and economically desirable but not

financially stable and profitable.


The proponents recommend that The Proposed Production of Massage Oil from

Pandan Leaves (Pandanus Amaryllifolius) and its Distribution to Spas in Cebu City be

still implemented despite the first three years of net losses.

However, to be profitable the following further recommendations should be done

by the prospective implementer:

1. The selling price of the product could be increased to cope up with the increase

in cost incurred in the production process.

2. To improve the financial performance, the business could widen its market by

extending to the neighboring cities and municipalities. The statement of financial

position shows a large amount of ending inventory which signifies that there is

room for more customers from cities other than of the target market.

3. To broaden the target market of the proposed product to household customers,

the product could be repacked into smaller volumes. The smaller packaging of

the product could be consigned to the supermarket around the target market.

4. The implementer may choose to bear all the risks and still continue the operation

of the proposed business for more than five years because his loss can still be

recovered in the following years since the projected revenue is continuously

increasing without a substantial increase in product cost.