Business Development Plan

On

“NEW SAPANA KIRAN JEWELLERY”

In partial fulfillment of the requirements for the degree of

Master of Business Administration (MBA)

Submitted to
Mr. Kishore Dhungana
MBA Program Director
Apex College
Pokhara University

Submitted By
Mr. Mukti Kiran Snehi
Section: Invader (4th trimester)
Examination Roll Number: 18220317

December, 2019
Kathmandu, Nepal
 ACKNOWLEDGEMENT

It is a matter of great pleasure for us to undertake and present our creative and practical work, a
project report on Business Development Plan. This attempt at any level cannot be satisfactorily
completed without the support and guidance.

First of all, I would like to extend my sincere gratitude to Mr. Kishore Dhungana from whom I
got immense inspiration to do this Business Development Plan. He had been very helpful while
suggesting us the outlines of this project and correcting our doubts. Without his support and
encouragement this report and business plan would not possible to enhance my practical
knowledge about the real situation.

I would like to express my deep and sincere gratitude to Apex College for providing me an
opportunity that has given me practical exposures and the real time experience to various
activities in practical setting which will be fruitful and beneficial for my upcoming future.

Last but not the least; I would like to thank everyone who contributed and helped me directly and
indirectly supports.

………………..

Sincerely,

Mukti Kiran Snehi

Roll No: 18220312

Section: Invader

ii
 DECLARATION

I am student of MBA, hereby declare that the project titled “New Sapana Kiran Jewelery,” for
the subject BUSINESS DEVELOPMENT PLAN submitted by me for 4th trimester of the
academic year 2019, is based on the actual work carried out by me under the guidance and
supervision of Course instructor Mr. Kishore Dhungana. I further state that this work is original
and not submitted anywhere else for any examination.

………………………

December, 2019

Mukti Kiran Snehi

Roll No: 18220312

INVADER (4th trimester)

iii
 EXECUTIVE SUMMARY

New Sapana Kiran Jewelery is owned by four partners. This business is registered as a private
limited company and going to start at Jogbuda, Dadeldhura, Nepal. Company promoted 24 karat
jewelers for promoting Nepalese Gems & Jewellery in Nepalese market. Unique and traditional
design as well as modern craftsmanship’s are our specialty. Our jewellery is made with finished
craftsmanship and care. We deal in intrinsic design, colorful stone, especially hand crafted
jewellery. Also, our company promoting customers through buying old ornaments and redesign
old ornaments. It is not only for female, it’s for all. We provide familiar, personalized and quick
service, through highly skilled, creative and experienced professionals. Vision of this company is
“To Serve the Customers with excellent Jewellery offering and services that imbeds: Trust,
Purity and Quality”.

Our company helps customers to finding their required products with the stylish and well-
designed compared to competitors. The major target customers of the company will be the young
age people with medium or high income. We will do marketing activities through paid promotion
in social media, television, pamphlets and brochures. Sales strategy always follow long term
objectives of our company by retaining and attracting our proud existing as well as new potential
consumers. Understanding the need of marketing in present time, the cost allocated for marketing
of the product is one lakh twenty thousand for first year which will be increased every year by
15%. Similarly, we have a different strategy to attract customers. That are: Cash Discount,
Special occasion discount and loyal customer discount.

The business will be managed by one CEO, one Director, one finance and accounting head and
one HRM and marketing head to look after the business and there will be four staffs under them
there will be design of ornaments. New Sapana Kiran Jewellery will be started with an initial
investment of Rs. 11,071,736 out of which Rs. 6,734,868 will be financed by loan and the
remaining Rs. 4,336,868 will be financed by equity. The equity capital will be contributed by the
four owners. The assumption is made that sales revenue of 50 gram gold and 150 gram silver and
rate is Rs. 71000 and Rs. 900 per tola and sales will be increased by 10%, 10%, 20% and 30%

iv
respectively. The COGS is also expected to be 85% of the total sales. The pro forma income
statement of New Sapana Kiran Jewellery shows after tax profit of Rs. 8,994,758.88 in beginning
of the year and Rs. 19,831,800.2 in 5 th year and the pro forma income statement show the
increasing profit.

Present value of money today to the present value of money in the future affected by inflation
and returns into account. IRR is the discount rate at which the present value of all future cash
flow is equal to the initial investment or in other words the rate at which an investment breaks
even. The projected NPV shows the total value of Rs. 25,960,249 and IRR of 86%. The modified
internal rate of return of this project is 48%. This rate can be realized when the cash flows from
the business are reinvested at a rate equal to its cost of capital. The pay-back period of this
company is 1.26 years. It means that the initial investment will be recovered in the second year
of operation. If the company is able to sell at BEP there will no profit. In first year the BEP is Rs.
26529333.33 and the last year is Rs.36537024.

Finally, there will come several growth opportunities in near future the company will have to
expand its operation to serve a larger market. The company will focus on expanding its business
through adding up another branches in several other locations and going for an online business as
well as increasing in the product design. By this, we will be able to earn more market share
which eventually leads to higher revenue and profit.

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 TABLE OF CONTENTS

Contents

ACKNOWLEDGEMENT...............................................................................................................ii

DECLARATION...........................................................................................................................iii

EXECUTIVE SUMMARY............................................................................................................iv

TABLE OF CONTENTS...............................................................................................................vi

CHAPTER 1: INTRODUCTION....................................................................................................1

1.1 BACKGROUND...................................................................................................................1

1.2 ORGANIZATION AND MANAGEMENT TEAM.............................................................2

1.2.1 ORGANIZATION'S MISSION AND VISION.................................................................2

1.2.2 MANAGEMENT TEAM...................................................................................................3

1.2.3 ORGANIZATIONAL STRUCTURE................................................................................3

1.2.4 IMPLEMENTATION PLAN: GANTT CHART...............................................................4

1.3 MARKETING AND SALES PLAN.....................................................................................5

CHAPTER 2: ANALYSIS OF THE SCENARIO..........................................................................7

2.1 MARKETS AND COMPETITION.......................................................................................7

2.2 LEGAL FRAMEWORKS, ENVIRONMENTAL AND SOCIAL FACTORS:...................7

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 ENVIRONMENTAL AND SOCIAL FACTORS:......................................................................9

CHAPTER 3: MARKETS AND COMPETITION.......................................................................11

3.1 MARKET SEGMENTATION AND TARGET MARKET................................................11

3.2 MARKET NEEDS...............................................................................................................11

3.3 MARKET TRENDS............................................................................................................12

3.4 COMPETITORS AND SWOT ANALYSIS.......................................................................12

CHAPTER 4: FINANCIAL PLAN...............................................................................................14

4.1 IMPORTANT ASSUMPTIONS.........................................................................................14

4.2 FINANCIAL DETAILS OF STARTUP EXPENSES.........................................................14

4.3 SALES FORECAST AND COST OF GOODS SOLD.......................................................15

4.4 BUDGETED LOAN REPAYMENT SCHEDULE............................................................15

4.5 PROJECTED INCOME STATEMENT..............................................................................15

4.6 PROJECTED BALANCE SHEET......................................................................................16

4.7 PROJECTED CASH FLOW...............................................................................................16

4.8 FINANCIAL RATIOS........................................................................................................16

4.9 NPV, IRR AND MIRR........................................................................................................21

4.10 PAYBACK PERIOD.........................................................................................................21

4.11 BREAKEVEN ANALYSIS..............................................................................................21

CHAPTER 5: FUTURE PLAN AND EXIT STRATEGY...........................................................22

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 5.1 FUTURE PLAN..................................................................................................................22

5.2 EXIT STRATEGY..............................................................................................................22

ANNEX.........................................................................................................................................23

viii
 CHAPTER 1: INTRODUCTION

1.1 BACKGROUND

1.1.1. Industry Background

Gold and silver was used for jewellery a long time ago, it was 560 B.C. As jewelry was well
known in every corner of the earth, the creation of stamped sealed gold coin was accepted. It
simplified trade as it was a much easier form of transfer of money. Gold is easily one of the most
popular and precious metals. Its capability of being an investment factor is one of the main
reasons. The main reason for the consideration of gold as investment is because it has the most
effective safe haven and also for its hedging properties across numerous countries.

Nepalese gold and silver jewellery is famous across the world for its quality and artistic designs.
Silver ornaments from Nepal are exported to various countries around the world as high value
articles of its trade basket, generating income to the producer and valuable foreign exchange to
the government. Nepal gold and silver handicraft designs are century’s old. The Shakya and
Sunar families, primarily in Kathmandu Valley, have been producing silver and gold jewelleries
since ancient times. The purity of gold is indicated by Karats. 24 karat gold is considered to be
the purest form of gold there is. It is said to be 99.99% pure whereas 22 karat gold is said to be
around 92% pure. But for making jewellery, 24 karat gold is the least preferred. 22 karat gold is
the most preferable one, but you also have 14 & 18 karats gold to select from. Gold is now a very
valuable asset.

Established in 2003, Nepal Gem and Jewellery Association has played a significant role in
institutionalizing the Nepali Gem and Jewelry industry by unifying the businessmen working in
this sector, promoting export, raising job opportunities, and providing quality service to the
customers. Nepali jewelry has been of high interest in the international market. Hence, for the
first time “Nepal Gem Jewellery Expo 2011” is being organized with a goal to bring Nepali gem

1
and jewellery products under one roof for the international market and investors for the
promotion of export.

1.1.2. Company Background

New Sapana Kiran Jewelery is owned by four partners. This business is registered as a private
limited company and going to start at Jogbuda Dadeldhura, Nepal. Companie promoted 24 karat
jewelers for promoting Nepalese Gems & Jewellery in Nepalese market. Unique and traditional
design as well as modern craftsmanship’s are our specialty. Our jewellery is made with finished
craftsmanship and care. We deal in intrinsic design, colorful stone, especially hand crafted
jewellery. Also, our company promoting customers through buying old ornaments and redesign
old ornaments. It is not only for female, it’s for all. We provide familiar, personalized and quick
service, through highly skilled, creative and experienced professionals.

1.2 ORGANIZATION AND MANAGEMENT TEAM

1.2.1 ORGANIZATION'S MISSION AND VISION

Our mission

• To promote Nepali traditional and designed jewelleries in the national and international
market.
• To provide quality service and products to customers.
• To develop the creative and innovative professionals in jewellery industry.
• To build trust, awareness, understanding and desirability in jewellery industry.
• Commitment to create the finest establishing Jewelleries.

Our Vision

Vision of this company is “To Serve the Customers with excellent Jewellery offering and services
that imbeds: Trust, Purity and Quality”.

2
1.2.2 MANAGEMENT TEAM

New Sapana kiran Jewellery will be a partnership company. This business will be registered
under partnership act. It will be owned by four promoters and will be contributing different
portion of equity for incorporation of the business.
S.N Name of Promoter Position Contribution
1. Chakra Prasad Snehi CEO 30%
2. Mukti Kiran Snehi Director 30%
3. Rupa Shrestha Finance/Account 20%
4. Rabin Kiran Snehi HRM/marketing 20%

1.2.3 ORGANIZATIONAL STRUCTURE

There will be one CEO, one Director, one finance and accounting head and one HRM and
marketing head to look after the business and there will be four staffs under them there will be
design of ornaments.

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1.2.4 IMPLEMENTATION PLAN: GANTT CHART
New Sapana Kiran Jewelery implementing its business plan is for 2 months and 3 weeks.
Search of location and purchase of land and building will be finalized within 1 month. Then
the company will apply for registration and will be completed within 1 week. Decoration
will be completed within 1 week and along with purchase of furniture and equipment’s will
be completed within 3 weeks. After finalize every decoration and necessary things, we will
purchase ornaments within 1 week. Similarly, the promotion and marketing of the business
will be done 4 weeks after registered our company. Finally, after 2.5 months our New
Sapana Kiran Jewelery welcome for grand opening.

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 1.3 MARKETING AND SALES PLAN

For meeting customer’s need, we need to understand marketing and sales activities. Marketing

and sales is important to successfully enter into the competitive market. We wanted to grape

opportunities and threats of our business. So that, we acknowledge marketing mix of the

company.  Products/Services:

New Sapana Kiran Jewelery will provide different kinds of gold and silver ornaments. The
various types of ornaments that offer by our company are as follows:

1. Tilhari
2. Finger Ring
3. Necklace
4. Pote
5. Jantar
6. Phuli
7. Bulaki
8. Mangalsutra
9. Rani Haar
10. Moon clip
11. Bangal
12. Bichhi
13. Payaju

5
  Price

Price of gold and silver is change every day but the cost of making all the different ornaments
are different. As per design and product customer have to pay different prices. We
have a standard price for each products set by Federation of Nepal Gold and Silver
Association.

 Place

New Sapana Kiran Jewelery will establish in buspark of jogbuda, Dadeldhura Nepal. Where
most of the customers arrives and visit this place. This place is suitable because around
buspark there is banks and hotels. Almost all the villager’s and tourist visit easily.

 Promotion

Only establishing business is not enough for us, for making company success we have to
promote our products and brand. New Sapana Kiran Jewelery will promote business
through different ways:

1. Social Media
2. News Paper
3. Television
4. Public relation, etc.

Sales Strategies:

Sales strategy always follow long term objectives of our company by retaining and attracting our
proud existing as well as new potential consumers. Understanding the need of marketing in
present time, the cost allocated for marketing of the product is one lakh twenty thousand for first
year which will be increased every year by 15%. We have a different strategy to attract
customers.
That are:

1. Cash Discount
2. Special occasion discount
3. Loyal customer discount
6
 CHAPTER 2: ANALYSIS OF THE SCENARIO

2.1 MARKETS AND COMPETITION

Since it is not a very new concept of business, there are several competitors on the proposed area.
There will be high chance of getting required number of customers because there are very few
competitors and there is the high population. As every family, now need of jewellery on their
marriage, party and others; it will provide a great opportunity for us in the market. Due to the
increasing demand in the market and moderate competition, with the quality of products and
services we can have a good revenue and profit. So, the major market for this business will be the
dadeldhura area. We also will have customers from the personal relations such as friends and
family.

The major competitors for our business will be:

• Bhemsen jewellery
• New purnagari Jewellery
• New Ghorak Jewellery
• Kailpal Jewellery

2.2 LEGAL FRAMEWORKS, ENVIRONMENTAL AND SOCIAL FACTORS:

LEGAL FRAMEWORK

In order to register a firm, an application in the format as referred shall be submitted before the
concerned Department, stating the details as follows, along with the fees as prescribed.

7
(a) Full Name of the firm

(b) The Principal place of business of the firm,

(c) The objectives of the firm including the short description of the nature of the goods or
services, as the case may be, which the firm intends to run the business,

(d) The full name, surname and permanent address of the partners,

(e) The matter of restriction imposed on the power of a partner, if any,

(f) The types of partnership and the capital subscribed by each partner

, (g) The name of a partner or partners, who represent the firm,

(h) The mode to share the profit and loss between /among partners,

For the exit from the business and issuance of the certificates necessary requirement shall be
fulfilled ass mentioned in partnership act. The fee for registration and renewal is charged as per
the capital of the boutique.

The firm should present the following document while registration:

• Application form
• Article of Association
• Memorandum of association
• Company registration certificate
• Partnership deed

8
ENVIRONMENTAL AND SOCIAL FACTORS:

 Political and Legal Environment

Political and legal environment has a great effect in any business. Political instabilities can
hamper the operation of business. Moreover the changes in plans and policies have a significant
impact on such business. The changes in plans and policies will impact the profit and operation of
the business. If there is stability in the political situations in country, the business can operate in
full scale and there will be predictability in the environment. The tax policy also affects the
profitability of the business. Similarly, the country's laws and bylaws regarding the
entrepreneurship also affects such business scenario.

 Economic Environment:

Economic environment of a country comprises of country's economic system, market size,

economic growth rate, inflation/deflation, trade policies, and economic policies and so on.
Economic factors like inflation, economic stability, market size etc. does affect our business. This
also determines about the growth of the business in the near future.

 Socio-cultural Environment

Socio-cultural factors that affect business are the group influence of the customers who want to
purchase the jewellery design. People are influenced for purchase of ornaments if they see their
friends or neighbors are having the one or multiple.

9
  Technological Environment:

Technology is also a great part of this business. The advance type of machines used in jewellery
design. Similarly, as businesses are going to the online platform, we should also focus on that.
Using social sites and websites, we can conduct the marketing activities on those platforms. So,
coping with the technological advancements, we should be updated with new opportunities in the
technology field regarding our business.

10
 CHAPTER 3: MARKETS AND COMPETITION

3.1 MARKET SEGMENTATION AND TARGET MARKET

The target market segmentation will be done on the basis of customer's age and income. The

business will also target the business customers such as income, age and other existing

businesses.  Income Based segmentation:

The customers of middle and high class income group will be the major target customers of our
products as low income group will not have capacity to using jewellery as usual in their life.

• Local Businesses

As the local existing businesses such as other jewellery who need our company’s design they will
be our target market too.

• Young Age People:

As old people will not be interested in purchasing jewellery, they will not be more targeted.
Young, loving people will be our major target customers such as just married and young people.

3.2 MARKET NEEDS

New sapana kiran jewellery is planned to be located at jogbuda area of Dadeldhura distict. It is
the village area as well as there are various local businesses are being operated. Today every
person wanted jewellery product for life style purpose. Therefore, the market need for jewellery
is high and also increasing. So, if we become able to do marketing well and able to provide
quality products, we will be successful. But our products and services will be different because of
quality and stylish design.

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3.3 MARKET TRENDS

Along with the development of the Nepalese market village areas also developed wisely. As per
there living standard they attract toward design and similarly increase in purchasing power of
customer. The market for this business in developed countries is relatively mature because they
used gems but the market in developing and religious countries is growing. So, in country like
Nepal the market is growing and the customers are being attracted for fashion in their setup.
Now, market is growing for jewellery business.

3.4 COMPETITORS AND SWOT ANALYSIS

Since the market is growing, the entrance of competitors is also growing. The major competitors
of our business are:

• Bhemsen jewellery
• New purnagari Jewellery
• New Ghorak Jewellery

• Kailpal Jewellery

SWOT ANALYSIS

The SWOT analysis examines the New Sapana Kiran Jewellery strength and weakness that needs
to be addressed. Further it also helps us know about the external factors such as opportunity and
threats. A strengths, weaknesses, opportunities and threats (SWOT) analysis of our jewelry store
can help to make business strategy and find areas that need attention or improvement. This
analysis provides a summary of these areas of our business and gives us a perspective of our
business that you may have overlooked. A SWOT analysis analyze our business and immediately
take action to improve it.

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 • Strengths

List the strengths of our jewelry store by determining the resources that give you an advantage
over competitors. Identify what our store does well and what it does effectively to serve its
customers. For example, our store have strong customer relationships, high-quality and designed
jewelry, skilled employees and good inventory management.

• Weaknesses

Determine and list our store's weaknesses that may limit our ability to maximize profits.
Determine what our store does not do well and what prevents customers from purchasing our
jewellery. For example, fluxing price of gold and silver, high pay to our employees and our store
in a poor location.

• Opportunities

Find and list external opportunities that could provide additional store profits and growth. Find
market trends and new ways to drive business. For example, there will be a new jewelry line to
attract new customers, and expand branches.

• Threats

Examine external threats that may inhibit our jewelry store's growth and profits. For example,
our competition may be expanding locations, and technologies change, which may limit
customer spending.

Finally, analyze strengths, weaknesses, opportunities and threats and form a specific plan that
will help us to address each area to improve our business. For example, it may decide to add the
new jewelry line to our store, relocate store to a better location and offer sales promotions to
attract more customers in a weak economy.

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 CHAPTER 4: FINANCIAL PLAN

4.1 IMPORTANT ASSUMPTIONS

• Salary remain same for year 1 and 2 then after increase by 10%annually
• Electricity charge will increase 10% annually
• Repair and maintainance will be incrase by 10% annually
• Promotion and mareting will be increase by 15% annually
• Insurance expenses will be increase by 20% annually
• Telephone and stationary expenses will increase by 20% annually
• Depreciation rate of land and other is 5% and 25% annually
• Sales will increase 10%, 10%, 20% and 30% year 2, 3, 4 and 5 respectively.
• Inventory will be 20 days
• A/R will be collected in 7 days.
• Account Payables will be paid to suppliers after 10 days.
• The interest rate for loan amortization is taken 15%
• Rate of dividend distribution is 100%, 150%, 200% , 250% and 300% respectively.

4.2 FINANCIAL DETAILS OF STARTUP EXPENSES

New Sapana Kiran Jewellery will be started with an initial investment of Rs. 11,071,736 out of
which Rs. 6,734,868 will be financed by loan and the remaining Rs. 4,336,868 will be financed
by equity. The equity capital will be contributed by the four owners. This financing can be further
break down to funding of total long term asset which is 70% on loan and 30% on equity and
working capital which is 50% loan and 50% equity. The start-up cost will consists of different
types of expenses like purchase of furniture, land and machine, registration fees and the initial
marketing expenses. The detail of the start-up expenses is shown in Annex 1.

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4.3 SALES FORECAST AND COST OF GOODS SOLD

The sales revenue is based on the basis average per day sales. The assumption is made that sales
revenue of 50 gram gold and 150 gram silver and rate is Rs. 71000 and Rs. 900 per tola and sales
will be increased by 10%, 10%, 20% and 30% respectively. The COGS is also expected to be
85% of the total sales. The details of sales revenue is shown in Annex 2.

4.4 BUDGETED LOAN REPAYMENT SCHEDULE

The start-up long term loan is taken at 15% annual interest rate from a bank. This loan will be
taken from the bank by keeping the collateral. The annual payment of this loan is supposed to be
paid by preparing loan amortization schedule with quarterly discounting. It will be fully
reimbursed within the loan period of 5 years. The detail of annual interest payment with principal
amount repayment is shown in Annex 3.

4.5 PROJECTED INCOME STATEMENT

Pro forma income statements are an important tool for planning future business operations. If the
projections predict a downturn in profitability, we can make operational changes such as
increasing prices or decreasing costs to have profitability in business. The pro forma income
statement of New Sapana Kiran Jewellery shows after tax profit of Rs. 8,994,758.88 in beginning
of the year and Rs. 19,831,800.2 in 5 th year and the pro forma income statement show the
increasing profit.
The detail of pro forma statement of this store is shown in Annex 4.

15
4.6 PROJECTED BALANCE SHEET

A pro-forma balance sheet discloses a business’s assets, liabilities, and equity at a specific point
in time. The overall pro forma balance sheet of New Sapana Kiran Jewellery for five years is
disclosed in Annex 5.

4.7 PROJECTED CASH FLOW

A pro forma cash flow statement shows the total net cash inflow or outflow at a specific point of
time. It shows the cash generated from operating, investing and financing activities. The opening
cash flow of New Sapana Kiran Jewellery shows the net cash balance of Rs. 5,451,441.40 at the
beginning year and balance of Rs. 8,140,427.98 at the end of year 5. The pro forma cash flow
statement of new sapana kiran Jewellery is disclosed in Annex 6.

4.8 FINANCIAL RATIOS

Financial Ratios are related to liquidity like liquidity ratio, profitability ratio, efficacy ratio and
solvency ratio. The ratios calculation is shown in annex 7

 PROFITABILITY RATIOS

Profitability ratios measure the company's use of its assets and control of its expenses to generate
an acceptable rate of return. The details are shown in Annex 7

• Gross Profit Margin:

New Sapana Kirsn Jewellery has maintained its gross profit margin above 15% throughout
the years of operation. The margin is consistent during the five years period.

16
• Net Profit Margin:

Initially, the profit margin is 8%. It is increasing and reached to 9% at the end of 5 years. A
high net profit margin indicates that a business is pricing its products correctly and is
exercising good cost control.

• Return on Asset:

The return on asset is 53% in the first year. The ROA increased and reached up to 84% at the
end of 5th year. If return on assets is increasing, then either net income is increasing or
average total assets are decreasing. This reflects the increase in the net income in relation to
the total assets. A low ROA indicates that the company is not able to make maximum use of
its assets for getting more profit.

• Return on common stock:

The return on common stock is 188% in beginning of the year and gradually increases.
Finally , 5th year return on common stock is 416%.

• Return on Equity:

The return on equity is 100%% in the beginning and has decreased to 85% in the next year.
After that it is increased to 90% in 4th year and again increase to 95% in next in the 5th year.

• Dividend Pay-Out:

The dividend is distributed on the basis of the capital and the income earned. At first 53%
dividend is declared and the next year dividend is increase. In later years the dividend has
been increased to 86% and in the 5th year it again decreased to 72%.

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  LIQUIDITY RATIOS

Liquidity ratios show the position of cash and cash equivalents in the organization. The details of
liquidity ratios are shown in Annex 7.

• Current Ratio:

The current ratio started with 2.628 in the first year and increased to 7.508 within 5 years.
The current ratio is an indication of a firm's liquidity. If the company's current ratio is too
high it may indicate that the company is not efficiently using its current assets or its
shortterm financing facilities.

• Quick Ratio:

The quick ratio of the company is quite similar to current ratio as there is minimal inventory
of the firm. The Quick ratio at the beginning year is 1.37 and expected to grow up to 5.51
.This is one of the benefits of the firm as it requires low inventory for its operation.

 EFFICIENCY RATIOS

Efficiency ratios show if the company is able to effectively manage its assets and liabilities to
gain maximum revenue. The details of efficiency ratios are shown in Annex 7.

• Inventory turnover Ratio:

The inventory turnover ratio is 18 times every year as the cogs is increased on the basis of
sales as well as the inventory is also increased as sales revenue is increased. Low turnover
implies weak sales and possibly excess inventory, also known as overstocking. A high ratio
implies either strong sales or insufficient inventory.

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• Account Receivable Turnover Ratio:

The account receivable turnover ratio is 240 times in every year as the receivables is based on
sales and sales increased in same portion every year.

• Days sales Outstanding:

The days sales outstanding calculation, a measures the number of days it takes a company to
collect cash from its credit sales. It shows how well a company can collect cash from its
customers. Low DSO means that it takes a company fewer days to collect its accounts
receivable. DSO of new sapana kiran jewellery is 1.52 days every years.

• Fixed Assets Turnover Ratio:

The total assets turnover ratio is 22.8 times at first and has increased to 52.9. It shows that the
total asset has increased in the next 5 years but sales increases in much more amount so the
ratio has increased in the coming years.

• Total Assets Turnover Ratio:

The asset turnover ratio measures the value of a company's sales or revenues relative to the
value of its assets. The higher the asset turnover ratio, the more efficient a company.
Conversely, if a company has a low asset turnover ratio, it indicates it is not efficiently using
its assets to generate sales. The fixed assets turnover ratio is 6.86 times in first year and has
fluctuated during other years and at the end of 5th year it will become 9.30 times.

19
  SOLVENCY RATIOS

Solvency ratios depict whether firm is solvent i.e. whether it is able to pay the liabilities with the
revenue generated and also the position of debt and equity in an organization. The details of
solvency ratios are shown in Annex 7.

• Debt Equity Ratio:

Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage. The debt
equity ratio is 89% in the first year and has decreased in the next 5 years as the debt has
decreased in the next 5 years and equity has not changed in next 5 years as well.

• Time Interest Earned Ratio:

Times interest earned (TIE) is used to measure a company's ability to meet its debt
obligations. TIE Ratio is increasing from 21 to 252.16. A high ratio means that a
company is able to meet its interest obligations because earnings are significantly
greater than annual interest obligations

• Total Assets to Equity:

The assets-to-equity ratio measures a firm's total assets in relation to the total stockholder
equity. This ratio decrease from 1.89 to 1.12 in 5 years.

20
4.9 NPV, IRR AND MIRR

NPV can be described as the “difference amount” between the sums of discounted: cash inflows
and cash outflows. It compares the present value of money today to the present value of money in
the future, taking inflation and returns into account. IRR is the discount rate at which the present
value of all future cash flow is equal to the initial investment or in other words the rate at which
an investment breaks even. The projected NPV shows the total value of Rs. 25,960,249 and IRR
of 86%. The modified internal rate of return of this project is 48%. This rate can be realized when
the cash flows from the business are reinvested at a rate equal to its cost of capital. The
calculation is shown in Annex 8.

4.10 PAYBACK PERIOD

The pay-back period of this company is 1.26 years. It means that the initial investment will be
recovered in the second year of operation. The calculation of these periods is shown in the Annex
8.

4.11 BREAKEVEN ANALYSIS

There are two major products that will be provided by new sapana kiran Jewellery. It is useful for
determination of level of production or a targeted desired sales mix. In first year the BEP is Rs.
26529333.33 And the last year is Rs.36537024. The overall breakeven calculation is in annex 9.

21
 CHAPTER 5: FUTURE PLAN AND EXIT STRATEGY

5.1 FUTURE PLAN

The future plans of New Sapana Kiran Jewellery are as follows:

• Currently, we are trying to focus only a particular location, few business and few
customers but after operating few years and increment in capacity we will be focusing on
more area and more customers.
• As the trend of online businesses growing, we will also be operating through online and
delivering online orders from customers. .
• We will be extending our product lines by offering new jewellery designs.

5.2 EXIT STRATEGY

As the environment for business is dynamic and uncertain, there might come any unfavorable
business situation in the future. So, the owners should always be prepared for those types of
situations and need to prepare various exit strategies to change the unfavorable scenario of the
business. The New Sapana Kiran Jewellery will be following one of the following exit strategies:
• Selling: If the environment is very unfavorable then the business should think of being
sold to others. The business will be sold to another party who is interested in
conducting the investment business.
• Liquidation: If there is no hope of success and no any chance of growing, the
company can be liquidated

22
 ANNEX

ANNEX 1: START-UP EXPENSES

Particular Quantaty Rate Amount
Land 1 3000000 3000000
Building 1 1000000 1000000
Furniture’s and Fixtures
Counter desk 1 100000 100000
Sofa 3 10000 30000
Chair 1 25000 25000
Decorating 1 200000 200000
Total Furniture’s and fixture 355000
Machines
Gold testing machine 1 55000 55000
Electric weighting machine 1 20000 20000
Gold melting machine 1 110000 110000
Gold ornaments design
Machine 1 700000 700000
Total Machine 885000
Equipment's 75000 75000
Fans 4 2500 10000
Computer and CCTV 1 100000 100000
Television 1 80000 80000
Total Fixed Assets 5505000

Assets Amount
Total Fixed Assets 5505000
Total preliminary expenses 490000
Initial working capital requirement 5076735.927
Total Assets 11,071,736
Shareholders equity and Liabilities Amount
Short term loan(50% of IWCR) 2538368
Long term loan (70% of FA&PE) 4,196,500
Equity (30% of FA&PE + 50% of IWCR 4336868
Total Shareholders’ equity and
Liabilities 11071736

ANNEX 2: SALES REVENUE AND COST OF GOODS SOLD

23
 Budgeted Purchase

Particular Price (per gram) Quantity Total cost (daily) year 1 year 2 (10%) year 3 (10%) year 4 (20%) year 5 (30%)
Gold 6087.105624 50 304355.2812 94958847.74 104454732.5 114900205.8 137880246.9 179244321
Silver 73.73113855 150 11059.67078 3450617.284 3795679.012 4175246.914 5010296.296 6513385.185
Total 6160.836763 200 315414.952 98409465.02 108250411.5 119075452.7 142890543.2 185757706.2

Budgeted Sales
Particulars Year 1 Year 2 Year 3 Year 4 Year 5
Average Sales price (rate) 51340.31 51340.31 51340.31 51340.31 51340.31
Average sales (Daily) 358426.0818 111828937.5 123011831 135313014.4 162375617.3
Average sales (Annually) 115775841.2 127353425.3 140088768 168106521.4 218538477.9

ANNEX 3: LOAN REPAYMENT SCHEDULE

24
 Beginning Principal
Year Periods PMT Interest Ending
Balance paid
1 4,196,500 301988.94 157368.75 144620.19 4,051,879.81
2 4,051,879.81 301988.94 151945.49 150043.45 3,901,836.36
3 3,901,836.36 301988.94 146318.86 155670.08 3,746,166.28
1 4 3,746,166.28 301988.94 140481.24 161507.71 3,584,658.58
5 3,584,658.58 301988.94 134424.70 167564.24 3417094.33
6 3,417,094.33 301988.94 128141.04 173847.90 3243246.43
7 3,243,246.43 301988.94 121621.74 180367.20 3062879.23
2 8 3,062,879.23 301988.94 114857.97 187130.97 2875748.26
9 2,875,748.26 301988.94 107840.56 194148.38 2681599.87
10 2,681,599.87 301988.94 100560.00 201428.95 2480170.93
11 2,480,170.93 301988.94 93006.41 208982.53 2271188.40
3 12 2,271,188.40 301988.94 85169.56 216819.38 2054369.02
13 2,054,369.02 301988.94 77038.84 224950.10 1829418.92
14 1,829,418.92 301988.94 68603.21 233385.73 1596033.19
15 1,596,033.19 301988.94 59851.2444 242137.70 1353895.49
4 16 1,353,895.49 301988.94 50771.08 251217.86 1102677.63
17 1,102,677.63 301988.94 41350.41 260638.53 842039.10
18 842,039.10 301988.94 31576.47 270412.48 571626.62
19 571,626.62 301988.94 21436.00 280552.94 291073.68
5 20 291,073.68 301988.94 10915.26 291073.68 0.00

ANNEX 4: PROJECTED INCOME STATEMENT

Particulars Year 1 Year 2 Year 3 Year 4 Year 5

25
 Sales revenue 115,775,841.20 127,353,425.32 140,088,767.85 168,106,521.4 218,538,477.85
2
Less: COGS (85%) 142,890,543.2
98,409,465.02 108,250,411.52 119,075,452.67 185,757,706.17
1
Gross Profit 17,366,376.18 19,103,013.80 21,013,315.18 25,215,978.21 32,780,771.68
Less : Operating Expenses

Salary 3,640,000.00 3,640,000.00 4,004,000.00 4,404,400.00 4,844,840.00

Electricity charge 93,600.00 102,960.00 113,256.00 124,581.60 137,039.76
Water 63,400.00 63,400.00 63,400.00 63,400.00 63,400.00
Miscellaneous expenses
60,000.00 60,000.00 60,000.00 60,000.00 60,000.00
Repair and maintaenance
60,000.00 66,000.00 72,600.00 79,860.00 87,846.00
Pomotion and marketing
120,000.00 138,000.00 158,700.00 182,505.00 209,880.75
Insurance expenses 240,000.00 288,000.00 345,600.00 414,720.00 497,664.00
Telephone and stationary
36,000.00 43,200.00 51,840.00 62,208.00 74,649.60
Depreciaion expenses
426,250.00 329,687.50 256,765.63 201,599.22 159,773.16
Preliminary expenses
98,000.00 98,000.00 98,000.00 98,000.00 98,000.00
Total operating expenses
4,837,250.00 4,829,247.50 5,224,161.63 5,691,273.82 6,233,093.27

EBIT 12,529,126.18 14,273,766.30 15,789,153.55 19,524,704.39 26,547,678.40

Less: Interest
: Long term loan
596,114.34 708,910.32 821,379.24 951,691.39 105,278.14
(15%)
: short term loan
356,468.09
(12%)
Total Interest Expenses
596,114.34 1,065,378.41 821,379.24 951,691.39 105,278.14
EBT 11,933,011.84 13,208,387.89 14,967,774.32 18,573,013.00 26,442,400.27
Less : Tax (25%) 2,983,252.96 3,302,096.97 3,741,943.58 4,643,253.25 6,610,600.07
Net Income 8,949,758.88 9,906,290.92 11,225,830.74 13,929,759.75 19,831,800.20
Add: Beginning R/E
0.00 4,180,691.48 6,933,381.30 8,621,077.23 10,628,168.49
Less: Dividend 4,769,067.40 7,153,601.10 9,538,134.80 11,922,668.50 14,307,202.20
Ending R/E 4,180,691.48 6,933,381.30 8,621,077.23 10,628,168.49 16,152,766.49

ANNEX 5: PROJECTED BALANCE SHEET

26
Assets Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
Current Assets
Account Receivable 482,399 530,639 583,703 700,444 910,577
Inventory 5,467,193 6,013,912 6,615,303 7,938,364 10,319,873
Cash 2,970,567 5,451,441 4,494,061 5,211,036 5,456,999 8,140,428
Total current assets 2,970,567 11,401,033 11,038,612 12,410,043 14,095,807 19,370,878
Preliminary Expn 490,000 490,000 392,000 294,000 196,000 98,000
Less: written off - 98,000 98,000 98,000 98,000 98,000
Net priliminary expenses 490,000 392,000 294,000 196,000 98,000 -
Fixed asssets
Land 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000 3,000,000
Fixed asssets 2,505,000 2,505,000 2,078,750 1,749,063 1,492,297 1,290,698
Less: Depereciation - 426,250 329,688 256,766 201,599 159,773
Net Fixed assets 2,505,000 2,078,750 1,749,063 1,492,297 1,290,698 1,130,924
Net Fixed assets 5,505,000 5,078,750 4,749,063 4,492,297 4,290,698 4,130,924

Total Assets 8,965,567 16,871,783 16,081,675 17,098,339 18,484,504 23,501,802

Liabilities and S/E

Current Liabilities
Account Payable 1,366,798 1,503,478 1,653,826 1,984,591 2,579,968
Short term loan - 2,970,567
Total current Liabilities - 4,337,366 1,503,478 1,653,826 1,984,591 2,579,968

Long term loan 4,196,500 3,584,659 2,875,748 2,054,369 1,102,678 (0)

Total Long liabilities 4,196,500 3,584,659 2,875,748 2,054,369 1,102,678 (0)

Total Liabilities 4,196,500 7,922,024 4,379,226 3,708,195 3,087,269 2,579,968

Common equity 4,769,067 4,769,067 4,769,067 4,769,067 4,769,067 4,769,067

Retained Earning - 4,180,691 6,933,381 8,621,077 10,628,168 16,152,766
Total S/E 4,769,067 8,949,759 11,702,449 13,390,145 15,397,236 20,921,834

Total 8,965,567 16,871,783 16,081,675 17,098,339 18,484,504 23,501,802

27
ANNEX 6: CASH FLOW STATEMENTS

Particulars year 0 year 1 year 2 year 3 year 4 year 5

1. Cash flow from Operating activities

Net profit - 8,949,759 9,906,291 11,225,831 13,929,760 19,831,800
Add: Depn expn. 426,250 329,688 256,766 201,599 159,773
(Increase ) Decrease in A/R (482,399) (48,240) (53,064) (116,741) (210,133)
Preliminary expn. written off 98,000 98,000 98,000 98,000 98,000
(Increase) Decrease in inventory (5,467,193) (546,719) (601,391) (1,323,061) (2,381,509)
Increase (Decrease) in short term loan 2,970,567 (2,970,567) - - -
Increase (Decrease) in Accounts payable 1,366,798 136,680 150,348 330,765 595,377

Cash flow from operating activities 7,861,783 6,905,132 11,076,489 13,120,323 18,093,308

2. Cash flow from Investing activities

Add: (Increase) Decrease in Fixed assets (5,505,000) - - - - -
(Increase ) Decrease in Preliminary expenses (490,000) - - - - -

Cash flow from investing activities (5,995,000) - - - - -

3. Cash flow from financing activities

Add: Increase ( Decrease) in share capital 4,769,067 - - - - -
Increase (Decrease ) in LTD 4,196,500 (611,841) (708,910) (821,379) (951,691) (1,102,678)
Divident Paid (4,769,067) (7,153,601) (9,538,135) (11,922,668) (14,307,202)

Cash flow from financing activities 8,965,567 (5,380,909) (7,862,511) (10,359,514) (12,874,360) (15,409,880)

Total cash and cash equivalent 2,970,567 2,480,874 (957,380) 716,975 245,963 2,683,429
Add: Opening cash - 2,970,567 5,451,441 4,494,061 5,211,036 5,456,999
Closing cash and cash equivalent 2,970,567 5,451,441 4,494,061 5,211,036 5,456,999 8,140,428

28
ANNEX 7: RATIO ANALYSIS
Ratios Year 1 Year 2 Year 3 Year 4 Year 5
Liquidity
Current Ratio 2.628561719 7.342051 7.503839 7.102626 7.508185

Quick Ratio
1.37 3.34 3.50 3.10 3.51
Efficiency Ratio
Receivable turnover (Times)
240.00 240.00 240.00 240.00 240.00
Days Sales Outstanding
(Days) 1.52 1.52 1.52 1.52 1.52

Inventory Turnover (Times)

18.00 18.00 18.00 18.00 18.00
Fixed Assets Turnover
(Times) 22.80 26.82 31.18 39.18 52.90
Total Assets Turnover
(Times) 6.86 7.92 8.19 9.09 9.30
Profitability Ratio
Gross Profit Margin 15% 15% 15% 15% 15%
Net Profit Margin 8% 8% 8% 8% 9%
Rutern on Assets 53% 62% 66% 75% 84%
Return on common stock 188% 208% 235% 292% 416%
Return on Equity 100% 85% 84% 90% 95%
Dividend Payout Ratio 53% 72% 85% 86% 72%
Solvency Ratio
Debt to equity 89% 37% 28% 20% 12%
Times Interest Earned 21.01799152 13.39784 19.22273 20.51579 252.1671
Total assets to equity 1.89 1.37 1.28 1.20 1.12

ANNEX 8: CAPITAL BUDGETING

29
 Rate of return = 15% Annually
Cumulative
Year Cash Flow
Cash flow
0
(11,936,134.80) (11,936,134.80)
1
9,474,008.88 (2,462,125.92)
2
10,333,978.42 7,871,852.50
3
11,580,596.36 19,452,448.86
4
14,229,358.97 33,681,807.83
5
20,089,573.36 53,771,381.19

15%
NPV $25,960,249.47
IRR 86%
MIRR 48%

PBP 1.26

ANNEX 9: BEP ANALYSIS

30
BEP Sales Year 1 Year 2 Year 3 Year 4 Year 5
Fixed costs 3,979,400.00 4,034,600.00 4,464,840.00 4,944,728.00 5,480,553.60
CM Ratio 0.15 0.15 0.15 0.15 0.15
BEP sales 26529333.33 26897333.33 29765600 32964853.33 36537024

31
ANNEX 10: WORKING CAPITAL ASSESSMENT

Initial Working Capital

Particulars Days Amount

Account Receivable 5 482399.338
Inventory 20 5467192.5
Cash 1358341.09
Total CA 7307932.92
Less: Total CL 10 1366798.13
Working capital 5941134.8

32
ANNEX 11: PRELIMINARY EXPENSES WRITE OFF

Preliminary expenses written-Off

Particular year 0 year 1 year 2 year 3 year 4 year 5

Preliminary Expenses 490000 490000 392000 294000 196000 98000
Less : written off(5 years) 0 98000 98000 98000 98000 98000
Remaining Preliminary exp. 490000 392000 294000 196000 98000 0

33