SAROMA BOREWELL

Promoted by

Santhosh M

Prepared by

Mahesh MV.

9995556874

1
Project Summary

The project is prepared with a view to avail a bank loan for Rs 15 lakhs to

revamp a borewell digging unit at under the proprietorship of Mr Santhosh.

The proposed is a loan which is intended to purchase tools and equipment for

the functioning of the units. The project is prepares with an estimated cost of

Rs 18.75 lakh which is detailed in the report, out of which the proprietor have

already introduced Rs 3.75 lakh as her share of capital and balance 15 lakh is

expected to be raised by a bank loan.

2
 SAROMA BOREWELL
Name of Project SAROMA BOREWELL
Promoted by Santhosh M
Address TC 41/495-4,Baby Nivas,Manacaud PO
Trivandrum,695009
Project Cost and finance
Capital Working
Particvulars Contribution Term Loan Capital loan
Tools 1,30,000.00 8,00,000.00
Equipments 1,25,000.00 7,00,000.00
Electrical fittings 75,000.00
Furniture and fixtures 45,000.00

Total 3,75,000.00 15,00,000.00 -

Means of Finance
Rate of interest 12.00%
Repayment Period in yrs 10.00
Repayment Period in months 120.00
Monthly EMI 21,520.64
Revenue from operation for the first year 19,85,000.00
Wokring Capital
loan Capital
0% Contribution
20%

Term loan
80%

3
About the promoter
The promoter of the project is Mr. Santhosh has several
years’ experience in the industry and always shows a
passion for the business. His entrepreneurial spirit, positive
approach, and dynamic hands-on leadership will make the
unit a premium in the industry and he possess a strong track
record in the field success of the project is unquestionable.
The promoter has already invested a substantial amount in the business and
profitably runs the business.

Project Assumption

For the projection purposes, the annual revenue growth rate of 5%to 10% has
been assumed which would cover anticipated growth in the industry as well as
price. Based on our previous experience and assumption and discussions with
the industry experts. These projections are made based on the current market
inputs with the following factors:

• The scheme is based on a single shift per day 365 working days per
annum.

4
• The break-even point has been calculated on a full capacity
utilization basis.
• The cost of Equipment & Furniture's has been taken based on
competitive
• It is assumed that the services have very good demand, and the
promoters have sound experience and connections in this
particular field
• The suppliers shall be preferably based in local areas.
• An optimum working capital cycle has been taken for calculating
the requirements.
• The basis for calculation of production capacity has been taken on
a single shift basis on 75% efficiency.
• During the first year and second year of operations, the capacity
utilization is 60% and 80% respectively. The unit is expected to
achieve full capacity utilization from the third year onwards.
• The salaries and wages, cost of raw materials, utilities, rents, etc.
are based on prevailing rates in Trivandrum. These cost factors are
likely to vary with time and location.
• Interest on loans has been taken at the rate of 8% on average. This
rate may vary depending upon the policy of the financial
institutions/agencies from time to time.
• There is no question of uncertainty in future growth and business
has normal growth. However unexpected contingencies have not
been considered

5
Statutory Status

The proposed business is planned to initiate

as a proprietorship concern.

Direct Taxation
Since the business is running as a sole
proprietorship the direct tax is applicable
under the slab of Individual. The profit from the business is computed and tax
is paid along with the proprietor's non-business income. The business can also
avail basic exemption under income tax which is available for Individual

Statutory Compliance
The Groundwater department is the nodal agency in the State for groundwater
exploration and development. It is mandatory for all the government
departments to seek the feasibility report from groundwater department before
taking up the bore well drilling. The amendment of Kerala Building rules 93 (a)
enforced the clearance from groundwater department to issue permits for the
construction of bore wells/tube which is mandatory to obtain from the bodies.
The clearance stipulated is nothing but the feasibility issued by the department
after conducting a field study considering the existing users in the locality and
other hydrogeological conditions in the area. The feasibility report would have
the recommendation of the location of the spot for drilling, diameter of the well,
and also the depth to be drilled. In addition to the above, all notified blocks in
the State would have to obtain prior permission for both construction and
conversion, which means to modify the depth, diameter, changing the horse
power of the pumping device etc.

6
Pollution Control
There is no major pollution problem associated with the setting up of this type
of industry. However, entrepreneurs seek guidance from the concerned State
Pollution Control Board in this regard. There is no major pollution problem
associated with this project in terms of air and sound pollution except for the
disposal of wastewater which would be managed appropriately through a
recycling facility. However, entrepreneurs should obtain NOC from the
concerned State Pollution Control Board.

Energy Conservation
Although the energy requirement is small, adequate care should be taken in
electrical installations and the optimal utilization of machinery.

EFFLUENT DISPOSAL:
No effluent disposal issues are related with this business.

OTHER UTILITIES:
Other utilities include fuel etc. those should be locally available.

Borewells and Tubewells

A borehole is a narrow shaft bored in the
ground, either vertically or horizontally. A
borehole may be constructed for many
different purposes, including the extraction
of water, other liquids (such as petroleum) or
gases (such as natural gas), as part of a
geotechnical investigation, environmental
site assessment, mineral exploration,
temperaturemeasurement, as a pilot hole for installing piers or underground
utilities, for geothermal installations, or for underground storage of unwanted
substances, e.g. in carbon capture and storage. A borewell is a narrow shaft that

7
is bored into the ground 100 to 1500 feet deep. A 6 to 12-inch PVC pipe is used
to bring the water to the surface using a pump. Bore water comes from
groundwater that has seeped into the ground and is stored in underground
aquifers.

There are both deep and shallow

borewells. In shallow borewells, the
contamination can be high because
the water is not protected from
defecation, pesticides, pathogens, and
other substances. It is often not fit for drinking without significant water
treatment and purification. However, bore water may be used for other
watering needs like livestock, toilets, showering, watering gardens, washing
cars, etc. It is wise not to water edible plants with borewell water unless it has
been tested or treated.
Water from deeper, confined aquifers generally gives higher quality water;
Regardless, it is wise to test water
often to make sure it is safe for
drinking or use in cooking. While
borewells can be contaminated
with natural sources like bacteria,
minerals, and viruses, human
activity likely has a greater
impact on the contamination.
Oftentimes, fertilizers, pesticides,
insecticides, poorly maintained
septic tanks, and fuel and

8
chemical leaks cause more contamination to borewells. Some of these
contaminants are very concerning, like nitrate, pesticides, arsenic, and
petroleum products

India being an agrarian country, our farmers depend mainly on groundwater

for irrigation. With increasing population, lesser land holdings and
urbanisation, deeper borewells are dug for groundwater abstraction. Borewells
& tubewells, are very similar. Both are basically vertical drilled wells, bored
into an underground aquifer in the earths surface, to extract water for various
purposes. The difference in the two lies in the type of casing used, the depth of
this casing and the type of soil where they are drilled. Casing to support the
external surfaces of the borehole against collapse may be needed at certain
depths, and usually is made up of PVC pipes. Electrical pumps are usually used
to pump out the water from the borewells, though the government is now
giving subsidy for solar pumps. This convenience of pumps may increase the
depletion of the groundwater at an increased pace.

9
Revenue Projection

For the projection purposes, annual revenue growth rate of 5%to 10% has been
assumed which would cover anticipated growth in the industry as well as price.
Based on our previous experience and assumption and discussions with the
industry experts

Financial Viability

The proposed Profitability Statement,

Projected Balance Sheet and the
Projected Cash Flow Statement, the
debt service coverage ratio, payback
period and the return-on-investment
ratio etc indicated the project is
financially viable. The projected profit
and loss account statement shows that
there will be surplus fund even for
meeting any unforeseen contingencies. The Cash Flow Statement also revels the
healthy financial trend in the flow of fund.

10
Raio analysis -Significance

Ratio analysis is a powerful tool of financial analysis. In financial

analysis, a ratio is used as a benchmark for evaluation the financial
position and performance of a firm. The absolute accounting figures
reported in the financial statements do not provide a meaningful
understanding of the performance and financial position of a firm. An
accounting figure conveys meaning when it is related to some other
relevant information. The relationship between two accounting figures
expressed mathematically, is known as a financial ratio . Ratios help to
summarize large quantities of financial data and to make qualitative
judgment about the firm’s financial performance.

Particulars Year-1 Year-2 Year-3 Year-4 Year-5

DSCR 2.43 2.67 2.93 3.22 3.53
BEP 76% 63% 53% 45% 38%
Cash Ratio 0.20 0.92 1.40 1.68 1.78
Gross Profit 34.36 34.29 34.22 34.22 34.07
Debt Equity Ratio 3.93 3.22 2.53 1.95 1.47
Proprietory 4.93 4.22 3.53 2.95 2.47
Quick Ratio 1.03 1.85 2.47 2.93 3.25
Current Ratio 2.08 2.87 3.43 3.84 4.10
Operating Expenses ratio 91.44 87.00 83.35 80.36 78.01

11
 SAROMA BOREWELL
Projected Profit and Loss Account
PARTICULARS Year-1 Year-2 Year-3 Year-4 Year-5
By Direct Income
" Revenue from operation 19,85,000.00 21,84,000.00 24,02,000.00 26,42,000.00 29,06,000.00
Closing Stock 2,35,000.00 2,50,000.00 2,60,000.00 2,70,000.00 2,80,000.00
Total 22,20,000.00 24,34,000.00 26,62,000.00 29,12,000.00 31,86,000.00
To Direct Expenses
" Opening stock 2,50,000.00 2,35,000.00 2,50,000.00 2,60,000.00 2,70,000.00
" Purchase 4,80,000.00 5,60,000.00 6,10,000.00 6,70,000.00 7,40,000.00
" Cleaning charges 25,000.00 27,000.00 30,000.00 33,000.00 36,000.00
" Salaries and wages 6,50,000.00 7,15,000.00 7,87,000.00 8,66,000.00 9,53,000.00
" Electricity charges 35,000.00 39,000.00 43,000.00 47,000.00 52,000.00
" Water charges 6,000.00 7,000.00 8,000.00 9,000.00 10,000.00
" Marketing and advertisement 55,000.00 61,000.00 67,000.00 74,000.00 81,000.00
" Staff welfare exp 20,000.00 22,000.00 24,000.00 26,000.00 29,000.00
" Other Expenses 17,000.00 19,000.00 21,000.00 23,000.00 25,000.00
Total 15,38,000.00 16,85,000.00 18,40,000.00 20,08,000.00 21,96,000.00
To Gross Profit 6,82,000.00 7,49,000.00 8,22,000.00 9,04,000.00 9,90,000.00
To Indirect Expenses
" Interest on term loan 1,76,000.00 1,65,000.00 1,53,000.00 1,40,000.00 1,25,000.00
" Generator rent 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
" Printing and stationary 17,000.00 19,000.00 21,000.00 23,000.00 25,000.00
" Repairs & Maintanance 15,000.00 17,000.00 19,000.00 21,000.00 23,000.00
" Travelling Expenses 20,000.00 22,000.00 24,000.00 26,000.00 29,000.00
" Depreciation 2,82,000.00 2,40,000.00 2,03,000.00 1,73,000.00 1,47,000.00
Total 5,12,000.00 4,65,000.00 4,22,000.00 3,85,000.00 3,51,000.00
Net Profit before tax 1,70,000.00 2,84,000.00 4,00,000.00 5,19,000.00 6,39,000.00
NP Ratio 8.56 13.00 16.65 19.64 21.99
Average NP ratio 15.97

12
 Net profit ratio
Year Year-1 Year-2 Year-3 Year-4 Year-5

Profit 1,70,000.00 2,84,000.00 4,00,000.00 5,19,000.00 6,39,000.00

Sales 19,85,000.00 21,84,000.00 24,02,000.00 26,42,000.00 29,06,000.00
NP Ratio 8.56 13.00 16.65 19.64 21.99
Average 15.97

30,00,000.00
The average Net profitability ratio is 15.97 percent over the
projected period of 5 years. It is presumed that the same 25,00,000.00
level of profitability will be there in the entity on a 20,00,000.00
sustainable basis. Profit
15,00,000.00
Sales
10,00,000.00
5,00,000.00
-
Year-1 Year-2 Year-3 Year-4 Year-5

Net Profit Margin

Net profit ratio establishes a relationship between net profit and sales and indicates and management’s in manufacturing,
administrating and selling the products. This ratio is the overall measure of the firm’s ability to turn each rupee sales into net profit.
If the net margin is inadequate the firm will fail to achieve a satisfactory return on shareholders’ funds. This ratio also indicates the
firm’s capacity to withstand adverse economic conditions. A firm with high net margin ratio would be an advantageous position to
survive in the face of falling prices, selling prices, cost of production. Net profit is obtained when operating expenses; interest and
taxes are subtracted from the gross profit margin ratio is measured by dividing profit after tax by sales: This is a ratio between the
Net profit after tax and the turnover.

13
 SAROMA BOREWELL
Projected Balance Sheet
Liabilities Year-1 Year-2 Year-3 Year-4 Year-5
Capital Account
Capital Account 3,75,000.00 4,17,000.00 4,88,000.00 5,88,000.00 7,18,000.00
Profit 1,70,000.00 2,84,000.00 4,00,000.00 5,19,000.00 6,39,000.00
Drawings 1,28,000.00 2,13,000.00 3,00,000.00 3,89,000.00 4,79,000.00
Sub Total 4,17,000.00 4,88,000.00 5,88,000.00 7,18,000.00 8,78,000.00
Term Loan 14,17,000.00 13,24,000.00 12,19,000.00 11,01,000.00 9,67,000.00
Working capital loan - - - - -

Current Liabilities .
Sundry Creditors 1,48,500.00 1,63,000.00 1,79,000.00 1,97,000.00 2,17,000.00
Other Current Liabilities 75,000.00 83,000.00 91,000.00 1,00,000.00 1,10,000.00
CREDIT TOTAL 20,57,500.00 20,58,000.00 20,77,000.00 21,16,000.00 21,72,000.00
Fixed Assets (As per Dep Statement) 15,93,000.00 13,53,000.00 11,50,000.00 9,77,000.00 8,30,000.00
Current Assets
Sundry Debtors 1,65,000.00 2,10,000.00 2,70,000.00 3,50,000.00 4,60,000.00
Other current assets 19,800.00 19,800.00 19,800.00 19,800.00 19,800.00
Closing Stock 2,35,000.00 2,50,000.00 2,60,000.00 2,70,000.00 2,80,000.00
Cash and bank balances 44,700.00 2,25,200.00 3,77,200.00 4,99,200.00 5,82,200.00
Sub Total 4,64,500.00 7,05,000.00 9,27,000.00 11,39,000.00 13,42,000.00
DEBIT TOTAL 20,57,500.00 20,58,000.00 20,77,000.00 21,16,000.00 21,72,000.00

14
 - - - - -
Cash Flow Statement
Year Year-1 Year-2 Year-3 Year-4 Year-5
Net Profit 1,70,000.00 2,84,000.00 4,00,000.00 5,19,000.00 6,39,000.00
Cash Flow from Operating Activities
Depreciation Expenses 2,82,000.00 2,40,000.00 2,03,000.00 1,73,000.00 1,47,000.00
Net (increase) Decrease in Stock (2,35,000.00) (15,000.00) (10,000.00) (10,000.00) (10,000.00)
Net (increase) Decrease in debtors (1,65,000.00) (45,000.00) (60,000.00) (80,000.00) (1,10,000.00)
Net (increase) Decrease in current asset (19,800.00) - - - -
Net increase (Decrease) in Creditors 1,48,500.00 14,500.00 16,000.00 18,000.00 20,000.00
Net Cash Flow from Operating Activities 10,700.00 1,94,500.00 1,49,000.00 1,01,000.00 47,000.00
Cash Flow from Financing Activities
Net increase (Decrease) in Capital 2,47,000.00 (2,13,000.00) (3,00,000.00) (3,89,000.00) (4,79,000.00)
Net increase (Decrease) in Capital
Net( increase )Decrease Advance - - - - -
Wokrin capital loan -
Loan 14,17,000.00 (93,000.00) (1,05,000.00) (1,18,000.00) (1,34,000.00)
Wokrin capital loan - - - -
Net increase (Decrease) in Other Liabil 75,000.00 8,000.00 8,000.00 9,000.00 10,000.00
Net Cash Flow from Financing Activities17,39,000.00 (2,98,000.00) (3,97,000.00) (4,98,000.00) (6,03,000.00)
Cash Flow from Investment Activities
Net (increase) Decrease in Fixed Assets (18,75,000.00)
Opening Cash Balance 44,700.00 2,25,200.00 3,77,200.00 4,99,200.00
Closing Cash Balance 44,700.00 2,25,200.00 3,77,200.00 4,99,200.00 5,82,200.00
- - - - -

15
Debt Service Coverage Ratio
The Debt Service Coverage Ratio (DSCR) measures the ability of a company to use its operating income to repay all its debt
obligations, including repayment of principal and interest on both short-term and long-term debt. This ratio is often used
when a business has any borrowings on its balance sheet such as bonds, loans, or lines of credit. It is also a commonly used
ratio in a leveraged buyout transaction, to evaluate the debt capacity of the target company. A debt service coverage ratio of
1 or above indicates that a company is generating sufficient operating income to cover its annual debt and interest payments.
As a general rule of thumb, an ideal ratio is 2 or higher. A ratio that high suggests that the company is capable of taking on
more debt.
Rather than just looking at an isolated number, it is better to consider a company’s debt service coverage ratio relative to the
ratio of other companies in the same sector. If a business has a significantly higher DSCR than most of its competitors, that
indicates superior debt management. A financial analyst may also want to look at a company’s ratio over time – to see
whether it is trending upward (improving) or downward (getting worse)

Ratio Analysis-DSCR
Financial Year Year-1 Year-2 Year-3 Year-4 Year-5
Net profit 1,70,000.00 2,84,000.00 4,00,000.00 5,19,000.00 6,39,000.00 4.00 DSCR
Add: Depreciation 2,82,000.00 2,40,000.00 2,03,000.00 1,73,000.00 1,47,000.00
3.00
Total 4,52,000.00 5,24,000.00 6,03,000.00 6,92,000.00 7,86,000.00
Add: Interest on term Loan 1,76,000.00 1,65,000.00 1,53,000.00 1,40,000.00 1,25,000.00 2.00
Total 6,28,000.00 6,89,000.00 7,56,000.00 8,32,000.00 9,11,000.00
Annual Repayment 2,58,247.71 2,58,247.71 2,58,247.71 2,58,247.71 2,58,247.71 1.00

DSCR 2.43 2.67 2.93 3.22 3.53

-
Average DSCR 2.96 Year-1 Year-2 Year-3 Year-4 Year-5

16
 P AND L BS
35,00,000.00 25,00,000.00

30,00,000.00
20,00,000.00
25,00,000.00

15,00,000.00
20,00,000.00

15,00,000.00 10,00,000.00

10,00,000.00
5,00,000.00
5,00,000.00

-
- Year-1 Year-2 Year-3 Year-4 Year-5
Salaries and wages
Revenue from operation

Electricity charges
Cleaning charges

Other Expenses
Water charges

Marketing and advertisement

Staff welfare exp

Purchase

Capital Account Term Loan

Working capital loan Working capital loan
Current Liabilities Other Current Liabilities
CREDIT TOTAL Fixed Assets (As per Dep Statement)
Current Assets Other current assets
Cash and bank balances Cash and bank balances Sub Total

" " " " " " " " " DEBIT TOTAL

Year-1 Year-2 Year-3 Year-4 Year-5

17
 SAROMA BOREWELL
Depreciation Statement
% of
Particulars dep Year-2 Year-3 Year-4 Year-5
Furniture and fixtures 45,000.00 38,000.00 32,000.00 27,000.00 23,000.00
Depreciation 15% 7,000.00 6,000.00 5,000.00 4,000.00 3,000.00
WDV 38,000.00 32,000.00 27,000.00 23,000.00 20,000.00

Equipments 8,25,000.00 7,01,000.00 5,96,000.00 5,07,000.00 4,31,000.00

Depreciation 15% 1,24,000.00 1,05,000.00 89,000.00 76,000.00 65,000.00
WDV 7,01,000.00 5,96,000.00 5,07,000.00 4,31,000.00 3,66,000.00

Tools 9,30,000.00 7,90,000.00 6,71,000.00 5,70,000.00 4,84,000.00

Depreciation 15% 1,40,000.00 1,19,000.00 1,01,000.00 86,000.00 73,000.00
WDV 7,90,000.00 6,71,000.00 5,70,000.00 4,84,000.00 4,11,000.00

Electrical fittings 75,000.00 64,000.00 54,000.00 46,000.00 39,000.00

Depreciation 15% 11,000.00 10,000.00 8,000.00 7,000.00 6,000.00
WDV 64,000.00 54,000.00 46,000.00 39,000.00 33,000.00

WDV Opening 18,75,000.00 15,93,000.00 13,53,000.00 11,50,000.00 9,77,000.00

Depreication Rounded 2,82,000.00 2,40,000.00 2,03,000.00 1,73,000.00 1,47,000.00
WDV Rounded 15,93,000.00 13,53,000.00 11,50,000.00 9,77,000.00 8,30,000.00

18
 Break Even Analysis
Year-1 Year-2 Year-3 Year-4 Year-5
Sale 19,85,000.00 21,84,000.00 24,02,000.00 26,42,000.00 29,06,000.00
Total 19,85,000.00 21,84,000.00 24,02,000.00 26,42,000.00 29,06,000.00
Variable Cost
Cost of Goods / services 4,95,000.00 5,45,000.00 6,00,000.00 6,60,000.00 7,30,000.00
Salaries and wages 6,50,000.00 7,15,000.00 7,87,000.00 8,66,000.00 9,53,000.00
Electricity charges 35,000.00 39,000.00 43,000.00 47,000.00 52,000.00
Water charges 6,000.00 7,000.00 8,000.00 9,000.00 10,000.00
Marketing and advertisement 55,000.00 61,000.00 67,000.00 74,000.00 81,000.00
Staff welfare exp 20,000.00 22,000.00 24,000.00 26,000.00 29,000.00
Other Expenses 17,000.00 19,000.00 21,000.00 23,000.00 25,000.00
Total 12,78,000.00 14,08,000.00 15,50,000.00 17,05,000.00 18,80,000.00
Fixed Cost
Interest on woking capital loan - - - - -
Interest on term loan 1,76,000.00 1,65,000.00 1,53,000.00 1,40,000.00 1,25,000.00
Generator rent 2,000.00 2,000.00 2,000.00 2,000.00 2,000.00
Printing and stationary 17,000.00 19,000.00 21,000.00 23,000.00 25,000.00
Repairs & Maintanance 15,000.00 17,000.00 19,000.00 21,000.00 23,000.00
Cleaning charges 25,000.00 27,000.00 30,000.00 33,000.00 36,000.00
Travelling Expenses 20,000.00 22,000.00 24,000.00 26,000.00 29,000.00
Depreciation 2,82,000.00 2,40,000.00 2,03,000.00 1,73,000.00 1,47,000.00
Total 5,37,000.00 4,92,000.00 4,52,000.00 4,18,000.00 3,87,000.00
Net Profit before tax 1,70,000.00 2,84,000.00 4,00,000.00 5,19,000.00 6,39,000.00
Contribuion 7,07,000.00 7,76,000.00 8,52,000.00 9,37,000.00 10,26,000.00
PV Ratio 35.62 35.53 35.47 35.47 35.31
Average PV Ratio 25.34
BEP in Rs 15,07,701.56 13,84,701.03 12,74,300.47 11,78,608.32 10,96,122.81
Average BEP in Rs 9,20,204.88
BEP in % 76% 63% 53% 45% 38%
Average BEP in % 44%

19
 Breakeven point
Detailed break-even analysis is attached to the DPR. The breakeven chart is given below. The average breakeven
point calculation Schedule attached with this report details of the variable cost, fixed cost, sales, and contribution.
The breakeven chart is depicted below. The breakeven analysis determines at which sales volume your firm will
start making money. The Breakeven Formula is: fixed costs (costs that must be paid whether or not any units are
produced) divided by variable costs (costs that vary directly with the number of products produced, e.g. materials,
labor used to produce units, percentage of overhead).

Year Year-1 Year-2 Year-3 Year-4 Year-5

Sales 19,85,000.00 21,84,000.00 24,02,000.00 26,42,000.00 29,06,000.00
Variable cost 12,78,000.00 14,08,000.00 15,50,000.00 17,05,000.00 18,80,000.00
Fixed Cost 5,37,000.00 4,92,000.00 4,52,000.00 4,18,000.00 3,87,000.00
BEP 15,07,701.56 13,84,701.03 12,74,300.47 11,78,608.32 10,96,122.81

35,00,000.00

30,00,000.00

25,00,000.00

20,00,000.00 Sales
Variable cost
15,00,000.00
Fixed Cost
10,00,000.00 BEP

5,00,000.00

-
Year-1 Year-2 Year-3 Year-4 Year-5

20
Current Assets Year-1 Year-2 Year-3 Year-4 Year-5
Cash and bank balances 44,700.00 2,25,200.00 3,77,200.00 4,99,200.00 5,82,200.00
Total 44,700.00 2,25,200.00 3,77,200.00 4,99,200.00 5,82,200.00

Current Liabilities
Sundry Creditors 1,48,500.00 1,63,000.00 1,79,000.00 1,97,000.00 2,17,000.00
Working capital loan - - - - -
Other Current Liabilities 75,000.00 83,000.00 91,000.00 1,00,000.00 1,10,000.00
Total 2,23,500.00 2,46,000.00 2,70,000.00 2,97,000.00 3,27,000.00

Year-1 Year-2 Year-3 Year-4 Year-5

Cash Ratio 0.20 0.92 1.40 1.68 1.78
Average cash ratio 1.19

21
 Cash Ratio
2.00

1.50

1.00

0.50

-
Year-1 Year-2 Year-3 Year-4 Year-5

The cash ratio indicates to creditors, analysts, and investors the percentage of a company’s current liabilities
that cash and cash equivalents will cover. A ratio above 1 means that a company will be able to pay off its
current liabilities with cash and cash equivalents, and have funds left over.Creditors prefer a high cash ratio,
as it indicates that a company can easily pay off its debt. Although there is no ideal figure, a ratio of not lower
than 0.5 to 1 is usually preferred. The cash ratio figure provides the most conservative insight into a company’s
liquidity since only cash and cash equivalents are taken into consideration.

22
 The gross profit margin (also known as gross profit rate, or gross profit ratio) is a
profitability measure that shows the percentage of gross profit in comparison to sales.
In other words, it calculates the ratio of profit left of sales after deducting cost of
sales.Generally, the higher the gross profit margin the better. A high gross profit
margin means that the company did well in managing its cost of sales. It also shows
that the company has more to cover for operating, financing, and other costs. The
gross profit margin may be improved by increasing sales price or decreasing cost of
sales. However, such measures may have negative effects such as decrease in sales
volume due to increased prices, or lower product quality as a result of cutting costs.
Nonetheless, the gross profit margin should be relatively stable except when there is
significant change to the company’s business model.

Year-1 Year-2 Year-3 Year-4 Year-5

Revenue from opera 19,85,000.00 21,84,000.00 24,02,000.00 26,42,000.00 29,06,000.00
Gross Profit 6,82,000.00 7,49,000.00 8,22,000.00 9,04,000.00 9,90,000.00
GP Ratio 34.36 34.29 34.22 34.22 34.07

Chart Title
40,00,000.00
30,00,000.00
20,00,000.00
10,00,000.00
-
Year-1 Year-2 Year-3 Year-4 Year-5

Revenue from operation Gross Profit GP Ratio

23
Debt to equity ratio (also termed as debt equity ratio) is a long term solvency ratio that indicates the soundness of
long-term financial policies of a business It shows the relation between the portion of assets financed by creditors
and the portion of assets financed by stockholders

Year-1 Year-2 Year-3 Year-4 Year-5

Year-1 Year-2 Year-3 Year-4 Year-5
Capital 4,17,000.00 4,88,000.00 5,88,000.00 7,18,000.00 8,78,000.00
Total Liabilities 16,40,500.00 15,70,000.00 14,89,000.00 13,98,000.00 12,94,000.00
Year-1 Year-2 Year-3 Year-4 Year-5
Debt Equity Ratio 3.93 3.22 2.53 1.95 1.47
Average DE ratio 2.62

The Debt quity ratio of the business varied from 3.93 to 1.47
with an average 2.62

Debt Equity Ratio

5

0
Year-1 Year-2 Year-3 Year-4 Year-5

24
This ratio shows the proportion of total assets of a buisiness which are financed by proprietors’ funds. The
proprietary ratio is also known as equity ratio. It helps to determine the financial strength of a business & is useful
for creditors to assess the ratio of shareholders’ funds employed out of total assets of the company.

Year-1 Year-2 Year-3 Year-4 Year-5

Capital 4,17,000.00 4,88,000.00 5,88,000.00 7,18,000.00 8,78,000.00
Total Assets 20,57,500.00 20,58,000.00 20,77,000.00 21,16,000.00 21,72,000.00
Year-1 Year-2 Year-3 Year-4 Year-5
Propritory Ratio 4.93 4.22 3.53 2.95 2.47
Average Proprietory r 3.62

The propritory ratio of the business varied from 4.93 to 2.47

with an average of 3.62 Propritory Ratio
6.00

5.00

4.00

3.00

2.00

1.00

-
Year-1 Year-2 Year-3 Year-4 Year-5

25
Current Assets Year-1 Year-2 Year-3 Year-4 Year-5
Other current assets 19,800.00 19,800.00 19,800.00 19,800.00 19,800.00
Sundry Debtors 1,65,000.00 2,10,000.00 2,70,000.00 3,50,000.00 4,60,000.00
Closing Stock 2,35,000.00 2,50,000.00 2,60,000.00 2,70,000.00 2,80,000.00
Cash and bank balances 44,700.00 2,25,200.00 3,77,200.00 4,99,200.00 5,82,200.00
Total 4,64,500.00 7,05,000.00 9,27,000.00 11,39,000.00 13,42,000.00
Quick assets (Current assets- cls stock) 2,29,500.00 4,55,000.00 6,67,000.00 8,69,000.00 10,62,000.00

Current Liabilities
Sundry Creditors 1,48,500.00 1,63,000.00 1,79,000.00 1,97,000.00 2,17,000.00
Other Current Liabilities 75,000.00 83,000.00 91,000.00 1,00,000.00 1,10,000.00
0 - - - - -
Total 2,23,500.00 2,46,000.00 2,70,000.00 2,97,000.00 3,27,000.00

Year-1 Year-2 Year-3 Year-4 Year-5

Quick Ratio 1.03 1.85 2.47 2.93 3.25
Average quick ratio 2.30

Quick Ratio
3.50
The Quick Ratio of the business varied from 1.03 to 3.25
3.00 with an average of 2.30
2.50

2.00

1.50

1.00

0.50

-
Year-1 Year-2 Year-3 Year-4 Year-5

26
 The Current Ratio Varied f 2.08 to 4.10 with an average
of 3.26 during the study period

In above table shown the current ratio of five years . . The solvency position of the
business in terms of current ratio was above the standard norm volume of 2:1 for the
entire period. Thecurrent Ratio showsutilization of idle funds in the business

Year-1 Year-2 Year-3 Year-4 Year-5

Current liabilities 2,23,500.00 2,46,000.00 2,70,000.00 2,97,000.00 3,27,000.00
Curretn assets 4,64,500.00 7,05,000.00 9,27,000.00 11,39,000.00 13,42,000.00

Year-1 Year-2 Year-3 Year-4 Year-5

Current ratio 2.08 2.87 3.43 3.84 4.10
Average CR 3.26

Current ratio

4.50

4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

-
Year-1 Year-2 Year-3 Year-4 Year-5

27
 Current Ratio
Particulars Year-1 Year-2 Year-3 Year-4 Year-5
Current Ratio 2.08 2.87 3.43 3.84 4.10
Current Assets 4,64,500.00 7,05,000.00 9,27,000.00 11,39,000.00 13,42,000.00
Current Liabilites 2,23,500.00 2,46,000.00 2,70,000.00 2,97,000.00 3,27,000.00
Average Current ratio 3.26

Current Ratio:
The current ratio is calculated by dividing current assets by current liabilities.
Current assets include cash and other assets that can be converted into cash within a year, such as marketable securities,
debtors, and inventories. Prepaid expenses are also included in the current assets as they represent the payments that will not
be made by the firm in the future. All obligations maturing within a year are included in the current liabilities. Current
liabilities include creditors, bills payable, accrued expenses, short-term bank loans, income tax, liability, and long-term debt
maturing in the current year.
The current ratio is a measure of a firm’s short-term solvency. It indicates the availability of current assets in rupees for every
one rupee of current liability. A ratio of greater than one means that the firm has more current assets than current claims
Current Ratio
5.00
4.00
3.00
2.00
1.00
-
Year-1 Year-2 Year-3 Year-4 Year-5

28
 Operating Expense Ratio (OER)
Particulars Year-1 Year-2 Year-3 Year-4 Year-5
Operating Expense Ratio 18,15,000.00 19,00,000.00 20,02,000.00 21,23,000.00 22,67,000.00
Sales 19,85,000.00 21,84,000.00 24,02,000.00 26,42,000.00 29,06,000.00
OER 91.44 87.00 83.35 80.36 78.01

Sales
40,00,000.00

20,00,000.00

-
Year-1 Year-2 Year-3 Year-4 Year-5

Sales

Operating Expense Ratio:

The operating expense ratio explains the changes in the profit margin (EBIT to sales) ratio. This ratio is
computed by dividing operating expenses viz., cost of goods sold plus selling expense, and general and
administrative expenses (excluding interest) by sales.. Operating expenses are costs associated with running
a business's core operations on a daily basis. Thus, the lower a company's operating expenses are, the more
profitable it generally is. Over time, changes in the OER indicate whether the company can increase sales
without increasing operating expenses proportionately (i.e. if the business is scalable). In real estate,
companies can compare properties by using the ratio.

29
 SAROMA BOREWELL

REPAYMENT SHEDULE Term loan

Month Interest Rate Interest Yealy
s Loan Outsanding 12.00% EMI Total EMI Yearly Total
1 15,00,000.00 15,000.00 21,520.64
2 14,93,479.36 14,935.00 21,520.64
3 14,86,893.72 14,869.00 21,520.64
4 14,80,242.07 14,802.00 21,520.64
5 14,73,523.43 14,735.00 21,520.64
Year -1

6 14,66,737.79 14,667.00 21,520.64

7 14,59,884.15 14,599.00 21,520.64
8 14,52,962.50 14,530.00 21,520.64
9 14,45,971.86 14,460.00 21,520.64
10 14,38,911.22 14,389.00 21,520.64
11 14,31,779.58 14,318.00 21,520.64
12 14,24,576.94 14,246.00 21,520.64 1,75,550.00 2,58,247.71
13 14,17,302.29 14,173.00 21,520.64
14 14,09,954.65 14,100.00 21,520.64
15 14,02,534.01 14,025.00 21,520.64
16 13,95,038.37 13,950.00 21,520.64
17 13,87,467.72 13,875.00 21,520.64
Year -2

18 13,79,822.08 13,798.00 21,520.64

19 13,72,099.44 13,721.00 21,520.64
20 13,64,299.80 13,643.00 21,520.64
21 13,56,422.15 13,564.00 21,520.64
22 13,48,465.51 13,485.00 21,520.64
23 13,40,429.87 13,404.00 21,520.64
24 13,32,313.23 13,323.00 21,520.64 1,65,061.00 2,58,247.71
25 13,24,115.59 13,241.00 21,520.64
26 13,15,835.94 13,158.00 21,520.64
27 13,07,473.30 13,075.00 21,520.64
28 12,99,027.66 12,990.00 21,520.64
29 12,90,497.02 12,905.00 21,520.64
Year -3

30 12,81,881.37 12,819.00 21,520.64

31 12,73,179.73 12,732.00 21,520.64
32 12,64,391.09 12,644.00 21,520.64
33 12,55,514.45 12,555.00 21,520.64
34 12,46,548.81 12,465.00 21,520.64
35 12,37,493.16 12,375.00 21,520.64
36 12,28,347.52 12,283.00 21,520.64 1,53,242.00 2,58,247.71
37 12,19,109.88 12,191.00 21,520.64
38 12,09,780.24 12,098.00 21,520.64
39 12,00,357.59 12,004.00 21,520.64
40 11,90,840.95 11,908.00 21,520.64
41 11,81,228.31 11,812.00 21,520.64
Year -4

42 11,71,519.67 11,715.00 21,520.64

43 11,61,714.03 11,617.00 21,520.64
44 11,51,810.38 11,518.00 21,520.64
45 11,41,807.74 11,418.00 21,520.64
46 11,31,705.10 11,317.00 21,520.64
47 11,21,501.46 11,215.00 21,520.64
48 11,11,195.81 11,112.00 21,520.64 1,39,925.00 2,58,247.71

30
 REPAYMENT SHEDULE Term loan
Month Interest Rate Interest Yealy
s Loan Outsanding 12.00% EMI Total EMI Yearly Total
49 11,00,787.17 11,008.00 21,520.64
50 10,90,274.53 10,903.00 21,520.64
51 10,79,656.89 10,797.00 21,520.64
52 10,68,933.24 10,689.00 21,520.64
53 10,58,101.60 10,581.00 21,520.64
Year -5

54 10,47,161.96 10,472.00 21,520.64

55 10,36,113.32 10,361.00 21,520.64
56 10,24,953.68 10,250.00 21,520.64
57 10,13,683.03 10,137.00 21,520.64
58 10,02,299.39 10,023.00 21,520.64
59 9,90,801.75 9,908.00 21,520.64
60 9,79,189.11 9,792.00 21,520.64 1,24,921.00 2,58,247.71
61 9,67,460.46 9,675.00 21,520.64
62 9,55,614.82 9,556.00 21,520.64
63 9,43,650.18 9,437.00 21,520.64
64 9,31,566.54 9,316.00 21,520.64
65 9,19,361.90 9,194.00 21,520.64
Year -6

66 9,07,035.25 9,070.00 21,520.64

67 8,94,584.61 8,946.00 21,520.64
68 8,82,009.97 8,820.00 21,520.64
69 8,69,309.33 8,693.00 21,520.64
70 8,56,481.68 8,565.00 21,520.64
71 8,43,526.04 8,435.00 21,520.64
72 8,30,440.40 8,304.00 21,520.64 1,08,011.00 2,58,247.71
73 8,17,223.76 8,172.00 21,520.64
74 8,03,875.11 8,039.00 21,520.64
75 7,90,393.47 7,904.00 21,520.64
76 7,76,776.83 7,768.00 21,520.64
77 7,63,024.19 7,630.00 21,520.64
Year -7

78 7,49,133.55 7,491.00 21,520.64

79 7,35,103.90 7,351.00 21,520.64
80 7,20,934.26 7,209.00 21,520.64
81 7,06,622.62 7,066.00 21,520.64
82 6,92,167.98 6,922.00 21,520.64
83 6,77,569.33 6,776.00 21,520.64
84 6,62,824.69 6,628.00 21,520.64 88,956.00 2,58,247.71
85 6,47,932.05 6,479.00 21,520.64
86 6,32,890.41 6,329.00 21,520.64
87 6,17,698.77 6,177.00 21,520.64
88 6,02,355.12 6,024.00 21,520.64
89 5,86,858.48 5,869.00 21,520.64
Year -8

90 5,71,206.84 5,712.00 21,520.64

91 5,55,398.20 5,554.00 21,520.64
92 5,39,431.55 5,394.00 21,520.64
93 5,23,304.91 5,233.00 21,520.64
94 5,07,017.27 5,070.00 21,520.64
95 4,90,566.63 4,906.00 21,520.64
96 4,73,951.99 4,740.00 21,520.64 67,487.00 2,58,247.71

31
 REPAYMENT SHEDULE Term loan
Month Interest Rate Interest Yealy
s Loan Outsanding 12.00% EMI Total EMI Yearly Total
97 4,57,171.34 4,572.00 21,520.64
98 4,40,222.70 4,402.00 21,520.64
99 4,23,104.06 4,231.00 21,520.64
100 4,05,814.42 4,058.00 21,520.64
101 3,88,351.77 3,884.00 21,520.64
Year -9

102 3,70,715.13 3,707.00 21,520.64

103 3,52,901.49 3,529.00 21,520.64
104 3,34,909.85 3,349.00 21,520.64
105 3,16,738.20 3,167.00 21,520.64
106 2,98,384.56 2,984.00 21,520.64
107 2,79,847.92 2,798.00 21,520.64
108 2,61,125.28 2,611.00 21,520.64 43,292.00 2,58,247.71
109 2,42,215.64 2,422.00 21,520.64
110 2,23,116.99 2,231.00 21,520.64
111 2,03,827.35 2,038.00 21,520.64
112 1,84,344.71 1,843.00 21,520.64
113 1,64,667.07 1,647.00 21,520.64
Year -10

114 1,44,793.42 1,448.00 21,520.64

115 1,24,720.78 1,247.00 21,520.64
116 1,04,447.14 1,044.00 21,520.64
117 83,970.50 840.00 21,520.64
118 63,289.86 633.00 21,520.64
119 42,402.21 424.00 21,520.64
120 21,305.57 213.00 21,518.57 16,030.00 2,58,245.64
10,82,475.00 25,82,475.00
15,00,000.00

32
 SAROMA BOREWELL
Calulation of NPV and IRR Chart Title
Opportunity Co 10% 20,00,000.00
Year Cash Flow Present Value
-
0 (18,75,000.00) (18,75,000.00) 0 1 2 3 4 5
1 4,52,000.00 4,10,909.09 (20,00,000.00)

2 5,24,000.00 4,33,057.85 (40,00,000.00)

3 6,03,000.00 4,53,042.82 (60,00,000.00)
4 6,92,000.00 4,72,645.31 Cash Flow Present Value
5 7,86,000.00 4,88,044.16
Net Present Value 3,82,699.24
IRR 16.966268%
-
Net Present Value (NPV)
Net present value (NPV) is the difference between the present value of cash inflows and the present value of cash
outflows over a period of time. NPV is used in capital budgeting and investment planning to analyze the
profitability of a projected investment or project. A positive net present value indicates that the projected earnings
generated by a project or investment - in present dollars - exceed the anticipated costs, also in present dollars. It is
assumed that an investment with a positive NPV will be profitable, and an investment with a negative NPV will
result in a net loss. This concept is the basis for the Net Present Value Rule, which dictates that only investments

with positive NPV values should be considered.

Internal Rate of Return (IRR)
Internal rate of return (IRR) is the interest rate at which the net present value of all the cash flows (both positive
and negative) from a project or investment equals zero. The internal rate of return is used to evaluate the
attractiveness of a project or investment. If the IRR of a new project exceeds a company’s required rate of return,
that project is desirable. If IRR falls below the required rate of return, the project should be rejected. Typically, the
higher the IRR, the higher the rate of cash inflow a company can expect from a project or investment.

33
 Conclusion
On revealing the various aspects of the project and studying the financial & technical
features of the scheme it can easily be noted that the above project will be a great success. This
Project viewed from any angle will find a viable and justifiable outlook. There are no hidden
anomalies or expenses in the Project. The Term Loan proposed to avail and can be repaid with
interest from the income derived from the business itself. This Project is recommended for
implementation. Considering the fair quality of services and products offered by the
establishment and further the prior experience, knowledge, technical expertise, and
commitment of the promoters are added advantages for the smooth running of the project.
The income generated, with the experience, expertise, and commitment of the promoter
ensures the success of the project. Even the conservative estimates show that the project is
financially and economically viable and commercially sound. Considering the fair quality of
services and products offered by the establishment and further the prior experience,
knowledge, technical expertise, and commitment of the promoters are added advantages for
the smooth running of the project. The income generated, with the experience, expertise, and
commitment of the promoter ensures the success of the project. The various projected
financial statements and Debt Service Coverage Ratio DSCR, Return on Investment ROI, Pay
Back Period, etc. show that the project will be able to repay the entire Bank Loan together with
interest within the stipulated period and further shows that the project is financially sound
and deserve support and help from the Bank.
The various projected financial statements and Debt Service Coverage Ratio (DSCR),
Return on Investment (ROI), Pay Back Period, etc. show that the project will be able to repay
the entire Bank Loan together with interest within the stipulated period and further shows
that the project is financially sound and deserve support and help from the Bank.

34