CHAPTER FIVE

FINANCIAL PLAN

The breakdown of the business financial plan will reflect the firm’s financial standing and
future potential as a measure of its stability as growth.

Allvine’s being a medium enterprise will be largely funded from savings from this two
proprietors, family and friend’s contribution and partially on loans and grants.

Savings 400,000
Donations (friends and family) 200,000
Grants 100,000
Loans 200,000

5.1 Pre- Operational Cost

This will cater for all expenses to be incurred before commencement of the fruit parlour
business to facilitate its efficiency.

ITEM KSH
Equipment purchase 300,000
Equipment installattion 20,000
Premises rent 5,000
Services(utilities) 20,000
Licence and permits 10,000
Travelling cost 5,000
Insurance 20,000
Salaries 200,000
advertising 5,000
Support services 20,000
Total 605,000

5.2 Estimation Working Capital

These will include expenses during the operation of the business and will be worked as;

Working capital= Current Assets- Current Liabilities

ITEM 2019 2020 2021

Current assets 50,500 70,000 60,000
Cash in bank 60,000 100,000 15,000
Stock 70,000 90,000 50,000
Work in progress 130,000 115,000 100,000
Debtors 90,000 105,000 100,000
Service changes 75,000 100,000 90,000
Total current assets 475,000 540,000 365,000
Bank loan 40,000 40,000 40,000
Creditors 35,000 50,000 25,000
Licence and permits 10,000 10,000 10,000
Salaries 95,000 95,000 100,000
Advances 20,000 20,000 20,000
Insurance 25,000 30,000 35,000
Working capital 225,000 245,000 230,000

E.W.C= T.C.A – T.C.L

=250,500 295,000 342,000

Assumptions

Bank loan payment interests are constant

Stock is increased periodically not necessarily monthly.

5.3 PROFORMA INCOME STATEMENT

5.3.1 proforma income Statement For The Year Ended 2019

ITEM JAN FEB MARCH APRIL MAY JUNE JULY AUG SEP OCT NOV DEC
‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’
Opening cash.(cash on hand 250 50 20 250 50 30 20.5 15 30 50.5 55 70
Cash sales 750 115 170 190 180 185 180 175 180 180 185 200
Credit sales 20 40 60 55 60 70 65 70 70.5 75 70 80

Debtors 20 30 35 40 35 45 40 45 45 45 50 50
Discounts 75 105.5 23 40 35 45 40 45 45 45 50 45
Loans 100 100
Total cash
Cash purchase 100 75 40 45 40 65 60 60 75 90 85 100
Credit purchasing 55 40 30 20 60 55 60 65 35 40 45 45
Salaries 75 80 95 95 95 95 95 95 95 95 95 100
Rent 5 5 5 5 5 5 5 5 5 5 5 5
Insurance 20, - - - - - - - - - - -
Loan repayment 40 40 40 40 40 40
Capital expenditure 37 85.5 31.5 46 38.5 34.6 37.8 38.25 42.5 43.9 44.5 47.2
Services changes 25.5 25.5 24.5 24.5 26 22.4 24.7 29.5 31.5 33.4 37.2 35
Total expenditure
Net cash flow
5.3.2 proforma income Statement For The Year Ended 2020

ITEM JAN FEB MAR APRIL MAY JUNE JULY AUG SEP OCT NOV DEC

‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’ ‘000’
Opening (cash at hand) 75 80 85 85 70 60 100 120 130 110 110 140
Cash sales 170 175 180 180 185 190 190 195 200 215 130 230
Credit sales 85 86 87 82 87 78 84 81 67 72 53 50
Debtors 48 48 43 46 48 54 53 57 67 72 78 77
Discounts 37 38 33 39 42 53 54 52 52 64 63 73
Total cash flow
Cash purchases 88 98 100 125 96 93 98 115 145 135 125 140
Credit purchases 31 47 49 54 48 44 47 46 41 37 30 43
Salaries 96 96 95 95 95 95 95 95 95 95 95 95
Rent 6 6 5 5 5 5 5 5 5 5 5 5
Insurance 20 - - - - - - - - - - -
Capitals expenditure 37 38 31 46 38 34 37 38 42 43 44 47
Service changes 25 25 24 24 26 22 24 29 31 33 37 35
Total expenditure
Net cash flow
Net after tax(15%)
5.4 Quaterly proforma income Statement For The Year Ended 2021

PARTICULAR JANUARY - APRIL- JULY- SEPT -

S MARCH JUNE SEPTEMBER DECEMBER
Cash at hand 148,000 206,000 243,000 256,000
Cash sales 669,000 724,000 700,000 745,000
Credit sales 145,000 153,000 146,000 115,000
Debtors 216,000 223,000 256,000 225,000
Discounts 202,000 197,000 230,000 230,000
Total cash
Purchase 426,000 306,000 602,000 647,000
Salaries 306,000 306,000 306,000 306,000
Capital 142,000 148,000 152,000 164,000
expenditure
Rent and 123,000 123,000 123,000 123,000
service charges
Insurance 54,000 54,000 54,000 54,000
Others 87,000 87,000 75,000 87,000
Total cash flow
Net cash flow
Taxed net
5.5 Proforma Income Statement for years ended 2019, 2020, 2021

ITEM 2019 2020 2021

Sales 2,750,000 3,210,000 3,390,000
Cost of goods sold 845,000 978,000 1,780,000
Gross profit 3,590,000 4,190,000 4,470,000
Purchases 1,406,000 1,884,000 2,240,000
Salaries 1,140,000 1,140,000 1,224,000
Capital expenditure 39,000 369,000 470,000
Others 420,000 537,000 461,000
Total expenses
Pre-tax profit
15% net profit pose tax

5.6 Performa Balance Sheet

FIXED ASSETS LIABILITIES

Building 100,000 Creditors 10,000
Land 100,000 Loans 50,000
Furniture 20,000 Bank overdrafts 10,000 70,000
160,000
5.7 Calculation of Break Even Point

This is that level at which the business makes neither profit nor loss meaning the business
generates only enough revenue to cover operating expenses.

Variable costs 2019 2020 2021

Costs of goods 1,406,200 1,884,920 2,240,200
Capital expenditure 390,000 369,200 470,000
Other services 420,000 537,200 461,600
charges
Total fixed assets 2,216,200 2,791,320 3,171,200
salaries 1,142,000 1,142,000 1,224,000
Rents 72,000 72,000 72,000
Loan repayment 266,000 266,000 266,000
Insurance 18,000 18,000 18,000
Totals 1,496,000 1,496,000 1,590,000

Contribution margin

Item 2019 2020 2021

Total sales 2,750,250 3,219,950 3,398,000
Variable cost 2,216,200 2,791,320 3,172,200
Contribution 534,050 1,428,630 225,800
margin

Break even analysis

B.E.P = Total fixed sales/ (total sales – variable costs/total sales) x100

2019= 1,496,000/ (2,750,250-2,216,200/2,750,250) x100

= 7,704,099

2020= 534,050/2,750x100

CM = 19.42%
2020= 123 , 000 ÷ [ ( 3 , 219 , 950−2 , 791 ,320 ) ÷ 3 ,219 , 950 ]

=923,994

5.8 Calculation of Profitability Ratios

ITEM NO. RATIOS 2019 2020 2021

1. Currents ratio 213.80 225.92 216.05
2. Quick ratio 182.13 190.21 191.62
3. Assets turnover 425.23 396.08 460.28
4. Trading profit 24.55% 59.11% 42.22%
5. Expense ratio 189.50 79.94 232.41

Return on owners equity= Net profit/owners equity

Return on equity 2019= 493235/629625x100= 78.34%

Return of equity for 2020= 128940/1188877x100= 105.89%

Return of equity for 2021= 902642/846239x100= 106.678%

5.9 Designed Financing

The designed financing for All vine’s fruit parlor is as follows.

ITEM AMOUNTS
Pre-operational costs 442,500
Working capital 25,500
Fixed costs 534,050

Proposed Capitalization
ITEM AMOUNTS
Owner capitalization 297,000
Borrowed 954,500
Bank loan 50,000
Totals 1,305,500
APPENDIX: MAP