Chapter five

5.1 FINANCILA PLAN

Pre- operating cost include any any expeses incurd during the start up or formation of a new
business. they include expenses related to the investigation of a potential new business

Working capital required (WCR) is the amount of money a company needs to deal with treasury
gaps between its expenditure and collections. By anticipating, it will be possible to optimistze
working capital requirement

A proforma invoice is a quote in an invoice format that license, contrant for pre-shipment
inspections, open a letter of credit or arrange for transer of hard currency .

Proforma balance sheet its list out your future assets, liabilities, and stock holders . equity in the
same format as your historical balabce sheet.

Projected cashflow statement is described as a list of all expected cash flows and outflows for
the coming year

Break even analysis is a financial calculation that weights the cost of a new business service or
product aginist the unit sell price to determine the point at which you will break the even

Desire financing clearly states how the capital will obtained, from whom , how much, and terms.

The proposed capitalization is anticipaited to increase th shareholders’ equity on consolidated

basis to above 25% of its issued and paid-up capital.

Profitability ratios assess a company’s ability to earn from its sales or operations, balance sheet
assets, or shareholderss’ equity. They indicate how efficiently a company generates profit and
value for ahareholders

5.1 pre operational cost

Pre-operation cost are the sum of money required to cater for the materials and equipments
before business commences
The business will have the following pre pre-operational cost

Description Number Amount

Printing machine 1 30000
Computers 2 20000
Photocopier 3 15000
Transport 4 10000
Electricity installation 5 20000
Stock 6 30000
Furniture 7 15000
Stationary 8 4500
Business registration 9 4500
WI-FI 10 5000
Rent 11 5000
Insurance 12 3000
Capital 13 50000

5.2 starting capital

O start a business I will require the name of the business, and I will get my start-up capital from
contribution, loans and personal savings .

Source Amount
Personal savings 100000
Contribution s 100000
Loans 300000
Totals 5000005.
5.3 working capital required

Item Year 1 Year 2 Year 3

Current assets
Opening stock 100000 150000 200000
Cash at hand 50000 80000 100000
Cash at bank 100000 200000 300000
Closing stock 120000 140000 160000
Debtors 50000 60000 70000
Total 420000 630000 830000
Current liability
Creditors 50000 60000 70000
Rent 15000 15000 15000
Insurance 2000 3000 4000
Total 67000 78000 89000
Working capital 353000 552000 741000
(C.A-C.L)

Year 1 (2026)

Working capital = C.A- C.L

= 420000-67000

=353000

Year 2 (2027)

Working capital = C.A- C.L

= 630000-78000

=552000
Year (2028)

Working capital = C.A- C.L

=830000-89000

=741000

5.4 cash flow projection

Cash flow projections predicts the amount of money entering and leaving in the business

Descri JAN FEB MA AP MA JUN JUL AU SEP OCT NOV DEC

ption R R Y G
Cash
in flow
Capital 500 610 670 680 700 750 800 850 9000 9100 92000 9500
000 00 00 00 000 00 000 000 00 0 00
Loans 300 300 300 330 330 300 330 330 3300 3500 40000 4000
00 00 00 00 00 0 00 00 0 0 0
Donati 100 100 150 150 150 160 160 160 1700 1800 18000 1800
on 00 00 00 00 00 00 00 00 0 0 0
Cash 500 600 700 800 800 800 840 840 8600 8700 88000 9000
sales 00 00 00 00 00 00 00 00 0 0
Debtor 500 600 650 700 750 800 850 900 9000 9500 9500 1000
s 0 0 0 0 0 0 0 0 0
Total 595 716 791 812 836 887 941 955 1047 1059 10755 1108
cash 000 00 500 000 500 000 500 000 000 500 000 000
flows
Rent 150 150 150 150 150 150 150 150 1500 1500 15000 1500
00 00 00 00 00 00 00 00 0 0 0
Electri 150 200 250 250 250 300 300 350 3500 3500 3500 4000
city 0 0 0 0 0 0 0 0
Salarie 100 100 120 120 140 140 140 140 1500 1500 16000 1600
s 000 000 000 000 000 000 000 000 00 0 0 00
Credit 500 500 500 600 600 600 600 600 7000 7000 7500 7500
ors 0 0 0 0 0 0 0 0
Licens 200 200 250 250 250 300 350 350 3500 4000 4000 4000
es 0 0 0 0 0 0 0 0
TOTA 123 124 145 146 166 167 168 179 1790 1800 19000 1900
L 500 000 000 000 000 000 000 000 00 00 0 00
CASH
OUT
FLOW

5.5 PROFOMA PROJECTED INCOME

5.6 PROJECTED BALANCE SHEET

DESCRIPTION YEAR 1 YEAR 2 YEAR 3

FIXED ASSETS
Production 10000 120000 130000
Facility 7000 7500 8000
Furniture 5000 5000 5000
Computer 25000 25000 25000
Less depreciation
Total
Current assets
Cash at hand 50000 80000 100000
Cash at bank 100000 200000 300000
Deptors 50000 60000 700000
Total 200000 160000 1100000

5.7 BREAK EVNE ANALYSIS

This a point where business makes a profit. The following is the breakeven analysis of the
business

Description Amount
Sales 400000
Variable
Water bills 4500
Transport 5000
Telephone 6000
Rent 15000
Total variable cost 30,500

Contribution = 40000- 30500

 =30500

Contribution margin = 369500/400000*100

=39999.375

Contribution = sale-varible costs

Contribution margin = contribution*100/sale

5.7.1 BRAK EVEN LEVEL SALES

FIXED COSTS AMOUT

Licenses 6000
Insurance 7000
Salaries 1000
Salaries 15000
Total 38000
Total fixed 38000

Brake even = 38000/30500*100

124.5910

Brake even cost = total fixed cost/contribution * 100

5.8 expected profitability

5.81 gross profit margin

Gross profit = gross profit/sale*100

Net profit = net profit/sale*100

Return on capital profit

Return on capital profit = net profit/total investments

Total investments = net profit/total assets

5.9 desired financing

Items Amount (ksh)

Pre operation cost
Fixed assets
Working capital 55200

5.9.1 proposed capitalization

Items Amount
Personal savings 100000
Loans 300000
Contribution (friends) 100000