NAMEOFTHEBUSINESS:BARAKACEREALSTORESANDWHOLESALE

TITLEOFTHEDOCUMENT:BUSINESSPLAN

PRESENTEDBY:NELLYCHELANGAT

INDEXNO:5151020768

ADMISSIONNUMBER:60010

INSTITUTION:KAIBOITECHNICALTRAININGINSTITUTE

SUPERVISOR:KEVINCHETAMBE

PRESENTEDTO:THEKENYANATIONALEXAMINATIONCOUNCILFORPARTIALFULFI
LMENTOFANEXAMINATIONSUBSEQUENTAWARDOFDIPLOMAINCOOPERATIVEM
ANAGEMENT

DATEOFSUBMISSION:JULY2021SERIES

DECLARATION
ThisistocertifythatthisismyoriginalworkandhasneverbeensubmittedtoKenyanationexaminationcou
ncilfromanyinstitution.

1
DEDICATION
Mydedicationgoestomyparentswhohavereallysupportedmefinancially,brothersandsisterandalsom
yclassmateswhoencouragemewhilewritingtheproject.

ACKNOWLEDGMENT
IwouldliketothankGodforthestrengthwhenwritingthisproject,myparentsfortheirfinancialsupportan
dmysupervisorforassistingtocompletethisprojectandstudentsofKaiboiTechnicalTrainingInstitutew
hoassistedmecompletionformyproject.

Contents
TOC \h \u \z DECLARATION 1
DEDICATION 2
ACKNOWLEDGMENT 3
CHAPTERONE 7
1.0EXACUTIVEBUSINESSSUMMARY 7
1.1BUSINESSDESCRIPTION 7
1.2MARKINGPLAN 7
1.3ORGANIZATIONANDMANAGEMENT 7
1.4OPERATIONALANDPRODUCTIONPLAN 7
1.5FINANCIALPLAN 7
CHAPTERTWO 8
2.0BUSINESSDESCRIPTION 8
2.1BUSINESSNAME 8
2.2BUSINESSLOCATIONANDADDRESS 8
2.3FORMOFBUSINESSOWNERSHIP 8
2.4TYPEOFBUSINESS 8
2.5TYPESOFPRODUCTSANDOPPORTUNITY 8
2.6JUSTIFICATIONOFTHEBUSINESSOPPORTUNITY 9
AVAILABILITYOFGOODS 9

2
IMPROVINGLIVINGSTANDARD 9
EMPLOYMENT 9
TECHNOLOGY 9
2.7INDUSTRY 9
2.8OBJECTIVEOFTHEBUSINESS 9
SHORTTERMGOALS 9
LONGTERMGOALS 10
2.9ENTRYANDGROWTHSTRATEGY 10
CHAPTERTHREE 11
3.0MARKETPLAN 11
3.1POTENTIALCUSTOMERS 11
3.2COMPETITION 12
3.3PRICINGSTRATEGY 13
3.4SALESTACTICS 13
3.5ADVERTISINGANDPROMOTIONATRATEGIES 13
3.6DISTRIBUTIONSTRATEGY 13
CHAPTERFOUR 14
4.0ORGANIZATIONANDMANAGEMENT 14
4.1BUSINESSMANAGERANDRESPONSIBILITY 14
4.2ORGANIZATIONCHART 14
4.3OTHERPERSONNELANDTHEIRDUTIES 15
4.4RECRUITMENT,TRININGANDPROMOTION. 15
4.5OTHERSUPPORTIVESERVICE 16
4.6LICENSEPERMITSANDBY-LAWS 16
CHAPTER5 17
5.0OPERATIONAL/PRODUCTPLAN 17
5.1PRODUCTS/SERVICESDESIGNDEVELOPMENT 17
5.2PRODUCTSERVICESANDCAPACITY 17
5.3WORKSHOPLAYOUT 18
5.4PRODUCTSTRATEGY 18
5.5PRODUCTIONPROCESS 19
5.6FACTORYAFFECTINGTHEPRODUCTION 20
1.INTRACTRACTURE 20

3
2.INSECURITY 20
3.GOVERNMENTREGULATIONS 20
5.7TAXATION 20
5.8APPROVALANDCOMPLIANCE 20
CHAPTERSIX 21
6.0FINANCIALPLAN 21
6.0PRE-OPERATIONAL 21
6.6WORKINGCAPITALREQUIREMENT 21
6.3PROFORMAINCOMESTATEMENTFORTHEFIRSTTHREEYEARS 22
6.4PROFORMABALANCESHEETATTHEENDOFTHREEYEARS 23
6.5PREPATIONOFPROFORMACASHFLOWSTATEMENT. 24
6.6BREAKEVENPOINT 25
6.7EXPECTEDPROFITABILITYRATIOS 26

CHAPTERONE

1.0EXACUTIVEBUSINESSSUMMARY

1.1BUSINESSDESCRIPTION
Theproposebusinessisasole-
proprietorship.ItoperatesunderthenameBarakaCerealStoresandWholesalewhichwillbedealingwith
cerealslikemaize,beansandrice.ItwillbelocatedwithinLiteintowncenteralongKaplong-
KerichoHighway.ThisbusinesswillbeoperatedandmanagedbyNELLYCHELANGAT.

1.2MARKINGPLAN
ThepotentialcustomersshallincludethosewithinLiteintowncenteri.e.schools,hospitalsandotherinstit
utions.italsotargetstocaptureapproximately40%ofthewholemarketshareasitexpands.Theexistingco
mpetitorsofthisfieldincludeWakarocerealsandKamaki’scereals.

4
1.3ORGANIZATIONANDMANAGEMENT
Atthestarttheproposedbusinesswillbeatotaloffouremployees,themanager,twooperativeandwatchm
an.Thetotalcashpaymentpermonthshallbesh.250000initiallyasmorelaborforcewillbeneededastheb
usinessexpands.

1.4OPERATIONALANDPRODUCTIONPLAN
Tocommencethebusinessrequiresgoods,equipmentandshelvesworthksh.500000.Thegrowthoftheb
usinesswilldeterminethepurchaseofmorecommodities.Thestaffwillbeencouragedtoattendshowsan
dexhibitionstobroadentheirtechnologyskills.Thisisaimedatimprovingthequalityofproductsandserv
icestobeofferedbythefirm.

1.5FINANCIALPLAN
Theinitialcapitalforthebusinesswillbefromowners’equityofksh.84500andksh.202000contributionf
romfamilymembersandksh.4000frombank.

CHAPTERTWO

2.0BUSINESSDESCRIPTION

2.1BUSINESSNAME
ThenameoftheproprietorofthisbusinesswillbeNELLYCHELANGAT,currentlyundertakingadiplo
macourseinBusinessCooperationatKaiboiTechnicalTrainingInstitute.Thenameoftheproposedbusi
nesswillbeBarakaCerealStoresandwholesale.Thenamedescribesthehardworkingladyinthevillagea
ndhasadesiretobringpeopleclosetoeachother.Themajoractivitywillbesellingcerealslikemaize,beans
,wheat,groundnutsandalsoshopcommoditiestothecustomers.Theproprietorchoosesthiskindofbusin
essduetorapidgrowthandhighdemandofgoodsinthevillage.Theproprietorduetomanyadvantagesenj
oyedbyasoleproprietor.

2.2BUSINESSLOCATIONANDADDRESS
ThebusinesswillbelocatedinLiteintowncenteralongKaplong-
KerichoHighway.TheproprietorselectedtolocatethebusinessinLiteintownbecauseofmanyinstitutio
nschoolsandrapidgrowthrateofpeopleintownwhodemandsgoodsinhighdemand.Someofthisinstituti
onschoolincludeLiteingirls’highschooloppositetheLiteinMissionHospitalalongKaplong-
KerichoHighway.
Thebusinessaddressshallbe
BARAKACEREALBOARD

5
P.O.BOX257,
LITEIN-KENYA,
TEL:0757058013.

2.3FORMOFBUSINESSOWNERSHIP
ThebusinessshallbesoleproprietorshipformofbusinessoperatedandmanagebyNELLYCHELANGA
T.

2.4TYPEOFBUSINESS
Theproposedbusinesswillbeservicebusinesswhichwillbedealingwithsellingofcereals,commodities
andshopcommodities.Thebusinesswillranmainlyaswholesaleandalsoofferretailservices.Theowner
ofthebusinesssaleswillbecomingdirectlyfromproducersthushavingadvantagesovercompetitorssinc
egoodswillbehighquality.

2.5TYPESOFPRODUCTSANDOPPORTUNITY
Theproprietorofthebusinesswillbealsooffersaleservicestohiscustomers.Theproprietoralsointendsto
doasmanyadvertisementsaspossiblesoastocreateawarenessconcerningthebusiness.Bysodoingwill
makepotentialcustomersawareofgoodsofferedbyproprietorandthelocationthereforemakingiteasyto
accessthemeffectively.

2.6JUSTIFICATIONOFTHEBUSINESSOPPORTUNITY

AVAILABILITYOFGOODS
Duetotherapidgrowthanddemandofthecommodities,theownerofthebusinessthoughtthebusinesswil
lbeabletomakesurethatgoodsofcurrentareavailableinLiteintownintimeneeded.Thiswillhelpthecust
omerstobuygoodsnearandreducetransportationdistance.

IMPROVINGLIVINGSTANDARD
Duetothefacttheproprietorwillcreatejobtotheproductneededinbusinessthiswillassistthemtoprovidet
heirbasicneedsandwantsthusthelifeofthepeoplewillbeliftedtoahigherandbetterlevel.

EMPLOYMENT
SincetheproprietorintentstolocatethebusinessnearthelocalresidentofLiteintown,thepeoplefromthea
reawillgetanopportunitytogetemploymentindifferentwayhencethebusinesswillbeoperatedasasalep
roprietorship.Therewillbeopenjobstothosepeoplewhotransportgoodsinthebusinessandthosecreatin
gopportunitytothem.

TECHNOLOGY
Thebusinesswillalsopromotelocaltechnologybyintroducingcomputersforaccountingforthebusiness
thuswillbepayingthetaxestothegovernmentthusimprovingthetechnologyandeconomyofthecountry.

6
2.7INDUSTRY
Thebusinesswillbedealingwithprovidingandsellingofcerealsandothergoods.Thetechnologytobeuse
dismodernonewhichwilleliminatethecashierwhowillbeoperatingcomputers,whomwillbedoingacco
untinginthebusiness.

2.8OBJECTIVEOFTHEBUSINESS
Theproprietorhassetfuturegoalsforherbusinesssoastokeepherinfutureorientedframeofmind.Thegoa
lincludesbothlongtermandshorttermgoals.

SHORTTERMGOALS
Theownerofthebusinessintentstoemployexperiencedpersonnelwhowillincludebothmanagementan
dtechnicalstaff.Theownerofthebusinessintentstobuyalorryfortransportinggoodsboughtandgoingfo
rthestocktosell.

LONGTERMGOALS
TheproprietorwillalsoopenotherbranchesinothertownslikeKericho,BometandEldoret.

2.9ENTRYANDGROWTHSTRATEGY
ThegrowthofthepopulationinLiteinareaisanobviousfactoranewbusinessofthisnature.Thepopulatio
nintheareaismajorlyself-
employedcharacterizedbysmallscaleenterprise.Thebusinesscaneasilyattractyoungunemployedpers
onnelintheregion.Theownerofthebusinesswillalsoimprovetheproductbymakingsurethebusinesssell
currentcommoditiesallthetimes.Theownerofthebusinessalsointendstoattendseminarsrelatingtothea
reaofthebusinesssoastogetknowledgeonhowtorunthebusiness.

Rb

CHAPTERTHREEbbbbrbb

3.0MARKETPLANr

3.1POTENTIALCUSTOMERS
ThefollowingtableshowspotentialcustomersfortheproprietorwhoislocatedatLiteintownwhichisalso
theproprietorsbusiness.
Tableno3.1potentialcustomers
1 Individualcustomers
2 Liteingirlshighschool
3 Organizationinstitute

7
Individualcustomers
Theownerofthebusinesswillbesellinghergoodstoindividualcustomerswhocometobuygoodsinwhole
saleandinsmallquantity.Theownerofthebusinesswilltargetbothmaleandfemalecustomersandalsogi
vepromotiontotheminordertogetmorecustomers.
Liteingirls’highschool
Liteingirls’highschoolisagovernmentschoolwhichislocatedneartheLiteintownoppositetheproprieto
rbusinessthustheproprietorwillbesupplyingtotheschoolhergoodsatappropriateprice.
Otherorganization
Theownerofthebusinesswillbesellingcommoditiestotheotherorganizationalinstitutebecausetheywil
lbedemandingthesegoods.
Availability
Theownerofthebusinesswillmakesurethatgoodsareavailableinthemarketattherequiredtimesinceshe
willbegettinggoodsdirectlyfrommanufacturers.
Economy
Theownerofthebusinessintendstosellgoodsofhighqualityandlastlonger,thusthiswillimprovetheeco
nomyofthecustomer.
Performance
Theownerofthebusinessexpectsthefrequencyofpurchaseofgoodsonmonthlybasicsincetheywillbepu
rchasingoncreditandlargequality.Theproprietorintendsalsotopurchasegoodstosomeonewhoistrust
worthythereforetheproprietoracceptstohaveatotalsaleineachmonthasitfollows.

items Dailysalesperbuy Price/unit total

Beans 5 9500 47000
Maize 6 4500 22500
Groundnuts 10 8200 82000
Greengrams 4 500 2000
Omo 20 300 6000
Fatsandoil 12 1000 12000
Biscuits 10 350 3500
Sugar 20 1500 30000
total 205000

8
3.2COMPETITION
Thepotentialcompetitorsoftheproposedbusinesswillbehandinhandwithitbyofferingqualityandfresh
productsastogainmorecustomers.Allthisbusinessarelocatedafewmetersawayfromproposedbusines
s.
Thesizeofthecompetitorstowardsthebusinessismoderateduetolargepopulationinthearea.
Sizeofthecompetitors
Factorstoconsider CompetitorA CompetitorB
Qualityperformance Medium Medium
Openinghours 12hoursaday 10hoursperday
No.ofemployees 10 12
Location 500metersaway 200metersway

3.3PRICINGSTRATEGY
Pricingofdifferentproductsdifferinquality,thebusinesswilldeterminethecostofitsgoods,thatis,theco
statwhichthegoodswillhavebeenbought,transported,theholdingcostandthepriceatwhichthecompetit
orswillbesellingtheirgoods.Thesellingpriceoftheproductsisvariable,thisisbecausethechangesthatm
ayoccuroncustomerlist,customersincomeetc.
product Cost
Beans 9500
Maize 4500
Groundnuts 8200
Greengrams 500
Omo 300
Fatsandoil 1000
Biscuits 350
Sugar 1500

3.4SALESTACTICS
Theproposedbusinesswillsellitsproductdirectlytocustomers.Thatiswhythebusinessissituatedataver
ystrategicplacewhoseeverycustomerwillhaveaccessto.

9
3.5ADVERTISINGANDPROMOTIONATRATEGIES
Theproposedbusinesswillbeadvertisedthroughinternet,radio,postersandtelevision.Duetothelocalpe
opleinthearea,thecheapandeffectivemeansofadvertisingthebusinessisthroughTaachFMsincemostp
eopleinthelocalarealistentoit.AlsothesignboardalongKaplong-
KerichoHighwaywillmakemanytoseeandgettoknowthekindofproductweareofferingtocustomers.

3.6DISTRIBUTIONSTRATEGY
Theproposedbusinesswillbedistributingitsproductsdirectlyfromthepremisestocustomers.Thepropo
sedbusinesschannelofdistribution;
Producer-wholesale-retailer-customer.
Producer-wholesale-customer.

CHAPTERFOUR

4.0ORGANIZATIONANDMANAGEMENT

4.1BUSINESSMANAGERANDRESPONSIBILITY
Theownerofthebusinesswillbethemanagerofthebusinessasasoleproprietor.Theresponsibilityoftheo
wnerwillalsoincludethewatchmanandacleanerwhowillcontributeintherunningofthebusinesseffecti
vely.
MANAGER
I) Delegatingdutiestootherteamplayers.
II) Overseeingtheoverallgoodmanagementofthebusiness.
III) Makingordersfornewbusinesspurchases.
WATCHMAN
Dutiesandresponsibilities.
i) Directingcustomerstothespecificdestination
ii) Tokeepsecurity.
CLEANER
i) Tomaintaincleansanitationofthebusiness.

10
4.2ORGANIZATIONCHART
Theproposedbusinesshasthreelevelsoforganizationchartduetotheyoungertooperateasasolepropriet
orbusinessinthearea.

Manager

Workers

Watchman
and
cleaner

4.3OTHERPERSONNELANDTHEIRDUTIES
Theproposedbusinesswillhaveotheremployeeswhoareassistinginordertoseethegeneralsuccess.The
ywillinclude;
Middlemen:theywillbeemployeeswhowillbeinformingtheproprietorofthenewproductsinthemarke
tandthegoodswhicharehighlydemandedinthemarketbythecustomers.Theywillbeensuringthatstock
ofthebusinessisavailableatalltime.

4.4RECRUITMENT,TRININGANDPROMOTION.
Recruitment:thisreferstotheprocedurethatwillbefollowedinselectingnewemployeesinthebusinesst
husbedonethrough;
i) Application
Thepersonwhomeetsrequiredqualificationwillhavetoapplyforadvertisedpost.
ii) Advertising
Theproprietorwillusepostersasameansofadvertisingfornotifyingthepotentialperson.Hencetheposte
rswillbedistributedtovariouslocationhenceitischeapofadvertising.

11
 iii) Updating
Thosewhopasstheinterviewwillbesummonedbytheproprietorforfinalupdateonwhatisrequiredfromt
hemasateamplayerinthebusiness.
iv) Training
Itwillbedonefromtimetohavethroughtheorganizationofseminarsandorganizationmeetingwhenthem
anagerwillbeinvitingspeaktotheemployees.
v) Promotion
Thisistheraceingradeoftheemployeesasaresultofgoodcharacterandhardworkingtopromotethebusin
esstoruneffectively.Theproprietorofthebusinesswillbeawardinghardworkingemployeesbyincreasi
ngtheirsalaries.Alsotothecustomerswhowillbebuyinggoodsinhugequantitytheywillbegiventradepr
omotionasawayofencouragingthemtobehis/herpotentialcustomers.

4.5OTHERSUPPORTIVESERVICE
Theseareserviceswhichwillenabletheproprietortooperatesuccessfullytheproprietorbanki.e.co-
operativebanksinceitiseasilytoaccesswithinLiteintownandsuitablefordevelopingbusiness.

4.6LICENSEPERMITSANDBY-LAWS
Licenseandpermits
Accordingtoregulationandrulesofcountryabusinesscannotstartoperatingwithouthavingbeenissueda
licenseortradinglicense.
TheownerofthebusinesswillobtaintradinglicensefromLiteinMunipalCouncil.

CHAPTER5

5.0OPERATIONAL/PRODUCTPLAN
Thefacilitiesthatwillberequiredtoofferservicestotheproposedbusinessarelikereceipts,tables,chairsa
ndcomputerswhichwillmakeoperationintheentireenterpriseserviceseasierandconvenient.

5.1PRODUCTS/SERVICESDESIGNDEVELOPMENT
Thedesignofthestockoftheproposedserviceswillmainlyincludeledgerbooks,andpens,rulers,formaki
ngrunningoftheenterprise.Thebusinesswillcarryouttheresearchonhowproductsandservicesindesign
willbetakenintoconsiderationbydevelopingnewmethodsofprovidingessentialservicestocustomers

12
5.2PRODUCTSERVICESANDCAPACITY
Theroomforthebusinesswillberented.Theroomwillbeequippedwithmaterialsandequipment’srequir
edforotherbusinesstobeoneoperation.Thefollowingtableshowsvariousequipment’sandmaterialsreq
uiredinthebusiness
ITEMS QUALITY UNITCOST(SH) TOTAL(SH)
Chair 6 500 3000
Shelves 4 600 2400
Counter 1 250 250
Receiptsbooks 3 150 450
Table 3 1500 4500
Pens 10 50 500
Writing 9 70 490
TOTAL 11590
Otherequipment’sthatarerequiredaretelephones,computers,cabinetandcalculators.
EQUIPMENTREQUIRED
ITEMS QUALNTY COST INSTALLATION TOTAL
Telephone 1 10000 10000
computer 2 21500 100 21600
Calculator 1 900 900
Television 1 5000 5000
Cabinet 1 6000 100 6100
Total 43600

5.3WORKSHOPLAYOUT
SECONDSHELVE

STORE ROOM ACCOUNTANT COUNTER

FIRST SHELVE

SECOND SHELVE
13
MANAGER
 TOILET

5.4PRODUCTSTRATEGY
Thetablebelowshowsmaterialrequiredproduction

MATERIAL SOURCES QUANTITY TOTAL

Books Wholesalers 10000
Rulers Suppliers 1500
Pens Wholesalers 300
Files wholesalers 50 800
TOTAL 12600

Theenterprisewillensurethatmaterialarereadilyavailablethroughouttheyearandalsocarewillbetakentoensuret
hatthereiscontinuousavailabilityofnecessaryitemsorderedtoavoidservicesrenderingtostoppage.Theenterpris
ewillemploytwocasualworkerstomakeproductsinsidethefirm,thiswillcost1000permonth.Thelevelofskillsth
atproposedbusinesswillrequireforitsworkerswillbeasfollows:

JOBTITTLE LEVELOFSKILLS
Manager Highskillsofmanagingandadministration
Accountant Highskillinauditingandaccountsstatementpreparati
on
Casualworker Highskillsinmaterialhandling
Salesrepresentative Aholderofcertificatesinsalesandmarketing
Thecostoftheproductionforworkerisassuchinthetablebelow:

No.ofdirectworkerscostperhour Total
Manager 540

14
 Accountant 500
Casualsworkers 450
Salesrepresentative 150
Watchman 150
TOTAL 1790

Thebusinesswillincurexpensesduringoperation.Thetablebelowshowstheexpensesandamounts:-

EXPENSES AMOUNTINKSH
Rent 500

Electricity 400

Telephone 500

Water 450

License 2500

Insurance 1000

Advertisement 550

Transport 1000

TOTAL 6900

5.5PRODUCTIONPROCESS
Thefollowingarestepswhichwillbeinvolvedinofferingtheproductionservicestothecustomers.Onreceivingthe
productsitwillbeinspectedandaccepted.Theywillbearrangedintheshelvesforcustomersandcustomerswillthen
cometothebusinesstopurchasetheproductthusthehelperwillassistinserving.Thereceiptswillbeissuedtocusto
mersaftertheypurchasetheproducts

5.6FACTORSAFFECTINGTHEPRODUCTION

1.INFROSTRACTURE
Theroadleadingtobusinessoperationisnotlargeenough,andalsoitisnotaccessibleduringtherainyseasons.Henc
e,wewillbetransportingourproductstotheconsumersforeasyaccessoftheproducts

2.INSECURITY
Duetothehighpopulationinthetownthebusinessoperationhastobeclosedearlierduetoinsecurity.

15
3.GOVERNMENTREGULATIONS
Theownerofthebusinesswillensurethataletteriswrittentotheregistrarofthesocietiesbythegovernment
ofKenyabeforeoperation.

5.7TAXATION
Therearemunicipaltaximposebytheministryoflocalauthority.

5.8APPROVALANDCOMPLIANCE
Thecertificateregulationistobeapprovedandgiventotheownerofthebusinessinordertobeginit’soperationunde
rthenexthealthandindustry.

CHAPTERSIX

6.0FINANCIALPLAN

6.0PRE-OPERATIONAL
BarakaCerealstoreinLiteinwillincurthefollowingexpenses:-

ITEMS COST(KSH)
Rent 600
Electricity 8800
Licenseandequipment’s 10000

16
 Water 1200
Advertisement 700
Furnitureandfitting 12000
Transportation 4500
Telephone 7200
Repairandmaintenance 3600
Materialandequipment 1400
Salariesandwages 34800
TOTAL 84800

6.6WORKINGCAPITALREQUIREMENT
Theproposedworkingcapitalforthefirstyearofthebusinessenterprisewillbeasfollows:-

ITEM YEAR1 YEAR2 YEAR3

Stock 120000 130000 160000
Cashatbank 10000 18000
Cashinhand 12000 15000 24000
TOTAL 132000 155000 202000

6.3PROFORMAINCOMESTATEMENTFORTHEFIRSTTHREEYEARS
ITEM YEAR1 YEAR2 YEAR3
Sales 950000 108500 150000
Directcost
Stock 100000 120000 140000
Directlabor 120000 30000 28000

Fuel 60000 40000 13000

17
Totaldirectcos 280000 190000 18100
t

Grossprofit 670000 595000 131900

Overheads

SalaryandWag 34800 32600 30000

es

Rent 600 600 600

Water 1200 3400 1200

Electricity 8800 1200 8200

Advertisement 700 8400 700

Transport 4500 700 4000

Licenseandper 10000 4300 10000

mit

Insurance 8000 10000

Repairandmai 3600 3200

ntenance

Depression 10000 8000 6000

Lessoverhand 94200 79200

Tradingprofit 575800 815800 72100

Lessdepressio 10000 8000 1246900

n

Furnitureandfi 12000 10000 8000 6000

tting

Netprofit 565800 1240900

18
6.4PROFORMABALANCESHEETATTHEENDOFTHREEYEARS
DETAILS YEAR1 YEAR2 YEAR3
Fixedassets 37200
Machinesan 37200 35200
dequipment
Lessdepreci 2000 35200 3000 32200
ation
Furniturean 5800 5800 5800 5600
dfitting
Lessdepreci 200 5600 300 5300
ation
TOTAL 43000 40800 37500
Currentasset
s
Stock 130000 140000 150000
Bank 10000 20000
Cash 1000 131000 20000 170000 30000 200000
Capitalempl 174000 210800 237500
oyed

Currentliabi
lities

Ownerequit 100000 120000 140000

y

Longtermlia
bility

loanfromba 40000
nk

Netprofit 51000 64500

Capitalempl 140000 171000 204500

oyed

19
 6.5PREPATIONOFPROFORMACASHFLOWSTATEMENT.
JA FE MAR AP MA JU JUL AU SEP OC NO DE TOT
N B CH RIL Y NE Y G T T V C AL
Opening 600 620 65050 6602 620 680 690 680 720 760 790 800 8272
balance 000 000 0 00 500 000 000 500 000 000 800 200 700
Cashsale 300 340 3800 3900 410 450 490 500 520 530 540 550 5380
s 000 0 0 00 00 00 00 00 00 00 00 00
Creditsal 150 180 19000 2000 180 190 170 200 190 200 150 140 2140
es 00 80 0 00 00 00 00 00 00 00 00 00
Capitalin 120 1200
troduced 000 00
Total
Expense 225 2250
000 00
Cashpur 100 800 6000 7000 350 900 650 700 750 600 400 950 8600
chase 00 0 0 0 0 0 0 0 0 0 0
Creditpu 600 700 1000 3000 400 500 200 450 200 250 300 400 4850
rchase 0 0 0 0 0 0 0 0 0 0 0
Salariesa 420 350 29000 4000 330 200 370 370 280 300 320 410 4040
ndwages 0 00 0 00 00 00 00 00 00 00 00 00
Rent 800 700 650 500 900 600 100 400 800 750 600 900 8600
0
Electricit 500 600 400 500 600 450 350 500 600 800 700 700 6700
y
Water 500 400 200 550 200 300 400 250 350 300 700 600 4600
Transpo 100 900 1000 800 800 600 550 600 750 500 700 600 8800
rt 0
Insuranc 200 300 500 400 100 300 200 350 550 500 600 700 4700
e
Repairan 100 200 150 300 250 100 100 400 600 300 150 200 3850
dmainte
nance
Furnitur 110 130 1000 900 140 120 250 150 800 110 120 140 1540
eandfitti 0 0 0 0 0 0 0 0 0 0
ngs
Advertis 500 500 500 500 500 500 500 500 500 500 500 500 600
ement
Total
Cashflow 627
00
Balance 162
300

20
6.6BREAKEVENPOINT
Particular Amount Totalamount
Sales 800000
Lessvariable
Cost

Electricity 8500

Advertisement 800

Waterbill 4800

Telephonebill 2200

Transport 12000

Repairandmaintenance 3600

Stationary 500

Totalvariable 33400

contribution 7666000

Contributionmargin=Saleslesstotalvariablecostscontributionmargininpercentage
766600X100
800000 = 9583%

Totalfixedassets

Wagesandsalaries 34800

Insurance 8000

Licensepermit 10000

Totalfixedassets

Break-evenlevelofsalesinshillings

=Totalfixedcostcontribution

52800X100

95.83 = 55095.56%

21
6.7EXPECTEDPROFITABILITYRATIOS
Grossprofitmargin=sales–costofgoodssoldX100

Sales

8000000–280000X100

80000

= 52000X100
800000 = 65%
Returnonequity = netprofitaftertaxx100
Owners’equity
5658000X100
595000 = 63.2%

22