INDRODUCTION

This will deal with financial plans. This phase will help the proprietor to know the financial aspects of the proposed business. It will also help the proprietor to gauge the future financial potential.

5.1 BOOKS OF ACCOUNT

The owner will keep books like:-

i) Cash books

This will show the records of cash received and spent.

ii) Purchases ledger

This will keep the records of goods bought over period of time.

iii) General ledger

This will show records for all bills such as rent, electricity, water, and mobile phones e.t.c.

iv) Debtors books

This book will be used to records all debt the people owns the business

v) Credit book This will be used to record all the money a business owns.

5.2 PRE-OPERATIONAL COST.

These are the cost that incur before the business begun.

S/No

Item

Amount(Ksh)

Loan fee

1000

Painting and renovation

10000

Electricity deposits

2000

Advertisements

1000

License and permits

2500

Stationary

2570

Water charge and installation

1500

Miscellaneous

2000

Transport

Total

31,570

5.3 ESTIMATION OF WORKING CAPITAL

The working capital is the financial used in each day.

ITEM

AMOUNT

Opening stock

50,000

Salaries

25,000

Pre-operational cost

31570

Transport

10,000

TOTAL

116,570

Working capital = total current assets – current liabilities

5.4 ESTIMATION OF FIXED ASSETS

This is the amount of money invested in capital, machine, tools and equipment.

Fixed assets

Serial no

Item

Amount

Shelves

6000

Dust coats

2000

Weighing machine

3500

Chairs

1500

Calculators

1500

Counter

2000

Total

12,900

CASH FLOW YEAR ONE

Items

Jan

Feb

Mar

Apr

May

June

July

Aug

Sep

Oct

Nov

Dec

Totals

Cash inflow

Cash sale

118400

110000

112000

110000

115000

113000

120000

109000

122000

116000

111000

123000

1379400

Collection from debtors

5000

6000

11000

Total inflow

118400

110000

112000

115000

113000

120000

109000

122000

116000

111000

123000

Cash outflow

Purchases

41700

44550

46000

50000

42000

41000

51000

43000

52000

44000

46000

53000

554320

Advertisements

1000

3000

Loan payment

5000

Electricity

400

600

465

500

535

600

504

604

600

502

605

6,410

Mobile phone

4000

48000

Salaries

49,800

597,600

Insurance

1500

18000

License

3000

Lunch

3000

36000

Water bill

500

400

420

430

500

600

750

345

278

670

560

700

6,153

Transport

1000

9000

Renovations

3000

9000

Lunch

2000

24000

Bank account

500

Total outflow

84719

79912

81375

86330

78370

77455

88020

79342

83364

79442

81342

90545

993216

Net cash

30681

30088

60625

23670

36630

35545

31980

29658

38636

36558

29658

32455

386184

Cumulative cash

30981

60769

91394

115064

151694

187239

219219

248877

287513

324511

53729

386184

Year two

Items

Jan

Feb

Mar

Apr

May

June

July

Aug

Sep

Oct

Nov

Dec

Totals

Cash inflow

Cash sale

120000

123000

130000

120000

135000

140000

142000

118000

145000

135000

143000

146000

1596000

Collection from debtors

4000

8000

Total inflow

120000

123000

130000

120000

139000

140000

142000

118000

145000

135000

142000

150000

1604000

Cash outflow

Purchases

45000

46000

50000

42000

35000

40000

44000

31000

50000

52000

48000

54000

543000

Advertisements

1000

30000

Loan payment

5000

60000

Electricity

400

600

465

500

535

600

504

604

600

502

605

6,410

Mobile phone

5000

60000

Salaries

14976

179712

Insurance

1500

18000

License

3000

Lunch

3000

36000

Water bill

600

500

620

510

610

520

620

540

650

630

625

645

7070

Transport

1000

9000

Renovations

3000

Lunch

2000

24000

Bank account

200

800

Total outflow

91125

85221

89336

80035

74586

79596

79046

75266

90626

85656

86201

96321

1013015

Net cash

28875

36779

40604

39965

64414

60404

62954

42134

54374

49374

56799

53679

590925

Cumulative cash

28875

65654

106258

146223

210637

271041

333995

376729

431103

480447

537246

590925

Year three

Items

Jan

Feb

Mar

Apr

May

June

July

Aug

Sep

Oct

Nov

Dec

Totals

Cash inflow

Cash sale

122000

120000

119000

115000

130000

135000

140000

112000

146000

148000

136000

150000

1573000

Collection from debtors

6000

5000

11000

Total inflow

122000

120000

119000

115000

136000

135000

140000

112000

146000

148000

136000

155000

1584000

Cash outflow

Purchases

40000

32000

45000

30000

46000

42000

45000

35000

48000

43000

38000

44000

488000

Advertisements

1000

3000

Loan payment

6050

5046

5040

4048

6080

5042

7000

4043

6750

6046

6052

6089

67286

Electricity

400

600

465

500

535

600

504

604

600

502

605

6,410

Mobile phone

15575

186900

Salaries

1500

18000

Insurance

License

3000

36000

Rent

700

610

510

650

690

710

665

630

625

675

720

590

14025

Water bill

1000

8000

Transport

3000

Renovations

2000

24000

Miscellaneous

200

800

Bank account

3000

30000

9000

Total outflow

81825

67731

77625

62973

80795

78827

79940

68748

86450

80746

72847

77754

916261

Net cash

40175

52269

41375

52027

55025

56173

60060

43252

59550

67254

63153

77246

667559

Cumulative cash

40175

92444

133819

185846

240871

297044

357104

400356

459906

527160

590313

667559

Summary of net cash for the first three years

Item

Year one

Year two

Year three

Net cash

386184

590925

667557

5.6 PRO-FORMA INCOME STATEMENT FOR YEAR ONE

Items

(ksh) year one

(ksh) total

(ksh) year two

(ksh) total

(ksh) year three

(ksh) total

Total sales

1379400

1596000

1573000

Debtors

11000

8000

11000

Total income

1390400

1604000

1584000

Beginning inventory

417700

46750

50550

Purchases

554320

543000

488000

Cost of goods sold

596090

589750

538550

Gross profit

794310

1014250

1045450

Expenses

Salaries

Advertisements

3000

Transport

9000

8000

Loan payment

60000

License

3000

6000

Rent

36000

Insurance

18000

Water bill

5374

7070

14025

Electricity bills

61400

74283

67286

Mobile phone

48000

60000

Renovations

3080

3000

Total expenses

419574

456065

396211

Net profit

374736

558185

649239

Tax at 15%

56210.4

83727.75

973855.85

Net profit after tax

187.368

7814590

9089346

Performa Income statement for year two

ITEM

AMOUNT (Kshs)

Cash sales

6,950,000

Credit sales

700,000

Total sales

7,650,000

Purchases

3,370,000

Total purchases

3,870,000

Gross profit

3,780,000

Expenses

Loan payment

240,000

Maintenance

100,000

Water and electricity bill

3,700

License

10,000

Salaries

360,000

Transport

104,000

Total expenses

817,700

Net profit before tax

2,962,300

Net profit before tax

444,343

2,517,955

Proforma Income statement for year three

ITEM

AMOUNT (Kshs)

Cash sales

6,950,000

Credit sales

700,000

Total sales

7,650,000

Purchases

3,870,000

Total purchases

3,870,000

Gross profit

3,870,000

Expenses

Loan payment

240,000

Maintenance

100,000

Water and electricity bill

3,700

License

10,000

Salaries

360,000

Transport

104,000

Total expenses

817,700

Net profit before tax

2,962,300

Net profit before tax

444,345

2,517,955

5.7 BALANCE SHEET ENSY AS AT 31ST DECEMBER 2016

Fixed assets

Current liabilities

Computer

15000

Creditors

5000

Furniture

2750

Salaries

4000

CALCULATOR

240

Rent

3000

HAMMERS

Long term liabilities

18825

Current assets

Net worth

64825

Cash at hand

6000

Cash in bank

15000

Stock

35000

Debtors

11000

67000

Total

85825

Total

85825

Balance sheet as at 31st December 2017

Fixed assets

Current liabilities

Computer

15000

Creditors

5000

Furniture

2750

Salaries

3000

Pallet

240

Rent

3000

Apron

500

Electricity

CALCULATOR

HAMMERS

Shelves

200

18825

Current assets

Cash at hand

7000

Cash in bank

30000

Stock

40000

Debtors

12000

89000

Total

107825

Balance sheet as at 31st December 2018

Fixed assets

Current liabilities

Computer

15000

Creditors

6000

Furniture

2750

Salaries

4000

Glasses

240

Rent

3000

CALCULATOR

500

Electricity

5000

HAMMERS

Transport

100

Apron

Shelves

200

Long term liabilities

18825

Loan

9000

Current assets

Net worth

8425

Cash at hand

8000

17425

Cash in bank

32000

Stock

44000

Debtors

10000

94000

Total

112825

Total

112825

5.8 BREAK EVEN ANALYSIS

Break even analysis for year 1

i. Gross margin of sales = Annual sales – variable cost

Total annual sales for year one = ksh.1390400

Variable cost – 705094

Gross margin sales = 1390400-705094

= 685306

ii. Gross margin % = Annual sales – variable cost X100

Annual sales

= 1390400-705094X100

1390400

= 49.29%

iii. Break ever point = Total fixed cost

Gross profit margin %

= 292800

49.29

= 29280.04

Break even analysis for year two

i. Gross margin of sales = Annual sales – variable

Total annual sales for year one = sh.1604000

Variable cost = 721153

Gross margin of sales = 1604000-721153

= 882847

ii. Gross margin % = Annual sales – variable cost X 100

Annual sales

= 1604000-721153X100

1604000

= 55.04%

iii. Breakeven point = total fixed cost

Gross profit margin %

= 199712

55.04

= 5445.35

Break even analysis for year three

i. Gross margin of sales = Annual sales – variable cost

Total annual sales for year one = 1584000

Variable cost = 665111

Gross margin of sales = 1584000 – 665111

= 918889

ii. Gross margin % = annual sales – variable cost X100

Annual sales

= 1584000-665111X100

1584000

= 58.01%

iii. Break even points = total fixed cost

iv. Gross profit margin %

= 240000

58.01

= 4152.73

Item

Year 1

Year 2

Year 3

Item

Year 1

Year 2

Year 3

Variable expenses

Fixed expenses

Purchase

554320

543000

488000

Salaries

1172800

179712

186900

Mobile bill

48000

60000

Rent

36000

Water bill

5374

7070

14025

License

3000

Electricity bill

61400

74283

67286

Insurance

18000

3000

Loan payment

60000

Transport

9000

8000

Stationeries

800

Lunch

24000

705094

721153

665111

292800

240900

Breakeven point sales summary

Item

Year 1

Year 2

Year 3

B.E.P

29280.04

5445.35

4152.73

Sales

1930400

1604000

1584000

Profit / loss

1,537,604

1,059,466

1,168,727

5.9 PROFITABILITY RATIO

Gross profit margin for year 1, 2 and 3

Year 1

Gross profit margin = gross profit X100

Sales

= 794310X100

1390400

GPM = 57.123%

Year 2

Gross profit margin = gross profit X100

Sales

= 1014250X100

1604000

GPM = 63.23%

Year 3

Gross profit margin - gross profit X100

Sales

= 1045450X100

1584000

GPM = 66.00%

Summary for gross profit margin

Item

Year 1

Year 2

Year 3

Profitable ratio

57.123%

63.23%

66.00%

5.10 RETURN OF EQUITY (R.O.E)

R.O.E for year 1

R.O.E = net profit after tax X 100

Owner's equity

= 187368X 100

80000

= 234.21

R.O.E for year 2

R.O.E = net profit after tax X 100

Owner's equity

= 78145X100

80000

= 9768.24

R.O.E for year 3

R.O.E = net profit after tax X 100

Owner's equity

= 9089346X100

80000

= 113.63

Summary of return on equity ration

Item year 1 year 2 year 3

Return on equity 234.21 9768.24 113.62

5.11 DESIRED FINANCING

Item

Amount

Remarks

Owner's equity

200,000

Cash

Youth fund

120,000

Cash

Friends, parents and relatives

100,000

Cash

Total

420,000

Loan repayment schedule

Funding source

Amount + Interest

Total payment per month

Total per year

Equity bank

120,000

10,000

120,000

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