Uniyty

Select Business and Technology College

Department of Accounting
3rd Year Degree Extension Program
Section B
Investment and portfolio management Assignment
Group members ID
1. Rahel Hailu ---------------------------------------------------------------------------1839/12
2. Kelemua Wendemu -------------------------------------------------------------------1799/12
3. Hanan Murad -------------------------------------------------------------------------1790/12
4. Bizayehu Tesfaye ---------------------------------------------------------------------1781/12
5. Tesfaye Bizuneh --------------------------------------------------------------------1847/12
6. Selamawit Girma -------------------------------------------------------------------1845/12
7. Meseret kiros ------------------------------------------------------------------------1818/12
8. Meseret Mebratu --------------------------------------------------------------------1822/12
9. Hiwot Nigussie ----------------------------------------------------------------------1796/12
10. Miskiya Murad ------------------------------------------------------------------- - - 1827/12

Addis Ababa, Ethiopia

2022
List of Figures...................................................................................................................................ii
List of Tables....................................................................................................................................ii
1. COMPANY DISCRIPTION......................................................................................................1
1.1. Company Ownership..........................................................................................................1
1.2. Mission Statement..............................................................................................................1
1.3. Current stage of Development............................................................................................1
1.4. Competencies......................................................................................................................1
1.5. Product and Services..........................................................................................................1
1.6. Objectives...........................................................................................................................2
1.7. Key to Success....................................................................................................................2
2. MARKET ANALYSIS SUMMARY........................................................................................3
2.1. Service Description.............................................................................................................3
2.2. Product comparison with our competitor...........................................................................3
2.3. Location, Market area and Main customer.........................................................................3
2.3.1. School and College Students.......................................................................................4
2.3.2. University students......................................................................................................4
2.3.3. Office Stationary.........................................................................................................4
2.4. Total Demand and Market Share........................................................................................4
2.5. Selling Price and Sales Forecast.........................................................................................5
3. Marketing Plan...........................................................................................................................7
3.1. Advertising and Promotion.................................................................................................7
3.2. Product pricing...................................................................................................................7
3.3. Promotional Measures and Marketing Budget...................................................................7
4. Service Rendering Plan (Production Plan)................................................................................8
4.1. Main Activities (Service rendering Process)......................................................................8
4.2. Fixed Assets........................................................................................................................8
4.3. Capacity..............................................................................................................................8
4.4. Stationary Center Location and Layout..............................................................................8
4.5. Raw Material......................................................................................................................8
4.6. Labor needed......................................................................................................................8
5. ORGANIZATIONAL STRUCTURE.......................................................................................9
5.1. Form of business.................................................................................................................9
5.2. Organization and Management...........................................................................................9
5.2.1. Man Power Requirement.............................................................................................9
5.2.2. Entrepreneur Experience and Qualifications.............................................................10
5.3. Pre-operating activities and equipment............................................................................10
5.4. Office Equipment.............................................................................................................10
5.5. Administrative Expense....................................................................................................11
6. FINANCIAL PLAN.................................................................................................................12
6.1. Initial Capital Investment.................................................................................................12
6.2. Financing Plan and Loan Requirement............................................................................12
6.3. Security for Loan and Investment....................................................................................13
6.4. Security for Loan and Investment....................................................................................13
6.5. Cash Flow Statement........................................................................................................13
6.6. Balance Sheet...................................................................................................................14
6.7. Break-even Point and Return on Investment....................................................................15
6.7.1. Financial Analysis.....................................................................................................15

List of Figures
Figure 5.1 1 Organizational Structure chart....................................................................................9

List of Tables
Table 2.1 1 Details of sales forecast................................................................................................6

Table 5.1 1 Minimum Manpower requirement and their education, experience and monthly Salary 10

Table 5.2 1 office equipment and their costs 11

Table 5.1 1 Minimum Manpower requirement and their education, experience and monthly Salary10

Table 6.1 1 Projection of Initial investment 12

Table 6.2 1 Financing plan 12

Table 6.3 1 Profit/Loss Projection 13

Table 6.4 1 Cash Flow Projection 14

Table 6.5 1 Balance Sheet Projection 15

 1. COMPANY DISCRIPTION
1.1. Company Ownership
The stationary center will be a Partnership business running by ten visionary Students looking for
mature capital and serve their customers with quality products and services.

1.2. Mission Statement

The Mission of the stationary shop is to provide the best office and basic stationary materials to
our customers. Stationary shop exists to attract and maintain customers. Our product and service
will exceed the expectation of our customers.

1.3. Current stage of Development

The project is at initial stage to fulfill all legal documents like Investment license, Business
license, issuing Value Added Tax (VAT), Tax Identification Number (TIN) certificate. Moreover,
we made rental agreement with the owner of building.

1.4. Competencies
We have found a niche market in the area, there is no good stationary shop in this specific area.
People, especially students from the area found them very disturb when they should go far for
very little and single things in addition to bulk purchase. There are some shop near to the
university that is offering these products and services but the customer demand is not satisfied all
the time. The location is far from main market at least requiring transport with no price discount.
So, this will be our competitive edge and we will use this as our strength and we will serve the
community diligently. The other competitive advantage we will be establishing good relationship
with university community and management to assess their need. Similarly, we will establish
good business relationship with suppliers of stationaries and books especially with importers to
receive products at lower price and sell it back with lower pricing adding certain profit margin.

1.5. Product and Services

Wisdom stationary shop will provide the following products and services to its customers:
The Stationary shop will be offer many office and basic stationary materials like paper, book,
copies writing materials like pencil, pen, exercise books, rubber, eraser, clips, binder, marker,
colors etc.

Other than that stationary shop will offer printing facility for students at affordable rates, scanning
document facility will be also given. For high level students and surrounding community there
will be also an internet service. There will be a good quality of photo copy machine in the shop
for photo copy service and binding machine for binding facility.

We will receive the stationary materials and books from well-known supplier. We will hire
Supplier for this act. We will sell these stationary materials and books to students on special
discount and some good package. We will use a few attracting strategies by giving free stickers
and candy to little students.

1.6. Objectives
The main objective of establishing the envisage project is that university student and surrounding
community are suffering to find quality as well as full-fledged stationary service at Unity
University. So that, to satisfy the demand for this types of service it was essential to establish
modern stationary center having all stationary products including internet service.

1.7. Key to Success

Key to success for the stationary shop will be:

 Maintaining a reputable reputation in the surround community

 Quality product
 Competitive price
 Dealing with customers/ having good relationship with customers.
 2. MARKET ANALYSIS SUMMARY
2.1. Service Description
The Stationary shop will offer many office and basic stationary materials like paper, book, copies
writing materials like pencil, pen, exercise books, rubber, eraser, clips, binder, marker, colors etc.

Other than that stationary shop will offer printing facility for students at affordable rates, scanning
document facility will be also given. For high level students and surrounding community there
will be also an internet service. There will be a good quality of photo copy machine in the shop
for photo copy service and binding machine for binding facility.

2.2. Product comparison with our competitor

Price, quality product and reputation are such critical success factor in the stationary business
industry. The stationary shop will compete well in our market by offering competitive prices, high
quality products and the availability of the product on time and by maintaining an excellent
reputation with customer and the community we serve.

There are few competitors around area but these shops are unable to satisfy customer demand.
The customer we are targeting require various service not only stationary material but also
copying binding internet service and the like. However, we will consider them as our main
competitor and we will consider their mistakes as our main strength.

2.3. Location, Market area and Main customer

The stationary shop will be located Addis Ababa City, around Torhailoch branch of Unity
University, this is one of the main city areas targeting the city segment because there is a need in
the area for this type of services. Stationary shop will be given the best quality product for
universities, college’s, schools, office, and home stationary use. The shop will be always
remaining nimble enough to respond to the needs of the community in which it serves. Mostly,
the surrounding residents always forced to go far area like, “Mexico”, “piazza”, and other places
to find quality products with affordable prices which in turn spend time and transportation cost.
The flowing are our main customers;
 2.3.1. School and College Students
The area where our shop is located is a recently established city sect where many people are
residing, following this many schools are opened and continued to open year after year. There are
many children studying in those schools so we have targeted this segment. We will keep books
including supportive according to new education road map and based on need assessment made
by our business. On beginning we will give some free sticker and other material to the school
students for attracting their minds on the shop. We will also keep those attractive and interesting
things which catch the eyes of our new customers.

There will be special discount on books, photocopy and on guides for elementary, High school
and college students.

2.3.2. University students

We will also mainly focus on these segments. There is Hawassa Universty around our shop.
Students and the community of the envisage university is our most important targets. There are
large amount of students studying in this universities. We will exert maximum effort to convince
students about our service, how much it is cheap and provide quality product and services. So we
will give special discount to university level on some books especially on printing facility.
Because university students have mostly printed out work so we will give them discount for
attracting them on our shop. Similarly, we will deliver our service to the university where there
are massive printing service orders.

2.3.3. Office Stationary

Beside schools, colleges and university students, targeting the office area is our main focus. We
will keep all necessary office stationary material and we will give the best quality to the office.
We will also offer buying in bulk so that more customer so that more customer can come and put
their trust on us. It will contain office papers of different qualities, office file covers of different
styles and we will also take orders for the covers of their own logo on files, writing materials like
pen, pencil etc. and many more basic and needy things.

2.4. Total Demand and Market Share

The literacy rate of Ethiopia is increasing is increasing year by year; this is showing that the
literacy rate is increasing and the education system is increasing in Ethiopia. This is the result of
education policy of the Government as well as Economic growth of the country. There is
education means people send their children’s to school and colleges for goodness of their futures.

More importantly Government universities and private colleges are increasing at increasing rate
over the years. All communities in these institutions requires at least one stationary item. Hence,
the demand for stationary item is ample. Our market shares from these all demand is significant.

2.5. Selling Price and Sales Forecast

As a startup business, 85,000 stationary items, 35,200 text book, note book and paper products,
21,500 printing and photocopies and 8300 miscellaneous item is estimated to be sold. The selling
price of those product and service on average per unit will be birr 15, 45, 2, and 8 respectively.
Sales Forecast

1.1 Unit Sales Year 1 Year 2 Year 3

  Stationery Items 85,000 102,000 122,400

  Textbooks, Notebooks & 35,200 42,240 50,688

Paper Products
  Photocopying, & Printing 21,500 25,800 30,960

  Miscellaneous Items 8,300 9,960 11,952

  TOTAL UNIT SALES 150,000 180,000 216,000

1.2 Unit Prices Year 1 Year 2 Year 3

  Stationery Items 15.00 16 17

  Textbooks, Notebooks & 45.00 48 50

Paper Products
  Photocopying & Printing 2.00 3 4

  Miscellaneous Items 8.00 10 12

1.3 Sales Year 1 Year 2 Year 3

   Stationery Items 1,275,000 1,632,000 2,080,800

  Textbooks, Notebooks & 1,584,000 2,027,520 2,534,400

Paper Products
  Photocopying & Printing 43,000 77,400 123,840

  Miscellaneous Items 66,400 99,600 143,424

  TOTAL SALES 2,968,400 3,836,520 4,882,464

1.4 Direct Unit Costs      

  Stationery Items 10.00 12 13

  Textbooks, Notebooks & 40.00 42 44

Paper Products
  Photocopying & Printing 1.00 1.5 2

  Miscellaneous Items 6.00 8 10

1.5 Direct Cost of Sales Year 1 Year 2 Year 3

  Stationery Items 850,000.00 1,224,000.00 1,591,200

  Textbooks, Notebooks & 1,408,000.00 1,774,080.00 2,230,272

Paper Products
  Photocopying & Printing 21,500.00 38,700.00 61,920

  Miscellaneous Items 49,800.00 79,680.00 119,520

  Subtotal Direct Cost of 2,329,300.00 3,116,460.00 4,002,912

Sales

Table 2.1 1 Details of sales forecast

 3. Marketing Plan
3.1. Advertising and Promotion
We will attract our customers towards us through various efforts to achieve our sales forecast, such
as:
 We will introduce ourselves to the schools, offices, and residents of the town by sending
them introductory letters
 We will advertise our shop through Social Media, Outdoor, catalogues and transit
 We will give 5% discount on every shopping above birr 300
3.2. Product pricing
Product pricing is one of the most important factors in deciding the success of a startup business so
it must be planned very carefully. At our stationery shop, some objects such as course books will be
sold at the same price as sold by our competitors. However, for the purpose of encouraging sales,
we have priced some of the things including office supplies, stationery and other merchandise
slightly cheaper as compared to our competitors.
3.3. Promotional Measures and Marketing Budget
The target market of the stationary shop is students belonging from Unity University and other
students from all classes. In addition, we will make our shop pamphlet and we will give to the
nearest school, college, universities and we will give these pamphlet doors to door houses in the
surrounding area. This will be the primary types of marketing strategy. The marketing cost is
estimated to be birr 50,000.00 at initial year.
 4. Service Rendering Plan (Production Plan)
4.1. Main Activities (Service rendering Process)
We will provide stationary items to our customers. The items are purchased from wholesaler or
importers which are found in Addis Ababa.

4.2. Fixed Assets

The intended business will have the following fixed assets;
 Photocopy Machine,
 Computers, Printer,
 Office furniture and
 Fax machine

4.3. Capacity
The shop assumed to operate at full capacity, all business activities are executed s our sales
strategy.

4.4. Stationary Center Location and Layout

The stationary shop will be located Addis Ababa, Torhailoch in front of Unity University where
the demand for stationary and related services is high. The business assumed to run using rental
building having 36 m2 areas. The building will give all stationary and related services at different
corner. Stationary item will be sold at one corner, books on the next corner, and internet, printing
and photocopy service on other corner.

4.5. Raw Material

The major raw material for the envisage business is various stationary items and books that is
ready to be resale. All items can be sourced locally at affordable price.

4.6. Labor needed

The required casual labor can be found locally from Addis Ababa city. The cost of labor is cheap
and productivity is not that much matter for this type of business.
 5. ORGANIZATIONAL STRUCTURE
5.1. Form of business
The business is a partnership established by ten select business and technology college of
Accounting students.

5.2. Organization and Management

Stationary business is service rendering business we can consider it like merchandizing but high
level which require specific skill to attract customer. The organizational structure chart depicted
below is an indicative for Stationary and related service business and it may rearrange according
to the capacity, location and interest of the promoters of the business.

Owner Manager

Purchase and Marketing

Accounting
Supplies and Sales
Section
Section Section

Figure 5.1 1 Organizational Structure chart

5.2.1. Man Power Requirement
The stationary shop management requires little labor force at initial stage. The skill and ability of
the staff and management should be upgraded and updated through training.
 Position Description Required Qualification Minimum
Salary Scale
Level of Education Experience
General Manager
General Manager BA Min. 0 years 5,000
Marketing and Sales Section
Sales person BA Min. 0 years 3,000
Purchase and Supply Section
Purchase and supply person BA Min. 0 years 3,000
Accounting Section
Accountant BA Min. 1 year 3,000
Table 5.1 1 Minimum Manpower requirement and their education, experience and monthly Salary
5.2.2. Entrepreneur Experience and Qualifications
The promoter/ owner of the business are students who are graduates. The will hold their BA in
Accounting in the coming few years. Using their entrepreneur capacity, they will run the business
successfully.

5.3. Pre-operating activities and equipment

The pre-operating activities of the business are issuing the necessary legal documents which help
to start the business, preparing business plan that shows weather the business is feasible or not.
Then, collect money from their saving or family source as owner contribution. Finally, looking
for local financer/bank that able to provide finance to start the business is the activities deserves
from the business owner. In this regard, Debub Global Bank is most preferred.

5.4. Office Equipment

The required office equipment’s will purchase and its total cost accounts birr 53,300.00 the
following table shows the necessary office equipment and its costs.
 Office Equipment & Furniture
No. Description Unit Price Required Total
(Birr) Quantity Cost
1 Computer 10,000 1 10,000
2 Printer 3,000 1 3,000
3 Fax Machine 9,700 1 9,700
4 Managerial Table 3,500 1 3,500
5 Managerial Chair 2,500 1 2,500
10 Guest Chair 800 2 1,600
11 File Cabinet 3,500 1 3,500
12 Shelf 7,500 1 7,500
13 Cash Save 12,000 1 12,000
Total     53,300
Table 5.2 1 office equipment and their costs

5.5. Administrative Expense

The total administrative cost of Wisdom Stationary centre is birr 10,000.00
 6. FINANCIAL PLAN
6.1. Initial Capital Investment
Ser. Description Existing Planned Total Investment
No. Investment Investment Cost(Birr)
Cost(Birr) Cost(Birr)
1 Building and Construction( rented) 60,000 - 60,000
2 Printing Equipment 118,800 118,800
3 Office Equipment & Furniture - 53,300 53,300
  Sub-total 60,000 172,100 232,100
4 Pre-production Cost 4,877 - 4,877
  Sub-total 4,877 - 4,877
6 Working Capital - 255,615 255,615
  Sub-total - 255,615 255,615
Grand Total 64,877 427,715 492,592
Table 6.1 1 Projection of Initial investment

6.2. Financing Plan and Loan Requirement

Own
Bank Loan Total Investment
No. Description Contribution
(Birr) Cost(Birr)
(Birr)
1 Building and Construction( rented) 60,000 - 60,000
2 Printing Equipment 118,800 118,800
3 Office Equipment & Furniture - 53,300 53,300
  Sub-total 60,000 172,100 232,100
4 Pre-production Cost 4,877 - 4,877
5 Pre-production Interest - - -
  Sub-total 4,877 - 4,877
6 Working Capital - 255,615 255,615
  Sub-total - 255,615 255,615
Grand Total 64,877 427,715 492,592
Table 6.2 1 Financing plan
 6.3. Security for Loan and Investment
Security of the loan will be existing fixed assets of the business and license of the business.
6.4. Security for Loan and Investment
Projected profit and loss statement of the project for the next three consecutive years are the
following

Wisdom Stationary Center

Profit/Loss Projection

Description Project Years

1 2 3
Net Revenue 2,968,400 3,836,520 4,882,464

Less: Operating Costs 2,643,440 3,442,600 4,341,652

Gross profit 324,960 393,920 540,812
Less: Depreciation 17,698 17,698 17,698

Profit Before Interest & 307,262 376,222 523,114

Tax

Less: Interest 49,900 17,821 -

Profit Before Tax 257,362 358,401 523,114

Less: Profit Tax 90,077 125,440 183,090

(35%)
Net Profit 167,285 232,961 340,024

Table 6.3 1 Profit/Loss Projection

6.5. Cash Flow Statement

Wisdom Stationary Center
Cash Flow Projection
 Description Project Year
0 1 2 3
Cash Inflows
Owner's Equity 64,877
Loan 427,715
Net Profit 167,285 232,961 340,024

Depreciation 17,698 17,698 17,698

Total Cash Inflows 492,592 184,983 250,658 357,722
Cash out Flows
Total Fixed Assets 232,100

Pre-operating Interest & 4,877

Cost
Working Capital 255,615
Increase in Working - 66,597 74,921
Capital
Loan Repayment - 142,575 142,575 -
Replacement
Withdrawal (30%) - 50,186 69,888 102,007
Total Cash Outflows 492,592 192,761 279,060 176,928
Net Cash Flow - 10,350 18,532 180,794
Cumulative Cash Balance - 10,350 28,882 209,676
Retained Earning - 117,100 163,073 238,017
Cumulative Retained Earning - 117,100 280,172 518,189

Table 6.4 1 Cash Flow Projection

6.6. Balance Sheet

Wisdom Stationary Center
Balance Sheet Projection
 Description Project Years

0 1 2 3
A. ASSETS
Current Assets
Cash - 52,223 23,821 62,050
Inventory 315,615 255,615 322,212 397,133
Total C. Assets 315,615 307,838 346,033 459,182

Fixed Assets
Printing Equipment 118,800 106,920 95,040 83,160
Office Equipment & Furniture 53,300 47,970 42,640 37,310
Total Fixed Assets 172,100 154,890 137,680 120,470

Intangible Asset
Pre-production Cost 4,877 4,389 3,902 3,414
Pre-Production Interest - - - -
Total Intangible Assets 4,877 4,389 3,902 3,414
TOTAL ASSETS 492,592 467,117 487,614 583,066

B. LIABILITY        
Bank Loan 427,715 285,140 142,565 -
Total Liability 427,715 285,140 142,565 -
C. CAPITAL        
Equity contribution 64,877 64,877 64,877 64,877
Retained earning - 117,100 280,172 518,189
Total Capital 64,877 181,977 345,050 583,067
TOTAL LIABILITY & CAPITAL 492,592 467,117 487,615 583,067

Table 6.5 1 Balance Sheet Projection

6.7. Break-even Point and Return on Investment

6.7.1. Financial Analysis
The income statement predicted for the first project years shows a net profit of Birr 167,285
implying that the project is financially profitable.

The cash flow projection made for the initial project year shows cumulative cash balance of Birr
117,100 implying that the project will not face liquidity constraint to finance its production cost
as well as timely payment of its debt obligation. And hence, the market and financial appraisal of
the project indicate that the project has ample market prospect and financially viable and
economically feasible.