BUSINESS PLAN

REGULAR ELECTRICAL ACCESSORIES ENTERPRISE

PRESENTER: DAISY CHEPKEMOI

INDEX: 5121060029
CENTRE NAME: NISHKAM SAINT PURAN SINGH INSTITUTE

DEPARTMENT:DIPLOMA CERTIFICATE IN ELECTRICAL

INSTALLATION

COURSE CODE: 2601

SUPERVISOR NAME: MADAM FAITH

BUSINESS NAME: REGULAR ELECTRICAL ACCESSORIES

PRESENTED TO : KENYA NATIONAL EXAMINATION COUNCIL

SERIES : OCT/NOV 2022.

i
DECLARATION
THE KENYA NATIONAL EXAMINATION COUNCIL.

Declaration form from post schools technical and Business examination.

Name of the project :

Code number of the project :

THE CANDIDATE

I .........................Index number……………………

The project was approved by KNEC and supervised by…………………….

I personaly carried out the project who’s report follows the declaration.

I receive no undue help from unauthorised person other than the normal guidance from the
supervisor .

I wrote the project unaid.

The project submitted to council is original

Signature ………………..

THE SUPERVISOR

I……………………. of TSC NO…………………….. declare that I supervise the above

candidate project and the report contained here is genuine work of the candidate.

Signature……………………

Date …………………..

ii
DEDICATION
First I will like to send praises to my great family and dedications to my uncle for the success of
the project.

It is so precious that you kept concern and provided all support required to that I got all the needed
materials for my project to complete on time.May God bless you.

iii
AKNOWLEDGEMENT
The success of the project was from the help of my supervisor, she made sure that all the
knowledge required in formulating the project I understood it well. Also all the others who
supported me I still recognise your efforts thank you.

iv
Table of Contents
DECLARATION...........................................................................................................................................2
DEDICATION...............................................................................................................................................3
AKNOWLEDGEMENT................................................................................................................................4
EXECUTIVE SUMMARY............................................................................................................................5
1.0 BUSINESS DESCRIPTION.......................................................................................................................5
2.0 MARKET PLAN......................................................................................................................................5
3.0 ORGANISATIONAL AND MANAGEMENT PLAN.....................................................................................5
4.0 OPERATIONAL PLAN.............................................................................................................................5
5.0 FINANCIAL PLAN...................................................................................................................................5
CHAPTER ONE............................................................................................................................................6
1.0BUSINESS DESCRIPTION.....................................................................................................................6
1.1 BUSINESS NAME..................................................................................................................................6
1.3 FORM OF BUSINESS OWERNERSHIP...............................................................................................7
1.4 TYPE OF BUSINESS..............................................................................................................................7
1.5 PRODUCTS AND SERVICES...............................................................................................................7
1.5.1 Products offered....................................................................................................................................7
1.5.2 Services offered....................................................................................................................................7
1.6 JUSTIFICATION OF OPPORTUNITY..................................................................................................7
1.7 TYPE OF INDUSTRY............................................................................................................................8
1.9 ENTRY AND GROWTH........................................................................................................................8
CHAPTER TWO...........................................................................................................................................9
2.0 MARKETING PLAN..............................................................................................................................9
2.1 CUSTOMERS.........................................................................................................................................9
2.1.1 Domestic customers..............................................................................................................................9
2.1.2Comercial customers..............................................................................................................................9
2.1.3 Institutional customers..........................................................................................................................9
2.2MARKET SHARE....................................................................................................................................9
2.3 COMPETITION....................................................................................................................................12
2.4 METHODS OF PROMOTION AND ADVERTISEMENT..................................................................13

v
2.5 PRICING STRATEGIES.......................................................................................................................13
2.6 SELLS AND TACTICS.........................................................................................................................13
CHAPTER THREE.....................................................................................................................................15
3.0 ORGANISATION AND MANAGEMENT PLAN...............................................................................15
3.1 ORGANISATIONAL CHART..............................................................................................................15
3.2 ORGANISATION TABLE....................................................................................................................16
3.3 RECRUITMENTS TRAINING AND PROMOTION...........................................................................17
This is the policy that the business will use to employ more workers, replacement of officials if any.This
will be done at the start of the business using procedure below;..................................................................17
3.3.2 Training...............................................................................................................................................17
3.3.3 promotion............................................................................................................................................17
3.4 REMUNARATION AND INCENTIVES..............................................................................................18
3.4.1 Remunaration......................................................................................................................................18
3.4.2 Incentives............................................................................................................................................18
3.5.0LICENSES...........................................................................................................................................18
3.5.1 Permit..................................................................................................................................................18
3.5.2By laws................................................................................................................................................18
3.6 SUPPORTING SERVICES...................................................................................................................18
CHAPTER FOUR........................................................................................................................................20
4.0 PRODUCTION STRATEGY/OPERATION PLAN..............................................................................20
4.1 PRODUCTION FACILITIES AND CAPACITY..................................................................................20
4.2 PRODUCTION STRATEGY................................................................................................................21
4.2.1 Monthly labour requirements..............................................................................................................21
4.3 PRODUCTION OR OPERATIONAL FACILITIES AND CAPACITIES...........................................21
4.4.2 Health regulation.................................................................................................................................22
4.4.3 Environmental regulation....................................................................................................................22
4.4.4 License and permits............................................................................................................................22
CHAPTER FIVE.........................................................................................................................................23
5.0 FINANCIAL PLAN...............................................................................................................................23
5.3 CASH FLOW PROJECTION................................................................................................................24
5.3.1 cash flowprojection for the year 2022.................................................................................................24
5.3.2 cash flow projection for the year 2023................................................................................................26

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5.3.3 cash flow projection for the year 2024................................................................................................28
5.4 PREPARATION OF PROFORMA INCOME STATEMENT AND BALANCE SHEET....................29
5.4.1 PROFORMA BALANCE SHEET......................................................................................................29
5.4.2 PROFORMA INCOME STATEMENT..............................................................................................31
5.5 preform balance sheet............................................................................................................................33
5.4 CALCULATION OF BREAK EVEN............................................................................................35
5.6 PROFITABILITY RATIO.............................................................................................................36
5.7 DESIRED FINANCING................................................................................................................36
5.8 PROPOSED CAPITALISATION..................................................................................................37

vii
EXECUTIVE SUMMARY

1.0 BUSINESS DESCRIPTION

The name of the business will be Regular electrical accessory enterprise. The business will be
located at Brooke town near kipchimatt supermarket alongside kapsaosuroad. The area has ready
market since it is the centre of the town.Regular electrical accessory enterprise will be a product
leading business,the entry strategy is based in low initial cost of establishment, government and
emphasis in business in rural and urban areas.

2.0 MARKET PLAN

It is a section which classifies the targeted market which is the institution like schools, hospital,
administration and offices. For the first year the market share is expected to be more than 20% due
to some competition from other similar businesses. My competition advantages will be based on
the price of the goods, free transport for those living near Brooke town and allowing some
discounts

3.0 ORGANISATIONAL AND MANAGEMENT PLAN

The business will start with a simple organizational structure comprising of the manager, salesman
and the security. Privilege will be based on initiating to the workers to boost their morals of
working. The structure is expected to expand as the business grows.

4.0 OPERATIONAL PLAN

Regular electrical accessories enterprise intends to come up with a new electrical design and
improving the existing design by considering economy of products and services and the cost of
maintaining the standards and some specifications demanded by the customers.

5.0 FINANCIAL PLAN

Finances will be required for purchase of goods, stationeries and other equipments. The finance of
the business is expected to come from the bank, friends’ contributions and from my own personal
saving. The business will require the minimum of 250000 in order to smoothen the running of the
business

viii
CHAPTER ONE

1.0BUSINESS DESCRIPTION

1.1 BUSINESS NAME

The name of the business will be Regular Electrical Accessories Enterprise.This name Regular has
originated frommy grand-fathers name which makes me a little bit focused when I actually see it.I
also get motivated with this kind of a name since it tries to give a throwback where my family has
come from and tries to work extra hard to pull it up.

1.2 BUSINESS LOCATION

The business will be located at Brooke town near kipchimatsupermarket along side Kapsao road.

Postal address – P.O. Box 51

KERICHO.

Email address – [email protected]

Telephone – 0715106109

MAP TO REGULAR ELECTRICAL ACCESSORIES ENTERPRISE

1
1.3 FORM OF BUSINESS OWERNERSHIP
The business will be a sole proprietorship form of business.This comes in because of the trust and
belief that he has.On the other hand the business deal with electrical engineering so it is sure that It
is capable of running this form of business.The reason why he chose this kind of the business is
because it is1.Very simple to run

, decision making is very simple

since you make your own decisions, you enjoy profits alone,it has a lot of reliance since you are
alone and finally it requires few legal requirements.

1.4 TYPE OF BUSINESS

The business is a startup business because I wanted to exercise my knowledge in the field of
electrical. The business will be supplying electrical accessories around Kericho County. It will
offer quality products and services at a low price,it will also offer some transport deliveries to its
customers who will buy goods in bulk. The business will also try so hard to give out some
possible discounts to the customers.

2
1.5 PRODUCTS AND SERVICES

1.5.1 Products offered

The business will be capable of offering the following products;
electricalcables,sockets,bulbs,switches,fuses,fans, side cutters, pliers and also some electrical
machines will be available like motors etc.

1.5.2 Services offered

Àbe given a discount of 3%. The business chosed this kind of service because it wanted to
enhance and motivate customers so that more customers to be many and by that it will help the
business to be known in the area.

1.6 JUSTIFICATION OF OPPORTUNITY

I have decided and come up with this kind of business because of the belief and strength I
have.Some of the skills I have I believe are enough to this kind of business.To add on top the
business is highly marketable and has a high demand in the location and by that I believe the
business will actually flow.

1.7 TYPE OF INDUSTRY

The business will fall under primary industry since it will be only offering raw materials which the
business will be cable.

1.8 GOALS OF THE BUSINESS

The business will actually have ashortterm goals like to get profit Increase number of employees
in the area, helping in increasing my salary.The business will as well a long term goals like being
the market leader, open some sub-branches county wide increasing my wealth and to create lasting
legacy.

3
1.9 ENTRY AND GROWTH
The business will actually offer the best kind of products so far at a very efficient cost and
affordable price. The business will used advanced machines for its records, the business will be
able to offer some discounts, the business will alsotry so hard to serve customers as best as it can
and the business will also increase the working time to increase its availability.

4
CHAPTER TWO

2.0 MARKETING PLAN

2.1 CUSTOMERS
The main customers will be people around the town (Brooke).IThe business will make sure it
tryits best to provide any kind of electrical accessory so that some customers come from far like
outside the town and purchase an item from the business.

2.1.1 Domestic customers

These will be a group of customers who will need the electrical accessories for his/her own
consumption

2.1.2Comercial customers
These are those customers who will come for some electrical accessories and they will use them to
someone else (for other personal consumption).

2.1.3 Institutional customers

These are some administrations which will be using item for their consumption.These institutions
include schools like Kimugu primary,Toror Girls,churches like AIC,Fullgospel
kapkugerwet,,hotels: Teaview hotel,Lee hotel e t.c

2.2MARKET SHARE
Because of the newly established business the market share is actually expected not to be more
than 20% in this first year. This is coming out due to some similar business competition in the area
but for thesecond year the business is expected to go past 80% because I will allow some business
discounts like of about 3% to those of my competitors

Market share =No.of people x 100

No of people in the area

Pie chart

5
 Sales

18%
bao
tekash
town city

56%
26%

2nd year

19000×100÷50000=38%

Tekash=16%

Town =46%

6
 Sales

bao
tekash
38%
town city
46%

16%

3rd year

Bapo =84%

Tekash=5%

7
Town city =11%

Sales

11%
5% bao
tekash
towm city

84%

2.3 COMPETITION
REGULAR ACCESSORY shop will have two big competitors, Town city electrical hardware and
Tekashi electrical shop. Due to this reason, the business will employ some skilled and
hardworking employees to compete and attract more customers. Town city hardware is a headache
because it’s a big business in the town but it lucks some good employees, they don’t know how to
handle customers. REGULAR will allow its customers to enjoy some discount, the business will
open at 6.00 Am in the morning and close at 10.30 p.m. the business will offer some free transport
and even door to door delivery to attract more customers.

COMPETITION TABLE

Name of the Strength Weakness Quality of goods and

competitor services

Town city electrical It has been in the Has illiterate and poor Goods are of low
hardware market for a long employees, they don’t quality
period of time offer transport system
and they don’t allow
discount

8
 Tekashi electrical It does its daily Poor customer care, Goods are of low
shop advertisement. It has they sell at high price quality and they sell at
also existed for long high price
time

2.4 METHODS OF PROMOTION AND ADVERTISEMENT

The business will use posters and some billboard to advertise the products that it will offer. Some
sign boards will be placed at the junctions to give direction to the customers. The business will
also use the employees to refer their friends to the business and also tell the people what the
business provides.

2.5 PRICING STRATEGIES

The business will be using purchasing price to calculate the selling price. If the purchase will be
high then the business will charge some prices that will give low prices. I know that some
competitors will take the same path am taking but I will be able to maintain this by providing
quality products at a fair price. The discount I will offer is to allow me offer my customers
delivery services. The business will even offer credit terms after knowing the paying the ability of
my trusted customers.

2.6 SELLS AND TACTICS

REGULAR will be using direct selling whereby all my customers will be interacting with me
directly. This will make honesty and fairness be practiced. The business will make sure the
products ordered are delivered and taken care off with a lot of care. The targeted customers I
intend to serve are people of Brooke

Method of advertising and No. of people expected to Cost (Ksh)

promotion reach

Signboards 5000 3500

9
 Posters 3000 2500

Total 8000 6000

2.7 DISTRIBUTIONS

The distribution of goods and services must reach the customers faster inorder to satisfy their
needs.

The distribution will also;

_increase the utility of the product

Improve the choice of the product and services

The business will have to use the following methods of distribution;

i.Use the sales agent-the business will have to create a sales agent at another place of the market
inorder to make the goods available.

ii.Using appointed dealers-The business will have to appoint the potential dealers or distributors
inorder to distribute their goods and services.

iii.Using mobile sales unit-This will be done using vehicle for supplying goods and services
promptly that at times needed without delay.

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CHAPTER THREE

3.0 ORGANISATION AND MANAGEMENT PLAN

This shows the organizational structure and how the business will be co-ordinating to accomplish
its objectives. This includes the general manager and the sell man other personnel includes the
securities.

3.1 ORGANISATIONAL CHART

THE GENERAL MANAGER

SALES MAN

SECURITY

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3.2 ORGANISATION TABLE
TITLE QUALIFIED DUTIES EXPERIENCE NO

Manager Diploma in Supervising and Have an 1

electrical and controlling duties experience of 1
electronic and above years
engineering

Be 20 years and
above.

Be electrician.

Salesman Craft in Repairing of Have an 1

electronic and machines and experience of
electronic accessories atleast 1 year
engineering

Security Craft in security Insuring security Experience of 2

from a well one and half
known institution years

Certificate of
good conduct

3.3 RECRUITMENTS TRAINING AND PROMOTION

This is the policy that the business will use to employ more workers, replacement of officials if any.This
will be done at the start of the business using procedure below;

Advertisement_ will be done openly to the public suitably a wide coverage media to reach many

Short/listing_All applicant are listed in order to attend the interview for approval whether fit for
the job

12
Interview_Theshortlistedareinformedaboutthedates,thevenueoftheinterviewsothattheycan attend

Selection_Will be based on qualification mention above.

Appointment The qualified party will be given an appointment later requiring him/her to start the
job.

Finally if he/she accepts and declares to adhere to the policies,terms and conditions of the
employment then, employment is done

The recruitment policy enhance the business by indicating that the business will start free and fair
thus enhancing transparency in employment.

3.3.2 Training
The business will carry out the training sectors to improve the job performance of employees and
technology so as to deal with competition effectively. The business will also be able to hire
experts for a period of two weeks in orienting them for every activity.

3.3.3 promotion
Actually, this will depend on the ability of an employee. If an employee works smart, he/she will
be promoted to improve and increase the employees moral and this will make them put more
effort and work extra hard leading to better success of the business.

13
3.4 REMUNARATION AND INCENTIVES

3.4.1 Remunaration
The following salaries will be paid on monthly basis to employees

TITLE NUMBER MONTHLY HOUSE MEDICAL

SALLARY ALLOWANCE ALLOWANE

Salesman 1 20,000 5,000 2,000

Security 2 10,000 2,000 1,000

3.4.2 Incentives
This is the motivation of the employees. The business will be able to take part in motivating its
employees by giving them overtime bonuses and some allowances. The best and hardworking
employee will be awarded. This is to encourage the employees and will make the business
successful.

3.5.0LICENSES
In-odderto avoid disturbance from government laws and regulations, the business will be able to
obtain the necessary licenses. This will allow me to operate the business in accordance with the
local authority and country laws.

3.5.1 Permit
The business will be able to obtain a business permit which will be reviewed department at
Kenyan shilling 2000 for a specific time like a duration of one year.

14
3.5.2By laws
These are laws made by other organs of local authority to ensure the safty of employees at work
place. They also require an entrepreneur to sell quality goods without quality products at a
reasonable prices.

3.6 SUPPORTING SERVICES

These are kind of services that help the business to run smoothly. They include

TITLE BRANCH SERVICE

Bank Equity bank Homa bay Borrow money

Withdraw money

Deposit money

Transport Transporting the business

products

Insurance Ensuring business products

and the employees

15
CHAPTER FOUR

4.0 PRODUCTION STRATEGY/OPERATION PLAN

4.1 PRODUCTION FACILITIES AND CAPACITY

ITEMS QUALITIES TOTAL COST (KSH)

Store 1 room 5,000

Office 1 room 5,000

Stapler 2 400

Paper punch 2 300

Ruler 2 60

File 3 150

Pen 2 20

Computer 1 21,000

Pliers 4 800

Spirit level 2 300

Masonry hammer 2 600

Tape measure 2 100

Bending spring 1 300

Screw drivers 2 200

Tuk-tuk 1 25,0000

Still tape 3 600

16
4.2 PRODUCTION STRATEGY
Bapo electrical accessory enterprise will make sure all the electrical products are available at all
time and at affordable price. I as the manager I will also make sure that I meet all the requirements
of customers. I will achieve this by co-operating and having good relationship with all my
customers and suppliers.

4.2.1 Monthly labour requirements

Payment of workers

Title Number Sallary Total

Salesman 1 20,000 20,000

Security 2 10,000 20,000

4.3 PRODUCTION OR OPERATIONAL FACILITIES AND CAPACITIES

ITEMS QUANTITY COST CAPACITY

Chairs 15 15000 15 Persons

Tables 5 10000 5 Persons

Computers 5 100000 5 Persons

Television 1 20000 3 Persons

Pickups 1 200000 1 Persons

Canter 1 300000 1 Persons

TOTAL 645000

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4.4.2 Health regulation
The business will observe total regulations as per the government constitution so as to put the life
of the workers very safe. All the workers will be also provided with the heath covers this will
make the business to run smoothly

4.4.3 Environmental regulation

Bapo electrical accessory enterprise will make sure all regulation concerning environment are met
such as decomposition of waste products in a very organized manner. This will help in such ways
of preventing air and water pollution. The business will also try to make sure some of the waste
products are being re-cycled

4.4.4 License and permits

The business will obtain license and permit as per government rule. It will also regulate purchase
and returns through taxation and municipality through issues of the trade license and permits.

18
CHAPTER FIVE

5.0 FINANCIAL PLAN

5.1 PRE-OPARATIONAL PLAN

START UP EXPANSES AMOUNT ( IN FCFA)

Building improvement 10,000

Graphic logo and name 7,000

Outdoor sign 1,000

Pre-opening expenses 15,000

Rent 360,000/year

Equipments 54,450

Total 438,000

5.2 WORKING CAPITAL

WC =CA – CL

CURRENT ASSET AMOUNT CURRENT LIABILITIES AMOUNT

Stock 1,193,710 Creditors 200,000

Cash in hand 500,000 Bank overdrafts 0

Cash at bank 1,000,000 Accruals 50,000

Debtors 100,000

Total 2,793,710 250,000

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5.3 CASH FLOW PROJECTION

5.3.1 cash flowprojection for the year 2022

REC Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
EIPT

Sales 1028 1028 1028 1028 1028 1028 1028 1028 1028 1028 1028 1028
400 400 400 400 400 400 400 400 400 400 400 400

Debto 1500 2000 1500 2000 2500 2000 2000 1500 9000 1500 9000 1500
rs 00 00 00 00 00 00 00 00 0 00 0 00

Loan 1890
00

Disco 1000 1000 9000 1000 9000 1000 1000 9000 1000 9000 9000 9000
unt 00 00 0 00 0 00 00 0 00 0 0 0

TOT 1467 1326 1268 1328 1368 1328 1328 1268 1218 1268 1208 1268
AL 400 400 400 400 400 400 400 400 400 400 400 400

Paym
ent

Total 8600 8600 8600 8600 8600 8600 8600 8600 8600 8600 8600 8600
out 0 0 0 0 0 0 0 0 0 0 0 0

Cash 9000 9200 9500 1000 1500 2500 2000 1200 1300 2150 1000 2000
flow 0 0 0 00 00 00 00 00 00 00 00 00

Balan 9000 1820 2770 3770 5270 7770 9770 1097 1227 1442 1542
ce 0 00 00 00 00 00 00 000 000 000 000
B/D

20
 Balan 9000 1820 2770 3770 5270 7770 9770 1097 1227 1442 1542 1742
ce 0 00 00 00 00 00 00 000 000 000 000 000
C/D

5.3.2 cash flow projection for the year 2023

REC Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
EIPT

Sales 1161 1161 1161 1161 1161 1161 1161 1161 1161 1161 1161 1161
400 400 400 400 400 400 400 400 400 400 400 400

Debto 1000 2000 1000 2000 1000 9000 1000 9000 2000 1000 1000 1500
rs 00 00 00 00 00 0 00 0 00 00 00 00

Loan 1700
00

Disco 1000 1000 1000 9000 1000 1000 9000 1000 1000 1000 9000 1000
unt 00 00 00 0 00 00 0 00 00 00 0 00

TOT 1431 1361 1361 1451 1361 1351 1351 1351 1461 1361 1351 1411
AL 400 400 400 400 400 400 400 400 400 400 400 400

Paym
ent

Total 9900 9900 9900 9900 9900 9900 9900 9900 9900 9900 9900 9900
out 0 0 0 0 0 0 0 0 0 0 0 0

Cash 1050 1200 1100 1000 1200 1300 1200 1100 1050 1000 1250 1300
flow 00 00 00 00 00 00 00 00 00 00 00 00

Balan 1742 1847 1967 2077 2177 2297 2427 2547 2657 2762 2862 2987

21
 ce 000 000 000 000 000 000 000 000 000 000 000 000
B/D

Balan 1847 1967 2077 2177 2297 2427 2547 2657 2762 2862 2987 3117
ce 000 000 000 000 000 000 000 000 000 000 000 000
C/D

5.3.3 cash flow projection for the year 2024

REC Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec
EIPT

Sales 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200
800 800 800 000 800 800 800 800 800 800 800 800

Debto 1500 2000 1000 2000 1500 1500 1000 1500 1500 1000 1500 2000
rs 00 00 00 00 00 00 00 00 00 00 00 00

Loan 1500
00

Disco 1000 1000 9000 9000 1000 1000 1200 9000 8000 9000 1000 1200
unt 00 00 0 0 00 00 00 0 0 0 00 00

TOT 1600 1500 1390 1490 1450 1450 1420 1440 1430 1390 1450 1520
AL 800 800 800 800 800 800 800 800 800 800 800 800

Paym
ent

Total 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200
out 00 00 00 00 00 00 00 00 00 00 00 00

Cash 1400 1300 1500 1600 1500 1300 1250 1350 1450 1500 1300 1450
flow 00 00 00 00 00 00 00 00 00 00 00 00

22
 Balan 3117 3257 3387 3537 3697 3847 3977 4102 4237 4382 4532 4662
ce 000 000 000 000 000 000 000 000 000 000 000 000
B/D

Balan 3257 3387 3537 3697 3847 3977 4102 4237 4382 4532 4662 4807
ce 000 000 000 000 000 000 000 000 000 000 000 000
C/D

5.4 PREPARATION OF PROFORMA INCOME STATEMENT AND BALANCE SHEET

5.4.1 PROFORMA BALANCE SHEET

FIXED ASSET TOTAL

Building 10,000

Machinery 285,000

TOTAL 295,000

CURRENT ASSET

Stock 1,193,710

Cash in hand 500,000

Cash at bank 1,000,000

Debtors 100,000

TOTAL 2,793,710

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CURRENT LIABILITIES

Creditors 200,000

Bank overdraft 0

Accrual 500,000

TOTAL 250,000

2,838,710

FINANCED BY

Capital 2,543,710

Profit 200,000

Drawings 95,000

2,838,710

24
5.4.2 PROFORMA INCOME STATEMENT
INCOME YEAR ONE YEAR TWO YEAR THREE

Sales 1,028,400 1,161,400 1,200,800

Cost of sales 402,100 414,150 426,600

Gross profit 626,300 747,250 774,200

EXPENSES

Transport 30,000 35,000 37,000

Electricity 10,000 12,000 13,000

Advertisement 6,000 7,000 8,000

Water bill 15,000 15,000 17,000

Insurance 25,000 30,000 40,000

TOTAL 86,000 99,000 120,000

Net profit before 504,300 648,250 654,200

taxation

Taxation 86448 103720 104672

Net profit after 453,852 544,530 549,528

taxation

25
5.5 preform balance sheet
Fixed asset Total

4378000 4816900 5295400

Expenses

Advertisement and 8000 4000 7500

promotion

Transport 12800 20845 25800

Utility bills 36000 36000 36000

Salary ana wadges 1278600 1278600 1278600

License 1000 1000 1000

Loan 200000 - 100000

Total expenses 1536400 1340445 1448900

Net profit before tax 2841600 3476455 3846500

Taxation 16% 454656 556232.8 609040

Net profit after tax 2386944 2920222.2 3237460

5.4 CALCULATION OF BREAK EVEN

 No. Of unit to break even.

marked price – marginal cost = 15 – 10 = 5

26
 fixed cost = 750000

contribution 5 = 150000

 Break even point in sh

750000 × 1000

5 =150000000sh

 Controbution per sales ratio

5 × 100%

15 = 33.33%

 Target profit

1350000 + 2010000 × 15

5 = 10080000sh

5.6 PROFITABILITY RATIO

 Gross profit ratio

1678000 × 100%

2358450 = 71%

 Net profit ratio

2386944 × 100%

2602700 = 92%

27
  Return to equity

2386944 × 100%

2424944 = 98%

 Asset turnover

2358450

770000 + 1350000 =1.1

 Quick ratio

770000 – 300000

177000 =3

 Liquidty ratio

81000×100÷99.83=81137.93

5.7 DESIRED FINANCING

Preoperational 21000

Working capital 280000

Fixed asset 1350000

TOTAL 165100

5.8 PROPOSED CAPITALISATION

Owner 50000
contribution

Borrowed funds 300000

Total investment 350000

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