IAMU POSHOMILL

PRESENTERS NAME : IAN MURANGIRI

INDEX NUMBER : 207101

COURSE NAME : CERTIFICATE IN SUPPLY CHAIN

MANAGEMENT

COURSE CODE : 1906/1

INSTITUTION : THIKA TECHNICAL TRAINING

INSTITUTE

PRESENTED TO : KENYA NATIONAL EXAMINIATION

COUNCIL (KNEC) IN PARTIAL

FULFILLMENT FOR THE AWARD OF

CERTIFCATE IN BUSINESS

MANAGEMENT

EXAMINATION SERIES : 2023

SUPERVISOR : MADAM ZIPPORAH

i
DECLARATION

I hereby declare that this is my original work, its written and composed by me hereby justify

it has never been presented by anyone else for any award.

Name : Ian Murangiri

Signature : ……………………………

Date : ……………………………

This business idea has been submitted to the Kenya Examination Council with approval from

a college supervisor.

Name : Madam Zipporah

Signature : ……………………………

Date : ……………………………

ii
DEDICATION

This business plan is dedicated to all young business people out there who have an ability to

start something small to a beneficial achievement and also to those who got brilliant business

proposals and don’t know how to share them or even scared of people being judgmental to

them.

It is also dedicated to my family and mentors who saw ability in me and have faith in me.

Am so very grateful.

iii
ACKNOWLEDGEMENT

I would like to acknowledge the Almighty God for granting me knowledge, wisdom to plan

this and strength and perseverance also for his guidance and good health.

I would like to thank my lecturer Madam Zipporah for her full support and guidance, also to

all those who believed in me.

Thank you all.

iv
TABLE OF CONTENTS

DECLARATION...................................................................................................................................ii
DEDICATION......................................................................................................................................iii
ACKNOWLEDGEMENT....................................................................................................................iv
EXECUTIVE SUMMARY.................................................................................................................viii
1.0 BUSINESS DESCRIPTION.........................................................................................................viii
2.0 MARKETING PLAN...................................................................................................................viii
3.0 ORGANIZATION AND MANAGEMENT PLAN........................................................................ix
4.0 PRODUCTION PLAN...................................................................................................................ix
5.0 FINACIAL PLAN..........................................................................................................................ix
CHAPTER ONE....................................................................................................................................1
1.0 BUSINESS DESCRIPTION............................................................................................................1
1.1 Sponsors......................................................................................................................................1
1.2 Business Name............................................................................................................................1
1.3 Business Location and Address...................................................................................................1
1.3.1 Business Location.................................................................................................................1
1.3.2 Business Address..................................................................................................................2
1.4 Type of Business.........................................................................................................................3
1.5 Business Ownership.....................................................................................................................3
1.6 Products and Services..................................................................................................................3
1.7 Justification of Opportunity.........................................................................................................4
1.8 Industry........................................................................................................................................4
1.9 Business Goals.............................................................................................................................4
1.9.1 Long Term Goals..................................................................................................................4
1.9.2 Short Term Goals..................................................................................................................5
1.10 Entry and Growth strategy.........................................................................................................5
1.10.1 Entry Strategy.....................................................................................................................5
1.10.2 Growth Strategy..................................................................................................................5
CHAPTER TWO...................................................................................................................................6
2.0 MARKETING PLAN......................................................................................................................6
2.1 Customers....................................................................................................................................6
2.1.1 Individual Customers............................................................................................................6
2.1.2 Institutional Customers.........................................................................................................6
2.1.3 Organizational Customers.....................................................................................................6

v
 2.1.4 Domestic Customers.............................................................................................................6
2.2 Market Share...............................................................................................................................7
2.3 Competition.................................................................................................................................8
2.3.1 Likert Scale Table.................................................................................................................9
2.4 Methods of Promotion and Advertising.......................................................................................9
2.4.1 Promotion.............................................................................................................................9
2.4.2 Advertising Strategy.............................................................................................................9
2.5 Pricing Strategy.........................................................................................................................10
2.6 Sales Tactics..............................................................................................................................10
2.7 Distribution Channel or Strategy...............................................................................................10
CHAPTER THREE.............................................................................................................................11
3.0 ORGANISATION AND MANAGEMENT PLAN.......................................................................11
3.2 Personnel Numbers and Duties..................................................................................................12
3.3 Recruitment, Training and Promotion........................................................................................13
3.3.1 Recruitment........................................................................................................................13
3.3.2 Training..............................................................................................................................13
3.3.3 Promotion...........................................................................................................................13
3.4 Remuneration and incentives.....................................................................................................13
3.4.1 Remuneration......................................................................................................................13
3.4.2 Incentives............................................................................................................................14
3.5 License, Permits and By Laws...................................................................................................14
3.5.1 License & Permits...............................................................................................................14
3.5.2 By-Laws.............................................................................................................................14
3.6 Support Services........................................................................................................................15
CHAPTER FOUR...............................................................................................................................16
4.0 OPERATIONAL PLAN................................................................................................................16
4.1 Production Facilities and Capacity............................................................................................16
4.1.1 Machines Tools and Equipments........................................................................................16
4.2 Production Strategies.................................................................................................................17
4.2.1 Monthly Labour Requirement.............................................................................................17
Table 4.2.1 Monthly Labour Requirements.................................................................................17
Table 4.2.2 Monthly Expenses.....................................................................................................18
4.3 Production Process....................................................................................................................18
4.4 Government and other Regulations............................................................................................18

vi
CHAPTER FIVE.................................................................................................................................19
5.0 FINANCIAL PLAN......................................................................................................................19
5.1 Pre-Operational Costs................................................................................................................19
5.2 Estimation of Working Capital..................................................................................................20
5.4 Proforma Income Statement......................................................................................................22
5.5 Proforma Balance Sheet.............................................................................................................23
5.6 Break Even Point.......................................................................................................................25
5.6.1 Total Contribution..............................................................................................................26
5.6.2 Contribution Margin Percentage.........................................................................................26
5.6.3 Fixed Assets........................................................................................................................26
5.6.4 B.E.P...................................................................................................................................26
5.7 Expected Profitability Ration.....................................................................................................26
5.7.1 Gross Profit Percentage.......................................................................................................26
5.8 Return on Equity........................................................................................................................27

vii
 EXECUTIVE SUMMARY

The sponsor of the proposed business will be Ian Murangiri. She will also be the one

directing the business. The business name is by the title IAMU POSHO MILL. The business

will deal with all types of cereals and grains. The proposed business will be located in Ruiru

Trading Centre, along the Thika Superhighway in Kiambu County.

This posho mill will categorize its customers into groups as follows;

i. Institutions

ii. Domestic

iii. Organizational

iv. Individual businessmen

This business will have 25% of the market shares at the beginning of its operations. The

main method of promotion shall be mainly free samples or discounts.

The distribution channel to be adopted shall be;

PRODUCER CONSUMER

IAMU Posho Mill will operate under sole proprietorship form of business, where the owner

of the proposed business will also be the director. The director will be assisted by 3 personnel

to ensure the objectives of the firm are achieved.Promotion or added salary will be offered to

employees who are hardworking and disciplined in order to motivate them.

For the business to operate smoothly and effectively production facilities will be required.

They include, packing papers, machines for grinding and computers to make work easier for

workers mainly in costing; also cleaning gadgets.

The production strategies that the business will focus on include product quality, product

pricing, customer relation and motivation. The business will therefore consider employing

viii
both permanent and casual workers. Tools and equipment will remain fixed asset to the

enterprise.

The financial plan shows sources of funds and uses in the business

Owner’s Equity 5,000,000

Bank 3,000,000

Relatives 2,000,000

Total 10,000,000

ix
 CHAPTER ONE

1.0 BUSINESS DESCRIPTION

1.1 Business Name

IAMU Posho Mill is the name of the proposed business which is simpler and is derived from

the name of the owner Ian Murangiri, the first initials were selected to come up with Iamu. It

fully concentrates on business activities.

Reason for choosing this name was simply because pronunciation is simpler and also

attractive to the targeted customers. Due to the following reasons the business is expected to

run smoothly.

1.3 Business Location and Address

1.3.1 Business Location

The proposed business will be located along Thika-Nairobi Highway at Juja trading centre

400 meters from Nyota House opposite Juja Farm Shopping Centre. At this geographical area

it’s expected to receive customers from the area where the local people are developing

permanent structures and also government projects construction and equipment’s.

Time delay and poor communication being the main course of loss of customers; the area has

tarmacked roads for faster and easy transportation of goods as well as railway and also the

area is served with several communication booster to avoid communication problems. The

area is well secured that is 24/7 security especially from Nyota Police Station and Nyota

Barracks.

1
 Business Location Map

Juja

IAMU
n POSHO MILL

r
Ruiru Thika Superhighway

b
Thika
1.3.2 Business Address

The business address for the proposed business will be;

IAMU POSHO MILL

P.O BOX 84009

1.4 Type of Business

The proposed business is expected to commence and stat its operation in 2024 January.

The initial capital of the business is ksh 1,795,000

Source Amount

Owner Savings 500,000

2
 Bank 685,000

Friends and Relatives 700,000

Total 1,795,000

1.5 Business Ownership

The business will be a partnership operated. It will be owned by Ian Murangiri. The reason

for farming partnership collaboration is to ease creation of business ideas, source of capital

and tasks involved in running of a business.

1.6 Products and Services

The proposed business is expected to deal on products and item such as

i. Maize

ii. Beans

iii. All kinds of cereals

iv. Wheat flour

v. Maize flour

The proposed business is expected to receive it’s proclaim procedure from Thika wholesalers

limited. The business will offer both wholesale and retail services to the customers. For the

wholesale products the packaging will be done in light boxes ranging from 20-25 kg and

containing 60-80 pieces of the items. The products will be fresh and contain business seal and

mark of quality from KEBS after approval for use. Services will include free transportation

for those purchasing a list of goods.

3
1.7 Justification of Opportunity

The area and its surrounding is a business market where most of its neighbors are at median

level development stages.

The proposed business being located in an urban centre ia an advantage since those people

who are fond of whole meal foods.

People don’t have to travel all the way to their rural places to get whole meal foods.

1.8 Industry

The business will fall under the Unga Limited Company.

It is a private centre.

1) The size of the business is medium project but an acceptable level from the industry.

2) The business will use a simple sophisticated technology which is affordable in terms

of cost and available when required always.

3) The business will expect a large turnover of customers due to its goods and services.

4) The business requires approx. 200000 to run smoothly.

1.9 Business Goals

The business intends to achieve the best and ready to serve the customers well.

1.9.1 Long Term Goals

The business will buy a lorry after a period of two years for the ease of transportation of

product to customers. Then the business will expand its operation by opening new branches

in different parts of the country.

1.9.2 Short Term Goals

At the fifth month of the business we will be advertising through the social media, newspaper

and posters so as to popularize its existence.

4
1.10 Entry and Growth strategy

1.10.1 Entry Strategy

The business will ensure that it operates in accountability to all customers thus to be trusted.

It will ensure that the business products which other firms does not produce often to lower the

completion rate.

1.10.2 Growth Strategy

The business will introduce new goods and services in the business to its growth. Also there

will be application of advanced technology to business to ensure networking is easy.

5
 CHAPTER TWO

2.0 MARKETING PLAN

2.1 Customers

The business will be located within the Juja Trading Centre in Thika Road as well as the

national level. IAMU Posho Mill will categorize its customers into groups as follows;

i. Institutions

ii. Domestic

iii. Organizational

iv. Individual

2.1.1 Individual Customers

There won’t be no individual customers due to the fact that the business will be offering

services directly to the customers delivered by the business.

2.1.2 Institutional Customers

The business will serve schools and colleges and institutions for example JKUAT in Juja.

2.1.3 Organizational Customers

The organization bodies will include K-unity savings and credit co-operative society and

inspire Africa.

2.1.4 Domestic Customers

The main factors that will be considered by domestic customers are the performance of the

service, economy and convenience of the service of products. The service will mostly be

purchased at the beginning of a month to be able to back-up data frequently to avoid data

loss.

6
2.2 Market Share

IAMU Posho Mill will have 30% of the market share at the beginning of its operation. The

competitors shall have technology of today which shall have 40% of the market share.

The competitors will be;

Juhudi Whole milers 30%

Quantum Enterprises 30%

Market Share

30%

40%

IAMU Posho Mill

30%

Objectives of the market share

i. To provide high quality service to attract customers

ii. To capture a wide region of the market share

iii. To provide the best services to institutions

iv. To provide services at affordable prices

2.3 Competition

Technology today is one of the competitors of the business. The presence of competitors

enables the business to provide even better quality goods in order to overcome the

7
 competition and by so doing the business finds & solves its weakness in order to increase its

sales.

SWOT Analysis Table

Competitors Strength Weakness Opportunities Threats

Name

IAMU Posho  Highly qualified staff  No offer sale  Accessible to  No

Mill  Sophisticated services superhighway computerizati

technology  Near on of invoice

 Affordable prices institutions

 Near police post

Juhudi Whole  Low prices  Poor customer  Near police post  No Mpesa

Milers  Provision of after sale service services

services

 Highly qualified staff

 Modern technology

 Media advertising

Quantum  High quality services  Near outdated  Near  No media

Enterprises  Good customer technology institutions advertisement

services  High prices (Juja modern

 Mpesa services hospital)

2.3.1 Likert Scale Table

COMPETITORS S W O T

IAMU Posho Mill 1 3 1 3

8
 Juhudi Whole Milers 3 1 2 2

Quantum 2 2 3 1

Enterprises

2.4 Methods of Promotion and Advertising

2.4.1 Promotion

Free education on cereals and food will be offered to customers who will involve need to free

samples. Trade shows will be organized to campaign on the emerging issues on the business.

Workers on the business that their hardworking and efforts are seen would be prompted or

salary increased. Customers that continue buying from the posho mill for a period of 3 years

and above, would be given free foods or a voucher of a certain period.

2.4.2 Advertising Strategy

The methods of advertising will include;

i. Sign boards shall be centered at strategic points to ensure that the existence of the

business is recognized by many customers.

ii. Posters will be put at strategic points in order to inform the products offered by the

proposed business to the new customers.

iii. Advertisements will be done by publishing on the daily nations and the people daily

twice a month in order to inform a large number of customers on the existence of the

business.

iv. The use of radio in the advertisement will improve on the effectiveness of the

advertisement because many people will be exposed on the advert.

2.5 Pricing Strategy

The price of the service will be determined by the demand. The increase in demand will lead

to an increase in the cost of the service. Production cost of the service will also affect the

9
price of the service as the more resources used the higher the price of the service. Price of

competitors will affect the price of the service because if all competitors raise the prices of

the service due to one of the factors discussed above the business may increase the price or

maintain the price to attract new and retain the customers.

2.6 Sales Tactics

The business would be to sell its service directly to its customers and will enable personal

contact between customers and the business owners. On employee into the business

employees/sale fare will be recruited on the specific way in which the business entails and

will do the best to remunerate and retain then.

2.7 Distribution Channel or Strategy

The services will get to the customers through the direct sales chain from the producer to the

customer. In order to provide good quality services of the business will render its services

directly to the customers.

O level

Producers

Consumers

10
 CHAPTER THREE

3.0 ORGANISATION AND MANAGEMENT PLAN

3.1 Business Mangers and Qualifications

The business shall be a sole proprietorship owned by Ian Murangiri who shall also be the

manager. The manager shall have a degree in Business Management which shall enable him

to run the business smoothly because of the knowledge and skill she passes in the field. The

manager shall be assisted by five other personalities to ensure the objectives of the firm are

realized.

Organization Chart for IAMU Posho Mill

MANAGER

ASSISTANT
MANAGER

ACCOUNTANT

SUPERVISOR

GUARD

CLEANER

11
 3.2 Personnel Numbers and Duties

Title No Qualifications Duties Salary

Manager 1  Degree in Catering  Finance the business formulate 40,000

 Age 25 years an above policies of staff development

 Ability to plan and organize  Search link for new market

Assistant 1  Diploma in human resource  To assist the operating manager in 25,000

Manager management issues relating to the business

 Age 30 years

 Minimum worked experience of

3 years

Supervisor 1  Certificate in business  To supervise workers 16,000

management  To make sure all duties are

 Working experience for a performed accordingly

period of 5 years

Accountant 1  Accounting knowledge of at  To administer, pay wages and 14,000

least ATD 2 salary

 Should have computer  To keep the financial statement

knowledge

Guard 1  K.C.P.E Certificate  Guard the enterprise day and night 7,500

 Direct visitors

 Keep attendance record book

Cleaner 1  K.C.P.E Certificate  Clean the office, store as well as 5,000

arranging documents in the office

12
3.3 Recruitment, Training and Promotion

3.3.1 Recruitment

Recruitment is the process of finding and hiring the best qualified candidate from within or

outside of an organization for a job opening in a timely or cost effective manner.

The process of recruiting new employees will be done mainly by advertising of the

opportunity available within the organization.

3.3.2 Training

Training is an organized activity aimed at impacting information and instructions to improve

the recipient’s performance or to help him attain a required level of knowledge or skill.

The business shall introduce short term training which will be aimed at enlightening the

employees through seminars for example.

3.3.3 Promotion

Promotion will be offered to employees in order to motivate them depending on the employee

willingness to work hard. Increment of salary will also be involved.

3.4 Remuneration and incentives

3.4.1 Remuneration

The salaries of all employees will be set in such a way that the business is able to cater for its

financial expenses or needs.

13
3.4.4.1 Remuneration Table

Employees No. of Staff Salary/month

Manager 1 40,000

Assistant Manager 1 25,000

Accountant 1 16,000

Supervisor 1 14,000

Guard 1 7,500

Cleaner 1 5,500

Total 1,080,000

3.4.2 Incentives

In case of any extra time work the firm workers will be paid depending on the extra hours

they have exceeded on.

The firm shall sponsor employees in various posts or positions to attend more training in

various institutions for them to enquire extra certificates & knowledge.

3.5 License, Permits and By Laws

3.5.1 License & Permits

The business will have permits showing that it is legal & registered with the entire

requirements.

3.5.2 By-Laws

All employees shall be provided with the right and safe equipment tools to be able to perform

their tasks in the required manner.

No employee shall be forced to work for extra hours without their concept.

14
3.6 Support Services

The business shall need the provision of support services which will include

i. Insurance services

ii. Banking services

iii. Postal services

iv. Legal services

v. Accounting and auditing services

15
 CHAPTER FOUR

4.0 OPERATIONAL PLAN

4.1 Production Facilities and Capacity

For the business to run smoothly and efficiently, production facilities will be required, this

will include, tools, machines & equipment’s.

4.1.1 Machines Tools and Equipment’s

In order for the business to achieve its objectives, tools and equipment’s will be required;

Table 4.4.1

Items No Uses Supplier Cost/Week Total Cost

Desktop 5 Help Adtech 10,000 50,000

Computers complete and software’s

maintain

information

Generator 1 Aid during Davis & 30,000 30,000

blackouts Shortleaf

Millers 5 For grinding Bills Tec 60,000 60,000

& processing shop

cereals

16
4.2 Production Strategies

Some of the major production strategies which shall be focused on include;

 Quality of the product

 Customer relations to the service offered

 Pricing of goods and service

 Motivation of work itself, employees

4.2.1 Monthly Labour Requirement

The business will employ both casual & permanent workers. Casual workers will be paid on a

weekly basis by cash.

The casual workers will only be hired when the work load increases in order to assist

permanent workers and serve on time used.

Generally the number of employees hired will depend on the demand of the service.

Table 4.2.1 Monthly Labour Requirements

Particulars Expenses per month

Salaries 108,000

Wages 15,000

Total 123,000

17
Table 4.2.2 Monthly Expenses

Expenses Cost per month

Water bill 5,000

Electricity bill 4,000

Telephone bill 1,000

Advertisement 2,000

Salaries & wages 83,000

Insurance 5,000

Total 100,000

4.3 Production Process

Production of the service rendered will be affected by the staff hired to conduct the job and

the tools available by the firm to help in accomplishing the intended task. The business

intends to hire highly qualified staff to conduct the service effectively and also acquire the

best equipment tools to make sure that high quality service is availed.

4.4 Government and other Regulations

The business will require registration from the registrar of companies, a license from the

County government and a certificate of incorporation to enable the business to start 20,000

for the license and 10,000 for the certificate of incorporation. The labour laws which will

ensure all employees are treated well and according to their rights.

18
 CHAPTER FIVE

5.0 FINANCIAL PLAN

5.1 Pre-Operational Costs

These are the preliminary expenses that the business will incur before its starts operating eg.

The business will incur the following;

ITEM COST (KSH)

Land and building 400,000

Motor vehicles 250,000

Machines 200,000

Tools and equipment’s 50,000

Telephones 2,000

Advertisement 5,000

Water Bill 1,000

Electricity 6,000

License and Permit 30,000

Insurance 12,000

Transport 30,000

TOTAL 987,000

CASH BALANCE = CAPITAL – OPERATIONAL COST

4,000,000 – 987,000

= 3,013,000

19
5.2 Estimation of Working Capital

Item 1st Year 2nd Year 3rd Year

Current Assets

Stock

Cash in hand 800,000 900,000 1,000,000

Cash in bank 1,200,000 1,400,000 1,700,000

Debtors 500,000 600,000 700,000

Total Current 2,500,000 2,900,000 3,400,000

Assets

Current Liabilities

Bank overdraft 800,000 1,000,000 700,000

Creditors 350,000 500,000 450,000

Total Current 1,150,000 1,500,000 1,200,000

Liabilities

Working Capital 1,450,000 1,400,000 2,200,000

WORKING CAPITAL = CURRENT ASSETS – CURRETN LIABILITIES

YEAR 1 2,500,000 – 1,150,000

= 1,450,000

YEAR 2 2,900,000 – 1,500,000

= 1,400,000

YEAR 3 3,400,000 – 1,200,000

= 2,200,000

20
5.3 Projected Cash flow Statement IAMU Posho Mill for year 2024

Items Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Cash in flows
Sales 200,000 220,000 230,000 220,000 250,000 240,000 260,000 270,000 250,0000 260,000 280,000 290,000 2,970,000
Debtors 3,000 1,000 1,500 2,000 3,000 5,000 15,500
Total In 230,000 230,000 230,000 235,000 250,000 260,000 290,000 270,000 300,000 260,000 280,000 290,000 3,125,000
flows
Cash
Outflow
Purchases 50,000 60,000 55,000 65,000 40,000 65,000 50,000 70,000 65,000 75,000 60,000 70,000 725,000
Salaries 108,000 108,000 108,000 108,000 108,000 108,000 108,000 108,000 108,000 108,000 108,000 108,000 1,296,000
License & 30,000 30,000
Permits
Electricity 6,000 7,000 8,000 7,500 6,500 7,500 8,000 6,500 7,200 8,000 7,000 6,000 85,200
Water 2,000 4,000 3,500 4,000 4,500 3,000 3,500 2,500 4,000 4,500 3,000 3,500 42,000
Insurance 12,000 12,000
Telephone 2,000 3,000 2,500 4,000 3,000 4,000 2,000 3,500 2,500 4,000 3,500 2,500 36,500
Transport 15,000 12,000 10,000 17,000 16,000 15,000 14,000 10,000 12,000 14,000 10,000 17,000 168,000
Advertisement 5,000 5,000
Outflow 230,000 194,000 193,000 205,550 178,000 202,500 185,500 200,500 198,700 23,500 191,500 207,000
Net Cash 0 36,000 37,000 29,500 72,000 57,500 104,500 69,500 101,300 46,500 88,500 83,000
Accumulated 36,000

21
5.4 Profoma Income Statement

IAMU Posho Mill Income Statement for years Ending 2024, 2025, 2026

ITEMS 2024 2025 2026

Sales 2,970,000 3,400,000 3,800,000

Cost Sales 900,000 1,200,000 1,500,000

Gross profit 2,070,000 2,200,000 2,300,000

Expenses

Salaries & Wages 1,296,000 1,340,000 1,420,000

Licenses & Permits 30,000 30,000 30,000

Electricity 85,200 90,000 88,000

Water 42,000 50,000 48,000

Insurance 12,000 14,000 16,000

Transport 168,000 174,000 178,000

Telephone 365,000 40,000 45,000

Adverts 5,000 10,000 20,000

Total Expenses 1,674,700 1,748,000 1,845,000

Net Profit before 396,000 452,000 455,000

tax

Net Profit 396,000 452,000 455,000

Provision of Tax 39,600 45,200 45,500

(10)

Net Profit after tax 356,400 406,800 409,500

22
5.5 Profoma Balance Sheet

IAMU Posho Mill balance sheet as at start up and end of the first two years of operation.

Item As At Opening As Of The End As Of End Year

Date 1/1/2024 Year 2015 31st Dec 2026 31st Dec

Assets

Current Assets

Cash 3,013,000 4,500,000 5,000,000

Stock 441,300 500,000 400,000

Debtors 500,000 400,000 500,000

Total Current 3,513,000 5,400,000 5,900,000

Assets

Fixed Assets

Land & Building 400,000 500,000 600,000

Machineries 200,000 300,000 340,000

Tools & 50,000 70,000 90,000

Equipment’s 250,000 400,000 600,000

Motor Vehicle

Total Fixed assets

Total Assets 4,906,400 6,670,000 7,530,000

Current Liability

Creditors 350,000 500,000 730,000

23
Bank Overdraft 800,000 170,000 200,000

Total Current 1,150,000 670,000 930,000

Liability

Long Term

Liability 400,000 5,000,000 2,500,000

Bank Loan 3,000,000 2,500,000 2,500,000

Owners Security

Net Profit 356,400 500,000 600,000

Long Term 3,756,400 6,000,000 6,600,000

Liability

Total Liability & 4,906,400 6,670,000 7,530,000

Equity

24
5.6 Break Even Point

Particulars Amount

Fixed Cost

Rent 50,000

Salaries & Wages 1,296,000

Insurance 12,000

License 30,000

Loan Repayment 20,000

Total Fixed Assets 1,408,000

Variable Costs

Advertisement 5,000

Transport 168,000

Telephone 36,500

Electricity 85,000

Water 42,000

Total Variable Costs 336,700

25
5.6.1 Total Contribution

Sales – Variable Cost

2,970,000 – 336,700

= 2,633,300

5.6.2 Contribution Margin Percentage

Total contribution x 100

Sales

2,633,300 x 100

2,970,000

= 88.66%

5.6.3 Fixed Assets

= 1,408,000

5.6.4 B.E.P

Fixed Assets

Contribution Margin

1,408,000

88.66

=15880.89

5.7 Expected Profitability Ration

2,070,000

5.7.1 Gross Profit Percentage

Gross Profit x 100

26
 Sales

2,070,000 x 100

2,970,000

=69.697%

5.7.2 Return on Equity

Net Profit after tax

Owners’ Equity

396,000 x 100

3,000,000

=13.2%

27
5.8 Proposed Capital

Source Amount

Owner Savings 500,000

Bank 685,000

Friends and Relatives 700,000

Total 1,795,000

5.9 Desired Financing

Item Amount

Pre-operational Costs

Working Capital

Fixed Assets

Total

28