Business Policy

Cold Storage vs. Knitwear

Omer Khalid Khan (10E0012)
Ahmed Zafar (10E0090)

Qualitative Facts
Cold Storage

Knitwear

Managerial problems
would be at low level

Knitwear industry has

intense competition

Problems emerge
after entering into
trading business

Huge promotional
efforts would be
required

No scope of
expansion in this
business

Promoters have to
manage both
production and
marketing side in order
to remain competitive

Quantitative Facts
Cold Storage

Knitwear

Projected Cost: 53,00,000

Projected Cost: 45,45,000

Sources of Funds:
a. Owned Funds
20,00,000
b. Loans
33,00,000
Total:
53,00,000

Sources of Funds:
a. Owned Funds 20,00,000
b. Loans
25,45,000
Total:
45,45,000

Total Cost / annum:

25,82,500

Total Cost / annum:

92,91,000
Total Revenues: 121,00,000

Total Revenues: 34,50,000

Profit before Tax:

Profit before Tax: 28,09,000

/ annum

Core Issue
The core issue is that both Ajay and
Durgesh do not have sufficient
capital to start a business. Both of
their business plans required huge
initial investment and they are stuck
between the two

Issues
Cold Storage
The cold storage would
normally operate at full
capacity as there was
more demand for storage
space as compare to
availability
Profitability could be
increased through trading
operations i.e. buying in
peak season and selling in
off season

Knitwear
According to the report
all calculations were based
on full plant capacity
Profitability would be
affected by variations in
raw materials prices which
consisted of major part of
cost production

Solution

Cold Storage

Knitwear

Payback Period

3.22

2.2267

ROI

43.4 %

140.45 %

Total Cost

25,82,500

92,91,000

Conclusion

Go for Knitwear
High ROI
High Risk of competition
High Expected growth rate
Good marketing efforts are required