TITLE: BUSINESS PLAN

BUSINESS NAME : MUREITHI’S AGROVET

NAME: MERCY NG’ENDO MUREITHI

ADMISSION NUMBER: DCHD/S-0006/THI/22

INSTITUTION: THIKA SCHOOL OF MEDICAL AND HEALTH SCIENCES

PRESENTED TO: KENYA NATIONAL EXAMINATION COUNCIL

COURSE NAME: DIPLOMA IN COMMUNITY HEALTH AND DEVELOPMENT

SUPERVISOR:
DECLARATION

I declare this is my own and original work and has never been presented before for any academic
award.

Name: MERCY NG’ENDO MUREITHI

Signature: ……………….

Date……………………...

Supervisor name: …………………………..

Signature:…………………

Date:……………………….

ii
DEDICATION

I dedicate this work to my parents for their financial and moral support that they gave me
throughout the course.

I also dedicate to my friends, classmates, and our lecture for their support in my study.

iii
 ACKNOWLEDGEMENT
I am so thankful to my supervisor for the full support in teaching me how to write a business
plan and document it.

iv
 Table of Contents
DECLARATION ............................................................................................................................ ii
DEDICATION ............................................................................................................................... iii
ACKNOWLEDGEMENT ............................................................................................................. iv
EXECUTIVE SUMMARY ............................................................................................................ 1
BUSINESS DESCRIPTION ....................................................................................................... 1
MARKETING PLAN ................................................................................................................. 1
ORGANIZATIONAL PLAN ...................................................................................................... 1
PRODUCTION PLAN ................................................................................................................ 1
FINANCIAL PLAN .................................................................................................................... 1
1.0 CHAPTER ONE .................................................................................................................. 2
BUSINESS DESCRIPTION ........................................................................................................... 2
1.1 BUSINESS NAME ............................................................................................................... 2
1.2 LOCATION AND ADDRESS.............................................................................................. 2
1.3 FORM OF BUSINESS OWNERSHIP ................................................................................. 3
1.4 PRODUCTS AND SERVICES ............................................................................................ 3
1.5 JUSTIFICATION OF THE OPPORTUNITY ...................................................................... 3
1.6 INDUSTRY ........................................................................................................................... 3
1.7 OBJECTIVES OF THE BUSINESS.................................................................................... 4
1.7.1 Short term goals .............................................................................................................. 4
1.7.2 Long term goals .............................................................................................................. 4
1.8 ENTRY AND GROWTH STRATEGY ............................................................................... 4
1.8.1 Entry Strategies ............................................................................................................ 4
1.8.2 Growth strategies.......................................................................................................... 4
2.0 CHAPTER TWO ................................................................................................................. 6
MARKET PLAN ............................................................................................................................ 6
2.1 CUSTOMERS ....................................................................................................................... 6
2.2 MARKET SHARE ................................................................................................................ 6
2.3 COMPETITION .................................................................................................................... 6
2.4 METHODS OF PROMOTION AND ADVERTISEMENTS .............................................. 7
2.5 Pricing Strategy ..................................................................................................................... 8
3.0 CHAPTER THREE ............................................................................................................. 9
ORGANIZATIONAL STRUCTURES .......................................................................................... 9
3.1 MANAGERS AND QUALIFICATIONS ............................................................................ 9
3.3 PERSONNEL ...................................................................................................................... 10
3.4 RECRUITMENT, TRAINING, AND PROMOTION ........................................................ 11

v
 3.5 REMUNERATION AND INCENTIVES ........................................................................... 11
3.6 LICENSES, PERMITS AND LAWS ................................................................................. 13
3.7 SUPPORT SERVICES ....................................................................................................... 13
4.0 CHAPTER FOUR .............................................................................................................. 14
OPERATIONAL PLAN ............................................................................................................... 14
4.1 PRODUCT OR SERVICES, DESIGN, AND DEVELOPMENT ...................................... 14
4.2 PRODUCTION OR OPERATIONAL FACILITIES AND CAPACITY........................... 14
4.3 PRODUCTION OR SERVICES STRATEGY ................................................................... 15
4.4 PRODUCTION PROCESS ................................................................................................. 15
4.5 REGULATION AFFECTING OPERATION .................................................................... 16
4.6 EQUIPMENT OR MATERIALS ....................................................................................... 16
5.0 CHAPTER FIVE: FINANCIAL PLAN ........................................................................... 17
5.1 PRE-OPERATION COST .................................................................................................. 17
5.2 ESTIMATED OF WORKING CAPITAL .......................................................................... 17
5.3PREPARATION OF CASH FLOW PROJECTION CASH FLOW YEAR 1 .................... 18
5.4 PRO-FORMA INCOME STATEMENT ............................................................................ 23
5.6 BREAK-EVEN POINT....................................................................................................... 25
5.7 PROFITABILITY RATIO .................................................................................................. 25

vi
 EXECUTIVE SUMMARY

BUSINESS DESCRIPTION
The proposed business opportunity will be registered under the name “Mureithi’s Agrovet.” It
will be involve in selling agro-chemicals and animal feeds. The businesss shall be located in
Meru, towards the outskirts of main town along Equator (Meru) Highway. MERCY NG’ENDO
MUREITHI, is the manager of the agrovet.

MARKETING PLAN
The business target population will be the small scale and large scale farmers in Meru town. The
business will adopt various promotion methods to promote the business as well as various
pricing strategies to penetrate the farm market. The business will ensure that credit facilities to
their customers can welcome others to buy the commodities. The business will be able to
purchase goods of low and high quality for their customers

ORGANIZATIONAL PLAN
The proposed business shall be managed by personnel comprising the managing director,
supervisor, accountant, shop attendant driver, and cleaners. The vacant posts will be advertised,
and qualifications will be attached.
The business will work under the law and shall have a license to operate efficiently.
The business will get support services from banks and to be paid later
PRODUCTION PLAN
The business will acquire various facilities and equipment needed to run the business. Various
strategies will be adopted to ensure stock is always available and also obtain all licenses requires
and following all County Government regulations.

FINANCIAL PLAN
Mureithi’s Agrovet will have a startup capital of Shs. 515,000 and inject shs. 320,000 from
Commercial Bank. In order to achieve its’ financial objectives the business will offer discounts,
come up with new marketing strategies and encourage clients to pay debts.

1
 1.0 CHAPTER ONE
BUSINESS DESCRIPTION
The business is described as follows:
1.1 BUSINESS NAME
The business name is called Mureithi’s Agrovet. The business name was chosen because of the
owner’s preference. The advantage of the business is that there are only two agrovets in the area,
this will keep the competition at a managed level.

Background of the owner

The owner of the business is called MERCY NG’ENDO MUREITHI. He is twenty two years
old. He was born and raised in Meru County. She is single. She has gone to Thika School of
Medical and Health Sciences.
1.2 LOCATION AND ADDRESS

The business will be located at Equator Meru road, about 1 mile from Pendo Preparatory School.
The figure represents the map of the business location.

Ithungu ScottMcCall
Commercial 100m Agrovet
Building for
office space
300m

Pendo preparatory
school

Meru Equator Road

Name: Mureithi’s Agrovet

Address: P.O Box 387, Meru
Telephone number: +254 714 028 267
E-mail address: mureithisagrovet@gmail.com

2
The location of the business was chosen because of good infrastructure in the area and road
network. This will easen transportation of goods from one place to another from the place of
business .
1.3 FORM OF BUSINESS OWNERSHIP
The advantage of starting a sole proprietorship is the simplicity of formation- it can be formed
with low capital requirements. The business needs small capital to start and run that business.
The business will need a small fortune to start and run that business.
The business will have good conduct to customers who can buy the goods.
Minimum legal restriction
The business will acquire a valid license for smooth operations.

The business will be operating in a medium, not too small or not too large but moderate, because
the product will be increasing in small quantities, and it can grow in a year or a few months.
The business will have a highly maintained operations procedures.
1.4 PRODUCTS AND SERVICES
The business will offer knapsacks, dairy meals, dips, fertilizers, chemicals, herbicides, pesticides.
The characteristics of the business will be:
• The quality and quantity of goods will be high.
• Assist farmers in the industry through the products the business will be offering.

1.5 JUSTIFICATION OF THE OPPORTUNITY

The business idea of an Agrovet was chosen because of prevalent farming in Meru County. An
end-to-end supply store for farmers, dealing in seed, fertilizer, animal feed, veterinary supplies,
etc. MERCY NG’ENDO MUREITHI, who is the sole proprietor and is going to be the owner,
was born and lived in Meru. I have done research on the location of the business. It is well secure
and easily accessible and close to a general market in the area. Competition will be at an all-time
low, there are only two other agrovets in the area.
1.6 INDUSTRY
The Agribusiness industry has been around since the beginning of the 19th century and with
the inception. The primary goal of agribusiness is to maximize profit while sustainably
satisfying the needs of consumers for products related to natural resources.
Mureithi’s Agrovet will indulge in the Agribusiness industry because of the knowledge acquired
in the Diploma in Agriculture course undertaken by the soon-to-be owner of the agrovet.

3
The industry is a an allround activity of the year thing because farmers are involved in day-to-
day farming activities to ensure farm produce is at optimum. This will ensure that Mureithi’s
stays in business throughout the year.

1.7 OBJECTIVES OF THE BUSINESS

The business will advertise its products to ensure reach to the market .
1.7.1 Short term goals
To increase the sales volumes of goods.
To advertise its goods by motor vans.
To create more profit from the sale of goods.
1.7.2 Long term goals
To open a new branch in a nearby county.
To establish high performance standards.
To meet revenue targets.

1.8 ENTRY AND GROWTH STRATEGY

The strategy that the business will engage and enter the penetrated market is through advertising,
personal contacts, and the uses of affiliate marketing. The business will inform other firms for
support so that when you don’t have the means, it can be able to help the business like vans.

1.8.1 Entry Strategies

Market entry strategy is a planned distribution and delivery method of goods or services to a new
target market.
a) Advertising
Using print media and press to ensure word spreads out there about the ‘new’ Mureithi’s
Agrovet.
b) Business Permit
A license from the local county authority “Meru County” to allow it to run its business
efficiently in the premise obtained. This will act as a door to the new market.
1.8.2 Growth strategies
a) Market Penetration
Market Penetration is all about selling more of your current products to your existing markets.
This also refers selling a product or a service in a specific market. Mureithi’s Agrovet will use

4
this strategy to earn a higher market share from its competitors by persuading customers through
sweet talking to buy and new customers to start buying.
b) Market Development
Market development is a known growth strategy that identifies and develops new market
segments for current products. A market development strategy targets non-buying customers in
currently targeted segments. It also targets new customers in new segments. Mureithi’s Agrovet
will try develop its business by targeting different markets e.g. from the neighboring counties
and towns. This will create a great pool of customers resulting in great revenues to the business.

5
 2.0 CHAPTER TWO
MARKET PLAN
The main focus will be on local customers who are active and to motivate those that are not
many active or potential customers. Mostly those from around the town, commercial customers
from up country who buy in cooperative measure so to stock their business.

2.1 CUSTOMERS
The business target population will be the small scale and large scale farmers in Meru town.
Livestock keepers will also be the target market for Mureithi’s Agrovet.
They will be buying goods in small quantities and large quantities, depending on buyer’s farm
inputs.
The customers will be looking for products that the business will have. Are they costly, quality,
or durable? So that they can afford them at a straightforward price
The products will be purchased timely and seasonally, like fertilizers, but pesticides are regularly
used when required.
The customers will be able to buy commodities to their reach. They can purchase small
quantities, and customers will be buying on credit, and others will be paying cash

2.2 MARKET SHARE

The business will share its products and services with other agro vets in the area to have a good
relationship even if they sell some commodities to the people. They work hard in hand with the
people. This happens when others agro vets don’t have that product. They can call the other
agrovet so that he can purchase a product there. They share ideas

2.3 COMPETITION
Mureithi’s Agrovet will have the following two major competitors;
• Baraka Agrovet– 40%
• Amani Agrovet – 25%
1. Name : Baraka Agrovet
Address: P O BOX 2465 MERU
Location: Equator Meru.
Market Share: 40%

6
Baraka Agrovet has 40% market share. They have been able to maintain this market share
because they have been in the market for some time. They set their base well and acquired
customers before their competitors.
2. Name : Amani Agrovet
Address: P O BOX 1254, MERU
Location: Kirori
Market Share: 25%
Amani Agrovet has a 25% market share. This is because; they have many branches in Meru
town. This enables them to win customers. But its main company is in based in Meru town,
hence making it a lesser competitor to Mureithi’s Agrovet.

Market share

Mureithi's Agrovet
35% Baraka Agrovet
40%

Amani Agrovet
25%

2.4 METHODS OF PROMOTION AND ADVERTISEMENTS

The business will use the following strategies for promotion and advertising;
a) Social Media
Mureithi’s Agrovet will use the social media platform to promote its business. This will be done
through platforms like Facebook, Twitter and WhatsApp. These platforms will be used to place
orders and request for services. This will result in a close relationship between the company and
the customers.

b) Bill Boards

7
Mureithi’s Agrovet will use billboards to market and promote its business. This is to target the
motorists and by passers. Mureithi’s Agrovet will situate the bill boards at Meru Equator Road,
since it’s the main tarmacked road.
2.5 Pricing Strategy
Mureithi’s Agrovet will use this strategy in order to attract its customers more than its
competitors. This will involve lowering the prices of both its products and services to its
customers. This will be done once the company has evaluated how much prices are being
charged by its competitors.

8
 3.0 CHAPTER THREE
ORGANIZATIONAL STRUCTURES

The business will have the following structure for the work to be efficient.

Manager

Assistant
Accountant
Manager

Driver Cleaner Salesman

3.1 MANAGERS AND QUALIFICATIONS

Manager
The proposed business Mureithi’s Agrovet shall be a runner by the manager, and they can be the
owner of the business
Qualification
(i) They should have at least 2 or 3 years experience in Agribusiness
(ii) Should create a good relationship with the customer
(iv)Should have a certificate of KCSE and attained a course in agrovet
(v) Should have respect for all department members

Assistant Manager
Mureithi’s agrovet will also employ an assistant manager because the manager is not always
present, so they can also run the business
Qualifications
(i) Should have good human relation
(iii) Should be a Kenyan citizen
9
 (iv) Should have a certificate in the business level
(v) Should have one year of working experience

Accountant
For keeping the financial books in order and updated.
Qualifications
(i) Should have a diploma in accountancy
(ii) Should be a Kenya citizen by birth
(iii) Should have working experience
(iv) Should have an excellent relationship with the public

3.3 PERSONNEL
Salesman/shop attendant
The business will employ three salespeople who will be able to serve the
customers Qualification
(i) They should have a certificate in running the business
(ii) Should have a working experience
(iii) Responsibility
(iv)They should offer credit facilities to customers
(v) They should compensate customers who cannot buy the products in the market.
Driver
Qualification
(i) Should have a driving license
(ii) Should have good conduct
(iii) Should have a certificate in driving
(iv) Should be able to transport goods from one place to another
Cleaners
Qualification
(i) Should have good relations skills
(ii) Should have a KCSE certificate
(iii) Responsibly
(iv) To keep hygiene

10
3.4 RECRUITMENT, TRAINING, AND PROMOTION
Recruitment
The proposed business shall advertise all the posts mentioned above except the manager. Posters
will be placed throughout the area streets, public institutions, and major shopping centres.
Candidates who can submit their documents will be taken, and they can be called for an
interview, and the appointments will come from the managers. Training
The interviewed trainees will be given one-week training to start working. The managing
directors will train them and give them the rules they introduced to the owner of the business,
and the owner can hand them over to the managers to the board Promotions
The proposed business will grow as time goes by and shall have branches which will be able to
know the products. The products will be advertised, and the products will be promoted. The
merits and demerits of the business must be followed.
The business will be able to reward employees who are in their operations and who have done
well and salary will be increased in a reasonable way that others can keep that so they can also
work hard.

3.5 REMUNERATION AND INCENTIVES

Key personnel Salary per month Salary per

year
Manager 13000 156000
Assistant Manager 10000 120000
Accountant 9000 108000
total 32000 394000
Support Staff Salary per month Salary per
year
Salesman 7000 84000
Driver 5500 76000
Cleaner 4000 36000
total 16500 196000

11
Incentives
title Allowances monthly Yearly

Manager Transport 1800 216000

Medical 1500 18000

Housing 1000 12000

Assistant Medical 1500 1800

Manager
Housing 1500 1800

Transport 1500 1800

Accountant Medical 1000 12000

Housing 1000 12000

medical 1000 12000

total 11800 135000

Staff Allowances Monthly Yearly

salesman Transport 800 96000
Housing 800 96000

medical 800 96000

driver Transport 600 7200

Medical 600 7200

Housing 600 7200

cleaners Transport 500 6000

Medical 500 6000

housing 500 6000

total 5700 68400

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3.6 LICENSES, PERMITS AND LAWS
Licenses
The business will be able to acquire a single business license to run safety
The amount that the business will be able to make so that it can acquire that license will be
obtained from the county government office of Meru, which has verified the business

Bylaws
The business should be under the law and must be able to follow those laws
The business should be able to pay the county counsellor so it can run smoothly.
3.7 SUPPORT SERVICES

The business will be able to bank its money in Barclays bank every week
The business will have insurance helps when they have an outbreak of a fire. The business can be
compensated the money so that it can be paid back latter.
Barclays Bank – Meru
AMCO Insurance Ltd. - Meru

13
 4.0 CHAPTER FOUR
OPERATIONAL PLAN

4.1 PRODUCT OR SERVICES, DESIGN, AND DEVELOPMENT

Mureithi’s agrovet will be able to purchase its products from Limitless distributors who will
offer quantity products and resale those goods at a profit
The business will ensure the suppliers of the product. Employees who make allowances so that
they can be able to motivate others to work harder

4.2 PRODUCTION OR OPERATIONAL FACILITIES AND CAPACITY

Item no Uses Supplier Unit cost Total

Compute 4 complex computer 2000 80000
r
Internet supplies

access

electricit For supply Kenya 2500 6000

y of power
power

Sprayers 100 Sprayers are to Limitless 800 8000

fo spraying distributors 0
compost
chemicals

Fertilize 10 Application in Limitless 1600 1600

s farm 00
distributors

Dairy 4 For boosting Limitless 250 4000

14
mash animal product distributors

Gloves 2 Used for Limitless 150 300

handling chemical distributors

total 330300

4.3 PRODUCTION OR SERVICES STRATEGY

The business will get its products from above
particulars Expenses per
month
insurance 2500
Advertising 10000
Transport 3500
Electricity bills 2200
Repair and maintainers 3000
Postal series 2000

4.4 PRODUCTION PROCESS

The business will be producing goods according to customers. Several steps will be followed for
the satisfaction of customers to the business. The business will ensure that it sells its raw
materials to attract more customers to buy goods. All materials will be available in the industry
for customers for whom they have discounts whom they have a till number so that if the
customer has no cash, they can pay with m-pesa

The salesman will be able to promote the products in the market so that people can buy them.
Selling price: there will be different selling prices in the business, so customers cannot purchase
goods beyond their reach. They provide a specific amount to each item Draw

15
4.5 REGULATION AFFECTING OPERATION
All employees in the form will be required to have a medical report from a recognized
government hospital. All employees will be required to have a KRA pin workplace. For instance,
the technician will dress a dustcoat. Waste material will be provided and hung on display from
the page to avoid confrontation with authority.
The business will have computers series provided, and the rules and regulations of the computer
work solution are maintained.
4.6 EQUIPMENT OR MATERIALS
Mureithi’s agrovet will use raw material as sprayers, chemicals, computers, and desktops
Receipt book for receipt production
Sprayers used by farmers in chemical process
Chemicals are like herbicides, pesticides

16
 5.0 CHAPTER FIVE: FINANCIAL PLAN
Mureithi’s Agrovet will have a startup capital of Shs. 515,000 and inject shs. 320,000 from
Commercial Bank.
5.1 PRE-OPERATION COST
items cost
Rent 7000
Insurance 4500
License 4000
Tools and equipment 7800
Machineries 6000
Advertisement 6500
Totals 35800

5.2 ESTIMATED OF WORKING CAPITAL

item 1st year 2nd year 3rd year
Current asset 400000 300000
Stock 15000 130000 120000
debtors 50000 70000 30000
Cash in hand 60000 25000 100000
Cash at bank 320000 120000 70000
Total current 580000 745000 620000
assets
Current
liabilities
Creditors 25000 70000 97000
Bank 40000 25000 54000
Overdraft
Total current 565000 95000 151000
Working 515000 650000 467000
capital

17
5.3PREPARATION OF CASH FLOW PROJECTION CASH FLOW YEAR 1
Receipt Jan. Feb marc Apri May Jun July August Sept Oct Nov Dec
h
Bal c/d - 16750 125200 15414 121000 116600 161500 176100 187600 125500 178500 220500

0 0

sale 300000 16000 150000 16000 200000 150000 130000 160000 170000 180000 190000 210000

Debtors 10000 8000 6000 8000 6000 7000 6500 55000 8800 7500 6500 7000

Discount receipt 2000 3000 2500 3000 5000 25000 6500 85000 6500 4000 5200 6000

Loan received 150000 12000 130000 - - - - 140000 - - - 180000

Commission 7000 6000 7500 6000 7000 6000 7000 8000 9000 7000 6000 5000

received
Total 532000 15300 179000 18000 120000 20000 4000 68000 5000 600000 888000 730000

Payment 35000 25000 35000 20000 25000 45000 65000 70000 60000 55000 40000 120000

Purchases
Salaries 61000 80000 92000 60000 60000 9000 90200 90000 92000 8000 60000 75000

Rent paid 6000 5000 5000 20000 30000 6000 2500 2800 4000 8000 6000 2500

Creditor 50000 6000 8000 80000 7500 6000 5000 7000 6000 7000 6000 7000

Discount 1500 3000 4000 2000 2500 2500 3000 6500 1500 6000 4500 6500

allowed
Loan allowed 9000 1200 6000 5500 5600 5000 6000 5500 6000 7500 6500 7500

Comm allowed 5000 3000 4400 4500 8000 6000 4400 8000 8000 7000 8000 6500

Total cash flow 167500 12520 154140 12100 111660 161500 176100 189600 123500 178500 131000 220500

Bal b/d 167500 125200 154140 121000 116600 161500 176100 189600 123500 178500 13100 2200500

18
YEAR TWO

receipt Jan. Feb marc April May Jun July Aug Sept Oct Nov Dec
h ust
Bal c/d - 150000 12500 25000 750 850 9500 1235 17800 16800 180000 220500
00 00 0 00 0
sale 30000 15000 25000 60000 1500 1200 75000 1700 12000 17000 180000 190000
00 00 00 0 0
Debtors 6000 7000 5000 25000 8000 6000 5500 65000 7500 7000 8000
0
Discount 2000 2500 3000 2000 1500 1800 35000 4500 4000 2000 3000 35000
receipt 0
Loan 15000 120000 - - - - - 1400 - - - 180000
received 00
0
Commissi 6000 7000 2000 5000 5500 1800 75000 7500 18000 70000 80000 75000
on 0 0
received
Totals 19440 301500 16000 11700 2400 2156 14900 2150 29500 75000 800000 1200000
0 00 00 0 00 0 0 0
0 0
Payment 35000 70000 2500 3500 3000 7500 8000 7500 60000 55000 50000 65000
Purchase 0 0 0 0 0

19
s
Salaries 80000 75000 8000 3500 8500 7500 8000 8000 65000 55000 63000 130000
0 0 0 0
Rent 60000 20000 5000 7200 8200 9500 92000 9100 75000 95000 85000 130000
paid 0 0 0 0 0
Creditor 5000 6000 7000 8000 7500 6500 8500 8500 7500 9000 8000 7500
0
Discount 1500 3000 4000 6000 2000 2500 3500 3000 8000 4500 7500 2500
allowed
Loan 6000 9900 4500 8200 6500 8000 4400 5500 4400 6000 2500 7500
allowed
Comm 5000 4000 2000 6000 4000 3000 8000 4500 5500 6000 6500 7500
allowed
Total 10750 105200 1270 1675 1765 1895 19400 1690 10900 18550 137000 230500
cash flow 0 00 00 00 0 00 0 0
0 0
Bal b/d 10750 105200 1270 1675 1765 1895 19400 1690 10900 18550 137000 230500
0 00 00 00 0 00 0 0

20
YEAR THREE
receipt Jan. Feb marc April May Jun July August Sept Oct Nov Dec
h
Bal c/d - 167500 12520 12700 180000 190000 150000 160000 180000 190000 185000 22000
0 0 0
sale 50000 160000 18000 15000 180000 175000 165000 150000 155000 14400 180000 12000
0 0 0
Debtors 10000 7500 8500 75000 7000 8500 11000 5500 6000 7500 7400 8500
Discount receipt 2500 2000 4000 35000 2500 7500 7500 8000 7500 8000 7500 4500
Loan received 180000 120000 14000 - - - - 140000 180000 - 14000 -
0
Commission 7000 5000 8000 5500 5500 8800 7500 8500 7500 4000 7500 4500
received
Totals 532500 414000 55000 45000 467000 475000 456000 870000 750000 800000 900000 120000
0 0
Payment 35000 40000 20000 50000 40000 60000 50000 35000 20000 40000 75000 65000
Purchases
Salaries 60000 75000 45000 35000 45000 55000 65000 40000 70000 40000 35000 47000

Rent paid 6000 4000 2000 4000 3000 4500 7500 2000 7500 4000 4500 7500
Creditor 50000 4000 8000 4000 4500 7500 8000 7500 8400 7400 5200 5800
Discount 1800 3000 4000 7500 4500 4400 6000 7500 7000 8500 6500 7500

21
allowed
Loan allowed 9000 1200 1500 5500 2500 3000 4000 8000 7000 8500 7500 8500
Comm allowed 5000 1300 1800 2200 2000 2100 1900 1950 2500 2100 1900 2000
Total cash flow 125000 135000 130000 1900 189000 165500 198000 175000 16900 172000 156000 199000
Bal b/d 125000 135000 130000 145000 189000 165500 189000 175000 169000 17200 156000 19900

22
5.4 PRO-FORMA INCOME STATEMENT

items Year Year2 Year3 Year4 Year

1 5
Sales 21000 140000 70000 168000 17800
0 0
Cost of sale 80000 65000 7000 8000 8000
Gross profi 13000 115000 95000 160000 17000
t 0 0
c/d

Less 5000 5000 5000 5000 5000

expenses

Rent

Salary 8000 6500 6500 68000 7500

Water bills 5000 5200 5200 7500 8000
Telephone 6000 6000 6000 6000 6000
Postage 4000 4000 4000 4000 4000
Transport 8800 8800 8800 8800 9000
Creditors 7000 8000 8000 8500 9000
Insurance 8000 9000 9000 9000 8000
license 4000 4000 4000 6000 5000
Electricity 3500 4000 3000 6500 500
Total 56000 3000 58000 73000 7800
0
expenses 79000 58000 57000 87000 1840
0
Net
profit
before

23
Tax provision 15800 57000 11400 16000
by 20%

Net profit 63200 114000 45000 71000 7300

0

Net profit= profit before tax less profit after tax (%)
Performer balance sheet

Fixed asset 220000

Furniture

Building 500000
Land 120000
Equipment 20000
Motor vehicle depre (100)000
Total fixed assets 810000
Current asset 40000
Cash in hand

Cash at bank 50000

Stock 15000
Debtors -
Total current asset 240000
Fewer 130000
liabilities
Creditors

Bank Overdraft 150000

Accruals 6000
Working capital 70000
Add net profit 84500
Less drawing 100000

24
Closing capital 282000
Owners’ equity 1000000
Working capital 2198000

5.6 BREAK-EVEN POINT

I. B.E.P (units) = fixed cost Contribution per unit

Contribution per unit=selling price-marginal
=12-6=6
B.E.P-units=6000 =12000 units
a. 6
II. B.E.P =fixed cost*selling price
Contribution per unit
600000=sh.120000
III. Contribution per sales=contribution per
unit*100. Selling price
6*100=60%
IV. target profit= fixed cost + target profit (selling price)
Contribution per unit
60000+20000=133333
6
V. Sale target profit= fixed cost +target profit Contribution per unit

60000+20000*10=133333
6

5.7 PROFITABILITY RATIO

Gross profit ratio= Gross profit*100

Sales

2198000*100 =10
21000
25
Net profit ratio =Net profit*100
Sales

63200*100 =30%

210000
Asset turnover =Sales revenue
Asset
210000 =1.75
120000
Return on equity =net profit *100
Owner equity
Owner equity =opening capital +net profit –
drawings Quick ratio = Current asset – stock (closing stock)
Current Liability
240000 – 150000 = 90000 =1:3
70000 70000
Liquid ratio =current asset
Current Liability
240000 =3:4
70000

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