BUSINESS PLAN FOR:

SWEET WATERS WINES AND SPIRITS

P. O BOX 5810-0012
PROJECT
CODE; 2901

PRESENTED BY:
MUTUKU LUCY
KATUNGE

INDEX NO:
40060030035

PRESENTED TO: DEPARTMENT OF BUSINESS

KABETE NATIONAL
POLYTECHNIC

P.O BOX 29010-00625

NAIROBI

SUBMITTED TO: KENYA NATIONAL EXAMINATION COUNCIL IN PARTIAL

FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF A DIPLOMA IN
DIPLOMA IN SECRETARIAL STUDIES.
KENYA NATIONAL EXAMINATION COUNCIL
[KNEC] P.O BOX 73596 – 00200

NAIROBI
NAME OF SUPERVISOR

JULY, 2023
 Table of content
BUSINESS PLAN FOR: 1
NAIROBI 1
Declaration III
Acknowledgement IV
Dedication V
EXECUTIVE SUMMARY VI
CHAPTER ONE 1
1.0BUSINESS DESCRIPTION 1
1.1BUSINESS NAME 1
1.2 BUSINESS LOCATION AND ADRESS 2
1.3 FORMS OF OWNERSHIP 3
1.4 PRODUCTS 0R SERVICES 4
1.5 JUSTIFICATION OF BUSINESS OPPORTUNITIES 4
1.6 THE INDUSTRY 4
1.7BUSINESS GOALS AND OBJECTIVES 5
1, 8 ENTRY AND GROWTH STRATEGY 5
CHAPTER TWO 6
2.1 POTENTIAL CUSTOMERS 6
2.2 MARKET SHARE 7
2.3 competition 7
2.4METHODS OF ADVERTISING AND PROMOTION STRATEGY. 9
2, 5 PRICING STRATEGY 10
2.6 SALES TACTICS 10
2.7 DISTRIBUTION STRATEGY 11
CHAPTER THREE 12
3.0 ORGANIZATION PLAN 12
3.1 ORGANISATION CHAT/STRUCTURE 12
3.2 KEY MANAGEMENT PERSONEL AND QUALIFICATION. 13
3.3 OTHER PERSONEL NUMBERS AND DUTIES. 13
3.4 RECRUITMENT, TRAINING AND PROMOTION. 14
3.5 REMUNERATION AND INCENTIVES 14
3.6 LICENCES, PERMITS AND BY-LAWS 15
3.7 SUPPORT STAFF AND SERVICES. 16
CHAPTER FOUR 17
4.0 OPERATING/ PRODUCTION PLAN 17
4.1 PRODUCTION OR SERVICE DESIGNS AND DEVELOPMENT. 17
4.2 PRODUCTION OR OPERATION FACILITIES AND CAPACITIES. 18
4.3 PRODUCTION OR OPERATION STRATEGY. 20
4 * 15,000 =60,000 20
2 * 10,000=20,000 20
4.5 GOVERNMENT REGULATON AFFECTING OPERATIONS 22
CHAPTER FIVE 23
5.0 FINANCIAL PLANNING. 23
5.1 Pre-operational cost. 23
5.2 working capital 23

1
5.4 profoma income statement 25
5.5 calculation of breakeven point 26
5.5.1 Contribution margin 26
75,000,000 -25,000,000 26
5.5.2 Contribution margin % 26
74,150,000 26
80,000,000 26
5.5.3 Determine the total fixed cost 26
5.5.4 Calculate the break-even level of sale in shillings 26
5.5.5 Break even points in units 27
5.6 calculation of profitable ration 27
5.6.1 Gross profit margin 27
75,000,000 27
80,000,000 27
5.6.2 Return on equity 27
41,350,000 27
41,350,000 27
5.6.3 Net profit margin 28
75,000,000 28
80,000,000 28
5.6.4 Return on asset 28
34,600,000 28
34, 000,000 28
5.6.5 curent ratio 28
5.7 Desired financing 29
5.8 Proposed capitalization 29
Appendix 30

2
 Declaration

I declare that the business plan is my original work and has not been submitted for examination
or any award in certificate in any institute of higher education at the Kenya National
Examination before.

Name: Mutuku Lucy Katunge

Signature:
Date:

APPROVAL by the supervisor

Name: Mr Danson
Signature:
Date:

3
 Acknowledgement

May the abundant grace go to the Almighty God for the gift of life He granted me and good
health through this session of production ,extended gratitude to my parents for their financial
support and encouragement. I also acknowledge my friends for orally advice and my supervisor
Mr Danson for his invaluable guidance,encouragement and advice through the development of
this project.

4
 Dedication

I wish to dedicate this piece of work to my lovely parents Mr and Mrs Boniface Mutuku for the
support and encouragement that they gave me.

5
 EXECUTIVE SUMMARY

1.0 Business description

The identification of the business is clearly described in these chapter. It include the long term

and short term goals of the business the location address and owners background information.

Also the identification of the opportunity and growth strategy make part of this chapter.

2.0 Market Plan

The potential customers of the business are stated in this chapter. The market research helped the

entrepreneur to analyze the strengths and weakness of the competitors. The pricing strategy is

clearly shown in this chapter as well as the production of the business, advertising strategy and

sales promotions.

3.0 Organization and management plan

The chapter gives the organization structure of the business, the responsibility and qualification

of various staff members in the organization of employees from the top. There is also ways of

recruiting, training and promotion of employees. There is also clear identification of licenses,

permits and by-laws.

4.0 Operation / Production plan

This chapter clearly indicates the operational and production plan of the business. It gives a

detailed equipment required to ensure smooth running of the business and its layout. In this

chapter, it also contain what need to be done in order to achieve the required service as planned.

It’s also contains the operational strategy to run the business.

6
5.0 Financial plan

In this chapter it gives a detailed statements of balance sheet and income statement well balanced

at the end of the at the end of the year. It also gives a cash flow statements showing the outflow

and inflow of cash in the business. The chapter also gives the desired financing and desired

capitalization of the business. It also tries to find

7
 CHAPTER ONE

1.0BUSINESS DESCRIPTION

The name of the business will be sweet waters wines and spirits. The sweet is to please and

attract customers for the products will be tasty. The business will offer the following products:

wines like Gin, Whisky, Tequila, cachaça, brandy and spirits. The business will be introduced in

the market through licensing.

1.1BUSINESS NAME

The name of the entrepreneur will Be Lucy Mutuku who is 18 years old. She was born on 16th

February 2004 in Embakasi east constituency headed by Hon. Paul Ongili Owino who is

famously known as Babu Owino. The name of the business will be sweet waters wines and

spirits. The entrepreneur lives in uthiru in Kabete constituency headed by George Muchai.

She is a student at Kabete national polytechnic undertaking a diploma course in secretarial

studies. The entrepreneur attended primary in 2010 at St Jesinta and Fatima academy located in

Mwala constituency headed by Hon. Vincent kawaya. She sat for her Kenya certificate of

primary education in the year 2018 after relocation and attained 353 marks. She later joined

Lema Girls secondary school to take her four year course in 2019 and completed in 2022 when

she sat for her Kenya certificate of secondary education and attained a min grade of C.

This qualified her to join her currently training college in the month of September the same year.

After her four yeah course the entrepreneur worked at her aunts wines and spirits shop where she

1
 got some skills in business. Due to lack of experience she intend s to help run the business and

also go for bench marking.

1.2 BUSINESS LOCATION AND ADRESS

The business will be located in Thika town in Njoka and Njoka building along Uhuru street

commercial street round about opposite Kenyatta highway.

sweet waters wines and

spirits

Nairobi campus
Town centre

KENYATTA HIGHWAY

Mall Level 5 hospital

Kmtc

Police post

The business is located in an urban town and industrial area hence the area is highly populated

giving presence of many customers. Also located along a highway hence availability of labor.

There is a liquor which will provide products to the business.

2
The address and contact will be

SWEETWATERS WINES AND SPIRITS

P.O BOX 5810-00212 , TELL:0705840145

EMAIL:mutukulucy@gmail.com, THIKA.

1.3 FORMS OF OWNERSHIP

Sweet waters wines and spirits will be a sole proprietorship where Lucy Mutuku will be the

controller of all business operation. The starting capital for business will be 500,000. The

entrepreneur will contribute 200,000, friends and family members will support with 100,000 and

the amount required from the bank like loan sponsorship will be 200,000.

Sales

72
20%

144
40%

144
40%

The entrepreneur also intends to start a butchery and a pool within the firm.

3
1.4 PRODUCTS 0R SERVICES

The business will offer the following products; vodka, whiskey, tequila, gin, brandy, cachaça and

other spirits. The products will come in different sizes according to one’s ability to purchase. The

smallest size will be 250ml. It will offer also different varieties or type of wines and spirits. The

business will offer discounts to these who purchase big quantity or amount and also to every

customer there will be water and soft drinks to accompany every drink. The products will be of

high quality that will satisfy customer’s needs. We will also offer/sell bottles of liquor and wines

cans and growlers of beer in addition to alcohol and retail tobacco products.

1.5 JUSTIFICATION OF BUSINESS OPPORTUNITIES

The business will make available a wide range of liquors, wines and beers from top brands at

affordable prices to reach the demand for alcohol hence satisfy entertainment need. The business

will offer employment to the people and enhance recreation factors. It will have three waiters,

two cashiers and one security man.

1.6 THE INDUSTRY

The business will be in medium size for it will be at starting point and increase within time.

There will be computers to calculate the sales made and also installment of closed circuit

television for the enhancement of security in the firm.

4
1.7BUSINESS GOALS AND OBJECTIVES

In order to serve my clients and increase personnel sales, we aim to learn all about liquor

industry and research the competition management with focus on daily sales revenue goals best

value products will be identified to assist customers with smart selections. The products will be

high to satisfy customer’s needs. The business will have well affordable to the customers.

1, 8 ENTRY AND GROWTH STRATEGY

There will be vast advertisement of the business before it opens. The use of fliers and stickers

will form a great way of marketing and advertising the business. This will happen one and a half

month before opening of the business. It will also ensure we offer the best service to our clients

so that they can market it to other clients to enable growth and expansion of the business.

5
 CHAPTER TWO

2.1 POTENTIAL CUSTOMERS

The business customers will be youths and adults probably the male gender in which many of

them will be students. In the other hand the business will sell in wholesale.

Customer gender Characteristics

I. youth 18yrs-27yrs

II. adults 28yrs-70yrs

The customers will be looking for a quality of the products.

products Customers

Alcohol Quality

Tobacco Quality

Bottle of liquor Quality

The customers will purchase the products during the evening and in weekends on Fridays and

also during the end month. The customers will purchase the products according to their financial

comfort that is from 250ml of the alcohol and above. The desired payment will be payment with

mpesa and also cash will also be allowed.

6
2.2 MARKET SHARE

The business is likely to grow due to friendly commissions offered and the high quality services.

The approximate people in need of the product is 30 percent of the population. The amount of

the product expected to be sold in a month will be:

Alcohol -700 by 750= 525,000

Tobacco-50 by 750= 135,000

Bottle of liquor- 200 by 750 =150,000

2.3 competition

The potential Competitors to sweet waters wines and spirits will be:

Name of the business Location

Swizz wines and spirits 2m apart

Maisha wines and spirits 5m apart

Miami wines and spirits 30m away

Glow blue wines and spirits 8m away

Chandutu wines and spirits 1km away

7
The competitors charge very high commissions to their customers. They also treat their

customers harshly whenever they don’t pay. They also allow sales on credit to their clients. The

size of the competitors are:

Sweet Swiz Maisha Miami Blue Chandatu

waters wines wines and wines and wines and wines and

wines and spirits spirits spirit spirit

spirits spirits

assets M L S M S L

sales of

volume S S M M M S

no. of

employee M M M M M M

no of brands

S L S M M M

The business will offer high quality products as compared to my competitors .

sweet swiz maisha miami Blue chanada

Benefits 4 2 1 1 1 1

Technology 5 3 2 2 1 2

Managemen 4 3 3 2 1 2

t 2 4 1 3 2 1

location

8
2.4METHODS OF ADVERTISING AND PROMOTION STRATEGY.

The business advertisement will be done through the inooro tv and mwaliama fm. The

advertisement will be done three times per day that is after the news in the seven in morning,

1pm and 3pm in the evening and it will cost:

item Cost

Mwaliama FM 8,000

Onooro TV 8,000

Calendars 10,500

t-shirts 12,500

SWEET WATERS WINES

AND SPIRITS
CALL: 0705848504
LOCATION: THIKA

The promotion campaign will include giving of T-shirt and caps to the frequent buying

customers and those who purchase in wholesales. This will be made to maintain the customers.

This is going to cost around 12,500.

9
2, 5 PRICING STRATEGY

The entrepreneur will price the products according to the buying price and the profit and the

expenses used. The entrepreneur will also do the government prices and the customer purchasing

power. The price discount and interest will be between 5% and 10%. The price will be valuable

according to the season of the year and clients power.

Product Cost

Gin 150

Brandy 250

vodka 300

2.6 SALES TACTICS

The business will use agents and also directly to customers to sell the products. When it uses the

agent way of selling the agent will be paid in commission of 50%of the products sold. The

business will also use the distributors to sell the products and will cover at least 200km.

2.7 DISTRIBUTION STRATEGY

The firm will get products from the companies through distributors from the wholesales. It will

also distribute

10
Its products and services to the entire town at the first hand. The distributors channel to be used

will be road. The chosen means of transport will cost 10,000 per month. The distribution

problems which are possibly going to be anticipated will be poor roads like muddy ones,

accidents, bad weather and insecurity. The entrepreneur will save the anticipated problems by

using alternative roads, following the safety regulations and driving carefully to avoid accidents

11
 CHAPTER THREE

3.0 ORGANIZATION PLAN

3.1 ORGANISATION CHAT/STRUCTURE

The organization structure of the business will be:

MANAGER

ASSISTANCE MANAGER

SUPERVISOR

HEAD OF WAITER

WAITER

12
 SECURITY PERSONEL

3.2 KEY MANAGEMENT PERSONEL AND QUALIFICATION.

JOB TITLE QUALIFICARION DUTIES AND PROPOSED

RESPONSIBITY SALARY

Manager Degree in business Oversees the activities in 50,000

management. the business.

Assistant manager Diploma in business Assists the manager in 45,000

management. managing the firm.

supervisor Diploma in business Supervising the activities 40,000

management. carried out in the firm.

chef waiter Diploma in food and Supervising the waiters 25,000

beverage.

3.3 OTHER PERSONEL NUMBERS AND DUTIES.

JOB TITLE QUALIFICATION DUTIES SALARY

Waiter Certificate in food Serving the clients. 15,000
and beverage, good
customer relation.
Cleaners 18yrs and above, Ensuring the firm is 10,000
form four certificate clean and tidy.
Security personnel Belonging to Ensure security in the 8,000
security firm, ID firm.

13
3.4 RECRUITMENT, TRAINING AND PROMOTION.

The method used to recruit new employees in the firm will be through interviews. The firm will

also advertise the product so as to get people with the qualifications needed.

Training

The method that will be used to train the employees will be internal way of training this is to

avoid high cost and expenses as the business is starting. This will be done to ensure that the

employees will have the required qualifications.

Promotion

The promotion will be done according to the merit basis. This is done according to the

employee’s hard work, advancing of one’s education and also basing into their years of

experience.

3.5 REMUNERATION AND INCENTIVES

1. Remuneration

The employees will be given attractive salaries according to the level of experience and task in

the firm. Overtime also will be rewarded depending with the tine they will be working after

official working hours and it will be ksh 150 per hour.

14
 JOB NO OF STAFF MONTHKY OTHER TOTAL

CATEGORY PAY BENEFITS

Manager 1 60,000 15,000 75,000

Supervisor 1 40,000 10,000 45,000

Chef waiter 1 25,000 8,000 30,000

waiter 4 15000 5,000 80,000

cleaners 2 10,000 5,000 30,000

Security 2 8,000 5,000 32,000

personnel

Ass.manager 1 45,000 8,000 58,000

2.Incentives

Other payments and things done to the staff will be meant to boost the morale of the works.

Some of which will be lunch breaks, tips and also one in a while part will be held to appreciate

the employees for their services for the firm.

3.6 LICENCES, PERMITS AND BY-LAWS

The firm needs licenses and permits to run smoothly.

One of which is: business permit, trade license, health permit and insurance cover and a fire

clearance certificate all to be given to the kiambu county government.

15
 BUSINESS PERMIT/LICENSE COST

BUSINESS PERMIT 20,000

KRA PIN CERTUFICATE 2,000

HEALTH CERTIFICATE 3,000

APPROVAL BY NEEMA 3,000

TAX REGISTRATION 2,000

3.7 SUPPORT STAFF AND SERVICES.

Banking services.

This business will be registered on co-operative bank of Kenya which will offer financial support

ie.loan and also the profit gained in the business will be bank there to get interest. The business

auditor will be internal auditor of Kenya wines agencies limited (KWAL) and also KENYA

BUREA OF STARDARDS (KEBS). The business will also have a lawyer who will be

representing the first in the case of matter that involves law erupts and will be Jorge kugwa and

advocate.

16
 CHAPTER FOUR

4.0 OPERATING/ PRODUCTION PLAN

4.1 PRODUCTION OR SERVICE DESIGNS AND DEVELOPMENT.

This business will offer the products in wholesale and also others in retail where the clients will

have to buy and consume the goods and products within the firm. The business intends to

develop their products by increasing the quantity and also purchasing products which are of high

quality. The business will produce good quality products to customers to satisfy them. The kind

of technology the business will need will be delivery apps, social media, computers and closed

circuit television. It will also require vehicles such as motorbikes and lorry for transporting of

products. The delivery apps and social media be required for advertisement of the products and

goods. Where else the computers will help in calculation of stock and sales in the firm. The

CCTV will be needed for security purposes. This will help to signal and monitor the movement

within the firm. Electricity will also be required for lighting purposes and also for preservation

purposes. The entrepreneur will ensure there is installed solar panels which will be used in case

there is power brake down.

17
4.2 PRODUCTION OR OPERATION FACILITIES AND CAPACITIES.

specification Date required Non required Cost per unit Total cost

steamers 5/6/2025 3 5,000 15,000

pasteurizers 5/8/2025 2 8,000 16,000

refrigerators 5/8/2025 1 15,000 15,000

Fermentation vat 5/8/2025 2 8,000 16,000

blenders 5/8/2025 4 10,000 40,000

Packaging 5/8/2025 1 10,000 10,000

machines

The business will hire vehicles from ISUZU Company when there is a lot of stock to be

transported and this will cost 5,000 per trip. The company will be in charge of maintenance of

the machines.

The figure below represents the ground of the business.

18
 SWEET WATERS WINES AND SPIRITS

SEATS

WASH
ROOMS
COUN
TER

BUTCHER PS POOL

EXIT ENT
PARKING
RAN

Since the workshop is not a large building that will allow expansion, the business owner in future

will open another branch one operating or buy a larger space for the business. The below shows

other equipment and tools that the business will require.

Items Date needed quantity Cost per unit ksh Total cost

Tongs 11/9/2025 20 150 3,000

Magazines 12/9/2025 20 200 4,000

racks 15/9/2025 3 100 300

t-shirt 15/1/2026 10 300 30,000

calendars 15/1/2026 5 150 7500

19
 Type of material Frequency Source and Cost per unit Total cost ksh

required quantity

blender Once per month Kenpoly 5 4,000 20,000

Every day

refrigerators Lamtops2 15,000 30,000

4.3 PRODUCTION OR OPERATION STRATEGY.

The materials will be readily available due to the presence of manufacturing company near thus

Reducing cost of transportation.

Number of direct workers * cost per month

4 * 15,000 =60,000

Number of indirect workers * cost per month

2 * 10,000=20,000

The following are the pre binary expenses that will be incurred in the business:

20
 Expenses Amount

Business permit 3,500

Health care certificate 3,000

Approval by NEMA 3,000

MCSK license 3,000

Insurance cover 5,000

OVERHEADS AMOUNT

Electricity bills 2,500

Water bills 2,000

Wi-Fi bills 2,000

Television channels 1,500

CCTvs 5,000

The following are the operational overheads

4.4 PRODUCTION OR OPERATION PROCESS.

The production process involved in producing the product will be fermentation, spraying and

wedding. The external factors that are likely to affect the production r operation process of the

firm include lack of rain and presence of pests. To minimize this factors the firm will ensure

there is good…

21
4.5 GOVERNMENT REGULATON AFFECTING OPERATIONS

LICENSE PERMIT SOURCE COST(KSH)

Business permit County council of kiambu. 3,500

Health permit County council of kiambu. 3,000

Approval by NEMA County council of kiambu. 3,000

Insurance cover County council of kiambu. 3,000

The below are the local taxes. These are; parking, garbage collection fees
The other government regulations are as below. These include business operations, price
regulations and operation hours given by the government. These may affect the functioning of
the firm. The location also in which the firm is located, that is, it should be located 5m away
from schools, hospitals and other amenities

22
 CHAPTER FIVE

5.0 FINANCIAL PLANNING.

5.1 Pre-operational cost.

The proposed business will incur the following cost before operation.

Items Amount (ksh)

license 5,000

permits 8,000

Equipment cost 100,000

Insurance cover 5,000

Transportation 10,000

Opening stock 50,000

advertisement 44,800

Total cost 222,800

5.2 working capital

Items Year(2026) Year2(2027) Year3(2028)

Stock of finished goods. 50,000 65,000 70,000
Cash in hand. 200,000 200,000 250,000
Cash in bank. 200,000 250,000 30,000
Debtors 100,000 80,000 50,000
Total current assets 550,000 595,000 670,000
Current liabilities
creditors 100,000 60,000 80,000
actuals 50,000 50,000 30,000
Total c.l 150,000 130,000 110,000
w/c 400,000 465,000 560,000

23
5.3 Projected cash flow for the year ending 2026 for sweet water wines and spirits.
Cash in flow Jan Feb March April May June July Aug sept Oct Nov De

Opening cash 250,000 500,000 745,000 300,000 350,000 150,000 300,000 350,000 150,000 30000 35000 15
00 00
Cash sales 300,000 350,000 150,000 300,000 300,000 350,000 150,000 300,000 350,000 15000 30000 35
0 0
Credit sales 250,000 200,000 150,000 250,000 250,000 200,000 150,000
Loans rec 100,000 50,000 300,000 150,000 150,000 66
00
Total cash in 900,000 1,050,000 1,095,000 1,955,000 1,855,000 1,955,000 2,280,000 2,175,000 2,77,000 3620000 45700
flows 000
Cash outflows

Payments to 50,000 55,000 40,000 100,000 100,000 150,000 400,000 50,000 200,000 250000 20000 25
creditors 0 0
purchases 50,000 50,000 50,000 150,000 50,000 70,000 100,000 50,000 50,000 100000 50000 10
0
Wages & 150,000 150,000 150,000 200,000 150,000 150,000 155,000 155,000 25,000 150000 15000 15
salary 0 0
Transport 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25000 25000 25

Electricity 25,000 25,000 25,000 25,000 25,000 25,000 25000 25,000 150,000 550000 25000 25

Loan repay 100,000 50,000 50,000 100,000 150,000 15

Total cash 400,000 305,000 340,000 550,000 450,000 420,000 705,000 455,000 450,00 550000 50000 70
outflow 0 0
Net cash b/f 500,000 745,000 755,000 1,405,000 1,405,000 1,530,000 1,575,000 1,720,000 2,320,000 3070000 41200 59
00 00

24
5.4 profoma income statement

Year 1(2026) Year2(2027) Year3(2028)

Sales 15,000,000 50,000,000 85,000,000
Gross profit 50,000,000 60,000,000 70,000,000
Less expenses
Selling and 345,000 600,000 500,000
distribution
General 1,500,000 1,500,000 1,500,000
administration
Salaries and wages 249,000 270,000 300,000
water 560,000 800,000 850,000
Electricity 850,000 900,000 950,000
stationary 600,000 500,000 500,000
Interest on loan 150,000 750,000 750,000
Maintenance and 580,000 650,000 700,000
repair
Trading profit and 44,765,000 54,150,000 64,050,000
loss
Less taxation 13,429,500 10,245,000 19,215,000
Net profit after 31,335,500 37,905,000 44,835,000
taxation
5.42
Assets amount liabilities Amount
Fixed assets 15,000,000 Shared capital 18,250,000
Land &building 8,000,000 Bank loan 1,000,000
furniture 3,000,000 Profit and loss 10,000,000
machinery 5,000,000 reserves 5,000,000
Total fixed asset 31,000,000 Total term 342,250,000
Current assets
debtors 500,000 Creditors 200,000
Stock 500,000 Tax 50,000
Cash in bank 1,500,000 actuals 100,000
Cash in hand 800,000
prepaid 300,000
Total current asset 3,600,000 Total 350,000
capital 34,600,000 34,600,000
Employed

25
 5.5 calculation of breakeven point

5.5.1 Contribution margin

Contribution margin=sales - total variable cost

75,000,000 -25,000,000
Year 1 = 50,000,000
Year 2 =80,000,000- 20,000,000
= 60,000,000

5.5.2 Contribution margin %

Contribution margin × 100

Year 1= 50,000×100 = 67%
74,150,000

Years = 60,000,000 × 100 = 75%

80,000,000

5.5.3 Determine the total fixed cost

Year 1= 5,235,000 +13,429,500

= 18,664,500
Year 2 = 5,850,000 +16,245,000
= 22,095,000

5.5.4 Calculate the break-even level of sale in shillings

Fixed cost
Contribution margin %
Year 1 = 18,664,500 × 100

26
 67
= ksh 27,657,463
Year 2 = 22, 095, 000 × 100 = ksh 29,460,000
75

5.5.5 Break even points in units

Year 1 = 18,604,500÷ 333.33 = 55,999 units

Year 2 = 22,095,000 ÷ 375 = 58.92 units

5.6 calculation of profitable ration

These are techniques which help the business in interpreting the information obtained in the
financial statement.

5.6.1 Gross profit margin

Year 1 50,000,000 ×100 = 67%

75,000,000

Year 2 = 60,000,000 ×100 = 75%

80,000,000

5.6.2 Return on equity

Net profit after tax × 100

Owners’ equity
Year 1 = 31,335,500 ×100 = 76%
41,350,000

Year 2 = 37,905,000 × 100 = 92%

41,350,000

27
5.6.3 Net profit margin

Net after tax × 100

Sale
Year 1 = 31,335,500 × 100 = 42%
75,000,000
Year 2 = 31,905,000 × 100 = 47.4%
80,000,000

5.6.4 Return on asset

N.P after tax × 100

Total after assets

Year 1 = 31,335,500 × 100 = 95%

34,600,000

Year 2 = 37,905,000 × 100 = 110%

34, 000,000

5.6.5 curent ratio

Curent assettes
Curent labilités
Year 1 = 3,600,000 ÷ 350,000
= 10.3

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5.7 Desired financing

Items description year 1

Pre-operational cost 385,000
Working capital 285,000
Fixed asset 31,000,000
Total 32,570,000

5.8 Proposed capitalization

Items description Amount (ksh)

Owner contribution 200,000
Bank loan 200,000
Loan from friends and relatives 100,000
Total 500,000

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 Appendix

SWEET WATERS WINES

AND SPIRITS
CALL: 0705848504
LOCATION: THIKA

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