BUSINESS PLAN

SMILEY ELECTRONICS ENTERPRICE

PRESENTED BY: KIMATU ALFRED KYALO

INDEX NO.:
COURSE: DIPLOMA IN ELECTRICAL AND ELECTRONICS ENG.
(POWER OPTION)
COURSE CODE: 2601
SUPERVISED BY: MR MASITA
INSTITUTION: KENYA COAST NATIONAL POLYTECHNIC
PRESENTED TO: KENYA NATIONAL EXAMINATION COUNCIL
EXAM SERIES: MARCH 2023
KENYA NATIONAL EXAMINATION COUNCIL
 DECLARATION
THE KENYA NATIONAL EXAMINATION COUNCIL
DECLARATION FORM FOR POST SCHOOLS TECHNICAL AND BUSINESS
EXAMINATIONS
NAME OF THE PROJECT
……………………………………………………………………………………………………..
CODE NUMBER OF THE PROJECT………………………………………………….
THE CANDIDATE
I……………………………………………………………………………………… of index
number…………………………………… declare that
i. The project named above was approved by KNEC and supervised by MR MASITA
[supervisor].
ii. I personally carried out the project whose follows after this declaration.
iii. I received no undue help from unauthorized persons other than the normal guidance from
my supervisor.

THE SUPERVISOR

Declare that, I supervised the above named candidate’s project and the report here in is the
genuine work of the candidate.

SIGNATURE OF THE
SUPERVISOR ……………………………………… TIME ………………………….
TSC NO…………………………………

ii
 DEDICATION

I dedicate this business plan to my family and friends for the unveiling support that they gave me
during my study. I also give thanks to my colleagues whom we shared knowledge and supported
each other.

iii
 ACKNOWLEDGEMENT

I thank the Almighty God for equipping me with knowledge to write this project. I also
acknowledge my lecturers for giving me support through guiding me in writing my project to
accomplishment.

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TABLE OF CONTENT
DECLARATION.............................................................................................................................ii
DEDICATION...............................................................................................................................iii
ACKNOWLEDGEMENT..............................................................................................................iv
EXECUTIVE SUMMARY..........................................................................................................viii
BUSINESS DESCRIPTION........................................................................................................viii
MARKETING PLAN...................................................................................................................viii
ORGANIZATIONAL PLAN/HUMAN RESOURCE PLAN.....................................................viii
OPERATION AND PRODUCTION PLAN...............................................................................viii
FINANCIAL PLAN.....................................................................................................................viii
CHAPTER ONE..............................................................................................................................1
1:0 Business Description.............................................................................................................1
1:0 Business Name......................................................................................................................1
1:2 Business Location and Address.............................................................................................1
1:3 Form of Business Ownership................................................................................................2
1:4 Type of Business...................................................................................................................2
1:5 Products and Services............................................................................................................2
1:6 Justification of the business opportunity...............................................................................2
1:7 Industry..................................................................................................................................3
1:8 Goals and Objectives.............................................................................................................3
1:8:1 Short Term Goals...............................................................................................................3
1:8:2 Long Term Goals............................................................................................................3
1:9 Entry and Growth strategy.....................................................................................................3
1:9:1 Entry Strategy.................................................................................................................3
1:9:2 Growth strategy..............................................................................................................3
CHAPTER TWO.............................................................................................................................4
2:0 MARKETING PLAN............................................................................................................4
2:1 Customers..............................................................................................................................4
2:1:1 Domestic customer.........................................................................................................4
2:1:2 Commercial customers...................................................................................................4
2:2 Market share..........................................................................................................................4
2:3 Competition...........................................................................................................................5
2:4 Advertisement and promotion strategy..................................................................................6
2:4:1 Advertisement.................................................................................................................6

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 2:4:2 Promotion.......................................................................................................................6
2.5 Pricing Strategy.....................................................................................................................7
2:6 Distribution Strategy..............................................................................................................7
CHAPTER THREE.........................................................................................................................8
3:0 ORGANISATTION AND MANAGEMENT PLAN............................................................8
3:1 Management Team................................................................................................................8
3:2 Other Personnel.....................................................................................................................9
ORGANISATIONAL CHART.............................................................................................10
3:3 Recruitment, training and promotion...................................................................................10
3:3:1 Recruitment..................................................................................................................10
3:3:2 Training........................................................................................................................10
3:3:3 Promotion.....................................................................................................................10
3:4 Remuneration and incentives...............................................................................................10
3:4:1 Remuneration...............................................................................................................10
3:4:2 Incentive.......................................................................................................................11
3:5 Licenses permits and by -laws.............................................................................................11
3:5:1 Licenses........................................................................................................................11
3:5:2 Permits..........................................................................................................................11
3:5:3 By-laws.........................................................................................................................12
3:6. Support services..................................................................................................................12
3:6:1 Banking services...........................................................................................................12
3:6:2 Insurance services.........................................................................................................12
3:6:3 Consulting services.......................................................................................................12
3:6:4 Legal services...............................................................................................................12
CHAPTER FOUR.........................................................................................................................13
4:0 PRODUCTION PLAN........................................................................................................13
4:1 Production facilities and capacity........................................................................................13
4:3 Production strategy..............................................................................................................13
4:4 Production process...............................................................................................................14
4:5 Regulations affecting operations.........................................................................................14
4:5:1 Health registrations.......................................................................................................14
4:5:2 Safety............................................................................................................................14
4:5:3 Environmental regulations............................................................................................14
CHAPTER FIVE...........................................................................................................................15

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5.0 FINANCIAL PLAN............................................................................................................15
5:1 Ore - operational cost..........................................................................................................15
5:2 pro-former balance sheet.....................................................................................................15
5:3 working capital....................................................................................................................16
5:4 Cash flow projection............................................................................................................17
5:4:1 Cash flow projection for the year 2020........................................................................17
5:4:2 Cash flow projection for the year 2021........................................................................18
5:4:3 cash flow projection for the year 2021.............................................................................19
5:5 Pro - formal income statement.............................................................................................20
5:6 Break Even Analysis...........................................................................................................20
5:7 Desired financing.................................................................................................................21
5:8 Capitalization.......................................................................................................................21
5:9 Profitability Ratios...............................................................................................................21

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 EXECUTIVE SUMMARY

BUSINESS DESCRIPTION
The proposed business name will be SMILEY ELECTRONIC ENTERPRISE which will be a
sole proprietor.
The business will be located in Matuu town along Garrisa Highway opposite main bus station.
The business will deal with selling electrical equipment services solutions and providing repair
services.
The business will be electrical industry with the aim of providing highly quality service solutions
to customers at high customer satisfaction levels. The business will have some goals which will
need to be achieved.

MARKETING PLAN
I will categorize customers as follows; domestic customers, Institutional customers and
commercial customers.

ORGANIZATIONAL PLAN/HUMAN RESOURCE PLAN

The business will be sole proprietorship. ALFRED will be the manager of the business. He will
be assisted by other staff to ensure that all the objectives are attained.

OPERATION AND PRODUCTION PLAN

There will be sufficient equipment for production. The services will be of fair prices to attract
customers. The services and products will be of high quality.
Services will entail the solutions to electronic equipment to increase functionality. Materials used
in servicing will be electrical materials, since it will be dealing with electronic office equipment
and devices.
The business will need skilled personnel for production process to be efficiently.

FINANCIAL PLAN
The business will require Ksh800,000 to start its operation.
Source of finance and their uses will be indicated. The source of capital for the business will be
from loans from banks and personal savings.

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 CHAPTER ONE
1:0 Business Description.

1:0 Business Name.

SMILEY ELECTRONICS ENTERPRISE.

The name comes from a friend, I decided to name it this way to attract people and create a happy
interpretation in my customs of a good happy entrepreneur.

1:2 Business Location and Address.

To kithimani

Smiley shop

From Garrisa

To Machakos

The bus
station

1
 SMILEY ELECTRONICS ENTERPRISE,
MATUU TOWN,
P.O BOX 80434 -50200,
MATUU.
The business will be located at Matuu town along Garrisa highway opposite main bus station.
The reason as to why the owner chose the location will be because of the good infrastructure
around the town center i.e. availability of well tarmacked road which make customers to access
to my location, good communication network, availability of fresh water and electricity.
1:3 Form of Business Ownership.

SMILEY ELECTRONIS ENTERPRISE will be sole proprietorship which will solely be owned
and managed by the owner. The owner chose a sole proprietorship because, it requires less
capital and less procedure to start. Nevertheless, all the profits gained from the business belongs
to the owner. Though this kind of ownership has the limitations that the sole proprietor in case of
a loss he or she suffers the loss alone and also may have led him or her to overwork since has no
other person to help.
1:4 Type of Business.
The business will be a startup. It will engage much in the following activities: selling of
electrical materials like cables, switches, insulators, lighting systems etc. Electrical tools like
phase testers electrical tool boxes and other electrical tools and equipment, repairing of faults,
electrical gadgets in different capacitors and motor windings, rewinding, dismantling, repair and
selling of rewinded motors.
1:5 Products and Services.

The products will be of high quality and quantity, convenient and less cheap for customers to
afford, the service will be affordable to all people both the high class and low class people. All
these will be achieved by having a large stock to start with. The service and products will be
readily available because of the location the business which is situated in town center along the
road. Cables, lighting systems, phase testers, switches, insulators etc. will be among the products
which will be sold. Repairing of faults, electrical gadgets, motor windings, rewinding,
dismantling electrical installation will be among the services offered by the business.
1:6 Justification of the business opportunity.

The assurance that the business success will be profound because of the following, availability of
knowledge and skills required to run the business which the owner has experience got during
industrial attachment and lastly the entrepreneurial skills. The business will be located at a
strategic area where many people will be available which will enhance the business to grow and
also transportation of materials and workers will be easy as the business will be near the road.

2
1:7 Industry.

The business will be commercial and service industry as it will serve on purchasing materials as
well as doing services such as repairing of electrical equipment, installation of electrical
equipment etc. The industry I suitable because transportation of the materials will be located in
areas where there is less competition, availability of skilled personnel and equipment required
and hence quality products and service will be offered.
1:8 Goals and Objectives.

1:8:1 Short Term Goals.

The changing world, the business will be very successful to many people as it will have the
following goals and injections:
a) It will create business opportunity to the owner and others
b) To establish very successful business which will win customers interest within a very
short period of time possible
c) To provide the best quality products and service and
d) To maximize profit.
1:8:2 Long Term Goals.
a) to expand into a bigger business dealing with a large quantity of stock and
b) increasing capacity of sales and services.
1:9 Entry and Growth strategy.

1:9:1 Entry Strategy.

The business will employ many tactics way of penetrating the market e.g.,
a) By offering low princess to some products services
b) offering promotions like giving discounts and incentives
c) making more advertisements through posters, radios, TVs etc.
1:9:2 Growth strategy.
For the business to grow into a large enterprise the following will required:
a) Employing dedicated and qualified personnel who can manage the business
b) Creating more space for expansion of the business e.g. buying land, plots, buying
vehicles which can be used in transporting materials hence reducing transportation and
c) By motivating the workers.

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 CHAPTER TWO
2:0 MARKETING PLAN.

Smiley electronic enterprise will have many strategic plans to achieve its objectives and to reach
the market demands. These will be expanding its operation and space also employing skillful
personnel to help in management. The business will be located along the road which will be
reached by many thus capturing many customers. The business will be doing though out
advertisement of its service and products, offer promotion, discounts etc. to win the interest of
people. The pricing of item and services will be relatively cheaper as compared to other
competitors. This products and services will always be readily available to the customers.
2:1 Customers.

The customers will be individuals or businesses that purchase the company's Google or services
The business targets to win both domestic and commercial customers.
2:1:1 Domestic customer.
The domestic customers will be generally public especially people around Matuu market who
will be the most targeted as they will buy the products and bring their items for service.
2:1:2 Commercial customers.
The commercial customers will be the retailers or wholesalers who will buy goods from the
business and sell them to the market as final retailers.
2:2 Market share.

Through research done thoroughly on the market in Machakos area, the business is expected to
reach and serve around four thousand (4000) customers who are potential. I will work with
others partners in order to meet my customer’s requirement.
Table no 1:0.
Name of Business Percentage share % Total number of customers

Smith willy Electrical shop 20% 720

Mwendwa Electronics 22% 792

Kioko Electrical and 15% 540

Electronics Dealers

Brilliant electronics 25% 900

Others 18% 648

Total 3600

4
Total = Number of customers per business/total number of customers of all the businesses in all
areas ×100
e.g. 720/3600×100=20%

2:3 Competition

The business will face stiff competition from other businesses like the Smith willy Electrical
Shop. Mwendwa Electronics, Kioko Electrical and Electronics and others who were established
five years ago. The business will base on the competitor’s weaknesses to conquer the business
scene. Despite these competition, the enterprise will have measures to cope and analyses
competition i.e.
Developing excellence in products and services provision
Increase the size of the business by expanding its operations and shop flour
Persuading more customers through promotions
Improving the quality of goods and services each time
Choosing the right and low cost technology with high volume.

5
Table no 1:1.
Swat Analysis.
Swat Analysis Table.
BUSINESS NAME STRENGTH WEAKNESS

Smith willy Electrical Shop It's central located Poor relation

Readily available personnel No promotion offered

Mwendwa Electronics Huge stock No promotion offered

Skilled personnel Lazy personnel

Kioko Electrical and Many employees Lazy personnel who are not
Electronics Dealers always available

Brilliant Electrical Dealer Qualified personnel Little capital

Quality goods
Low price and service

2:4 Advertisement and promotion strategy.

2:4:1 Advertisement.
The enterprise will employ the following advertisement methods;
1) Through posters where all the activities and location of the business will be written on the
posters and spread all over Matuu market center.
2) Through local F.M e.g. BAITU F.M, MUSYI F.M, MWATU F.M who can pass
information in local languages to people outside the market area.
3) Use of sign post with Smiley Electronics Enterprise where can be found.
4) Through local newspapers like Taifa LEO, Daily nation etc. which are written both
national language and local languages.
5) Through direct email to the person around who can be potential customers.
2:4:2 Promotion.
This will be done by;
1) Offering discounts on goods and service bought from the business
2) Employing good character and well hovered employees who can attend to all customers
without favor or fear.
3) Purchasing enough stock of materials required to make sure that customers don't miss
anything they require or service they need.
4) Offering free samples on goods brought hence attracting more customers.
5) Marketing the services and products through business exhibitions and shows.

6
All this method will ensure that customers are well informed about the direction, local operating
time and kind of service provided.
2.5 Pricing Strategy.

The business will adopt different pricing strategies like;

i) Competitive pricing where competitor’s prices will be analyses and compared then come
up with a suitable price which is relatively affordable for the customers.
ii) Cost plus where prices will be determined through the cost of materials used or involved.
2:6 Distribution Strategy.

The business will employ both direct and indirect channels of distributing goods and services to
customers. Goods and will be sold to customers directly from the shop. Also goods may reach
the customers indirectly from the business through agents, distributors or hawkers.

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 CHAPTER THREE.
3:0 ORGANISATTION AND MANAGEMENT PLAN.

3:1 Management Team.

The business will have the following management team who will assist in the running of the
business. It will have the management director, sales manager, marketing research manager,
financial controller manager and the executive officer.
Management Director.
Since the form of business ownership is a sole proprietorship, the owner of the business will take
the role as the management director and he will perform the following duties,

 He or she will be responsible for all the activities taking place in and out of the business
organization.
 He or she will mobilize and assign duties of all employees in the business.
 He or she is the caption provider of the business.
 Finance all the activities taking place in the business organization
Although the form of business ownership is a sole proprietorship, the owner has been working
with Makutano company which deals with electrical installation for the last ten years as a
supervisor and he is holding degree in electrical engineering and also hold Diploma in business
management.
Financial Controller.
As the name suggest, he or she will be responsible for controlling all the finances credited or
debited within the business platform. He or she will sign all the receipts within the business. The
business will be successful since he or she holds degree in financial and has been working with
Kenya Commercial Bank(KCB) for the last thirty years.

Executive officer.
He or she acts as the assistant manager. His or he role will be to manage the overall operation
and resources of the business platform. He will also assist the management director in major
decision making concerning the business. He qualifies to manage the business since hold
bachelor degree in economics and he has worked with county government of Nairobi as a human
resource manager for the last five years.
Sales manager.
As the name suggest, he will be responsible for monitoring all the goods entering and leaving the
business premises. He will also implement some strategic sales plan that will help the business to
expand to the expected range. He holds diploma in marketing so there is hopes of taking the

8
business far since he also has the experience from Kimwa Smart company where he worked for
the last two years.
Marketing research manager.
His role will be to look for market for the goods and service of the business, provide means for
advertising the goods and service offered in the business, bring out the trending methods and
advertising means which will expand the business business.
The research manager holds degree in marketing plan.
3:2 Other Personnel.

Table no 1:1:2.
Tittle Number Qualifications Duties

Sales representatives 4 K.C.S.E C-. Distributing

products.
Diploma in sales and
marketing. Sales and promotion.

Security officers 3 K.C.S.E ( D plain premises security.

and above).

Electrical engineer 6 At least hold diploma Responsible for

in electrical electrical installation
engineering and
above. Repair electrical
equipment.

Architecture 1 Diploma in Designing plans for

architecture. electrical installation.

Accountant 1 At least hold diploma Responsible for cash

in accounts. flow in the business
Offers receipt for
goods bought or sold.

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 ORGANISATIONAL CHART

MANAGEMENT DIRECTOR

Executive Financial Sales Marketing

Manager Manager Manger Research
Manager

Other Personnel
Security Officers

3:3 Recruitment, training and promotion.

3:3:1 Recruitment.
The recruitment will use recruitment agencies and advertisement to recruit management team. It
will also recruit the other personnel through poaching, advertisement and word mount. Through
all this means, the business is expected to get qualified and hardworking both the management
and the other personnel.
3:3:2 Training.
Smiley Electronic enterprise will offer individual training to the newly employed staff and also
for those who are promoted. On the job mwendwa electrical dealer will offer shadowing training
where by the newly staff will observe other employees to gain experience of the job.
3:3:3 Promotion.
After the period of the training of the new staff, the business will promote other personnel after
attained the qualifications and the experience.
3:4 Remuneration and incentives.

3:4:1 Remuneration.
Smiley Eletronics Enterprise will will offer good salaries and wages to all employees to retain
them.

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Remuneration and incentive table.
Table no 1:1:3
Tittle. Number. Monthly pay. Allowance. Total.

Executive 1 55000 15000 70000

officer.

Finance 1 50000 15000 65000

controller

Sales manager 1 45000 10000 550000

Marketing and 1 45000 10000 55000

research
manager

Accountant 2 40000 10000 50000

Sales 4 15000 5000 80000

representatives

Electrical 6 35000 20000 330000

engineer

Security officer 3 5000 3000 24000

Architecture 1 30000 15000 45000

3:4:2 Incentive.
Smiley Electronics Enterprise will provide overtime allowance, transport allowance, breakfast
and lunch to her employees. Through this the business will have hardworking personnel who will
take the business far.
3:5 Licenses permits and by -laws.

3:5:1 Licenses.
The business will get license from the Kenya Revenue Authority (K.R.A) and it will cost Twenty
thousand (20000). The license is given out in order to start the business and also to ensure all the
goods and service offered by the business is loyal from the national government and final to
protect the business against unhealthy competition.
3:5:2 Permits.
Smiley Electronic Enterprise since it will deal with all types of electrical, installation repair, it
will gate permit from the Institute of Electrical Engineers (I.E.E) which governs all types of
electrical engineering.

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3:5:3 By-laws.
The business needs to comply with the by-laws issued by the Kenya Revenue Authority reasons
being;

 Reduces unhealthy competition

 Failure to comply the by - laws issued may lead to dissolution of the business
 It regulates number of businesses in the market.
 All of this reason makes the business to adhere to the rules offered.
3:6. Support services.

The business will need support services enable it carry out its operations effectively. These
services include;
3:6:1 Banking services.
Bank Name: Kenya Commercial Bank.
Account Name: Smiley Electronics Enterprise,
Branch Name: Matuu Town Center.
Branch Code: 435465.
The account will be used for transferring of cash credited or debited and seek capital from the
bank.
3:6:2 Insurance services.
The business will be insured by BETAMAC Insurance Company and it will be insured against
the risk of fire and is required to pay a monthly premium of twenty thousand (20000).
3:6:3 Consulting services.
The business is expected to gate some consultation from an engineering who is currently
working as a management director at Kenya Power Lightning Company (KPLC) at Thika sub-
station. He will provide the business with trending goods and the new laws regarding electrical
engineering. He will also advise on how quality products and services should be to the
customers.
3:6:4 Legal services.
The legal service of the business will be required when writing contracts, drafting legal letters,
interpreting labour and employment laws. Shadow advocates will be the legal firm of the
business and lawyers will be Daniel Mutie and shardrank Mbithi. Shadow advocates is registered
under Kenya commission of registration no 4354.

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 CHAPTER FOUR.
4:0 PRODUCTION PLAN.

4:1 Production facilities and capacity.

The business will require several facilities which will in hence its operation, and they include;
1) Transport facilities which will enable transportation of goods bought in bulk by the
customers
2) It will also require PLC (Programmable logic controller) for multitasking some activities
within the business premises.
3) Some electrical machines for customers who needs service.
4) The building or rooms where the business will take place.
5) Electricity since the business will be dealing with electrical equipment.
The business is expected to do well and expand to its best since it has done all the qualifications
required and its strategic location.
Production facilities and capacity table.
Table no 1:1:4.
Item Quality Cost Capacity

Office 3 rooms 30000 4 office personnel

Store 2 rooms 20000 2 tons of tools

Pick up 1 500000 Cc 1800

Electricity 2 phase 30000 1000 KV

The business will be expanded if it increases its sales. Office furniture and equipment will be
purchased and computers for online advertisement, searching new market etc.
4:3 Production strategy.

Currently the business is small it has only the ability to nibble and keep its conversation organic,
it only hears from the potential customer’s experience there is opportunity that they are asking
for a type of goods or services required in their wardrobe and the current connection. The
business also keep eyes on what is going on the world global. Out of these, the business will do
some research about how it can innovate. It is constantly looking for trending electrical goods
and service's offered to sell the name of the business far which will help to expand its operation.
The business will gate the goods from Maasai electrical supply. The supplier also has knowledge
to offer internship to the new trending products so as the business can have knowledge on the
goods. Through long working experience, the engineers will use their knowledge to design other
products in case of failure in supply. The production of the goods and services will cost a

13
monthly almost one million and hundred thousand and the purchasing and stock control method
will be re- order load timer.
4:4 Production process.

Since the business will deal mostly in service and selling of electrical products, the goods will be
ordered and delivered to the business premises. All services will be offered after down payment
has been made. Materials involved will be anything requiring electricity for it to operate. There
will be competition from other electrical shops around who produces the same service, lack of
enough capital to deliver goods and this will be the factors affection the production. Due to high
competition in the market center, the business will ensure it produces high and quality services to
its customers and sell the best products. It will also minimize the price of goods and services
offered so as to attract more customers apart from their potential customers. On the other side of
capitation, it will gate loans and grants from financial institution to ensure bulk and quality goods
available to the business. In the production of goods and services the business lacks enough
capital to facilitate all the activities within the business, lack of highly skilled personnel to run
the business and the modern equipment for offering the services are among the factors affecting
the business production.
4:5 Regulations affecting operations.

4:5:1 Health registrations.

The business will ensure all of the waste products is dumped in the dumping site where cabbage
collection is done to ensure cleanness in and out of the business. It will also make sure adhere all
the rules that the public health offered to them.
4:5:2 Safety.
All employees will be offered with safety boots, overalls, dust cot, helmet to ensure their safety
within the business. It will also have fire extinguishers for the risk of fire and also first aid kit
will be available in the business.
4:5:3 Environmental regulations.
The business will have no effects to the environment since it will deal mostly in selling and
offering service to their customers and the waste from the business will be dumped to the
respective areas and other waste will be recycled for other uses. It will also provide silencers to
the machines to prevent noise position since the business will be located at town center.

14
 CHAPTER FIVE.

5.0 FINANCIAL PLAN.

One of the main reason of preparing business plan is to source for investment for business.
5:1 Ore - operational cost.

Items Cost

Research/Traveling 5000

Designing 3000

License 30000

Advertisement 5000

Recruitment 10000

Installation 15000

Rent deposit 25000

Utility bills 30000

Total amount 123000

5:2 pro-former balance sheet.

Is a financial statement that shows the financial position of the business at a given period of time
Balance as at 31st December 2019.

Fixed assents Costs

Pick up 300000

Furniture's and fittings 50000

Total 350000

Current assets

Cash in hand 50000

Cash at bank 80000

15
 Debtors 20000

Stock 150000

Total 300000

Less current liabilities

Creditors 40000

Working capital 610000

Financed by

Opening capital 460000

Add net profit 180000

Less drawing 30000

Closing capital 610000

5:3 working capital.

Working capital is the current assents minus current liabilities i.e.; C.A-C.L.

Current assents Cost

Cash in hand 50000

Cash at bank 80000

Debtors 20000

Stock 150000

Total 300000

Less current liabilities

Creditors 40000

Working capital 260000

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5:4 Cash flow projection.

It is a financial statement that shows cash in and out of the business.

5:4:1 Cash flow projection for the year 2020.
Receipts Jan Febr Mar Apr Ma Jun July Aug Septe Oct Nove Dece
uary uary ch il y e ust mber ober mber mber

Balance 500 2500 300 470 660 820 950 950 10700 900 9700 9200
brought 00 0 00 00 00 00 00 00 0 00 0 0
forward

Salaries/ 300 7000 800 850 900 900 950 970 98000 800 9500 9800
wages 00 0 00 00 00 00 00 00 00 0 0

Debtors 200 2000 350 390 400 400 500 50000 700 6000 1000
00 0 00 350 00 00 00 00 00 0 00
00

Discoun 500 5000 400 400 500 800 500 100 5000 100 1000 1000
t 0 0 0 0 0 0 0 00 0 0 0
received

105 1200 149 171 200 220 235 252 26000 250 2620 3000
Total 000 00 000 000 000 000 000 000 0 000 00 00

Paymen
ts

Purchas 300 3000 450 450 500 550 600 600 80000 700 8000 8500
es 00 0 00 000 00 00 00 00 00 0 0

Salaries/ 100 1000 150 150 200 200 250 300 30000 250 3000 3000
wages 00 0 00 00 00 00 00 00 00 0 0

Creditor 300 3000 340 350 400 400 450 450 50000 500 5000 5000
s 00 0 00 00 00 00 00 00 00 0 0

Discoun 100 1000 800 100 800 100 100 100 10000 800 1000 1000
t 00 0 0 00 0 00 00 00 0 0 0
allowed

800 9000 102 105 118 125 140 145 17000 153 1700 1750
Total 00 0 000 000 000 000 000 000 0 000 00 00

Balance 250 3000 470 660 820 950 950 107 90000 970 9200 1250
c/f 00 0 00 00 00 00 00 000 00 0 00

17
5:4:2 Cash flow projection for the year 2021.
Receipts Janua Febr Mar Ap M Jun Jul Aug Septe Octo Nove Dece
ry uary ch ril ay e y ust mber ber mber mber

Balance 1250 1200 100 90 80 80 88 760 85000 1000 85000 80000

B/f 00 00 000 00 00 00 00 00 00
0 0 0

Salaries/ 9000 9000 850 80 75 80 90 950 90000 8000 90000 75000

wages 0 0 00 00 00 00 00 00 0
0 0 0 0

Debtors 9500 8000 800 75 85 90 70 840 80000 7500 80000 95000

0 0 00 00 00 00 00 00 0
0 0 0 0

Discount 5000 5000 400 50 50 40 50 500 10000 5000 5000 10000

received 0 00 00 00 00 0

3150 2950 269 25 24 25 25 260 26500 2600 26000 26000

Total 00 00 000 00 50 40 30 000 0 00 0 0
00 00 00 00

Payments

Purchases 8500 9000 900 85 80 86 97 900 95000 1000 10000 95000

0 0 00 00 00 00 00 00 00 0
0 0 0 0

Salaries/ 4000 3500 300 30 30 32 30 350 35000 3000 40000 40000

wages 0 0 00 00 00 00 00 00 0
0 0 0 0

Debtors 6000 6000 540 50 45 40 45 400 30000 3500 35000 30000

0 0 00 00 00 00 00 00 0
0 0 0 0

Discount 1000 1000 500 50 10 80 50 100 5000 1000 5000 5000

allowed 0 0 0 00 00 00 00 00 0
0

Total 1950 1950 179 17 16 16 17 16500 1750 18000 17000

00 00 000 00 50 60 70 175 0 00 0 0
00 00 00 00 000

Balance 1200 1000 900 80 80 88 76 850 10000 8500 80000 90000

C/f 00 00 00 00 00 00 00 00 0 0
0 0 0 0

18
5:4:3 cash flow projection for the year 2021.

Recei Janu Febr Mar Apri Ma June July Aug Septe Octo Nove Dece
pts ary uary ch l y ust mber ber mber mber
Balan 900 1050 115 120 850 800 910 105 10200 106 11000 10000
ce b/f 00 00 000 000 00 00 00 000 0 000 0 0
Salari 800 9000 700 800 900 950 900 850 90000 840 70000 90000
es 00 0 00 00 00 00 00 00 00
/wage
s
Debto 850 8000 900 600 700 800 990 700 78000 900 85000
rs 00 0 00 00 00 00 00 00 00 85000
Disco 500 1000 500 100 500 500 500 500 10000 500 10000 5000
unt 0 0 0 00 0 0 0 0 0
receiv
ed
Total 260 2850 280 270 250 260 285 265 28000 285 27500 28000
000 00 000 000 000 000 000 000 0 000 0 0
Paym
ents
Purch 800 1000 950 900 950 100 100 990 95000 100 90000 10000
ases 00 00 00 00 00 000 000 00 000. 0
salary 400 3500 300 400 300 350 350 400 40000 300 45000 30000
/ 00 0 00 00 00 00 00 00 00
wage
s
Credi 300 3000 250 500 400 300 400 300 35000 400 30000 20000
tors 00 0 00 00 00 00 00 00 00
500 300 4000 500 10000 5000
Disco 500 5000 100 500 500 400 0 0 0
unts 0 00 0 0 0
allow
ed
155 1700 160 185 170 169 180 163 17400 175 17500 15500
Total 000 00 000 000 000 000 000 000 0 000 0 0
105 1150 120 850 800 910 105 102 10600 110 10000 12500
Balan 000 00 000 00 00 00 000 000 0 000 0 0
ce c/f

19
5:5 Pro - formal income statement.

(Trading profit and loss a/c).

Items. Year 1. Year 2. Year 3.

Sales. 2524000. 3186000. 3275000.

Cost of sales. 1573000. 2112000. 1244000.

Gross profit.= 2524000- 3186000- 327500-

Sales- Cost of 1573000=951000 1074000=2112000. 1244000=2031000.
sales.

Less expenses;

Rent. 50000. 50000. 50000.

Transport. 10000. 10000. 10000.

Salaries/wages. 774000. 774000. 774000.

Electricity. 30000. 30000. 30000.

864000. 864000. 864000.

Total

Net profit= Gross 951000-864000= 2112000- 2031000-

profit less 87000. 864000=1248000. 864000=1167000.
expenses.

Taxation 5% of 5/100×87000=4350.
the net profit. 5/100×124800=62400. 5/100×1167000=58350.

Net profit after 87000-4350 = 1248000-62400 = 1167000-58350

taxation = Net 82650. 1185600. =1108650.
profit - Taxation.

5:6 Break Even Analysis.

Products and services price 20/=.

Marginal cost 15/=.
Fixed cost 95000/=.
Number of units to break-even point (B.E.P).
B.E.P in (units) = fixed cost/contribution/units.

20
Contribution = Selling price - marginal/ variable cost.
= 20 -15.
=5
B.E.P in units = 95000/5 = 19000 units.
Break-even point in (she) value = Fixed cost/ contribution/unit × selling price/unit.
= 95000/5×20 = 380000.
Contribution per sales ratio = 5/20×100 = 25℅.
Targets profits = (95000+20000)/5 = 115000.
Sales for target profit = (95000 + 20000) / 5 × 20 =460000 value.

5:7 Desired financing.

Item. Amount.

Per - operational cost. 123000.

working capital. 260000.

Fixed assets. 300000.

Total. 683000.

5:8 Capitalization.

Item. Amount.

Owners contribution. 400000.

Borrowed funds. 150000.

Total investment. 550000.

5:9 Profitability Ratios.

Gross profit ratio = G.P/ Sales × 100.

= G.P (951000 + 2112000 + 2031000 = 5094000).

21
Sales (2524000 +3186000 +3275000 = 8985000)
(5094000 /8985000) × 100
=56.7%.
Net profit ratio =N. P/Sales × 100.
= (2502000/8985000) × 100.
= 27.8%.
Return on equity ratio = N.P /Owners equity × 100.
= {2502000/400000} ×100.
= 625.5%.
Assents turner ratio = Sales/Assents.
= [ 8985000/650000] = 276 :130.
Quick ratio = (Current assents - closing stock) /Current liabilities.
= {300000 -610000} /40000.
= - 7.75.
Liquidity ratio = Current assents/ current liabilities.
= 300000 / 40000
= 7.5

22
x