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5.0 Financial Plan: Chapter Five

The document outlines the financial plan for a business including pre-operational costs, working capital estimates, proforma income statements, production expenses, balance sheets, break-even analysis, profitability ratios, financing needs, and proposed capitalization. It provides cost estimates to renovate space and partition stores totaling 25,000 KSHS. It also presents projections for sales, costs, expenses, profits and assets/liabilities for the first year of operations ending July 2021. The break-even point is calculated to be 389,404 KSHS in sales based on contribution margin. Gross profit is projected to be 17% with a very high expected return on equity of 2194.5%. The section on financing

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Jane Wangari
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261 views6 pages

5.0 Financial Plan: Chapter Five

The document outlines the financial plan for a business including pre-operational costs, working capital estimates, proforma income statements, production expenses, balance sheets, break-even analysis, profitability ratios, financing needs, and proposed capitalization. It provides cost estimates to renovate space and partition stores totaling 25,000 KSHS. It also presents projections for sales, costs, expenses, profits and assets/liabilities for the first year of operations ending July 2021. The break-even point is calculated to be 389,404 KSHS in sales based on contribution margin. Gross profit is projected to be 17% with a very high expected return on equity of 2194.5%. The section on financing

Uploaded by

Jane Wangari
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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CHAPTER FIVE

5.0 FINANCIAL PLAN

5.1 PRE-OPERATIONAL COST

The table shows the preliminaries.

Item no Description Cost

1 Room renovation 20,000

2 Stores partitioning 15,000

Total 25,000

5.2 ESTIMATION OF WORKING CAPITAL FPR THE YEAR STARTING 3RD JULY 2020

ITEM NO DESCRIPTION AMOUNT (KSHS)

A CURRENT ASSETS

1 Stock 200000

2 Debtors 10000

3 Cash at bank 100000

4 Cash at hand 150000

TOTAL CURRENT ASSETS 360000


B CURRENT LIABILITIES

1 Personal savings 250000

TOTAL LIABILITIES 250000

Working capital 210000

5.3 PROFOMA INCOME STATEMENTS FOR THE YEAR ENDING 3RD JULY 2021

ITEM NO DESCRIPTION AMOUNT (KSHS)

1 Sales 25,000,000

2 Cost of goods sold 2,0000,000

GROSS PROFIT 5,200,000

5.4 PRODUCTION EXPENSES FOR THE YEAR ENDING 3RD JULY 2021

EXPENSES AMOUNT

Incentives 25000

Electricity 18000

Water 21600

Telephone 12000
Salaries and wages 500000

Creditors 300000

Licenses 4800

Miscellaneous 50000

Total expenses 920,600

Net profit (loss)before tax 4,702,535


Provision of tax 30% 1,410760.50
Net profit (loss)after tax 3,291,774.50

5.5 PROFOTRMA BALANCE SHEET FOR THE YEAR ENDING JULY 3RD 2021

FIXED ASSETS

Fixed assets amount

Equipment and machinery 75000

Machine depreciation 10% 7500

Total fixed assets 67500

CURRENT ASSETS

Cash in hand 100000

Cash in bank 140000

Stock 200000

Debtors 20000

Total current assets 460,000


Total assets 527,500

LIABILITIES

LONG TERM LIABILITIES AMOUNT

Personal saving 250000

Owner equity 150000

TOTAL LONG TERM 400000

5.6 CALCULATION OF BREAK EVEN LEVEL

Variable cost =cost of goods sold + total expenses

20,000,000+920,600

Sales 29,206,000

Total contribution margin = sales –total variables

=29,206,000-25,000,000

=4,206,000

Contribution margin % =contribution margin*100/sales

=4,206,000*100/29, 206,000

=0.1444%

Fixed cost

Fixed cost amount

Salaries 500000

Licenses 4800

Depreciation 7500
Incentives 25000

Interest on loan 25000

TOTAL FIXED COST 562,300

Total fixed cost =562,300

Break-even level =total fixed cost/contribution margin percentage

=562,300/0.14444%

=389,404.13

5.7 EXPECTED PROFITABILITY RATIOS

Gross profit %=gross profit *100/sales

= 17%

Return on equity =net profit after tax *100/owners’ equity

=2194.5%

5.8 DESIRED FINANCING TOTAL INVESMENT

Item amount(in cash)

Pre – operational cost

Working capital

Fixed assets

1 equipment and machinery

Total desired financing

5.9PROPOSED CAPITALIZATION

Capital amount (kshs)

Owners’ equity
Personal saving

Family and friends

Total investment

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