BUSINESS PLAN ON

RETAIL TRADE OF KIDS TEXTILES CLOTHING

OWNERS OF THE BUSINESS

ETSUBDINK TADESSE WUBENEH

Etsubdink Tadesse Wubeneh

Addis Ababa

March, 2024

1
Contents
1. Executive Summary.....................................................................................................................................3
2. Background of the company...........................................................................................................................4
2.1 Business Description.................................................................................................................................5
2.3 Mission, Key to success and Objective of the Business.............................................................................6
3. Organization and Management plan...............................................................................................................6
4. Marketing strategy..........................................................................................................................................7
5. Technical and Operations Plan........................................................................................................................9
6 Financial Plan.................................................................................................................................................10
6.1 Working Capital requirement-estimation...............................................................................................12
6.2 Loam Amortization Schedule....................................................................................................................1
6.3Expected income projection from the next four Consecutive year............................................................0
6.4 Relevant assumptions...............................................................................................................................1
6.5. Projected Cash Flow.................................................................................................................................2
6.6 Projected Balance Sheet...........................................................................................................................3
6.7 Financial Ratios.........................................................................................................................................4

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1. Executive Summary

Etsubdink Tadesse Wubeneh is an Ethiopian Retail Kids textile clothing company that began as a
Retail supplier of Kids clothing, textile and cotton fabrics products in 2014. The company also have a
business license in the field of business Land transport and related service. The company is legally
established and aims to increase accessibility and affordability of quality Retail Kids textile clothing
products. Its strategic location in Addis Abeba Nefase Silke Lafto sub city will enhance customer
visibility and service uptake.

General Over View

Young parents, whether father or mother, are interested about the latest trends therefore they want
their kids to look smart and beautiful by wearing dresses of the latest design. In order to fulfil young
parents' expectations and demands for clothes that suit their kids whether boys of girls, Etsubdink
Tadesse Wubeneh will be the ideal concept store. Etsubdink Tadesse Wubeneh is a well known
company to provide good quality and latest trend of children's clothing. We present an extensive
range of kids wear that are Purchasing locally different fabrics such as Cotton, Silk, Wool and others.
Available in a wide range of gorgeous colours, designs and prints, these apparels are designed
keeping in mind the most up-to-date fashion trends. The target customers are parents who pamper
their children of aged 0-12years old with trendy clothes.

The Company is planning to increasing income and Improving profitability of the business, The
company plans also to create a branch in Addis Ababa, Ethiopia, to grow its current business location
and enhance sales income and profitability. the company requires additional Working Capital
Finance for covering its Purchase of stock items and operational costs and the plan indicate that
working capital loan from Leander institution will be obtained in order to avoid financial strain at the
beginning of the 2016 E.C. fiscal year in order to run at the expected level.

According to the strategy, the company must invest a total of ETB 3.5 million to cover its operating
costs and the purchase of stock items. Of this amount, ETB 3 million will come from a bank credit
facility, which will be fully repaid in four years at an estimated interest rate of 15.5%. The company
equity will cover the remaining financing. This loan choice will be very beneficial to us in
accomplishing our business objectives.

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Beside to this, the promoter believes the loan will strengthen the relationship between the investor
and the bank. in addition to this loans and advances to various sectors of the economy on the strength
of viability and assessment of concentration risk will increase the success of the business.

The business is financially feasible based on the appropriate income projection assumption, with an
average annual sales growth of 30%, a 15% profit margin, and positive cash inflow over the next four
years, as demonstrated and briefly explained in the financial plan.

The Business also will create employment Advantage and will create backward linkage with
suppliers and forward linkage with the sub sectors and generate income for the Government in terms
of tax revenue and payroll tax

2. Background of the company

Etsubdink Tadesse Wubeneh was established to engage in Retail Kids textile clothing business. The
entity has received Principal registration No. AA/NL/W02/1/0003278/2009, Business license No.
AA/NL/W02/14/666/3339358/2014 from Addis Ababa Trade Bureau Nefase Silke Lafto sub city as
at 2014 EC and with paid up capital of birr 289,319.00. It is registered in Nefase Silke Lafto sub city
and House No 02. It also received Tax Payers Registration Certificate No. 0050465211.

The Company is owned and managed by Etsubdink Tadesse Wubeneh who are highly professional
with commendable business experience in the sector and the business will be strategically located in
Addis Abeba Nefas Silk-Lafto sub city ensuring easy accessibility for both residential and
commercial clients. This prime location will enhance visibility and convenience for customers,
contributing to increased foot traffic and service uptake.

The Company has good knowledge of Retail Kids textile clothing sector, well established business
relation with manufacturers and Wholesalers. In order to exploit this relationship and to capitalize on
the sector’s weakness of inability to supply quality Kids textile clothing as demanded by customers
both with respect to specification and quantity.

The company also has business license in, Land transport and related business.

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2.1 Business Description

Young parents, whether father or mother, are interested about the latest trends therefore they want
their kids to look smart and beautiful by wearing dresses of the latest design. In order to fulfil young
parents' expectations and demands for clothes that suit their kids whether boys of girls, Etsubdink
Tadesse Wubeneh is a well-known company to provide good quality and latest trend of children's
clothing. We present an extensive range of kids wear that are Purchasing locally different fabrics
such as Cotton, Silk, Wool and others. Available in a wide range of gorgeous colours, designs and
prints, these apparels are designed keeping in mind the most up-to-date fashion trends. The target
customers are parents who pamper their children of aged 0-12years old with trendy clothes, Hence,
some basic product supplies all the time available at our stores including but not limited to items
listed below

Products Descriptions
Etsubdink Tadesse Wubeneh will offer young customers the following kids clothing:
 Shoes.
 Jackets.
 Sweaters.
 Shirts.
 Pants.
 Bags.
 Hats.
 T-shirts.
 Dresses and skirts.
 Shorts.
All the kids clothing and product above are in-house branded.

Future Products
As we achieve and exceed our sales and profitability goals, Etsubdink Tadesse Wubeneh will be open
chain store to more areas and our own personal in-house label of clothing that will also be expanded
to add on to the collection of Etsubdink Tadesse Wubeneh kids clothing. We will expand our line of

5
brands with those that have been repeatedly requested by our customers. An e-commerce website will
also be expanded to increase our distribution channels so that our customer base can be expanded.

2.3 Mission, Key to success and Objective of the Business

Mission

The mission of Etsubdink Tadesse Wubeneh is to deliver good quality and latest trend children's
clothing at affordable prices. To accomplish this, we focus on exceptional design, innovation, quality,
convenience and interactive communication.

Objectives

The objectives of Etsubdink Tadesse Wubeneh are as following:

 To offer products at affordable price for the customers.
 To provide and deliver good quality and latest trend clothing to customers.
 To expand and sustain a high level of customer satisfaction.
 To build branded franchise initially within local area community.
 To secure ETB 3,0000,000 bank loan facility, partially to cover purchase of stock item for
resale and fulfill the additional working capital requirement.
Keys to Success

 Accessible store where you always find something new that you want.
 Excellent vendor relationship that facilitates quick shipment of orders.
 Establish an effective strategy for advertising to our target customers.
 Create a store image that our target customers sees as both attractive and trendy.

3. Organization and Management plan

It is evident that for the proper and continuous profitable of the business, due consideration has to be
given to the organization and management.

The owner, being accountable to the business, will manage all activity of the business, market
information and customer needs and wants as well as providing new and quality products that satisfy
customer needs. The owners will manage all financial aspects of the business.

The company currently has One staff member which are permanent employees, and in the future the
company plans to hire skill person to enhance customer satisfaction.

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 List of Staff team as follows.

No Employer Name Position Monthly Annual

Salary Salary

1 Eyobe Tefera General Manager 15,000 180,000.00

2 Aster Wendemu Marketing Manager 8,000 96,000.00

3 Yalemsewe Alelegn Sales 10,000 120,000.00

4 Rebka Tefera Accountant 7000 84,000.00

Total 0 40000

4. Marketing strategy

The main business strategy of the company is customer driven approach and focused to address the
need and want of their valuable customers.

Currently, only a few regional malls offer access to the good quality and trendy clothing products that
young people want. Unfortunately, the focus of these mall stores is only on the mainstream of the
youth market.

It is Etsubdink Tadesse Wubeneh plan to bring these new alternative fashion and products to its
target customer groups

The Company’s strategy is therefore to supply products required by customers at the quality and
quantity level they demanded. The Company can also compete on prices besides the flexibility and
quality factors as it will only trading on demand and hence can significantly reduce the stock carrying
costs.

 Target Market

The company has conducted in depth market research and business plan on determining the target

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market that expected domestically. Therefore, the target market for Etsubdink Tadesse Wubeneh
Retail Kids Clotting business includes:

 Childrens Families

 Childrens Schools

 Children event organizer

 Other Retailers, etc.

 Our Competitive Advantage

A close study of the Etsubdink Tadesse Wubeneh Retail Kids Clotting business reveals that the market
has become much more intensely competitive over the last decades.as a matter of fact it has to be
highly creative, customer centric and proactive if you must survive in this industry. We are aware of
the stiff competition and we are well prepared to compete favorably with other leading Retail Kids
Clotting store in Addis Abeba.

Etsubdink Tadesse Wubeneh competitive advantage is offering product lines that make a statement
but won't leave you broke. Etsubdink Tadesse Wubeneh offers products that are just ahead of the
curve and so affordable that our customers will return to the store often to check out what's new.

Another competitive factor is that products for this age group are part of a lifestyle statement.
Etsubdink Tadesse Wubeneh is focused on serving the demand and expectation of young parents. We
want to represent their style and life choices for their kids. We believe that we will create a loyal
customer base that will see Etsubdink Tadesse Wubeneh as part of their lives

 Product Pricing

The determination of sales price for a consumer-oriented product like Medical Supplies depends on a
complex series of factors such as the production and marketing costs, distribution techniques, the
prevailing competitors’ price and market conditions. In general, price setting is done by selecting one
of the two frequently used pricing approaches. The simplest method is cost-based approach (Cost-
plus pricing), which involves adding a standard mark-up to the cost of the product, and competition-
based approach (going-rate pricing), which bases its price largely on competitors’ prices.

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Accordingly, Etsubdink Tadesse Wubeneh is using cost-based approach(Cost- plus pricing), which is
average selling price per product type by considering 25% profit margin on costs of goods sold.

 Product Promotion

In a competitive market, trade promotion should be made to persuade or to make a product attractive
for end users. Such trade promotional tools include; credit and discount with the volume of products
sold etc. The envisaged company is recommended to offer discounts with the volume of product
bought and credit for one to two months. The other promotional strategy, is selecting of the media
channel that involves choosing among available advertising media and deciding how they can be
used; given the type of message, target audience and the budget available. To that end, the company
Etsubdink Tadesse Wubeneh has a plan to develop an extensive sales brochure that will showcase
the business ability to supply any type of kids clothe supplies to domestic market. This brochure will
provide all necessary contact information and preliminary pricing information for the customer. The
company will also use an internet based strategy. Finally, the Company will maintain a modest level
of print and media advertising within local trade publications. In this regard, the company will have
financial budget of 1.5% of annual profit for promotion costs.

5. Technical and Operations Plan

 Business Location

The main business Office of Etsubdink Tadesse Wubeneh including the intended standard warehouse
is located in Addis Ababa City Administration, Nefas Silke Lafto Sub- city; Woreda-02. In addition,
the company has a plan to open more business branch in different regional locations.

 Descriptions Of Supplies and Costs

Currently and short-term objective, the business intends to overcome the cash short it has faced to
cover working capital requirement which mainly related to item Purchase costs, transporting
products from genuine wholesalers/distributors and other administrative costs that enables to provide
equivalent products as demanded.

However, this stock items for the business, particularly those procured locally, play a pivotal role in
ensuring the smooth and uninterrupted functioning of the business. Local procurement not only

9
fosters community engagement but also facilitates timely restocking and supports the overall
sustainability of the company operations. Efficient management and utilization of these stock items
contribute to maintaining the high standards of service and customer satisfaction.

Currently almost all suppliers are providing Kids product supplies through import and only few
products are manufactured in the country. Thus, in connection with the new business plan activities,
the company has a plan to sales products sourced through Local Purchase which will cost the
company for newly planned strategy as tabulated below:

Item
No Quantity Unit Cost Total Cost
Description
1 Top 450.00 600.00 270,000.00
2 Skirt 150.00 850.00 127,500.00
3 Jeans 200.00 1,000.00 200,000.00
4 T-shirt 125.00 450.00 56,250.00
5 Sweater 256.00 650.00 166,400.00
6 Shorts 120.00 360.00 43,200.00
7 Dungarees 360.00 750.00 270,000.00
8 Jackets 200.00 746.00 149,200.00
9 Sweatshirt 150.00 220.00 33,000.00
10 Cord-Sets 128.00 450.00 57,600.00
11 Socks 350.00 120.00 42,000.00
12 Pants 222.00 125.00 27,750.00
13 Shoes 500.00 1,505.00 752,500.00
14 Hats 150.00 300.00 45,000.00
15 Bags 150.00 856.00 128,400.00
16 Toys 320.00 785.00 251,200.00
Total 2,620,000.00

6 Financial Plan
Currently and short-term objective, the business intends to overcome the cash short it has faced to
cover working capital requirement which mainly related to item Purchase costs, transporting
products from genuine wholesalers/distributors and other administrative costs that enables to provide
equivalent products as demanded.

However, this stock items for the business, particularly those procured locally, play a pivotal role in
ensuring the smooth and uninterrupted functioning of the business. Local procurement not only
fosters community engagement but also facilitates timely restocking and supports the overall
sustainability of the company operations. Efficient management and utilization of these stock items
contribute to maintaining the high standards of service and customer satisfaction.

10
It is known that the price of these stock items and operating cost has increased significantly.
However, recently the company competed with different customers, so it is necessary to purchase
more stock items in order to deliver the Products to the customers in a timely manner It is necessary
to get a loan from the bank to overcome this lack of purchase.

The Company is planning to increasing Service income and Improving profitability of the business,
The company plans also to create a branch in Addis Ababa, Ethiopia, to grow its current business
location and enhance service income and profitability. It also hopes to attract more consumers, the
company requires additional Working Capital Finance for covering its stock items and operational
costs and the plan indicate that working capital loan from Leander institution will be obtained in
order to avoid financial strain at the beginning of the 2016 E.C. fiscal year in order to run at the
expected level.

According to the strategy, the company must invest a total of ETB 3.5 million to cover its operating
costs and the purchase of stock items. Of this amount, ETB 3 million will come from a bank credit
facility, which will be fully repaid in four years at an estimated interest rate of 15.5%. Owners' equity
will cover the remaining financing. This loan choice will be very beneficial to us in accomplishing
our business objectives.

Based on the nature of the financing, we have chosen the Commercial Bank of Ethiopia to be our
bank for filling our financial need. Accordingly, we have decided to lodge our financing request of
Birr 3 million to be addressed by in the form of term loan. In order to secure the requested loan, the
company is willing to offer collaterals.

As it is discussed above, Purchase items and Service related costs are bottlenecks for the company
such as operational costs, Salary and Wage, transportation, rent of warehouse and shop and other
Distribution and administration expense.

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6.1 Working Capital requirement-estimation

Estimated working
Description capital
Cost of Purchase stock items 2,620,000
Rent of Wearhouse and shop 300,000
Salary and wages 480,000
Transportation Other Distribution 100,000
& Administration Cost
Total Requirement 880000
Note:- From The total working capital requirement 3 million covered by bank loan and the
remaining fund covered by owners’ equity.

 Cost of Purchase stock items

Kids Clothing stock items for the business, particularly those procured locally, play a pivotal role in
ensuring the smooth and uninterrupted functioning of the business. Local procurement not only
fosters community engagement but also facilitates timely restocking and supports the overall
sustainability of the company operations. Efficient management and utilization of these stock items
contribute to maintaining the high standards of service and customer satisfaction.

It is known that the price of these stock items and operating cost has increased significantly.
However, recently the company competed with different customers, so it is necessary to purchase
more stock items in order to deliver and resale the Products to the customers in a timely manner It is
necessary to get a loan from the bank to overcome this lack of purchase.

Basic assumption in forecasting our Purchase Kids Clothing stock costs is the following:

Item
No Quantity Unit Cost Total Cost
Description
1 Top 450.00 600.00 270,000.00
2 Skirt 150.00 850.00 127,500.00
3 Jeans 200.00 1,000.00 200,000.00
4 T-shirt 125.00 450.00 56,250.00
5 Sweater 256.00 650.00 166,400.00
6 Shorts 120.00 360.00 43,200.00
7 Dungarees 360.00 750.00 270,000.00
8 Jackets 200.00 746.00 149,200.00
9 Sweatshirt 150.00 220.00 33,000.00
10 Cord-Sets 128.00 450.00 57,600.00

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 11 Socks 350.00 120.00 42,000.00
12 Pants 222.00 125.00 27,750.00
13 Shoes 500.00 1,505.00 752,500.00
14 Hats 150.00 300.00 45,000.00
15 Bags 150.00 856.00 128,400.00
16 Toys 320.00 785.00 251,200.00
Total 2,620,000.00

 Rent of Wearhouse and shop

● Rent Expenses- the company will pay office, Shop and store rent

which is presented as follows.

Monthly Annual
S.no Description
Rent Rent

Office, Shop
1 and store rent 25,000.00 300,000
 Salary and Wage
It is computed taking the following assumptions regarding the required
number of staff, basic salary
Table 1- Staff Salary and Wage Plan: -

No Employer Name Position Monthly Annual

Salary Salary

1 Eyobe Tefera General Manager 15,000 180,000.00

2 Aster Wendemu Marketing Manager 8,000 96,000.00

3 Yalemsewe Alelegn Sales 10,000 120,000.00

4 Rebka Tefera Accountant 7000 84,000.00

Total 0 40000

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 ● This shows that the Company’s Monthly salary and benefit expense

will be Birr 480,000 offering competitive salary and employing

adequate staff.

 Other Administration Cost

● Transportation- it will be significant cost element and it is expected to

cost 5% of the total cost of purchase.

● Administrative expenses- comprises stationery and printing,

professional fees, license and legal fees, travel and postage, per diem,
telephone, bank charges, etc. It is expected that administrative
expenses amounts to 2% of annual sales.

● Profit tax- Annual profit tax is computed assuming effective tax rate of
35%. Income tax liability of a fiscal year is assumed to be paid in the
same year

● Interest Expenses: - It is planned that the Company will obtain bank

term loan of ETB 3 million to be repaid in 4 years as shown in the

table below. The loans are expected to be obtained at annual interest
rate of 15.5%

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6.2 Loam Amortization Schedule

Loan amount 3,000,000.00

Annual interest rate 15.50 %
Loan period in years
4

Number of payments per year 4

Start date of loan 3/1/2024
Optional extra payments

Loan summary
Scheduled payment 255,091.57
Scheduled number of payments 16
Actual number of payments
16
Total early payments
-
1,081,465.14
Total interest

Scheduled
Pmt. Paymen Payment
Beginning Total Ending Cumulative
No. t Date Principal Interest
Balance Payment Balance Interest
1 6/1/2024 3,000,000.00 255,091.57 255,091.57 138,841.57 116,250.0 2,861,158.43 116,250.00
0
2 9/1/2024 2,861,158.43 255,091.57 255,091.57 144,221.68 110,869.8 2,716,936.75 227,119.89
9
3 12/1/2024 2,716,936.75 255,091.57 255,091.57 149,810.27 105,281.3 2,567,126.47 332,401.19
0
4 3/1/2025 2,567,126.47 255,091.57 255,091.57 155,615.42 99,476.15 2,411,511.05 431,877.34
5 6/1/2025 2,411,511.05 255,091.57 255,091.57 161,645.52 93,446.05 2,249,865.53 525,323.39
6 9/1/2025 2,249,865.53 255,091.57 255,091.57 167,909.28 87,182.29 2,081,956.25 612,505.68
7 12/1/2025 2,081,956.25 255,091.57 255,091.57 174,415.77 80,675.80 1,907,540.49 693,181.49
8 3/1/2026 1,907,540.49 255,091.57 255,091.57 181,174.38 73,917.19 1,726,366.11 767,098.68
9 6/1/2026 1,726,366.11 255,091.57 255,091.57 188,194.88 66,896.69 1,538,171.22 833,995.37
10 9/1/2026 1,538,171.22 255,091.57 255,091.57 195,487.44 59,604.13 1,342,683.79 893,599.50
11 12/1/2026 1,342,683.79 255,091.57 255,091.57 203,062.57 52,029.00 1,139,621.21 945,628.50
12 3/1/2027 1,139,621.21 255,091.57 255,091.57 210,931.25 44,160.32 928,689.96 989,788.82
13 6/1/2027 928,689.96 255,091.57 255,091.57 219,104.84 35,986.74 709,585.13 1,025,775.5
6
14 9/1/2027 709,585.13 255,091.57 255,091.57 227,595.15 27,496.42 481,989.98 1,053,271.9
8
15 12/1/2027 481,989.98 255,091.57 255,091.57 236,414.46 18,677.11 245,575.52 1,071,949.0
9
16 3/1/2028 245,575.52 255,091.57 245,575.52 236,059.47 9,516.05 1,081,465.1
4

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6.3Expected income projection from the next four Consecutive year

The Company is planning to increasing Service income and Improving profitability of the
business, The company plans also to create a branch in Addis Ababa, Ethiopia, to grow its
current business location and enhance service income and profitability. It also hopes to attract
more consumers in order to meet sales targets for the following four years.

Expected income projection from the next four Consecutive years are as follows
Profit and Loss Total
Projection
Year 2016 2017 2018 2019
Revenue 7,091,171.88 9,218,523.44 11,984,080.48 15,579,304.62 43,873,080.42
Total revenue 7,091,171.88 9,218,523.44 11,984,080.48 15,579,304.62 43,873,080.42

Cost of Service
Cost of Sales 5,318,378.91 6,913,892.58 8,988,060.36 11,684,478.47 32,904,810.32
Total Cost of Sales 5,318,378.91 6,913,892.58 8,988,060.36 11,684,478.47 32,904,810.32
-
Gross Profit 1,772,792.97 2,304,630.86 2,996,020.12 3,894,826.16 10,968,270.11
-

Administration -
Expense
Salary and Wage 132,000.00 145,200.00 159,720.00 175,692.00 612,612.00

Rent Expense 330,000.00 363,000.00 399,300.00 439,230.00 1,531,530.00

Utility 11,379.06 12,516.97 13,768.66 15,145.53 52,810.22

Labor 13,282.50 14,610.75 16,071.83 17,679.01 61,644.08

License and Registration 1,155.00 1,270.50 1,397.55 1,537.31 5,360.36

Stationery and Printing 2,960.27 3,256.29 3,581.92 3,940.11 13,738.59

Deprecation Expense 396,220.00 435,842.00 479,426.20 527,368.82 1,838,857.02

Communication 17,325.00 19,057.50 20,963.25 23,059.58 80,405.33

Cleaning and Sanitation 7,610.30 8,371.32 9,208.46 10,129.30 35,319.38

Total Expense 911,932.12 1,003,125.33 1,103,437.87 1,213,781.65 4,232,276.97

Net Profit/Loss Before 860,860.85 1,301,505.53 1,892,582.25 2,681,044.50 6,735,993.14
Tax

0
6.4 Relevant assumptions

The following relevant assumptions are considered to draw financial projections.

 The financial plan is prepared taking into account the internal

capability an existing physical facility as well as environmental
opportunities and threats.
 The previous year's financial performance serves as the key
forecasting basis for the years under consideration.
 The fiscal year refers to a period of 12 months covering from Hamle 1
to Sene 30 of Ethiopian Calendar.
 To finance the growth in sales, it is projected that, the company will
secure additional loan in the form of term loan from banks.
Interest rate on the loan is assumed to be 15.5% per annum

 Previous period sales revenue was taken as base year for comparison.
Based on this scenario, the 2016 E.C sales will grow by 30% as per
critical assumptions explained previously in this paper.

 For long-term assets, the business employed the straight-line

deprecation method.

 Sales will increase by average 30% every year after 2016 E.C.

 Administrative and Selling Expenses is assumed to increase by 10%

per annum.

 Profit margin is Assumed as 25%.

 Operational costs are considered from historical costs.

 Income tax of 35% is applied on profit.

1
6.5. Projected Cash Flow

Year 2016 2017 2018 2019

Cash Inflow
Beginning Cash 240,104.26
Income 7,091,171.88 9,218,523.44 11,984,080.48 15,579,304.62
Loan 3,000,000.00
Total Inflow 10,331,276.14 9,218,523.44 11,984,080.48 15,579,304.62
Cash outflow
Cost of Sales 5,318,378.91 6,913,892.58 8,988,060.36 11,684,478.47
Administration Expense 911,932.12 1,003,125.33 1,103,437.87 1,213,781.65
Profit tax 283,301.30 437,526.94 644,403.79 920,365.58
Total Outflow 6,513,612.33 8,354,544.85 10,735,902.01 13,818,625.69
Net Cash Flow 3,817,663.81 863,978.59 1,248,178.47 1,760,678.93

The cash flow projection is made assuming that:

● The Company will obtain ETB 3,000,000 loan finance at the beginning of operation,

● Interest rate assumed 15.5 %.

● Beginning cash balance taken from Previous year financial statement.

● All purchases are on cash basis.

● The annual sales of the company will be collected in the current year,

● Profit tax of the fiscal year will be paid in the same year.

Overall, the projected cash flow shows that the Company will generate series of surplus cash
flows after covering all operational and financial commitments that confirms its liquidity.

2
6.6 Projected Balance Sheet

STATEMENT OF PROJECTED BALANCE SHEET

Currency in Ethiopia Birr
Beginning of
the Year Year, 1
ASSETS
Current assets
Cash and cash equivalent 240,104 3,817,664
Debtors and pre payement 282,741 456,789

Invesement - 0
Inventories 258,963 284,859

Other current assets - 0

Total current assets 781,808 4,559,312

Non-current assets

Property, plant and equipment 22,396,000 22,035,800

22,396,000 22,035,800

Total non-current Assets 22,396,000 22,035,800

Total assets 23,177,808 26,595,112

Liabilities and equity

Current liabilities
Trade payable 509,123 560,035
Tax payable 306,711 283,301
Other current liabilities - -
Total current liabilities 815,834 843,337

Non-current liabilities

3,000,0
Bank Loan - 00.00
3,000,000
Total non-current liability - .00

Total liabilities 815,834 3,843,337

Equity

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 Capital 289,319 289,319
Owners account 21,451,621 21,565,091
Retained Earning 621,034 897,365
Total equity 22,361,975 22,751,775
Total equity and liabilities 23,177,807 26,595,112

6.7 Financial Ratios

A financial ratio is used to calculate a company’s financial status or production against other
firms. It is a tool used by investors to analyze and gain information about the finance of a
company’s history or the entire business sector. To calculate financial ration, numbers are taken
from the balance sheet, income statement, and cash flow statement. The financial ratio is not a
calculation but an explanation of the economic status of a company, in terms of profit, liquidity,
leverage, and market valuation. A ratio may serve as an indicator, red flag or clue for various
issues.

0.037837
Return on Equity = Net Profit before tax 860,860.85 1
Net Equity 22,751,775.52

Current ratio = Current asset 4,559,312.11 5.406278

Current Liability 843,336.60

5.068501
Quick ratio = Current asset- Inventory 4,274,452.81 5
Current Liability 843,336.60

0.037066
Debit to Equity = Total Liability 843,336.60 8
Net Equity 22,751,775.52

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