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COLLEGE: KOBUJOI INSTITUTE OF DEVELOPMENT STUDIES

COURSE: DIPLOMA IN SOCIAL WORK AND COMMUNITY

DEVELOPMENTTITLE: UTU BORA FRUITS AND VEGETABLES DISTRIBUTION ADDRESS: P.O BOX 3548,

ELDORET,

Phone Number: 0704692517,

E-mail: mureycheruto@gmail.com

PRESENTED BY: MUREY JULIET CHERUTO

ADMISSION: SW/211/ 344

PRESENTED TO: THE KENYA NATIONAL EXAMINATION COUNCIL

(K.N.E.C) IN PARTIAL FULFILMENT OFTHE REQUIREMENT FOR THE AWARD OF DIPLOMA IN

SOCIAL WORK AND COMMUNITY

DEVELOPMENT

CLASS: DIPLOMA IN SOCIAL WORK (2010- 2012 JAN)EXAM SERIES: JUNE / JULY

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DECLARATION

The project is my own work and has not been presented for a diploma in other college.

Name: Murey Juliet Cheruto

Sign:

Date: ..

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DEDICATION

I dedicate this project to my parents, friend, brothers, sisters and my future kids.

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EXECUTIVE SUMMARY

i. BUSINESS DESCRIPTION

The name of the business will be UTU BORA FRUITS AND VEGETATION DISTRIBUTION. The form of business ownership will be sole proprietorship. It will be owned by MUREY JULIET CHERUTO. Thebusiness will be subjected to uplift the living standard people in the area as well as providing vegetablesand variety of fruits to the same people.

ii. MARKETING PLAN

The business will be located in Uasin-Gishu district in Rift Valley Province. The premises will be locatedin Eldoret/ Iten road opposite Eldoret air strip.

The place is chosen because it is located in a busy area where the potential customers from nearby

market will have access. Also distributing to schools, hotels and hospitals will be easier.

In order to create awareness and thereby promoting sales a thorough program of advertising andpersonal selling will be used throughout the first three mouths upon the opening of the business. Thosewill therefore call for establishment of effective marketing department.

iii. MANAGEMENT AND ORGANIZATION PLAN

The owner of the business will be the general manager. She will carry out the supervision of all activitiestaking place in the business. She will also finance all the projects.

There will also be an accountant who will work hand in hand with the general manager. He will deal withsupplies, sales and public relation.

It will easy to train them They will be effective and efficient They will be manageable

iv. OPERATIONAL PLAN

The business will start its operations immediately after acquisition of needed facilities. Since it is a newbusiness the facilities of production will be needed and they will be bought with the available funds.

There are several regulations that will govern the business. The registrar of trade will issue license forthe business, insurance, labour law building and health regulation, all this will be strictly be followed forproper running of the business.

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v. FINANCIAL PLAN

The business will require a start capital of 800,000 shillings. From this amount, 200,000shillings will beborrowed from the bank in form of a loan; 200,000 shillings will be from friends and relatives while theremaining will be from my personal contribution.

All the important business transaction will be done for the upkeep of the business, this include; theproforma income statement, cash flows statements and balance sheet.

This will show the business growth and its profitability of the business.

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CHAPTER ONE

1.0 BUSINESS LOCATION

1.1BUSINESS NAME

The name of the business will be UTU BORA FFRUITS AND VEGETATION DISTRIBUTION. The name fitsthe business in that its main aim is to work extra hard to achieve the goals which are;

a. To earn profitb. To attract more customersc. To dominate market and look strategies to withstand the competition

1.2 BUSINESS LOCATION AND ADDRESS

The business will be located in Uasin Gishu county Rift Valley province. The premises will be in Eldorettowns along Eldoret Iten road opposite air stripe Action Eldoret. Action complex in ground floor.Thebusiness is established here because it is strategic and also have a parking facility for those who owncars.

Then address will be:

UTU BORA FRUITS AND VEGETATION DISTRIBUTION,

P.O BOX 3548,

ELDORET,

Phone Number: 0704692517,

E-mail; mureycheruto@gmail.com

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1.3 PHYSICAL LOCATION

NAIROBI ROAD UGANDA ROAD

AIRSTRIP ROAD

ACTIONCOMPLEX

UTU BORAFRUIT &VEGETABLES

KIPCHOGETADIUM

AIRSTRIP

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1.4 FORM OF OWNERSHIP

The business will be a sole proprietorship. It will be owned and managed by MUREY JULIET CHERUTO.All the operation will be organized and run by me. This type of ownership is preferred because;

I. Ability to have profit aloneII. Direct contact between customers and the owner

III. To have quick decision makingIV. Freedom of terminating or expanding the business

1.5 TYPE OF OWNERSHIP

Utu Bora fruits and vegetables distribution will be dealing on collection of fruits and vegetables fromvarious farmers, sort, clean, packaging and preserve them to maximize the sales. The business willmarket its produce to local market, schools, hotels and hospitals. The business opens its doors onJanuary 2012. The startup capital is aimed to be 7.2million, this aimed at purchasing machines andinstallation plus the transportation trucks. Farmers around the town will directly deliver fruits andvegetables to business premises to reduce operation costs. For farmers away from town, our trucks willbe collecting like those suppliers from Kerio Valley, Nandi, Burnt Forest and Kitale.

1.6 EXPANSION

The business aim at expanding by opening various deports around the country. This will be receiving theproducts and circulating them to target market. Also the business will purchase two trucks so as todeliver products to these depots and to various customers.

1.7 PRODUCTS AND SERVICES OFFERED

The business will deal with all varieties of fruits and vegetables from the county and neighboringcounties. These services will be cleaning, packaging and transporting under preservation in trucks whichwill be equipped with refrigerators.

1. ORANGES

Oranges will be collected from farmers then will be washed, sorted and because they have longer shelf life, they will be packed and supplied to the various market, schools, shops, supermarket, hospitals andschools. The farmers supplying them will be from Kerio Valley, Kitale and Nandi.

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2. PLUMS

It will be collected, washed, sorted and it will be packed under small transparent polythene bags thenpreserved in the refrigerators because they cannot withstand high temperatures for two days. Thefarmers supplying will be from Timboroa.

3. LEMONS

They will be collected, sorted, washed and they will be packed in ventilated boxes then taken to themarket. The farmers supplying them will be from Kitale, Nandi and Kerio Valley.

4. PASSION FRUITS

It will be collected, sorted, washed then packed in small boxes and be sorted under favorable conditionsto stop over ripening. For unripe they will be stored in good atmosphere so that they ripe before packingthem. Supplying farmers will be from Kerio Valley and Uasin Gishu.

5. MANGOES

The mangoes will be collected Kerio Valley and Baringo, they will be sorted and packed in crate.

6. TOMATOES

Due to high demand and its perishability of tomatoes, they require good method of handling so thatthere will be continuous flows in the market. It will be cleaned, sorted then packed in the crates thenpreserve them before releasing to the market. The farmers supplying will be from Nyaru andgreenhouses around.

7. CABBAGES

Because of high demand of cabbages in the market, they will be collected, sorted and be packed inwooden crates then transported to the market. The supplying farmers will be from Timboroa andKaptagat.

8. SUKUMA WIKI

The location of the business is very productive such that Sukuma wiki are left to rot in the farm and attimes is used to feed animals. During the bumper harvest, the business involves in the packing of vegetable for export to other countries, this make it easier because of availability of EldoretInternational Airport facility. The suppliers are from Kaptagat,Timboroa and Nyaru.

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9. ONIONS

Onions are plenty in the region thus they can be accessed easily and brought to the market, But at timesthe productions decline during dry period, especially in the months of December to March. So thescarcity of the product hikes the prices because the demand is higher and supply is low.

10. POTATOES

Potatoes are sorted and stored in sisal bags to prevent them from rotting and used later days. This willhelp the business to regulate the prices because they are not perishable. The supplies will be fromNyaru, Kaptagat and Timboroa.

11. CARROTS

Carrots are produced in plenty during dry seasons thus the market price is low. Timboroa area produceslarge quantities because the area is most favorable for the growth of Carrot.

1.8 JUSTIFICATION OF THE OPPORTUNITY

The potential of business to success is high because of the following reasons;

i. The owner has skills and knowledge on entrepreneur and management acquire from theKobujoi Instituted of Development Studies.

ii. There are few people who have ventured the business in that location thus competition is low;

there is high demand for the commodity with few sellers.iii. The owner will capitalized on competitor weakness by providing quality services to its

customers.iv. The location of the business is strategic in that they are ready market, the populace in the area

are middle class thus used on daily basis the vegetable products because they are affordable tothem.

v. The ever increase in rural-urban migration make the business sustainable despite the entranceof new competitor to the market.

vi. The hotels and Restaurant industry are growing at alarming rate in the area, thus there will be aready market of products on daily basis.

vii. All areas where the products are produced have good road network, thus products are broughtto the market at right time.

1.9 GOALS OF THE BUSINESS

The business intents to achieve the following goals;

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i. To maximize profitii. To maintain good relationship between customers and workersiii. To be best distributor in the all region and later the whole Country and meeting the

requirements of our nationiv. To provide quality products in the all region and to the customers

1.10 INDUSTRY OF THE BUSINESS

As agriculture is the basic business that Kenyans can indulge in successful. The business is in thesector of fruits and vegetables industry. The government encourages small-scale farmers to plantshort term crops. The industry has picked up since past four years because they packed their fruitsand vegetables in appropriate packets and transport using faster means like plain. Also thegovernment has opened various industries that deal with these perishable products and being ableto pay their famers. All this will make the supply to increase also the production.

1.11 ENTRY AND GROWTH STRATEGY

The business intends to enter in the market by paying their farmers after delivery of farm produceand this will encourage farmers to sell their produce to our company. Also will advertise our productusing media, magazines and posters this help my company to be known countrywide. Also in theadvert we will indicate the price of every commodity which will be reduced by 30% that will help tohave more customers and maintain them. This method of reduction of prices will help our companyto grow in a faster rate and will help us to open more branches elsewhere thus creating jobopportunities.

The branches will offer the same services as the parent business as well as effective and efficientservices to the customers. I will be offering discounts, delivering products and offering credits ongoods to well known customers all these will help retain my customers and withstand competitionin the market.

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CHAPTER TWO

2.0 MARKETING PLAN

This is a strategy that tries to explain how the products are to be marketed and achieve the laiddown goals.

2.1 CUSTOMERS DESCRIPTION

The customers are those people who buy the products available in the market. After conducting amarket survey, the owner found that the business will be serving domestic, institutional andcommercial customers.

i. Domestic customers

The population in the town is increasing day by day due to more people employed in variousindustries that have been installed due to modern technologies and achievement of MillenniumDevelopment Goals (MDGs). The owner will get more customers from these people working indifferent industries.

ii. Hotels

The hotels and restaurants are many in Eldoret towns. The owner believe that the location of thebusiness will be accessible to these customers, the prices will differ to some hotels because they arethe best hotels and their services are expensive for example; Sirikwa, Miyako, Wargon, High LandsInn, Mahindi.

iii. Hospitals

The products will be supplied to various hospitals because the patients should take vitamins daily.These hospitals are; Moi teaching and referral hospital, Nursing home, Mediheal hospital, Eldorethospital, District hospital and Memorial hospital. They will get good services without anyinconveniences.

iv. School and institutions

The schools that will be supplied various products are Moi girls, Hill school, Chebisaas boys, Motherof apostles seminary, Elgon view Academy, Kipchoge Keino Academy L ions Academy.

The institutions are; Moi university, school of Law, West campus, Chepkoilel campus, Rift ValleyTechnical Training Institute, Eldoret polytechnic, African institute and Elgon View college.

The products will be offered at reasonable prices.

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v. Commercial customers

These are customers who will buy the products in large amount for reselling them in order to gainprofit.

2.2 COMPETITORS DESCRIPTION

The business will have competitors who will be direct entrepreneurs; these are those competitorswho deal with similar products while indirect are those who deal with different products that can beused to substitute the products found in the market.

The competitors that the business will face are:

COMPETITOR LOCATION STRENGTH WEAKENESS COMMENTSUTUMISHI FRUITSDISTRIBUTIONP.O BOX 132

ELDORET

ELDORET Well establishedMany employeesStock variety

No transportationfacilities

I will offertransport services

JASHO FRUITSAND VEGETABLESDISTRIBUTORSP.O BOX 58121ELDORET

ELDORET Large spacedpremisesMany employees

Poor packagingHigh prices

AttractivepackagingAffordable pricesin all products

COMING SOONVEGETABLESDISTRIBUTORSP.O BOX 187ITEN

ITEN Large spaceLow pricesHavetransportationfacilities

PoorinfrastructurePoor storagefacilities

To improve oninfrastructure

JICHO THREEVEGETABLESDISTRIBUTORSP.O BOX 12342TIMBOROA

TIMBOROA Lower pricesLarge spaceMany workers

Have unskilledemployees

Have no threat tomy business

SYSTEMATICFRUTSDISTRIBUTORSP.O BOX 34765ELDORET

ELDORET Large stockSkilled labourWell established

High pricesDo not operate onweekends

I will reduce myproduct pricesslightly

MANENO MINGIFRUITS ANDVEGETABLESDISTRIBUTORSP.O BOX 435ELDORET

ELDORET Located in denselypopulated areaMany employeesUnskilled labour

Poor recordkeeping

I will offer monthlytraining to myemployees

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2.3 MARKET SHARES

The business will offer some unique services from incumbent competitors which will attract customersand retain them. By doing so the business will get bigger market share easily. Also the rapid populationincrease yearly in urban areas means that the business will be annually expanding. Another factor which

is different from other competitors is that the business has transporting truck which will collect theproduce from various farms, the business will have an edge over the others because the selling prices atthe farms are lower than the ones which suppliers deliver to business premises, so the business willhave the flexibility of adjusting their prices slightly lower its rival. It implies that when you sell at lowerprices you will able to have many customers thus higher market share you have.

At the moment the market has 30000 potential customers hence the business expects to have around15% of the total customers at the first months of the operations. The rest will be shared betweencompetitors. Eldoret competitors will take about 30% and the rest will take the remaining 50%.

The total market

=30,000 customers

The market held by the competitors

85/100 *30,000

=25,500 customers

Eldoret competitors

30/100 *30,000

=9,000 customers

The expected market share

15/100 *30,000

=4,500 customers.

2.4 METHODS OF PROMOTION AND ADVERTISING

Aim of promotion is to make aware the potential buyers about the existence of business alongside theservices offered by the business, basically promotions try to give out to the public unique service fromwhat the competitor offer. Some of the promotions that the business will offer include;

I. Offer good discount on those customers who will buy products on a large quantities.II. Provide door to door delivery services to customers who purchase products on bulky.

III. Give after sales service to regular customers.

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Advertisement methods

The business will advertise through the following ways:

1. Placing attractive designed bill board having the business name and products offered bybusiness. This will attract potential customers.

2. Printing business cards and sticker to given to customers during delivery. These cards will bearname, address, telephone number and all the services offered by the business, this make it easyfor the customers to make orders easily.

3. Posters also can be placed in strategic position.4. Also the manager will have records of delivery that is dates and methods of delivery to their

customers to maintain standard customer demand.5. When the business has established well the use of SAYARE Radio will be of great importance in

advertisement.

2.5 PRICING STRATEGY

In order to come up with the fair price to the customers I will set up the lowest price than mycompetitors but that price still yield to business some profit. When there is high demand and low supplyof products the prices increases due scarcities of commodity.

The overheads cost should be put into consideration before the prices of commodity is set, thefollowing factors should be taken into consideration:

1) Business objective: The objective of the business will affect the pricing of the products; thebusiness should have a certain target to achieve within a given period.

2) The Law of demand which state that the lower the supply the higher the demand, thus increasein prices of commodity.

3) Cost: the cost will should not be less than which is spend in production, the minimum priceshould be recover its initial cost.

4) Also the customers will be from upper, middle and lower classes therefore the prices will befavorable to all of them.

5) The goal is to have bigger and well established market; therefore I will adjust the prices to beslightly less than those of competitors.

2.6 SALES TACTICS

The business will offer quality products at fair prices this enables more customers. Also I will ensure thatthe products are always in stock and available at required quantities

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CHAPTER THREE

3.0 ORGANISATIONAL PLAN

3.1 ORGANIZATION

Management involves planning, directing, organizing, controlling and coordinating so as to achieve theset goals and objectives. So as the business to succeed sound management should be formed. Also themethods of communication do matter and will be:

i. Two way vertical communication

The manager will pass information to employees and vice verse

ii. Horizontal communication

Communication between employees in the level will share ideas and make consultation

iii. Internal communication

This will done through memorandum and meetings where suggestion, ideas and complains shall beaddressed. To major decisions the manager shall be responsible and each employee in the business shallhave roles to play to promote effective and efficient working environment.

The organization chart of the business will be as follows:

1.

GENERAL MANAGER

ACCOUNTANT

WATCHMAN ATTENDANTSDRIVER

DRIVER ASSISTANCE

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3.2 BUSINESS MANAGEMENT, PERSONNEL AND QUALIFICATION

The writer of this project, Miss Murey Juliet Cheruto, will be the manager as well as the Director.

1. Business manager/director

Name: Murey Juliet Cheruto

Title: Director/ general manager

Qualification: Diploma in Social Work and Community Development

Duties

Delegating responsibilities to employeesAddressing all matters arising in the businessPlays all roles of the management that is directing, coordinating, planning, organizing and

controlling.

2. Accountant

Qualification

Certificate in CPA (11) Certificate in book keeping Computer literate Two years working experience Must be fluent in Kiswahili and English

Duties

Keeping records of businessPurchasing and distributing the needed materialsPreparing staff payrollReceiving cash and give out receipt to customersConsultation incase of errors in cash books

3. Driver

Qualification

Holder of secondary certificate Qualified driving license of class B,C,E A certificate in sales and marketing

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Duties

Collecting goods and delivery of products to customersDoing the packages where necessaryArranging the warehouse, cleaning and making its presentable place

Serving customers who buy in retail

4. WATCHMAN OR SECURITY GUARD

Qualification

From a recognized security firm, for example Hatari

Duties

Providing security at day and at nightKeeping records of customers coming inAlso checking vehicles that enter so as to prevent unsafe products from being brought

5. DRIVER ASSISTANCE

Qualification

Holder of Kenya Certificate of Secondary Education Valid driver license of B,C,E class

Duties

Loading and off loading the truck with the help of the driver

6. BUSINESS ATTENDANT

Qualification

Form four leaver with mean grade of D+ Able to communicate fluently in Kiswahili and English Well discipline Age 25-38years

Duties

Arranging the warehouse and cleaning itServing all customersDoing packages where necessaryChecking the vegetable and fruits if they are fresh also well preserved

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3.3 RECRUITMENT, TRAINING AND PROMOTIONAL PROGRAMS

a. Recruitment

Recruitment will be done if there is a need and will be based on qualification and working experience.This will be done after advertising the posts in newspapers.

Application will be received, shortlisted candidates will be conducted and interview is done; thereafterthe qualified candidates should report with recommendation letters from their previous working places.

b. Training

This is one way of motivating employees in my company. Providing training to them after every threemonth and giving out study period this will help my employees to gain knowledge and skill from the newadvancing technology. Also the recruited employees will be trained before starting their job.

c. Promotion

Promotion will depend on qualification of each an employee, also the commitment to his or her post inthe job. The effort one is putting to improve the company will also determine. All these will motivateeach an employee to work hard so has to be promoted.

3.4 REMUNERATION AND INCENTIVES

i. Remuneration

JOB TITLE NO. OFEMPLOYEES

BASIC SALARY ALLOWANCE TOTAL

GENERALMANAGER

1 10000 3000 13000

ACCOUNTANT 1 8000 2000 10000DRIVER 1 6000 1000 7000WATCHMAN 2 9000 1600 10600ATTENDANT 3 5000 1500 9000DRIVER ASSISTANT 1 2000 500 25000

TOTAL 9 40000 9600 52100

All these salaries will be paid on time to prevent delays which might affect the budget.

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ii. Incentives

The director will introduce incentives which uplift morale of the employees, these include:

Paying medical bill by 8% All employees will be involved in business decision making Offering leaves and training The employees will be entitled to a year bonus of between 1000-2000 shillings Overtime pay will be paid to employees who work beyond their time Rewards for best employees at end of every year

3.5 LICENSE AND BY LAWS

Before the business commence some factors should be consider, this include:

i. License

The manager will obtain permit from Eldoret municipality at 5000 shillings and will be renewed annually

ii. By laws

The by- laws will be put across by all employees which will guide each employee and sustainability of thebusiness.

iii. Disposal laws

These are laws enacted to ensure sanitation within the premises. It will have dust pins for waste disposaland dust coats for all workers.

3.6 SUPPORT SERVICES

The external services are Red Cross and fire extinguishers that will provide necessary support andprotection if there are emergencies. This will ensure smooth running of the business.

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CHAPTER FOUR

OPERATIONAL AND PRODUCTION PLAN

4.0 OPERATIONAL PLAN

To enable business to prosper there should be a good operational plan in place. This will actual assistbusiness to focus on goals stated on the establishment of business. Also operation plan guides thebusiness on the amount of budget needed to run the business effective. To achieve maximum returnson business, the management should embrace the current technology in day to day business operation.

4.1 PRODUCTION FACILITIES AND CAPACITY

The business is new thus the facilities needed in the productions are bought using the available capital,priority are given to those facilities that will drive business. After securing the business premise thebusiness will pay the rent for the first six month. Monthly rent is five thousands thus the total for six

months will be thirty thousand only. The business premises consist of three rooms, warehouse, the mainhouse and the managers office. The managers office is enough to accommodate an office table, sixchairs and file cabinet. The warehouse should be spacious enough to allow good displays of goods oncounter. Other resources that are necessary for the business are:

RESOURCES NUMBER REQUIRED COSTLABOUR 9 EMPLOYEES 52100TELEPHONE 1 2000TABLE 2 1200OFFICE CHAIRS 6 1200COUNTER 1 1000

STATIONERY Counter books, pens, receiptbook

800

Rent 6 MONTHS 30,000TOTAL 88300

4.2 PRODUCTION STRATEGY

To attain competitive services, cost minimization and shortest time of operation the following measuresshould be taken into consideration.

Measure 1

Those goods which are moving fast are stocked in large quantities to avoid shortage during businessoperation. Since the business is dealing with perishable goods the maximum days a good is to be sold istwo days, this because most customers like fresh products from the farm.

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Measure 2

To be consistent and reliable to customers the business will operate through out from 7.30 am to8.00pm.

Measure3

To encourage and maintain customers, after sales service and discounts are offered.

Measure4

Working environment and general sanitation in business should be of high standard throughout.

Measure 5

Good public relation with customers is ultimate goal to be maintained and also attractive packaging of goods.

4.3 PRODUCTION PROCESS

The business deals on purchasing products from farm store and sell and distribute to diverse customersin the town. The process is shown below.

Buying from farm storing Distributing/selling

The manager and accountant will prepare a list of the products to be purchased and state their costprice.

4.3.1 Reception of the produce

On delivery to the premises the produce will be weighed and recorded by the accountant and thosedamaged will be separated. The goods are then kept in the warehouse for distribution

4.3.2 Selling

Customers make orders through telephone or coming personally. The goods should be purchased oncash basis then the driver will deliver them.

4.3.3 Restocking

When the stock reduces from the required amount the accountant will notify the manager where shewill make more orders of goods from suppliers and farmers. When it has been delivered it is beingsorted, weighed, cleaned and recorded.

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4.4 REGULATION AND AFFECTING OPERATION

4.4.1 Health regulation

Sanitation should be observed in the business premises and the goods that are being sold to customers.Also all goods sold should be satisfied by Kenya Bureau of Statistics (KEBS). In case of any improperpacking the business will be liable.

4.4.2 Safety regulation

The business will observe safety for the all workers by providing gloves, white coats for those working inwarehouses and boots to prevent their feet from being injured.

4.4.3 Environmental regulation

The business surroundings will be kept clean, this is having proper drainage and disposal of waste.

4.4.4 Labour laws

The business will comply with it s by- laws and government laws and some of these laws are:

The workers compensation act; deals with the compensation of workers involved in any accident whilein work.

The employment ant; states the treatment, payment and time of working for each worker.

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CHAPTER FIVE

5.0 FINANCIAL PLAN

This deals with ways of getting and spending the initial capital also how to obtain more capital forexpansion.

The business will have two types of capital:

i. Fixed assets money invested in assetsii. Working capital money invested on finished products and stock

5.1 PRE-OPERATIONAL COSTS

The cost to be incurred prior to the commencing of the operations in UTU BORA FRUITS ANDVEGETABLES DISTRIBUTORSwill be as follows:

ITEMS COSTFURNITUREMACHINERYTRADE LICENSERENTELECTRCITY AND FIXTURESTELEPHONEFITTING AND FIXTURESVEHICLEINSURANCEREGISTRATION

2500085000500010000980050002000080000300002000

TOTAL 271800

5.2 ESTIMATION OF WORKING CAPITAL

WORKING CAPITAL (WC) = CURRENT ASSETS (CA) CURRENT LIABILITIES (CL)

CURRENT ASSETS

Cash at hand 400,000

Cash at bank 200,000

Stock 100,000

TOTAL 700,000

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CURRENT LIABILITIES

Creditors 30,000

WC = CA CL

WC = 700,000 30,000

WC = 670,000 shillings

5.5 PROFORMA BALANCE SHEET

FOR YEARS 2013 AND 2014

ITEMS AS AT OPENING AS AT THE END OF2013

AS AT THE ENDOF 2014

CURRENT ASSETS

CashDebtorStock

TOTAL CURRENT ASSETS

400,000-100,000

500,000

450,00040,000150,000

640,000

500,00062,000200,000

762,000

FIXED ASSETS

MachineryAccumulated depreciation 5%Net machinery

Furniture and fittingsAccumulated depreciationNet furniture and fittingsTOTAL FIXED ASSETS

TOTAL ASSETS

CURRENT LIABILITIES

CreditorsAccruals

TOTAL CURRENT LIABILITIES

LONG TERM LIABILITIES

Bank loanOwners equityRetained earnings

85,0004,25080,750

45,000-45,000260,000

760,000

29,000-

29,000

200,000398,750-

90,0004,51085,690

41,0001,23039,770262,200

903,000

50,00090,000

140,000

180,000300,000145,000

92,0004,60087,400

40,0001,20038,800264,000

1,026,000

65,00080,000

145,000

150,000300,200293,000

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TOTAL LONG TERM LIABILITIES

TOTAL LIABILITIES

598,750

760,000

625,000

903,000

743,200

1,026,000

5.6 BREAK EVEN ANALYSIS

When the income is equals to the expenditure the business is said to be in break-even point. Thebusiness incurs neither profit nor loss.

METHOD 1

Total sales 38,100.70

Total cost of goods sold 25,250.00

Total gross profit 12,580.70

METHOD 11

Gross profit percentage = Gross profit/Total sales*100

= 12,580.70/38100.70* 100

=33%

STEP 111

TOTAL FIXED COST AMOUNTSalaries 625,200Insurance 30,000Rent 60,000License 3,000TOTAL 718200TOTAL VARIABLE COST

Transport 22,000

Advertising 10,000Electricity 14,400Telephone 15,000Water 4270Creditor 29,000Miscellaneous 5,000

TOTAL 99670

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B.E.P SALES LEVEL

Fixed cost *sales/sales-variable cost

= (718200*38100.70)/38100, 70-99,670

=737,492.5275

PROFITABILTY RATIOS

These are ratios used to check business profitability,

(a) Gross profit Ratio= (Gross profit *100)/sales

1258070 *100/3810070=33.02%

(b) Net profit ratio

=Net profit before tax *100/sales

=434840 *100/3810070

=11.41%.

(c) Return on capital employedNet profit before tax *100/ Net asset Value

Net asset value = fixed assets + current assets current liabilities

500000+125750-29000=596,000

=434840*100/ 596750.

=72.87%

(d) Return on total assets= Net profit before tax* 100/ Total asset

434840 *100/625750=69.49%

7/31/2019 bus plan(4)

28/28

(e) Return on owners equity =Net profit * 100/owners equity

=434840*100/398750=99.33%

DESIRED FINANCING

PRE-OPERATIONAL COST

WORKING CAPITAL

259,000670,000

TOTAL 929,000

PROPOSED CAPITALIZATIONs

PERSONAL SAVINGSBANK LOANFAMILY AND FRIENDSTOTAL

400,000200,000200,000800,000