COLLEGE: COURSE:

KOBUJOI INSTITUTE OF DEVELOPMENT STUDIES DIPLOMA IN SOCIAL WORK AND COMMUNITY DEVELOPMENT

TITLE: ADDRESS:

UTU BORA FRUITS AND VEGETABLES DISTRIBUTION 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 OF THE REQUIREMENT FOR THE AWARD OF DIPLOMA IN SOCIAL WORK AND COMMUNITY DEVELOPMENT

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

DECLARATION The project is my own work and has not been presented for a diploma in other college. Name: Murey Juliet Cheruto Sign: Date: ..

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

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. The business will be subjected to uplift the living standard people in the area as well as providing vegetables and 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 located in 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 and personal selling will be used throughout the first three mouths upon the opening of the business. Those will 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 activities taking 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 with supplies, 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 new business 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 for the business, insurance, labour law building and health regulation, all this will be strictly be followed for proper running of the business.

v.

FINANCIAL PLAN

The business will require a start capital of 800,000 shillings. From this amount, 200,000shillings will be borrowed from the bank in form of a loan; 200,000 shillings will be from friends and relatives while the remaining will be from my personal contribution. All the important business transaction will be done for the upkeep of the business, this include; the proforma income statement, cash flows statements and balance sheet. This will show the business growth and its profitability of the business.

CHAPTER ONE
1.0 BUSINESS LOCATION 1.1BUSINESS NAME The name of the business will be UTU BORA FFRUITS AND VEGETATION DISTRIBUTION. The name fits the business in that its main aim is to work extra hard to achieve the goals which are; a. To earn profit b. To attract more customers c. 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 Eldoret towns along Eldoret Iten road opposite air stripe Action Eldoret. Action complex in ground floor.The business is established here because it is strategic and also have a parking facility for those who own cars. Then address will be: UTU BORA FRUITS AND VEGETATION DISTRIBUTION, P.O BOX 3548, ELDORET, Phone Number: 0704692517, E-mail; mureycheruto@gmail.com

1.3 PHYSICAL LOCATION

NAIROBI ROAD

UGANDA ROAD

KIPCHOGE STADIUM

AIRSTRIP ROAD ACTION COMPLEX UTU BORA FRUIT & VEGETABLES

AIRSTRIP

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. II. III. IV. Ability to have profit alone Direct contact between customers and the owner To have quick decision making 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 from various farmers, sort, clean, packaging and preserve them to maximize the sales. The business will market its produce to local market, schools, hotels and hospitals. The business opens its doors on January 2012. The startup capital is aimed to be 7.2million, this aimed at purchasing machines and installation plus the transportation trucks. Farmers around the town will directly deliver fruits and vegetables to business premises to reduce operation costs. For farmers away from town, our trucks will be 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 the products and circulating them to target market. Also the business will purchase two trucks so as to deliver 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 neighboring counties. These services will be cleaning, packaging and transporting under preservation in trucks which will 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 and schools. The farmers supplying them will be from Kerio Valley, Kitale and Nandi.

2.

PLUMS

It will be collected, washed, sorted and it will be packed under small transparent polythene bags then preserved in the refrigerators because they cannot withstand high temperatures for two days. The farmers supplying will be from Timboroa. 3. LEMONS

They will be collected, sorted, washed and they will be packed in ventilated boxes then taken to the market. 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 conditions to stop over ripening. For unripe they will be stored in good atmosphere so that they ripe before packing them. 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 that there will be continuous flows in the market. It will be cleaned, sorted then packed in the crates then preserve them before releasing to the market. The farmers supplying will be from Nyaru and greenhouses around. 7. CABBAGES Because of high demand of cabbages in the market, they will be collected, sorted and be packed in wooden crates then transported to the market. The supplying farmers will be from Timboroa and Kaptagat. 8. SUKUMA WIKI The location of the business is very productive such that Sukuma wiki are left to rot in the farm and at times 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 Eldoret International Airport facility. The suppliers are from Kaptagat,Timboroa and Nyaru.

9. ONIONS Onions are plenty in the region thus they can be accessed easily and brought to the market, But at times the productions decline during dry period, especially in the months of December to March. So the scarcity 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 will help the business to regulate the prices because they are not perishable. The supplies will be from Nyaru, Kaptagat and Timboroa. 11. CARROTS Carrots are produced in plenty during dry seasons thus the market price is low. Timboroa area produces large 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. ii. iii. iv. The owner has skills and knowledge on entrepreneur and management acquire from the Kobujoi Instituted of Development Studies. 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. The owner will capitalized on competitor weakness by providing quality services to its customers. 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 to them. The ever increase in rural-urban migration make the business sustainable despite the entrance of new competitor to the market. The hotels and Restaurant industry are growing at alarming rate in the area, thus there will be a ready market of products on daily basis. All areas where the products are produced have good road network, thus products are brought to the market at right time.

v. vi. vii.

1.9 GOALS OF THE BUSINESS The business intents to achieve the following goals;

i. ii. iii. iv.

To maximize profit To maintain good relationship between customers and workers To be best distributor in the all region and later the whole Country and meeting the requirements of our nation 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 the sector of fruits and vegetables industry. The government encourages small-scale farmers to plant short term crops. The industry has picked up since past four years because they packed their fruits and vegetables in appropriate packets and transport using faster means like plain. Also the government has opened various industries that deal with these perishable products and being able to 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 produce and this will encourage farmers to sell their produce to our company. Also will advertise our product using media, magazines and posters this help my company to be known countrywide. Also in the advert we will indicate the price of every commodity which will be reduced by 30% that will help to have more customers and maintain them. This method of reduction of prices will help our company to grow in a faster rate and will help us to open more branches elsewhere thus creating job opportunities. The branches will offer the same services as the parent business as well as effective and efficient services to the customers. I will be offering discounts, delivering products and offering credits on goods to well known customers all these will help retain my customers and withstand competition in the market.

CHAPTER TWO
2.0 MARKETING PLAN This is a strategy that tries to explain how the products are to be marketed and achieve the laid down goals. 2.1 CUSTOMERS DESCRIPTION The customers are those people who buy the products available in the market. After conducting a market survey, the owner found that the business will be serving domestic, institutional and commercial customers. i. Domestic customers

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

The hotels and restaurants are many in Eldoret towns. The owner believe that the location of the business will be accessible to these customers, the prices will differ to some hotels because they are the best hotels and their services are expensive for example; Sirikwa, Miyako, Wargon, High Lands Inn, 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, Eldoret hospital, District hospital and Memorial hospital. They will get good services without any inconveniences. iv. School and institutions

The schools that will be supplied various products are Moi girls, Hill school, Chebisaas boys, Mother of apostles seminary, Elgon view Academy, Kipchoge Keino Academy Lions Academy. The institutions are; Moi university, school of Law, West campus, Chepkoilel campus, Rift Valley Technical Training Institute, Eldoret polytechnic, African institute and Elgon View college. The products will be offered at reasonable prices.

v.

Commercial customers

These are customers who will buy the products in large amount for reselling them in order to gain profit. 2.2 COMPETITORS DESCRIPTION The business will have competitors who will be direct entrepreneurs; these are those competitors who deal with similar products while indirect are those who deal with different products that can be used to substitute the products found in the market. The competitors that the business will face are: COMPETITOR UTUMISHI FRUITS DISTRIBUTION P.O BOX 132 ELDORET JASHO FRUITS AND VEGETABLES DISTRIBUTORS P.O BOX 58121 ELDORET COMING SOON VEGETABLES DISTRIBUTORS P.O BOX 187 ITEN JICHO THREE VEGETABLES DISTRIBUTORS P.O BOX 12342 TIMBOROA SYSTEMATIC FRUTS DISTRIBUTORS P.O BOX 34765 ELDORET MANENO MINGI FRUITS AND VEGETABLES DISTRIBUTORS P.O BOX 435 ELDORET LOCATION ELDORET STRENGTH Well established Many employees Stock variety Large spaced premises Many employees WEAKENESS No transportation facilities COMMENTS I will offer transport services

ELDORET

Poor packaging High prices

Attractive packaging Affordable prices in all products To improve on infrastructure

ITEN

TIMBOROA

Large space Low prices Have transportation facilities Lower prices Large space Many workers

Poor infrastructure Poor storage facilities Have unskilled employees

Have no threat to my business

ELDORET

Large stock Skilled labour Well established

High prices Do not operate on weekends

I will reduce my product prices slightly

ELDORET

Located in densely populated area Many employees Unskilled labour

Poor record keeping

I will offer monthly training to my employees

2.3 MARKET SHARES The business will offer some unique services from incumbent competitors which will attract customers and retain them. By doing so the business will get bigger market share easily. Also the rapid population increase 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 the produce from various farms, the business will have an edge over the others because the selling prices at the farms are lower than the ones which suppliers deliver to business premises, so the business will have the flexibility of adjusting their prices slightly lower its rival. It implies that when you sell at lower prices 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 around 15% of the total customers at the first months of the operations. The rest will be shared between competitors. 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 the services offered by the business, basically promotions try to give out to the public unique service from what the competitor offer. Some of the promotions that the business will offer include; I. II. III. Offer good discount on those customers who will buy products on a large quantities. Provide door to door delivery services to customers who purchase products on bulky. Give after sales service to regular customers.

Advertisement methods The business will advertise through the following ways: 1. Placing attractive designed bill board having the business name and products offered by business. This will attract potential customers. 2. Printing business cards and sticker to given to customers during delivery. These cards will bear name, address, telephone number and all the services offered by the business, this make it easy for 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 my competitors but that price still yield to business some profit. When there is high demand and low supply of products the prices increases due scarcities of commodity. The overheads cost should be put into consideration before the prices of commodity is set, the following factors should be taken into consideration: 1) Business objective: The objective of the business will affect the pricing of the products; the business 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 increase in prices of commodity. 3) Cost: the cost will should not be less than which is spend in production, the minimum price should be recover its initial cost. 4) Also the customers will be from upper, middle and lower classes therefore the prices will be favorable to all of them. 5) The goal is to have bigger and well established market; therefore I will adjust the prices to be slightly 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 that the products are always in stock and available at required quantities

CHAPTER THREE
3.0 ORGANISATIONAL PLAN 3.1 ORGANIZATION Management involves planning, directing, organizing, controlling and coordinating so as to achieve the set goals and objectives. So as the business to succeed sound management should be formed. Also the methods 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 be addressed. To major decisions the manager shall be responsible and each employee in the business shall have roles to play to promote effective and efficient working environment. The organization chart of the business will be as follows: GENERAL MANAGER

ACCOUNTANT

DRIVER

WATCHMAN

ATTENDANTS

1. DRIVER ASSISTANCE

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: Title: Qualification: Duties Delegating responsibilities to employees Addressing all matters arising in the business Plays all roles of the management that is directing, coordinating, planning, organizing and controlling. 2. Accountant Qualification Duties Keeping records of business Purchasing and distributing the needed materials Preparing staff payroll Receiving cash and give out receipt to customers Consultation 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 Certificate in CPA (11) Certificate in book keeping Computer literate Two years working experience Must be fluent in Kiswahili and English Murey Juliet Cheruto Director/ general manager Diploma in Social Work and Community Development

Duties Collecting goods and delivery of products to customers Doing the packages where necessary Arranging the warehouse, cleaning and making its presentable place Serving customers who buy in retail 4. WATCHMAN OR SECURITY GUARD Qualification Duties Providing security at day and at night Keeping records of customers coming in Also checking vehicles that enter so as to prevent unsafe products from being brought 5. DRIVER ASSISTANCE Qualification Duties Loading and off loading the truck with the help of the driver 6. BUSINESS ATTENDANT Qualification Duties Arranging the warehouse and cleaning it Serving all customers Doing packages where necessary Checking the vegetable and fruits if they are fresh also well preserved Form four leaver with mean grade of D+ Able to communicate fluently in Kiswahili and English Well discipline Age 25-38years Holder of Kenya Certificate of Secondary Education Valid driver license of B,C,E class From a recognized security firm, for example Hatari

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; thereafter the 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 three month and giving out study period this will help my employees to gain knowledge and skill from the new advancing 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 in the job. The effort one is putting to improve the company will also determine. All these will motivate each an employee to work hard so has to be promoted.

3.4 REMUNERATION AND INCENTIVES i. Remuneration

JOB TITLE GENERAL MANAGER ACCOUNTANT DRIVER WATCHMAN ATTENDANT DRIVER ASSISTANT TOTAL

NO. OF EMPLOYEES 1 1 1 2 3 1 9

BASIC SALARY 10000 8000 6000 9000 5000 2000 40000

ALLOWANCE 3000 2000 1000 1600 1500 500 9600

TOTAL 13000 10000 7000 10600 9000 25000 52100

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

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 the business. iii. Disposal laws

These are laws enacted to ensure sanitation within the premises. It will have dust pins for waste disposal and dust coats for all workers. 3.6 SUPPORT SERVICES The external services are Red Cross and fire extinguishers that will provide necessary support and protection if there are emergencies. This will ensure smooth running of the business.

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 assist business to focus on goals stated on the establishment of business. Also operation plan guides the business on the amount of budget needed to run the business effective. To achieve maximum returns on 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 the business 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 main house and the managers office. The managers office is enough to accommodate an office table, six chairs and file cabinet. The warehouse should be spacious enough to allow good displays of goods on counter. Other resources that are necessary for the business are: RESOURCES LABOUR TELEPHONE TABLE OFFICE CHAIRS COUNTER STATIONERY Rent TOTAL NUMBER REQUIRED 9 EMPLOYEES 1 2 6 1 Counter books, pens, receipt book 6 MONTHS COST 52100 2000 1200 1200 1000 800 30,000 88300

4.2 PRODUCTION STRATEGY To attain competitive services, cost minimization and shortest time of operation the following measures should be taken into consideration. Measure 1 Those goods which are moving fast are stocked in large quantities to avoid shortage during business operation. Since the business is dealing with perishable goods the maximum days a good is to be sold is two days, this because most customers like fresh products from the farm.

Measure 2 To be consistent and reliable to customers the business will operate through out from 7.30 am to 8.00pm. 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 customers in 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 cost price. 4.3.1 Reception of the produce On delivery to the premises the produce will be weighed and recorded by the accountant and those damaged 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 on cash 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 she will make more orders of goods from suppliers and farmers. When it has been delivered it is being sorted, weighed, cleaned and recorded.

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 improper packing 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 in warehouses 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 its 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 while in work. The employment ant; states the treatment, payment and time of working for each worker.

CHAPTER FIVE
5.0 FINANCIAL PLAN This deals with ways of getting and spending the initial capital also how to obtain more capital for expansion. The business will have two types of capital: i. ii. Fixed assets money invested in assets 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 AND VEGETABLES DISTRIBUTORS will be as follows:

ITEMS FURNITURE MACHINERY TRADE LICENSE RENT ELECTRCITY AND FIXTURES TELEPHONE FITTING AND FIXTURES VEHICLE INSURANCE REGISTRATION TOTAL

COST 25000 85000 5000 10000 9800 5000 20000 80000 30000 2000 271800

5.2 ESTIMATION OF WORKING CAPITAL WORKING CAPITAL (WC) = CURRENT ASSETS (CA) CURRENT LIABILITIES (CL) CURRENT ASSETS Cash at hand Cash at bank Stock TOTAL 400,000 200,000 100,000 700,000

CURRENT LIABILITIES Creditors WC = CA CL WC = 700,000 30,000 WC = 670,000 shillings 5.5 PROFORMA BALANCE SHEET FOR YEARS 2013 AND 2014 ITEMS CURRENT ASSETS Cash Debtor Stock TOTAL CURRENT ASSETS FIXED ASSETS Machinery Accumulated depreciation 5% Net machinery Furniture and fittings Accumulated depreciation Net furniture and fittings TOTAL FIXED ASSETS TOTAL ASSETS CURRENT LIABILITIES Creditors Accruals TOTAL CURRENT LIABILITIES LONG TERM LIABILITIES Bank loan Owners equity Retained earnings 200,000 398,750 180,000 300,000 145,000 150,000 300,200 293,000 29,000 29,000 50,000 90,000 140,000 65,000 80,000 145,000 85,000 4,250 80,750 45,000 45,000 260,000 760,000 90,000 4,510 85,690 41,000 1,230 39,770 262,200 903,000 92,000 4,600 87,400 40,000 1,200 38,800 264,000 1,026,000 400,000 100,000 500,000 450,000 40,000 150,000 640,000 500,000 62,000 200,000 762,000 AS AT OPENING AS AT THE END OF 2013 AS AT THE END OF 2014 30,000

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. The business incurs neither profit nor loss. METHOD 1 Total sales Total cost of goods sold Total gross profit 38,100.70 25,250.00 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 Salaries Insurance Rent License TOTAL TOTAL VARIABLE COST Transport Advertising Electricity Telephone Water Creditor Miscellaneous TOTAL AMOUNT 625,200 30,000 60,000 3,000 718200

22,000 10,000 14,400 15,000 4270 29,000 5,000 99670

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 employed Net 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%

(e) Return on owners equity =Net profit * 100/owners equity =434840*100/398750 =99.33% DESIRED FINANCING PRE-OPERATIONAL COST WORKING CAPITAL TOTAL 929,000 259,000 670,000

PROPOSED CAPITALIZATIONs PERSONAL SAVINGS BANK LOAN FAMILY AND FRIENDS TOTAL 400,000 200,000 200,000 800,000