CHAPTER FIVE

5.0 FINANCIAL PLAN

5.1 PRE – OPERATIONAL COST

This is the cost incurred at he start of the business to determine its income ans expenses for a particular
year

The table below shows the annual expenses / loses that the proposed business shall incure

ITEM TOTAL
MACHINE AND EQUPMENTS 70 000
ELECTRICITY COST 10 000
WATER 5 000
ADVERTISEMENT 40 000
LICENSE 50 000
WAGES AND SALARIES 512 000
TELEPHONE COST 15 000
TOTAL 702 000

5.2 WORKING CAPITAL

This is the amount in the business that can be easily converted into cash

1 ST YEAR 2ND YEAR 3 RD YEAR

STOCK 100 000 150 000 200 000
DEBTORS 60 000 100 000
CASH AT BANK 200 000 250 000 300 000
CASH AT HAND 175 000 195 000 230 000
TOTAL 475 000 655 000 830 000
 5.3 CASH FLOW PROJECTION

2023

Sep Oct Nov Dec Jan Feb March April may June July Aug
Cash flow
Capital 220900
Balances 0 365 000 27 000 22 000 175 000 180 000 400 000 250 000 300 000 300 000 300 000 300 000
Sales 200 000 435 00
Total cash flow 200 000 800 000
Cash out flow
Rent 220 220 220 220 220 220 220 220 220 220 220 220
Stock 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000
repair 5000 4000 3100 2100
Salaries 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666
License 4166 4166 4166 4166 4166 4166 4166 4166 4166 4166 4166 4166
Electricity 800 800 800 800 800 800 800 800 800 800 800 800
Telephone 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250
Water 400 400 400 400 400 400 400 400 400 400 400 400
Advert 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000
Transport 620 620 620 620 620 620 620 620 620 620 620 620
Loan repay
Payment on credit 200 200 200 200 200 200 200 200 200 200 200 200
 2024

Sep Oct Nov Dec Jan Feb March April may June July Aug
Cash flow
Capital
Balances 0 365 000 27 000 22 000 175 000 180 000 400 000 250 000 300 000 300 000 300 000 300 000
Sales 100 000 150 000 600 000 500 000 120 000 10 000 170 000 200 000 40 000 60 000 50 000
Total cash flow 100 000 520 000 860 000 750 000 520 000 235 000 500 000 540 000 390 000 440 000
Cash out flow
Rent 220 220 220 220 220 220 220 220 220 220 220 220
Stock 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000
repair 5000 4000 3100 2100
Salaries 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666
License 4166 4166 4166 4166 4166 4166 4166 4166 4166 4166 4166 4166
Electricity 800 800 800 800 800 800 800 800 800 800 800 800
Telephone 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250
Water 400 400 400 400 400 400 400 400 400 400 400 400
Advert 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000
Transport 620 620 620 620 620 620 620 620 620 620 620 620
Loan repay
Payment on credit 200 200 200 200 200 200 200 200 200 200 200 200

total 60 622 90 622 62 722 91 622 62 722

 2025

Sep Oct Nov Dec Jan Feb March April may June July Aug
Cash flow
Capital
Balances 0 340 000 14 000 60 000 90 000 110 000 170 000 190 000 350 000 400 000 380 000 390 000
Sales 150 000 100 000 160 000 50 000 20 000 10 000 200 000 400 000 1 000 000 500 000 200 000 304 000
Total cash flow 200 000 800 000
Cash out flow
Rent 220 220 220 220 220 220 220 220 220 220 220 220
Stock 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000 10 000
repair 5000 4000 3100 2100
Salaries 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666 42 666
License 4166 4166 4166 4166 4166 4166 4166 4166 4166 4166 4166 4166
Electricity 800 800 800 800 800 800 800 800 800 800 800 800
Telephone 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250
Water 400 400 400 400 400 400 400 400 400 400 400 400
Advert 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000
Transport 620 620 620 620 620 620 620 620 620 620 620 620
Loan repay
Payment on credit 200 200 200 200 200 200 200 200 200 200 200 200
Total 60 622
 5.4 PRO FORMA INCOME STAEMENT AND BALANCE SHEETS

5.4.1 PRO FORMA INCOME STATEMENT

This is used to determine the revenue and cost during the operating period of the business

Milkas mala products income statement for first three years .

1 ST YEAR 2ND YEAR 3RD YEAR

SALES 105 000 1 255 000 1 315 000
LESS GOODS SOLD 140 000 150 000 178 000
GROSS PROFIT 800 000 885 000 1 037 000

LESS EXPENSES

Wages and salaries 514 000 514 000 514 000

Telephone 3 500 39 000 4 200
Water 4 000 4 200 4 500
Electricity 5 000 5 200 7 000
License 2 700 2 700 2 700
Repair and maintenance 17 100 17 200 19 000
Loan payment 50 000 50 000 54 000
Advert 8 000 81 000 85 000
Net profit before tax 504 000 517 200 545 800
16 % tax 54 680 70 616 77 328
Net profit after tax 339 612 416 984 460 472
 5.4.2 BALANCE SHEET

This is the financial statement prepared at the end of the year to know the financial position of the
business

MILKAH’S MALA PRODUCTS BALANCE SHEET FOR THE FIRST THREE YEARS

1 ST YEAR 2 ND YEAR 3 RD YEAR

Fixed assets
Machine and equipments 74 350 74 350 74 350
Current assets
Stock 900 000 1 000 000 1 100 000
Debtors 85 000 70 000 120 000
Cash in hand 165 000 175 000 195 000
Cash at bank 200 000 250 000 300 000
Total assets 1350 00 1 560 350 1 789 350
Current liabilities
Creditor 10 000 60 000 85 000
Working capital 880 000 1 030 000 550 000
Financed by
Owner saving 500 000 600 000 700 000
Bank loan 300 000 100 000
Family contribution 140 000 300 000
Less loan payment 110 000 110 000 110 000
Total liabities 1940 000 2 200 000 1 475 000

5.5 BREAK EVEN ANALYSIS

This is the analysis of the relationship between cost income to a certain the profitability of the
business break dowwwwn point at which the cost to is neither a loss or profit is incurred break even
point is fixed cost / contribution

5.5.1 gross profit margin

Gross profit percentage 0 gross profit + sales

Year 1 9000/ 1050 000 x 100 = 85.71%

Year 2 995 000 / 1155 000 x 1000 = 86.11%

5.5.2 BREAK EVEN LEVELS

EXPENSES / GROSS PROFIT MARGIN X 100

Year 1 495 7000 / 85.7 x 100 = 578 413

Year 2 : 395 000 /86.1 x 100 = 458 769

5.6 CALCULATION OF PROFIT RATIO

5.6.1 GROSS PROFIT MARGIN

900 000 / 105 0400 X 100 = 55.7%

995 000 / 1155 000 X 100 =86.9%

5.6.2 RETURN EQUITY

Net profit after tax /owners equity x 1000

1349612 / 500 000 = 66.9%

5.7 FINANCIAL REQUIREMENT

ITEM AMOUNT
PRE- OPERATIONAL COST 416 000
FACILITIES FOR OPERATION 100 000
TOTAL 516 000

5.8 PROPOSED CAPITALIZATION

BUSINESS DETAIL AMOUNT

OWNERS EQUITY 400 000
DONATIONS 400 000
BANK LOAN 300 000
TOTAL 1 200 000

TITTTLE OF THE DOCUMENT : MILKAH’S MALA SHOP PRODUCTION

PO BOX THIKA

NAME OF THE PRESENTER : MILKA;HS KIIRU WAITHERERO

COURSE : CRAFT CERTIFICATE IN FOOD PROCESSING AND PRESERVATION TECHNOLOGY

COURSE CODE : 1903

INDEX NUMBER : 1542

INSTITUTION : MICHUKIO TECHNICAL TRAINING INSTITUTE

SUPERVISOR : OYWER
EXAMINATION SERIES : JULY 2023

PRESENTED TO : KENYA NATIONAL EXAMINATION COUNCIL FOR PARTIAL FULFILMENT OF CRAFT

CERTIFICATE IN FOOD PROCESSING AND PRESERVATION TECHNOLOGY

DECLARATION

I declare that this work is my original work and it has not been presented anywhere for the purpose of
examination or any award in any institution

PRESENTER : MILKAH KIIRU WAITHERERO

SIGNATURE :

DATE :

SUPERVISOR : MR OYWER

SIGNATURE :

DATE:

DEDICATION

I dedicate this piece of work to my beloved parents Mr. and Mrs. Kiiru for their moral and financial
support .To my sisters for their support and understanding during this period

ACKNOWLEDGEMENT

I wish to acknowledge my supervisors Mr. Oywer for his assistance from the start

EXECUTIVE SUMMARY

The owner of the business is intending to start up a business under the name Milkah Mala shop /
producer. The business will be located at Thika town near the main stage along Sedion
supermarket .She will be assisted in running of business by manager ,supervision ,finance
manager ,marketing manager, chefs ,drivers, receptionist and security officers

The location of the business will be easily accessible effective and efficient communication .The
business will serve individual commercial and institutional customer satisfaction and to challenge the
competitors through the use of various promotion and advertisement method price reduction and
promotion strategies.

The business will enable both skilled and unskilled man power enjoy the fruits through employment .It
will operate through out the week excluding Sunday morning following a time schedule as will be laid
down.

The financial requirement in starting and operating the business will be as follows

LOANS 200 000

PERSONAL 400 000
FAMILY 100 000
FRIENDS 150 000