Business Plan Potato Fritters

POTATO FRITTERS BUSINESS PLAN Muhammad Hayat Qureshi

Business Feasibility Term Project

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S.no. Table of Content Pg no. 1. Executive Summary ................................................................................................................. 1

2. PRODUCT ................................................................................................................................ 2

Concept ..................................................................................................................................... 2

3. Location .................................................................................................................................... 3

4. STRATEGY ............................................................................................................................. 3

5. SUSTAINABLE COMPETITIVE ADVANTAGE............................................................... 5

6. SWOT Analysis ........................................................................................................................ 6

Strengths ................................................................................................................................... 6

Weaknesses ............................................................................................................................... 6

Opportunities ............................................................................................................................ 6

Threats....................................................................................................................................... 6

7. Marketing Plan ......................................................................................................................... 7

Product ...................................................................................................................................... 7

Place .......................................................................................................................................... 7

Price .......................................................................................................................................... 7

Promotion ................................................................................................................................. 7

8. Human Resources Plan ............................................................................................................ 8

9. Production Capacity ................................................................................................................. 9

10. Financial Plan ......................................................................................................................... 10

11. Conclusion .............................................................................................................................. 11

12. Appendixes ............................................................................................................................. 12

A: Data and Assumption ........................................................................................................ 12

B: Product Costing ................................................................................................................. 13

C: Sales Forecasting ............................................................................................................... 17

D: Fixed Asset Schedule ........................................................................................................ 18

E: Operating Expense Schedule ............................................................................................ 19

F: Financing Required – Balance Sheet Year 0 ................................................................... 20

G: 1st Years Monthly Profit & Loss Account ...................................................................... 21

H: 3 Years Profit and Loss Account and Balance Sheet (Yearly) ...................................... 23 I: 3 Years cash Budget, NPV, IRR, and PI ........................................................................... 26

J: Reciepts & Payment Schedule ........................................................................................... 30

K: Scenario Analysis .............................................................................................................. 34

L: Ratios Analysis .................................................................................................................. 37


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M: Amortization Table for the long term Loan .................................................................... 38 N: Operating Cylce


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Executive Summary Potato Fritter proudly presents its first product named as ‘Potato Fritter’. It is a snack made of

circle shaped potato slices coated in our special batter of spices, served with tempting dips. At

the introduction stage the dips are available in four different flavors and our consumer will be

able to enjoy two different dips at a time in our one serving. The targeted location gives strength

to target all age group segments throughout the year in all seasons. We have selected two stall to

place at Par tower shopping Mall and Forum. The location has advantages that we can easily ca-

ter all the age group and the target audience has the affordability level for our product as well as

there is a high acceptability of this sort of snacks. We designed our business strategy based on

differentiation because we are offering a new product in the Pakistan’s snack industry with our

own invented recipe. We have product and service differentiation in this way we are giving our

customer more benefit in slightly high prices as compared similar product. We foresee with the

time our concept can be adopted and imitated by many others, we aim and challenge to maintain

the recipe as our sustainable competitive advantage. We prepare all the semi-prepared ingre-

dients ourselves such our own prepared bread crumbs and other coating dips and sauces with our

own innovative recipes to maintain a sustainable competitive advantage. Our strength supports

us with our innovative product, process, customer, and targeted segment. We will have opportun-

ities to grow in a view that end user positive response towards innovation, high profitability,

market development, continues innovation (product development). Project does not require an

aggressive advertisement because the location gives us the advantage to make aware our custom-

er about our product. So, that marketing expense is constant throughout the year. We have the

spare production capacity as well as we will try practice best human resources policy as we tar-

get 10% and 15% increment regardless of any extra ordinary sales performance. Moreover, our

profitability is increasing on yearly base with the high cash inflows. Financial success can be

analyze from the present value of the project which positive at rate of 60%. The project implicit

rate of return is 62.56% and on the profitability scale it has the value 1.016.


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PRODUCT

Concept

We are introducing “Potato Fritters” exclusively offering potato fritters as a snack made of circle

shaped potato slices coated in our special batter of spices, served with tempting dips. Potato frit-

ters is purely a new and original concept in snack meals with a variety of four different dips to

enhance its taste.

Potato fritters are made from thin slices of potatoes which are marinated in the batter of baking

powder, corn flour, mustard powder, black pepper, white pepper, and salt. Then they are coated

with hand made fresh bread crumbs. These well marinated and coated potato slices are then deep

fried in oil to get crispy and golden color. We serve Potato Fritters with any of two dips of our

customer’s choice from a range of four mouth watering dips. Dips include deep mints which are

made of Tamarind, mint, and coriander, Mustard dip, Chili Mayo Dip, and Garlic Mayo Dip.

Potato Fritters is nutritious and healthy as its made in highly hygiene conditions and cooking

process. We take special care of our customers to serve them in disposable and easy-to-carry

plates to help them easily revolve and enjoy their food while shopping as we have our stalls out-

let at renowned food courts of shopping malls.

Potato Fritters are served hot and crispy with any of two dips in our designed plates with our

unique logo embossed on it. We serve 12 slices of fritters in each plate. Order time takes 3 to 5

minutes to serve.


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Location Park Tower shopping Mall & Forum Shopping Mall

Easy to target all age groups

Audience has affordability for product

Positive attitude for having wispy delicious snacks while shopping

People want something different with different taste

Target market is used try new stuff and always ready to accept superior products

Audience are used to have luxurious appetite

STRATEGY We have the strategy of ‘product differentiation’. As our product is a different concept in snacks

we have emphasized on its differentiation. On the basis of product differentiation, we can charge

the premium price by following the differentiation product strategy. Also adopting the psycho-

logical pricing we sell each pallet for Rs. 95 to keep the price in two-digit figure. As our product

is at introduction stage so we cannot charge high prices however we plan to focus on cost recov-

er strategy with maintaining our unique selling preposition as well.

We have differentiated our product based on;

Product Differentiation – Our Taste, recipe, pioneer to introduce in this sort of snack

Service Differentiation – We have direct customer interactive process, that shows our

hygienically care and real time process.

Personnel Differentiation – It’s our own invented recipe that is our mutual creativity

Moreover, Karachi has a developed and fast growing food market with dynamic competition

among the different food chains. But market has great potential for new entrants for their innova-

tive ideas. So we can differentiate our product based on:


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Innovation in snacks: we have unique and innovative idea in snacks as fries have been

very common snacks for decades so we have come up with a new idea for potato lovers.

Snacks have limited range in Pakistan as in fries, pasta, desi chats etc.

Quality food: we provide quality in food as well as serving our customers in hygienic

pallets made from quality paper. We use high quality oil and fresh spices to enhance the

taste and maintain quality. We aim to deliver high quality and delicious taste within rea-

sonable price.

New taste in snacks: we differentiate our product with its different taste. We have our

own invented recipe with aromatic blend of spices and we have expertise and cooking

tactics to develop new taste for our customers.

In all way, we are trying to serve our customer with better product with slightly high price that

more for more as compared to our similar product competitors:


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SUSTAINABLE COMPETITIVE ADVANTAGE

We believe and challenge our recipe is our sustainable competitive advantage. Firstly it’s the

first time ever Potato Fritters are being launched in the market but as we foresee with the time

our concept can be adopted and imitated by many others, we aim and challenge to maintain the

recipe as our sustainable competitive advantage.

We use a number of different tips to create unique taste through our recipe. We use homemade

bread crumbs from bakery bread which are used partly soaked rather than dry bread crumbs as

commonly used by others.

We use double coating for potatoes, firstly a powder coating of mustard powder, black pepper,

white pepper, and baking powder. Then again potato slices are coated with the same ingredients

as batter.

For our deep mints dip, we heat the Deep Mint-mint paste for few minutes as it would never af-

fect the throat and gets less tangy.

From time to time, we will be introducing new flavors of dips to provide our customers with a

broader choice of dips to enjoy with potato fritters.


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SWOT Analysis Strengths

End-user sales control and direction Right products, quality, and relia-

bility Spare manufacturing capacity. Have customer lists Direct delivery capability. Product innovations ongoing Product (what are we selling) Process (how are we selling it) Customer (to whom are we selling

it) Management is committed and con-

fident New Product in the market an USP Cooking expertise, own invented

recipe Difference of taste Our Human Resource High quality, delicious taste within

reasonable price ISO – Quality Certification Hygienic cooking process with cus-

tomer interaction Cultural support, and increasing

trend of snacks & fast food

Weaknesses

Customer lists not tested. Some gaps in range for certain sec-

tors. We would be a small player. No direct marketing experience Limited budget No pilot or trial done yet Customer service staff needs train-

ing. Lack of competitive strength Reputation and presence Financials Timescales, deadlines and pressures

Opportunities

Can develop new products Profit margins will be good. End-users respond to new ideas. Could extend to other cities New specialist applications Could be a better supplier for cater-

ers Market development Industry or lifestyle trends Business and product development

Threats

Environmental effects would favor larger competitors.

Market demand Retention of key staff critical Could distract from core business


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Marketing Plan

Product

Potato fritters a snack made of potatoes coated in our special batter of spices, served with tempt-

ing dips. Potato fritters is purely a new & original concept in snack meal with a variety of four

dips to enhance its taste. There are many varieties in dips to give the maximum varieties in taste

which includes Deep Mint, mayo, Garlic and Mustard etc.

Place

We planned to open our outlet in a form of stall at:

Park Tower

Forum

Those people who come for shopping usually they need some sort of delicious appetizer that

must be slightly healthy. In this way we are catering all segment of the market and segment have

the affordability and acceptability for the expensive, delicious taste.

Price

The fritters is only available in 250gms disposable paper box with two different dip just for

Rs.95. the price is slightly high as compared to other snacks which are available in our targeted

segments. But we have come up with absolute new idea with our differentiated taste and product

recipe so in this sense we are giving our consumer “more for more.”

Promotion

We market our brand with sensational opening ceremony in which we make trail of our products

in the whole mall and we will place standees and buntings. We will play games with kids and

make aware all the age group about our snacks and we will also take their suggestion to enhance

or customize our dip taste.

Then, on quarterly basis we will introduce some discount offers against our marketing budget or

as per the sales performance.


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Human Resources Plan

Workers Year 2009 Year 2010 Year 2011

Monthly Yearly Monthly Yearly Monthly Yearly

Chef 1 10,000

120,000

11,500

138,000

13,800

165,600

Chef 2 10,000

120,000

11,500

138,000

13,800

165,600

Helper 1 6,000

72,000

6,600

79,200

7,590

91,080

Helper 2 6,000

72,000

6,600

79,200

7,590

91,080

Manufacturing 32,000

384,000

36,200

434,400

42,780

513,360

Salesman 1 9,000

108,000

10,350

124,200

12,420

149,040

Salesman 2 9,000

108,000

10,350

124,200

12,420

149,040

Manager Operation & Finance

12,000

144,000

14,000

168,000

16,000

192,000

Operating 30,000

360,000

34,700

416,400

40,840

490,080

Total Annual Salaries 744,000

850,800

1,003,440

Here, we have allocated salaries over the period of the 12 months and every year our employees

getting the increment regardless of the extra ordinary performance. In case of good performance

they get the one month salary as bonus at the end of semi-annually period. In year 2010 and 2011

the increment will be 10% and 15% respectively.


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Production Capacity Potato Fritter Pvt Ltd

Production Capacity Planning Per 12 Hrs Shift Per Year

Normal Capacity Units 1400 511000 Capacity Utilization 2009 600 219,000 Capacity Utilization 2010 780 284,700 Capacity Utilization 2011 1092 398,580

In year 2009, we allocate fixed cost over the utilize capacity which will remain same until our

normal capacity. So, in the next years we will have the favorable capacity variance that indirectly

lower per unit cost of the product.


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Financial Plan As Potato Fritters is a food business therefore its main factor of cost is material costing in overall

the product analysis. Product cost is slightly high but as the capacity utilization will increase the

cost of overhead will also decrease. The profitability of the business solely depends upon the

turnover of the business. It has direct relationship with turnover because the profitability is being

played a significant role through per unit profit. Since, the turnover start increasing we will have

more contribution margin to cover operating expense. In year 2009, sales is 21900 units which is

contributing Rs. 3,066, 727 in volume (Rs. 14 per unit), in year 2010 and 2011 contributions are

Rs. 4,258,754 in volume (Rs. 15 per unit) and Rs. 6,333,310 in volume (Rs. 16 per unit) respec-

tively. It is expected that at 95% capacity utilization this contribution margin will be contributed

Rs 22 per unit.

Operating expense is based on the cycle of the business which is not related sales in a sense they

are showing a fixed behavior. So that, these a very rare probability in increase of operating ex-

pense until the attainment of the 95% capacity.

Financial charges affected a significant burden in the starting years but after the 3 years we will

pay off loan amount than we will have high profitability with dual affect. From one side our sales

volume and on second the expenses like financial charge and other operating expense will be

lower.

We will have the flawless operating cycle due to our efficient process; we will have 100% ability

to pay off our short term debt and to maintain inventory level on cash basis. Our cash flows are

very good throughout the year.

Annual profits are Rs. 1,024,873 in year 2009, Rs. 1,810,586 in 2010, and Rs. 3,149,205 in 2011

respectively.

Ongoing economic condition does not support the bad cash flows that further lower the Implicit

Rate of Return. So, our cash Inflows are Rs, 2,158,682 in year 2009, Rs. 2,063,919, and Rs.

3,652,577 in years 2011. If we discount our cash inflows @60% still we are getting positive Net

Present value against the Investment of Rs. 3,000,000. It shows the viability of the project and its

current implicit rate of return is 62.56% and on the profitability index it has the 0.984.


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Conclusion The project idea has a great potential in terms of profitability and growth. There is definite

chance to build an industry in hard snacks. On the base of the product idea and its strong pillar in

a form of:

Product USP

Highly sustainable competitive advantage

Increasing returns

Growing business opportunity

Itself sustainable financial support

Targeted segment (Consumer Need)

Continues product development and new market expansion

We can conclude the 100% percent viability of the project in all the way around.


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Appendixes

A: Data and Assumption

Sale price

The introductory price of the fritters packet is Rs 95 which is available in four delicious

dips.

Inventory level

The level of stock is to be maintained for the 30 days normally which is consist 20 days

normal consumption; 5 days lead time and 5 days safety stock. Stock would order 20th day

of every month that will be receive by the 25th day of the same month.

Payment Mode

The payment of the stock will be made in 30 days credit period from the date of the order to

the next order. All other manufacturing and operating expenses will be made on 30 days

credit period. However, the labor cost and salaries will be paid until the 10th of the next

month which includes:

Labor wages

Salesperson and staff salaries

Receipt Mode

The revenue collection is totally based on the cash basis as per the nature of the business.


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B: Product Costing

Potato fritter (Pvt) Ltd Product Cost Sheet

Material Costing

Ingredients Cost per kg / ltr

Recipe /Platter PKR

Potato 17 250 gms 4.25 Maida 30 120 gms 3.60 Corn flour 40

120 gms 4.80

Bread Crumbs 20 4 pcs 6.67 Beson 53 100 gms 5.30 Mustard Powder 20 25 gms 5.00 Black paper 45

10 gms 4.50

White pepper 25 10 gms 2.50 Water 7 500 ml 3.50 Butter / Corn Oil 140

200 /ltr 28.00

Salt 13 10 gms 0.13 Dip Cost 5 Material Cost per Platter 73.25

Packing Material Costing Cost/box (PKR) No. of pcs

Cost/unit (PKR)

Butter Papers 200 1000 0.2 Paper box 2000 1000 2 2.2

75.45

Labor Costing Monthly salary (PKR)

Volume Cost/unit

Chiefs (2 persons) 10000 120,000 0.548

Waiter (2 persons) 6000 72000 0.329

16000 192,000

Labor per platter 0.8767

Prime Cost

76.3234


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FOH Costing Monthly expense

Per unit

Fixed

Depreciation 7556 90,667 0.414

Rent 50000 600,000 2.740

57,555.6 690,667 3.154

Variable (W-1)

Supplies 2,614 31,286 0.143

Heat & Power 5,143 62,571 0.286

Maintenance & Repairs 3,857 46,929 0.214

11,614 140,786 0.643

69,288 831,452

FOH per unit 3.797 Miscellaneous

0.000

Cost per unit 80.120 Sale Price 95

W-1

Variable FOH Rates 10 hrs Shift

(PKR) Daily Units Per Unit Supplies 200 1400 0.143 Heat & power 400 1400 0.286 Maintenance 300 1400 0.214


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Dips Costing per 100 ml

Serving Dips Deep Mint Dip Cost

Ingredients Cost/kg or ltr

Recipe/Platter PKR

Mint 4

40 gms 0.8 Fresh Coriander 3 40 gms 0.6 salt 15 8 gms 0.12 Red chili powder 25 8 gms 0.2 Cumin 25

8 gms 0.2

Pulp (Tamarind) 32 100 gms 3.2 Garlic 30 24 gms 0.72 Sugar 23 8 gms 0.184

5.224

Chili Mayo Dip Dip Cost Ingredients Cost Weight Recipe/Platter PKR

Chili Garlic Sauce 90 90/kg 32 gms 2.88 Mayonnaise 100 100/kg 32 gms 3.2

6.08

Garlic Mayo Dip Dip Cost

Ingredients Cost Weight Recipe/Platter PKR

Garlic 30 30/kg 16 gms 0.96 Mayonnaise 100 100/kg 32 gms 3.2

4.16


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Mustard Dip Dip Cost

Ingredients Cost Weight Recipe/Platter PKR

Garlic 30 30/kg 16 gms 0.96 Mayonnaise 100 100/kg 32 gms 3.2

4.16

Weight Average Dip Cost

DEEP MINT DIP 5.224 Mayo Dip

6.08

Garlic Mayo Dip 4.16 Mustard Dip 4.16

19.624 Weight Average per unit Dip Cost 4.906


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C: Sales Forecasting

Potato Fritter Pvt Ltd Sales Forecast

Month Days

Year 2009 Year 2010 Year 2011

Sales/Day Sales Sales

/Day

Sales Sales/

Day

Sales

Units PKR Units PKR Units PKR

Jan 31 600 18,600 1,767,000 780 24,180

2,297,100

1,092

33,852

3,215,940

Feb 28 600 16,800 1,596,000 780 21,840

2,074,800

1,092

30,576

2,904,720

March 31 600 18,600 1,767,000 780 24,180

2,297,100

1,092

33,852

3,215,940

April 30 600 18,000 1,710,000 780 23,400

2,223,000

1,092

32,760

3,112,200

May 31 600 18,600 1,767,000 780 24,180

2,297,100

1,092

33,852

3,215,940

June 30 600 18,000 1,710,000 780 23,400

2,223,000

1,092

32,760

3,112,200

July 31 600 18,600 1,767,000 780 24,180

2,297,100

1,092

33,852

3,215,940

Aug 31 600 18,600 1,767,000 780 24,180

2,297,100

1,092

33,852

3,215,940

Sep 30 600 18,000 1,710,000 780 23,400

2,223,000

1,092

32,760

3,112,200

Oct 31 600 18,600 1,767,000 780 24,180

2,297,100

1,092

33,852

3,215,940

Nov 30 600 18,000 1,710,000 780 23,400

2,223,000

1,092

32,760

3,112,200

Dec 31 600 18,600 1,767,000 780 24,180

2,297,100

1,092

33,852

3,215,940

219,000 20,805,000 284,700

27,046,500

398,580

37,865,100

Sales Forecast

219,000 20,805,000

284,700

27,046,500

398,580

37,865,100


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D: Fixed Asset Schedule

Potato Fritter Pvt Ltd Fixed Assets Schedule

units Cost PKR

Life in yrs Salvage value

Annual Depre-ciation

Monthly Depre-ciation

Fryers 2 150,000.00 5 20,000.00 26,000.00 2,166.67 Crockery & Cutlery 4 120000 3 - 40,000.00 3,333.33 Stalls 2 100000 10 20,000.00 8,000.00 666.67 Cooking Supplies 2 50000 3 - 16,666.67 1,388.89 Van 400000 5 50,000.00 70,000.00 5,833.33 Advance

600000

warehouse 500000 Depreciation 160,666.67 13,388.89

Total Fixed Assets 1,920,000.00 Continue

Monthly

Book Value 31, Dec,09



Manufacturing De-preciation

Operating Depre-ciation

124,000.00 98,000.00 72,000.00 2,166.67 80,000.00 40,000.00 - 3,333.33 92,000.00 84,000.00 76,000.00 666.67 33,333.33 16,666.67 - 1,388.89

330,000.00 260,000.00 190,000.00 5,833.33 600,000 600,000 600,000 500,000 500000 500000 1759333.333 1598666.667 1438000.000 7556 5833

Yearly 90666.66667 70000


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E: Operating Expense Schedule

Operating Expense Schedule Direct Labor and Salaries

Workers Year 2009 Year 2010 Year 2011

Monthly Yearly Monthly Yearly Monthly Yearly Chef 1 10,000 120,000 11,500 138,000 13,800 165,600 Chef 2 10,000 120,000 11,500 138,000 13,800 165,600 Helper 1 6,000 72,000 6,600 79,200 7,590 91,080 Helper 2 6,000 72,000 6,600 79,200 7,590 91,080 Manufacturing 32,000 384,000 36,200 434,400 42,780 513,360 Salesman 1 9,000 108,000 10,350 124,200 12,420 149,040 Salesman 2 9,000 108,000 10,350 124,200 12,420 149,040 Manager Operation & Finance 12,000 144,000 14,000 168,000 16,000 192,000 Operating 30,000 360,000 34,700 416,400 40,840 490,080 Total Annual Salaries 744,000 850,800 1,003,440

Marketing Expense 50,000 600,000

Supplies

10,000 120,000

Miscellaneous

10,000 120,000

Total 70,000 840,000


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F: Financing Required – Balance Sheet Year 0

Potato Fritter Pvt Ltd Balance Sheet As on

1,Jan,2009 Fixed Assets PKR Equity & Liability PKR

Net 1,920,000 44% Share Capital 2,000,000 45%

Current Assets 0% Long Term Loan

Cash 1,080,000 25% Bank loan @ 22% 1,000,000 23%

Inventory 1,403,308 32% 0%

Account Payable 1,403,308 32%

4,403,308 100% 4,403,308 100%

Potato Fritter Pvt Ltd

Balance Sheet As Year O Fixed Assets PKR Equity & Liability PKR

Net 1,920,000 64% Share Capital 2,000,000 67%

Current Assets Long Term Loan

Cash 1,080,000 36% Bank loan @ 22% 1,000,000 33%

3,000,000 100%

3,000,000 100%


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G: 1st Year Monthly Profit and Loss Account

Month Jan Feb Mar April

Sales

1,767,000.00

1,596,000.00

1,767,000.00

1,710,000.00

Less: Cost of Goods Sold (1,490,231.35) (1,346,015.42) (1,490,231.35) (1,442,159.37)

Gross profit

276,768.65

249,984.58

276,768.65

267,840.63

Less: Operating Expenses Salaries 12000 12000 12000 12000 Depreciation 5833 5833 5833 5833 Supplies 10000 10000 10000 10000 Marketing expense 50000 50000 50000 50000 Miscellaneous 10000 10000 10000 10000

(87,833.33) (87,833.33) (87,833.33) (87,833.33) Operating profit 188,935.31 162,151.25 188,935.31 180,007.29

less: Financial charges (18,333.33) (18,333.33) (18,333.33) (18,333.33)

Profit before tax

170,601.98

143,817.92

170,601.98

161,673.96

less: Taxation (@35%) (59,710.69) (50,336.27) (59,710.69) (56,585.89) Profit after tax 110,891.29 93,481.65 110,891.29 105,088.07

Month

May

Jun

Jul

Aug

Sales 1,767,000.00 1,767,000.00 1,710,000.00 1,767,000.00 Less: Cost of Goods Sold (1,490,231.35) (1,490,231.35) (1,442,159.37) (1,490,231.35)

Gross profit 276,768.65 276,768.65 267,840.63 276,768.65 Less: Operating Expenses

Salaries 12000 12000 12000 12000 Depreciation 5833 5833 5833 5833

Supplies

10000

10000

10000

10000

Marketing expense 50000 50000 50000 50000 Miscellaneous 10000 10000 10000 10000

(87,833.33)

(87,833.33)

(87,833.33)

(87,833.33)

Operating profit 188,935.31 188,935.31 180,007.29 188,935.31 less: Financial charges (18,333.33) (18,333.33) (18,333.33) (18,333.33)

Profit before tax

170,601.98

170,601.98

161,673.96

170,601.98

less: Taxation (@35%) (59,710.69) (59,710.69) (56,585.89) (59,710.69) Profit after tax 110,891.29 110,891.29 105,088.07 110,891.29

Continue...


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Month Sep Oct Nov Dec

Sales 1,710,000.00 1,767,000.00 1,710,000.00 1,767,000.00

Less: Cost of Goods Sold

(1,442,159.37)

(1,490,231.35)

(1,442,159.37)

(1,490,231.35) Gross profit 267,840.63 276,768.65 267,840.63 276,768.65

Less: Operating Expenses

Salaries

12000

12000

12000

12000

Depreciation 5833 5833 5833 5833 Supplies 10000 10000 10000 10000

Marketing expense

50000

50000

50000

50000

Miscellaneous 10000 10000 10000 10000 (87,833.33) (87,833.33) (87,833.33) (87,833.33)

Operating profit 180,007.29 188,935.31 180,007.29 188,935.31 less: Financial charges (18,333.33) (18,333.33) (18,333.33) (18,333.33)

Profit before tax 161,673.96 170,601.98 161,673.96 170,601.98 less: Taxation (@35%) (56,585.89) (59,710.69) (56,585.89) (59,710.69)

Profit after tax

105,088.07

110,891.29

105,088.07

110,891.29


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H: 3 Years Profit and Loss Account and Balance Sheet

Potato Fritter (Pvt)Ltd

Profit and Loss Account

For the Period ended 31, Dec, 09

PKR

per Units Units Sold

Sales

20,805,000.00

95

219,000


(17,738,272.38)

(81.00)

Gross profit

3,066,727.62

14.003

Less: Operating expense

Salaries

360,000

Depreciation

70,000

Supplies

120,000

Marketing expense

600,000

Miscellaneous

120,000

(1,270,000.00)

(5.799)

Operating profit

1,796,727.62

8.204

less: Financial charges

(220,000.00)

(1.005)

Profit before tax

1,576,727.62

7.200

less: Taxation (@35%)

(551,854.67)

(2.520)

Profit after tax

1,024,872.95

4.680

Balance Sheet


Balance Sheet As on 31,Dec,2009

Fixed Assets PKR Equity & Liability PKR

Net

1,759,333 25.79% Share Capital 2,000,000 29.32%

Stall Advance Retained Earning 1,024,873 15.02%

Current Assets Long Term Loan

Cash

3,238,682 47.47% Bank loan @ 22% 730,342 10.71%

Inventory 1,824,300 26.74% Short term Liability

Account Payable 2,025,588 29.69%

Loan Payable 269,658 3.95%

Accrued Interest 220,000 3.22%

Accrued Tax 551,855 8.09%

Total

6,822,316 100%

Total

6,822,316 100.00%


28 | P a g e

Year 2010




PKR

per Units

Units Sold

Sales

27,046,500.00

95

284,700


(22,787,754.10)

(80.04)

Gross profit

4,258,745.90

14.96


Salaries

416,400

Depreciation

70,000

Supplies

120,000

Marketing expense

600,000

Miscellaneous

120,000

(1,326,400.00)

(4.659)

Operating profit

2,932,345.90

10.300


(160,675.22)

(0.564)

Profit before tax

2,771,670.68

9.735


(970,084.74)

(3.407)

Profit after tax

1,801,585.94

6.328

Balance Sheet




Net 1,598,667 16.91% Share Capital 2,000,000 21.15%

Retain Earning 2,826,459 29.89%

Current Assets

Long Term Loan

Cash

5,302,601 56.08% Bank loan @ 22% 401,359 4.24%





Accrued Tax 970,085 10.26%

9,455,289 100%

9,455,289 100%


29 | P a g e

Year 2011




PKR

per Units

Units Sold

Sales

37,865,100.00

95

398,580


(31,531,789.07)

(79.11)

Gross profit

6,333,310.93

15.89


Salaries

490,080

Depreciation

70,000

Supplies

120,000

Marketing expense

600,000

Miscellaneous

120,000

(1,400,080.00)

(3.513)

Operating profit

4,933,230.93

12.38


(88,299.00)

(0.222)

Profit before tax

4,844,931.94

12.16


(1,695,726.18)

(4.254)

Profit after tax

3,149,205.76

7.90

Balance Sheet




Net

1,438,000 11.11% Share Capital 2,000,000 15.45%

Retained Earning 5,975,665 46.15%

Current Assets

Long Term Loan

Cash

8,955,577 69.17% Bank loan @ 22% (0) 0.00%





Accrued Tax 1,695,726 13.10%

12,947,598 100%

12,947,598 100%


30 | P a g e

H: 3 Years cash Budget, NPV, IRR, and PI


Cash Flow Statement

Year 0 2009 2010 2011

Cash Flow From Opera-tions

EBIT 1,796,727.62 2,932,345.90 4,933,230.93 Changes in Inven-tory (420,992.40) (729,720.16) - Changes in paya-ble 622,280.10 742,139.80 18,820.71

Less Interest - (220,000.00) (160,675.22) 1,998,015.32 2,724,765.55 4,791,376.42

Less Tax - (551,854.67) (970,084.74)

1,998,015.32 2,172,910.88 3,821,291.69

Add Depreciation 160,666.67 160,666.67 160,666.67 Operating Cash Flow 2,158,681.98 2,333,577.55 3,981,958.35

Cash Flow from Invest-ments (3,000,000.00) - - -

Cash Flow after Investing (3,000,000.00) 2,158,681.98 2,333,577.55 3,981,958.35

Cash Flow From Financ-ing

Repayment of Loan - (269,658.07) (328,982.85)

Net Cash Flow (3,000,000.00) 2,158,681.98 2,063,919.47 3,652,975.50

Opening Cash Balance 1,080,000.00 3,238,681.98 5,302,601.46 Closing Cash Balance 3,238,681.98 5,302,601.46 8,955,576.96

Net Present value DF @ 35% 0.740740741 0.548696845 0.406442107 Investment (3,000,000.00) 1,599,023.69 1,132,466.10 1,484,723.06 DCF 4,216,212.86 NPV 1,216,212.86


31 | P a g e

DF @ 40% 0.714285714 0.510204082 0.364431487 Investment (3,000,000.00) 1,541,915.70 1,053,020.14 1,331,259.29 DCF 3,926,195.14 NPV 926,195.14

DF @ 50% 0.666666667 0.444444444 0.296296296 Investment (3,000,000.00) 1,439,121.32 917,297.54 1,082,363.11 DCF 3,438,781.98 NPV 438,781.98

DF @ 55% 0.64516129 0.403225806 0.252016129 Investment (3,000,000.00) 1,392,698.05 832,225.59 920,608.75 DCF 3,145,532.39 NPV 145,532.39

DF @ 60% 0.625 0.390625 0.244140625 Investment (3,000,000.00) 1,349,176.24 806,218.54 891,839.72 DCF 3,047,234.51 NPV 47,234.51

DF @ 65% 0.606060606 0.378787879 0.236742424 Investment (3,000,000.00) 1,308,292.11 781,787.68 864,814.28 DCF 2,954,894.07 NPV (45,105.93)

IRR 62.56%

PI @ 60% 1.016


32 | P a g e

Cash Budget

Potato Fritters (Pvt) Ltd

Cash Budget For the Year 2009

Jan Feb Mar Apr May Jun

Receipts 1,767,000

1,596,000

1,767,000

1,710,000

1,767,000

1,710,000

Less : Payments

(1,403,308)

(1,468,792)

(1,604,596)

(1,559,328)

(1,604,596)

(1,559,328)

Cash balance 363,692

127,208

162,404

150,672

162,404

150,672

Add : Opening Cash Bal-ance

1,080,000

1,451,248

1,586,011

1,755,971

1,914,199

2,084,159

Add Depreciation 7,556

7,556

7,556

7,556

7,556

7,556

Net Cash Balance 1,451,248

1,586,011

1,755,971

1,914,199

2,084,159

2,242,387

Continue Potato Fritters (Pvt) Ltd Cash Budget For the Year 2009 Jul Aug Sep Oct Nov Dec

Receipts 1,767,000

1,767,000

1,710,000

1,767,000

1,710,000

1,767,000

Less :Payments

(1,604,596) (1,604,596)

(1,559,328)

(1,604,596)

(1,559,328)

(1,604,596)

Cash balance 162,404

162,404

150,672

162,404

150,672

162,404

Add : Opening Cash Bal-ance

2,242,387

2,412,347

2,582,307

2,740,534

2,910,494

3,068,722

Add: Depreciation 7,556

7,556

7,556

7,556

7,556

7,556

Net Cash Balance 2,412,347

2,582,307

2,740,534

2,910,494

3,068,722

3,238,682


33 | P a g e

Year 2010 & 2011 Potato Fritters (Pvt) Ltd

Cash Budget For the Year Year 2010 Year 2011 Dec Dec Receipts 27,046,500 37,865,100 Less : Payment (25,073,014) (34,301,015) Cash Balance 1,973,486 3,564,085 Add : Opening cash Balance 3,238,682 5,302,834 Add : Depreciation 90,667 90,667

Net Cash Balance

5,302,834 8,957,586


34 | P a g e

Receipts and Payments

Potato Fritters (Pvt) Ltd

Receipts & Payments For the Year 2009

2009 Jan Feb Mar Apr May

Sales 1,767,000

1,596,000

1,767,000

1,710,000

1,767,000

Total Cash Receipts 1,767,000

1,596,000

1,767,000

1,710,000

1,767,000

Raw Material Con-sumption

1,403,308

1,267,504

1,403,308

1,358,040

1,403,308

Material Purchases 1,267,504

1,403,308

1,358,040

1,403,308

1,358,040

Payments

Material

1,403,308

1,267,504

1,403,308

1,358,040

1,403,308

Labor 32,000

32,000

32,000

32,000

FOH 69,288

69,288

69,288

69,288

Salaries 30,000

30,000

30,000

30,000

Operating expense 70,000

70,000

70,000

70,000

Total Payments 1,403,308

1,468,792

1,604,596

1,559,328

1,604,596

Continue


35 | P a g e

Jun Jul Aug Sep Oct Nov Dec 1,710,000

1,767,000

1,767,000

1,710,000

1,767,000

1,710,000

1,767,000

1,710,000

1,767,000

1,767,000

1,710,000

1,767,000

1,710,000

1,767,000

1,358,040

1,403,308

1,403,308

1,358,040

1,403,308

1,358,040

1,403,308

1,403,308

1,403,308

1,358,040

1,403,308

1,358,040

1,403,308

1,824,300

1,358,040

1,403,308

1,403,308

1,358,040

1,403,308

1,358,040

1,403,308

32,000

32,000

32,000

32,000

32,000

32,000

32,000

69,288

69,288

69,288

69,288

69,288

69,288

69,288

30,000

30,000

30,000

30,000

30,000

30,000

30,000

70,000

70,000

70,000

70,000

70,000

70,000

70,000

1,559,328

1,604,596

1,604,596

1,559,328

1,604,596

1,559,328

1,604,596


36 | P a g e

For year 2010 & 2011

YEAR 2010 Year 2011 Year 2012 Jan Dec Jan Dec Jan 2,297,100 2,297,100 3215940 3215940

2,297,100 2,297,100 3,215,940 3,215,940

1,824,300 1,824,300 2,554,021 2,554,021 2,554,021 1,824,300 2,554,021 2,554,021 2,554,021

1,824,300 1,824,300 2,554,021 2,554,021 2,554,021 32,000 36200 36200 42780 42780 69,288 72,807 72,807 78,908 78,908 30,000 34700 34700 40840 40840 70,000 70,000 70,000 70,000 70,000 2,025,588 2,038,008 2,767,728 2,786,549 2,786,549

Summary at Year End

2010

Total Sales

27,046,500


Raw Material Consumption 21,467,014

Payments Material 21,467,014 Labor 434,400 FOH 873,688 Salaries 416,400 Operating expense 840,000 Taxes 551,855 Installment 489,658 Total Payments

25,073,014


37 | P a g e

2011 Total

Sales 37,865,100


Raw Material Consumption 30,050,935

Payments Material

30,050,935

Labor 513,360 FOH 946,897 Salaries

490,080

Operating expense 840,000 Taxes 970,085 Installments

489,658

Total Payments 34,301,015


38 | P a g e

I: Scenario Analysis



Worst Case by 10% For the Period ended 31, Dec, 09

PKR

per Units

Units Sold

Sales

18,724,500.00

85.5

219,000


(19,300,899.62)

(88.13)

Gross profit

(576,399.62)

(2.63)


Salaries

120000

Depreciation

70000

Supplies

120000

Marketing expense

600000

Miscellaneous

120000

(1,133,000.00)

(5.174)

Operating profit

(1,709,399.62)

(7.81)


(220,000.00)

(1.005)

Profit before tax

(1,929,399.62)

(8.81)


675,289.87

3.084

Profit after tax

(1,254,109.75)

(5.73)

Best Case by 10%

PKR

per Units

Units Sold

Sales

22,885,500.00

104.5

219,000


(15,791,645.14)

(72.11)

Gross profit

7,093,854.86

32.39


Salaries

120000

Depreciation

70000

Supplies

120000

Marketing expense

600000

Miscellaneous

120000

(927,000.00)

(4.233)

Operating profit

6,166,854.86

28.16


(220,000.00)

(1.005)

Profit before tax

5,946,854.86

27.15


(2,081,399.20)

(9.504)

Profit after tax

3,865,455.66

17.65


39 | P a g e




Worst Case by 10%

PKR

per Units

Units Sold

Sales

24,341,850.00

85.5

284,700


(25,091,169.50)

(88.13)

Gross profit

(749,319.50)

(2.63)


Salaries

248400

Depreciation

70000

Supplies

120000

Marketing expense

600000

Miscellaneous

120000

(1,274,240.00)

(4.476)

Operating profit

(2,023,559.50)

(7.11)


(160,675.22)

(0.564)

Profit before tax

(2,184,234.73)

(7.67)


764,482.15

2.685

Profit after tax

(1,419,752.57)

(4.99)

Best Case by 10%

PKR

per Units

Units Sold

Sales

29,751,150.00

104.5

284,700


(20,529,138.69)

(72.11)

Gross profit

9,222,011.31

32.39


Salaries

248400

Depreciation

70000

Supplies

120000

Marketing expense

600000

Miscellaneous

120000

(1,042,560.00)

(3.662)

Operating profit

8,179,451.31

28.73


(160,675.22)

(0.564)

Profit before tax

8,018,776.09

28.17


(2,806,571.63)

(9.858)

Profit after tax

5,212,204.46

18.31


40 | P a g e




Worst Case by 10%

PKR

per Units

Units Sold

Sales

34,078,590.00

85.5

398,580


(35,127,637.31)

(88.13)

Gross profit

(1,049,047.31)

(2.63)


Salaries

298080

Depreciation

70000

Supplies

120000

Marketing expense

600000

Miscellaneous

120000

(1,389,292.00)

(3.486)

Operating profit

(2,438,339.31)

(6.12)


(88,299.00)

(0.222)

Profit before tax

(2,526,638.30)

(6.34)


884,323.41

2.219

Profit after tax

(1,642,314.90)

(4.12)

Best Case by 10%

PKR

per Units

Units Sold

Sales

41,651,610.00

104.5

398,580


(28,740,794.16)

(72.11)

Gross profit

12,910,815.84

32.39


Salaries

298080

Depreciation

70000

Supplies

132000

Marketing expense

600000

Miscellaneous

132000

(1,232,080.85)

(3.091)

Operating profit

11,678,734.99

29.30


(88,299.00)

(0.222)

Profit before tax

11,590,435.99

29.08


(4,056,652.60)

(10.178)

Profit after tax

7,533,783.40

18.90


41 | P a g e

J: Ratios Analysis


Ratio Analysis

Ratios Year 2009 Year 2010 Year 2011

Current ratio 1.651 1.858 2.315

Quick ratio 1.056 1.254 1.801

Working Capital ratio 9.6% 13.4% 17.3%

Cash ratio 0.475 0.561 0.692

Receivable T/O 0.000 0.000 0.000

Inventory T/O 9.723 times 8.922 times 12.346 times 37.024 days 40.348 days 29.159 days

Fixed Asset T/O 11.826 times 16.918 times 26.332 times

30.443 21.279 13.672

Total Asset T/O 3.050 times 2.860 times 2.924 times 118.050 days 125.854 days 123.098 days

Debt ratio 0.107 0.042 0.000

Debt-Equity ratio 0.241 0.083 0.000

Equity Multiplier 2.255 1.959 1.623

Interest Coverage ratio 8.167 18.250 55.870

Fixed Charge ratio 3.222 5.262 9.383

Profit margin 4.9% 6.7% 8.3%

Operating Profit ratio 9% 10.8% 13.0%

Return on Assets 15% 19.1% 24.3%

Return on equity 34% 37.3% 39.5%


42 | P a g e

K: Amortization Table for the long term Loan


Loan Amortization Table

Loan Amount

1,000,000

Tenure 3 years Interest rate 22%

Installment 489,658.07

Date

Installment Interest Principle

Repayment Principle

Outstanding

1-Jan-09 1,000,000

1-Jan-10 489,658.07

220,000

269,658.07

730,341.93

1-Jan-11 489,658.07

160,675

328,982.85

401,359.08

1-Jan-12 489,658.07

88,299

401,359.08

(0.00)

1,468,974.22

468,974

1,000,000.00


43 | P a g e

L: Operating Cycle

Date Stock in hand units PKR

1-Jan 18600 1426006 2-Jan

17900 1372339

3-Jan 17200 1318672 4-Jan 16500 1265006 5-Jan 15800 1211339 6-Jan

15100 1157672

7-Jan 14400 1104005 8-Jan 13700 1050338 9-Jan 13000 996671

10-Jan 12300 943004 11-Jan 11600 889337 12-Jan 10900 835670 13-Jan

10200 782003

14-Jan 9500 728337 15-Jan 8800 674670 16-Jan 8100 621003 17-Jan

7400 567336

18-Jan 6700 513669 19-Jan 6000 460002 20-Jan

5300 406335

21-Jan Order Point 4600 352668

22-Jan 3900 299001 23-Jan 3200 245334 24-Jan 2500 191668

25-Jan Min Level 1800 138001

26-Jan Max Level 22100 1694341

27-Jan 21400 1640674 28-Jan 20700 1587007 29-Jan 20000 1533340 30-Jan 19300 1479673 31-Jan 18600 1426006

1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627282930

0

5000

10000

15000

20000

25000

Days

Units

Inventory LevelStock in hand

Maximum level

Re-OrderLevel

Minimum level

Lead Time

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