- •Introduction to Operations Management
- •Business Proposal Smart Tutorial Books (Textbooks)
- •Contents
- •1. Business concept
- •2. Financial features
- •3. Financial requirements
- •4. Current business position
- •5. Major achievments – government, kimep uni agreement
- •Industry description, structure of business, legal issues and cooperation
- •Identification and Analysis of Competitors
- •Design and Development Plan
- •Income statement
Income statement
|
January – March 2017 |
April – June 2017 |
July - September 2017 |
October – December 2017 |
Year 2018 |
Year 2019 |
Sales |
48,000,000 |
36,000,000 |
24,000,000 |
48,000,000 |
306,000,000 |
468,000,000 |
Cost of goods sold |
40,000,000 |
30,000,000 |
20,000,000 |
40,000,000 |
255,000,000 |
390,000,000 |
Gross Profit |
8,000,000 |
6,000,000 |
4,000,000 |
8,000,000 |
51,000,000 |
78,000,000 |
Operating expenses |
|
|
|
|
|
|
Salaries |
2,040,000 |
2,040,000 |
2,040,000 |
2,040,000 |
8,160,000 |
8,160,000 |
Outside services |
1,230,000 |
1,230,000 |
1,230,000 |
1,230,000 |
4,920,000 |
4,920,000 |
Rent & related costs |
300,000 |
300,000 |
300,000 |
300,000 |
1,200,000 |
1,200,000 |
Equipment |
700,000 |
800,000 |
500,000 |
300,000 |
1,000,000 |
1,000,000 |
Advertising & promotion |
180,000 |
180,000 |
180,000 |
180,000 |
720,000 |
720,000 |
Packaging & shipping |
120,000 |
120,000 |
120,000 |
120,000 |
400,000 |
400,000 |
Utilities |
160,000 |
160,000 |
160,000 |
160,000 |
640,000 |
640,000 |
Insurance |
150,000 |
150,000 |
150,000 |
150,000 |
600,000 |
600,000 |
Total expenses |
4,880,000 |
4,980,000 |
4,680,000 |
4,480,000 |
17,640,000 |
17,640,000 |
Net profit |
3,120,000 |
1,020,000 |
(680,000) |
3,520,000 |
33,360,000 |
60,360,000 |
Depreciation |
100,000 |
150,000 |
200,000 |
250,000 |
400,000 |
500,000 |
Net profit before interest |
3,020,000 |
870,000 |
(880,000) |
3,270,000 |
32,960,000 |
59,860,000 |
Interest |
65,000,000 |
61,980,000 |
61,110,000 |
62,290,000 |
59,120,000 |
26,160,000 |
Net profit before taxes |
(61,980,000) |
(61,110,000) |
(61,990,000) |
(59,020,000) |
(26,160,000) |
33,700,000 |
Taxes |
300,000 |
300,000 |
300,000 |
300,000 |
1,200,000 |
1,200,000 |
Profit after taxes |
(62,280,000) |
(61,410,000) |
(62,290,000) |
(59,320,000) |
(26,360,000) |
32,500,000 |
The income statement shows calculations made for the each three months in 2017 year and next numbers are estimated yearly. We wanted to focus especially on the first months of the product development, due to the fact that this is the crucial time for our project. Based on the estimations made we can see that the project will become profitable in the year of 2019. And the main reason for this is money (long term payment) needed for the operation of our business, which we are going to lend on interest from two investors in the amount of 31,000,000 and 34,000,000 tg. respectively.
Return on investment = (Revenue – Cost of Goods Sold) / Cost of Goods Sold = (48,000,000 – 40,000,000) / 40,000,000 = 20% or (468,000,000 – 390,000,000) / 390,000,000 = 20%, meaning that each period or year the ROI will be equal 20%.
Cash Flow Statement
|
|
January – March 2017 |
April – June 2017 |
July - September 2017 |
October – December 2017 |
Year 2018 |
Year 2019 |
Cash sales |
|
48,000,000 |
36,000,000 |
24,000,000 |
48,000,000 |
306,000,000 |
468,000,000 |
Total Income |
|
8 000 000 |
6 000 000 |
4 000 000 |
8 000 000 |
51 000 000 |
78 000 000 |
Expenses: |
|
|
|
|
|
|
|
Material/merchandise |
|
(40,000) |
(30,000) |
(20,000) |
(40,000) |
(255,500) |
(390,000) |
Production labor |
|
(2,040,000) |
(2,040,000) |
(2,040,000) |
(2,040,000) |
(8,160,000) |
(8,160,000) |
Overhead |
|
(1,205,000) |
(1,205,000) |
(1,205,000) |
(1,205,000) |
(4,820,000) |
(4,820,000) |
Marketing/sales |
|
(180,000) |
(180,000) |
(180,000) |
(180,000) |
(720,000) |
(720,000) |
R&D |
|
(1,065,000) |
(1,165,000) |
(865,000) |
(665,000) |
(5,127,360) |
(5,127,360) |
G&A |
|
(350,000) |
(350,000) |
(350,000) |
(350,000) |
(1,400,000) |
(1,400,000) |
Taxes |
|
(300,000) |
(300,000) |
(300,000) |
(300,000) |
(1,200,000) |
(1,200,000) |
Start up cost |
(65,000,000) |
|
|
|
|
|
|
Loan payment |
|
6,000,000 |
6,000,000 |
6,000,000 |
6,000,000 |
20,500,000 |
20,500,000 |
Total expenses |
|
11,180,000 |
11,180,000 |
10,960,000 |
10,780,000 |
42,182,860 |
42,317,360 |
Cash flow |
(65,000,000) |
(3,180,000) |
(5,180,000) |
(6,960,000) |
(2,780,000) |
8,817,140 |
35,682,640 |
Cumulative cash flow |
(65,000,000) |
(3,180,000) |
(8,180,000) |
(15,140,000,) |
(17,920,000) |
(9,102,860) |
26,579,780 |
According to statement of Cash Flows first two years will not generate any profit. However, third year will be a successful one and it will bring us substantial earnings.
In case with loan payment, in the beginning our payments will be equal to moderate amount; each 3 months during the first year payment will be equal 6,000,000 and the next two years payment will be eaul 20,500,000. Such payment strategy will lead us to substantial profit.
Consequently, breakeven point is in the beginning of year 2019 and project itself is going to have partial success.
Payback period = 2 years + (9,102,860 / 35,682,640) = 2 + 0.26 ≈ 2.26 years
Balance Sheet
1 year
Current Assets |
In KZT |
Cash |
10 000 000 |
Accounts Receivable |
12 000 000 |
Inventory |
10 000 000 |
Other Current Assets |
900 000 |
Total Current Assets |
32 900 000 |
Long-term Assets |
350 000 |
Accumulated Depreciation |
(100 000) |
Total Long-term Assets |
250 000 |
Total Assets |
43 150 0000 |
|
|
Current Liabilities |
|
Accounts Payable |
8 000 000 |
Other Current Liabilities |
2 000 000 |
Total Current Liabilities |
10 000 000 |
Long-term Liabilities |
350 000 |
Total Liabilities |
9 750 000 |
Owner’s Equity |
|
Owner’s Equity |
30 000 000 |
Retained Earnings |
3 520 000 |
Total Owner’s Equity |
33 150 000 |
Total Liabilities and Owner’s Equity |
43 150 000 |
2 year
Current Assets |
In KZT |
Cash |
20 000 000 |
Accounts Receivable |
20 000 000 |
Inventory |
6 000 000 |
Other Current Assets |
1 000 000 |
Total Current Assets |
47 000 000 |
Long-term Assets |
300 000 |
Accumulated Depreciation |
(200 000) |
Total Long-term Assets |
100 000 |
Total Assets |
47 100 0000 |
|
|
Current Liabilities |
|
Accounts Payable |
8 500 000 |
Other Current Liabilities |
3 000 000 |
Total Current Liabilities |
11 500 000 |
Long-term Liabilities |
300 000 |
Total Liabilities |
11 800 000 |
Owner’s Equity |
|
Owner’s Equity |
29 000 000 |
Retained Earnings |
6 300 000 |
Total Owner’s Equity |
35 300 000 |
Total Liabilities and Owner’s Equity |
47 100 000 |
3 year
Current Assets |
In KZT |
Cash |
31 000 000 |
Accounts Receivable |
22 000 000 |
Inventory |
3 000 000 |
Other Current Assets |
900 000 |
Total Current Assets |
56 900 000 |
Long-term Assets |
400 000 |
Accumulated Depreciation |
(300 000) |
Total Long-term Assets |
100 000 |
Total Assets |
60 000 0000 |
|
|
Current Liabilities |
|
Accounts Payable |
10 000 000 |
Other Current Liabilities |
4 500 000 |
Total Current Liabilities |
14 500 000 |
Long-term Liabilities |
500 000 |
Total Liabilities |
15 000 000 |
Owner’s Equity |
|
Owner’s Equity |
40 000 000 |
Retained Earnings |
5 000 000 |
Total Owner’s Equity |
45 000 000 |
Total Liabilities and Owner’s Equity |
60 000 000 |
Projected estimations show that total liabilities and owner’s equity for the first year equal 43,150,000 tg, for the second year 47,100,000 tg and for the third year 60,000,000 tg.