I.
Introduction Banana Bananas s are vigorous vigorously ly growing, growing, herbaceo herbaceous us plants plants growing growing in every every humid humid
tropical region. Edible bananas are believed to have originated in the Indo-Malaysian region reaching to northern Australia. They constitute the fourth largest fruit crop of the world, following the grape, citrus fruits and the apple. orld production is estimated to be twenty-eight million tons!si"ty-five percent from #atin America, twenty-seven percent from $outheast Asia, Asia, and seven percent from Africa. %ne-fifth of the crop is e"ported to Europe, &anada, &anada, the 'nited $tates and (apan as fresh fruit. India is the leading banana produ producer cer in Asia, Asia, follo followe wed d by Indo Indone nesia sia and and then then by )hili )hilippi ppine nes. s. The )hili )hilippi ppine nes s produces about one-half million tons, e"porting mostly to (apan. The )hilippines, )hilippines, being one of the contenders contenders for the title, *Banana &apital of the orld,+ has innumerable banana plantations scattered across Mindanao. Biggest producing region is $outhern Mindanao capturing almost half of the countrys total production. )roduction of banana is mainly concentrated in Mindanao where the biggest banana producing producing provinces of avao del orte, avao del $ur and avao &ity of $outhern Mindanao region. %utside Mindanao, the biggest producing provinces are Iloilo in estern /isayas /isayas and Isabela of &agayan /alley /alley.. Most of the 001,234 hectares of bana banana na are mostl mostly y bac5y bac5yard ard or smallh smallhold older er opera operatio tions ns.. Acco Accordi rding ng to a study study conducted conducted by orld Ban5, the few commercial plantings are located in Mindanao Mindanao where there are about 43,222 hectares of &avendish bananas being produced for e"port. Banana has many uses especially in the human diet. 'tili6ation of banana as food can be in many ways -- from simply being peeled and eaten out of-hand to being sliced and served in fruit cups and salads, sandwiches, custards and gelatins7 being mashed and incorporated into ice cream, bread, muffins, and cream pies. 8ipe
bana banana nas s are often often slice sliced d length lengthwi wise, se, fried fried in coo5in coo5ing g oil, oil, and and re-co re-coo5e o5ed d in sugar sugar caramel. Banana puree is important as infant food and can be successfully canned by the addition of ascorbic acid to prevent discoloration. Because of seasonal gluts and peris perisha habil bility ity and and the the tonn tonnag ages es of bana banana nas s and and planta plantains ins that that are not not suita suitable ble for for mar5eting or e"port because of overripeness overripeness or stained peel or other defects, there has been tremendous interest in the development of modes of processing and preserving these fruits. 'nripe banana has many food uses as well. In 9amboanga 9amboanga &ity, &ity, green unripe bananas, boiled in s5in and served with * haleia+ haleia + or coconut mil5 caramel, are popular. popular. $un-drying slices of unripe fruits and pulveri6ing pulveri6ing ma5e banana or plantain flour or powder. %ne of the most popular unripe banana products is banana chips. &ommercia &ommerciall producti production on and mar5etin mar5eting g of banana banana chips chips has been been increasing in various parts of the world over the past 4: years and these products are commonly commonly found in retail retail grocerie groceries s alongsid alongside e potato potato chips chips and other snac5 snac5 foods. foods. &arinosa and Bungulan bananas are favored for chip-ma5ing in #atin Amerca. In the )hilippines, the ;$aba< and ;&ardava< varieties are chosen for this purpose. This paper proposes a banana chips production business in 9amboanga &ity &ity. The The idea idea stemme stemmed d from from the the propo propone nent< nt
−
The snac5 product is nutritious. Its nutritional contents include potassium and protein
WeaknessesG
−
#ac5s access to grocery stores and office canteens
−
o established supplier of honey in 9amboanga &ity
Opportunities G
−
There are more and more schools that are being put up in the city
− A supportive government indicates that there is a bright future for the firm in the e"port mar5et
ThreatsG
−
The preference of students and young people to eat Hun5 foods
−
The prices of coo5ing oil, sugar and honey are increasing
Strategies Strength-Opportunities:
−
E"tensively promote nutritious product to students of the different schools by Hoining trade fairs during school fiesta or palaro
− Accumulate profit and reinvest it for e"pansion of business and distribution in the neighboring places of 9amboanga &ity
Weaknesses-Opportunities:
−
&oncentrate mar5eting efforts on the distribution to school canteens
−
hen sales volume increases due to increased demand for the product, find suppliers outside 9amboanga &ity and negotiate terms.
Strengths-Threats:
−
Invest in 8esearch and evelopment activities to obtain cost efficiency and optimal productivity
−
)ac5age and label product differently to attract even Hun5 food eaters
Weakness-Threats:
−
IV.
8esearch on the feasibility of processing own honey made from banana
Profile of Target Maret!s"
9amboanga &ity is the center for education in estern Mindanao. It is a home to three universities, three computer colleges, ad numerous colleges and institutes in the 9amboanga )eninsula region. The epartment of Education C 9amboanga &ity ivision records a total of three hundred fifty-two schools in all education level including pre-
school in school year 4221-4223. Two hundred forty-five 4:J and one hundred one 2J of these schools are government-owned and privately-owned, respectively. This number is si" less than the recorded number of schools in school year 422@-4221. The closing of twelve private elementary schools and the opening of one public high school, three public pre-elementary schools and two private pre-elementary schools contributed to the decrease. The epartment of Education C 9amboanga &ity ivision has in record 1:,0K and 1@,21K students in the preschool, primary and secondary level in school years 422@-4221 and 4221-4223, respectively. More than ninety percent of the schools in 9amboanga &ity have their own school canteens. A survey was conducted to thirty different schools located in the city proper, east and west coast in 9amboanga &ity. Twenty-eight of the thirty schools have canteens located inside the school and these canteens are owned by a cooperative of teachers and staff members. Ten students for each of the twenty-eight schools were handed out Duestionnaires to determine their purchases and purchase level from the canteens. ?ive out of ten :2FJ students visit and buy from the school canteen once a day either for snac5s, lunch, or school supplies7 three students 02FJ seldom go to the canteen less freDuent than once a wee5lyJ and buy school supplies and drin5s. The remaining two students 42FJ never go to the canteen because they bring their own food and school supplies or because they do not have money at all. Three out of the five regular canteen goers are li5ely to buy snac5 food. Two out of these three snac5 buyers prefer commerciali6ed chips li5e &hippy and )iatos and
other Hun5 foods. %ne prefers home made snac5s li5e bico, cassava ca5es, sandwiches, and bananaDue. Eleven of the twenty-eight school canteens were selected as targeted place of distribution of the product. ine out of eleven pre-selected school canteens committed to buy the product from the business. The Brent >ospital and &ollege Inc. and Immaculate &onception Archdiocese $chool are the two schools who responded *o+ when as5ed if they will buy the proposed product. All nine prefer the goods to be on consignment basis. This term provides that each pac5 of :2 grams honeydipped banna chips is priced at )@.22. )ayment on the delivered goods for the day shall be made on the ne"t day
$ 4 M$' #ab >igh &ollegeJ 0 9>$ est )ilar &ollege All levelsJ : $TI &ollege @ $&& >$ &ollegesJ 1 'niversidad de 9amboanga &ity &ollegeJ 3 'niversidad de 9amboanga Tetuan >$ &ollegeJ K 9&>$ Main
#ocation $an (ose 8d, Baliwasan, 9amboanga &ity ormal 8d, Baliwasan, 9amboanga &ity 8T. #im Blvd., Baliwasan, 9amboanga &ity 8T. #im Blvd., Baliwasan, 9amboanga &ity ov. #im Ave., 9amboanga &ity )ilar $treet, 9amboanga &ity ). #oren6o $treet, 9amboanga &ity
)opulation ,13 44,222 :,321 ,0K3 :K ,K1 :,KK
on Toribio $treet, 9amboanga &ity
3,@2K
on Alfaro $treet, 9amboanga &ity
K,K@
V.
Mareting Plan
A. Mar5eting Mi"
Product Mr. =ummy banana chips are healthy and delicious snac5s. Bananas are dipped in honey syrup before fried. The product does not contain any preservative or additive. The banana chips are pac5ed by :2 grams in plastics and are each pac5 is individually labeled.
Price Each pac5 of :2 grams of banana chips is priced at )@.22. This is because the desired gross profit margin is 1:F. A unit cost of )4.3 with a gross margin of this rate will result to a rounded off-price of )@.22. The price of the Mr. =ummy Banana &hips is not greatly different from the price of the products of the competitors. In fact, the wholesale price of the Member ?ood ealer and uiwan $pecial Banana &hips, which distributes to retail and convenience stores, is also )@.22. )rices of other competitors range from )@.:2 to )2.22. $uch differences in the prices, however, shall have the least significant effect in the competition. )rice is neither the competency nor strategy of the proposed business.
It shall focus instead in delivering banana chips product, uniDue and special for its honey content. ?urthermore, the main distribution lin5s of the competitors are the grocery stores and convenience centers. These stores will sell the products at )K.22 to ):.22. Miles &ompany shall do direct delivery of its products to the school canteens and stores at )@.22.
Place or Distribution The delicious and healthy banana chips product will be distributed mainly to canteens of the different schools in 9amboanga &ity. Initially, it shall deliver to the canteens of &laret >igh $chool, estern Mindanao $tate 'niversity, 9amboanga ational >igh $chool est, )ilar &ollege, Brent >ospital and &ollege, $TI &ollege 9amboanga, $outhern &ity &ollege, 'niversidad de 9amboanga - &ity &us and '9 Tetuan &us, 9amboaga &ity >igh $chool Main and Immaculate &onception Archdiocese $chool. The first five schools above are located in the west area of the city while the last three schools are located in the east. $TI &ollege, $outhern &ity &ollege and 'niversidad de 9amboanga are found within the city proper. $ince the business aims to ma5e it 5nown also to non-school canteen customers, it will deliver to retail stores in uiwan, Tumaga, &anelar, $ta. Maria, and $an 8oDue. &anteens of $I$ and BI8 are also targeted. &ash collection shall be made on the following delivery. iven that delivery shall be made daily, collection of the day
$aturday of delivery. This is to encourage these customers to buy and patroni6e the proposed product.
Promotion The business shall be promoted by word of mouth and through personal selling efforts of the business proponent. )ac5aging and labeling will be enhanced more to further promote the product.
B. &ompetition The following are the competitors of the Miles &ompany7
#o$petitors
%usiness &ocation
. NuNuh
$ta. Maria, 9amboanga &ity
4. Member ?ood ealer Banana &hips
&anelar, 9amboanga &ity
0. Ecoco Banana &hips
Manila &ity
. uiwan $pecial Banana &hips
uiwan, 9amboanga &ity Isabela &ity
:. ?ood Trade &enter Banana &hips
Place of Distribution &anteens of schools and offices7 &onvenience stores &anteens of schools and offices7 &onvenience stores in 9& rocery $tores ationwide 8etail $tores7 Ba5eries &anteens of schools and offices7 &onvenience stores in Isabela &ity
Price !of '(g pac" ) 1.22
@.22
2.22
@.22 @.:2
and 9&
The banana chips products of the competitors listed in the foregoing page are almost ali5e. E"cept E&%&% banana chips, which uses table banana or sweet plantain of the Musa acuminata group li5e the lady finger sulaybaguioJ and ;<ros Michael+ lakatanJ bananas, all of the companies use saba and cardava. )eeled and sliced bananas of these varieties are deep fried and pac5ed in plastics. Miles &ompany, however, shall soa5 the banana in honey syrup before frying. This shall result more delicious and nutritious banana chips. This gives Miles &ompany edge over all its competitors.
&. ?actors in the E"ternal Environment that Affect the Business
Political Factors The #ocal overnment of 9amboanga &ity as well as national government agencies li5e the epartment of Trade and Industry and epartment of $cience and Technology are supportive to entrepreneurs and the whole business sector. The current political issue involving the 9TE proHect does affect the business directly or indirectly.
Economic Factors Inflation is a problem of all businesses. Although inflation does affect the business in the costing of the raw materials and pricing of the finished goods to a great e"tent, it significantly affects the purchasing power of the money given to students as allowance.
Socio-Cultural Factors Mr. =ummy banana chips product competes with other snac5s in capturing the taste and preference of students who are the end customers of its mar5et. These other snac5s include the potato chips of (ac5 and (ill &orporation, cheese curls and other Hun5 foods. They are often preferred by students.
Technological Factors Training on banana chip production in the future, can open doors to the use of technology in the business. Technology, automation can increase the efficiency of the production, in volume and Duality and can therefore pave the way to banana chips e"port.
VI.
Operational Plan
A. )roduction )rocess The Mr. =ummy Banana &hips production process shall be as followsG
Raw Materials Inventory
Peeling of the bananas
Slicing of the banana
Soaking in honey and sprinkling of sugar
Cooking in vegetable oil
Cooling
Packaging
Finished Goods Inventory
)roduction shall be daily, the coo5ing in the morning and manual pac5aging in the afternoon. ?inished goods for the day shall be delivered the following day. oods produced on ?ridays are distributable to non-school canteens on $aturday while goods made on $aturdays are to be delivered on Monday the following wee5. Bananas will be peeled and sliced. )eeling and slicing of one bunch and two hands of bananas will ta5e one hour and fifteen minutes. Ten 5ilograms of peeled and sliced bananas shall be soa5ed in honey and sprin5led with sugar. The sliced bananas will be soa5ed in honey syrup for thirty minutes and then drained. They shall be fried, five 5ilograms first and then the remaining five. A coo5ing strainer shall be used to facilitate the emerging and sieving from oil of coo5ed banana chips. ?rying will only ta5e 02 minutes for all ten 5ilograms. The coo5ed banana chips will then be spread over large *bilao+ atop with absorbent paper and will be cooled for one hour without manual or electric fanning to maintain its crispiness. &ooled banana chips are then pac5aged by :2 grams in plastics. They are measured first using a small but precise weighing scale and should be :2 grams in weight before sealing. )ac5s are sealed and labeled. The following table summari6es the banana chips production process with the length for each stepG
B. $uppliers The business shall buy its wee5ly supply of seven and a half bunches of bananas from the farmers in ungcaan, east of 9amboanga &ity. The contact person in the area is Ms. Marie Atilano, a relative of the business proponent. $he resides in the area and 5nows the residents of the barrage.
&. $chedule of %perations The business shall operate from Monday to $aturday, from 3 A.M. to :G22 ).M. )urchase of raw materials and supplies shall be made every $aturday before the production wee5. Banana chips produced during the day shall be sold in the following
day. )roducts completed during ?ridays are made so for distribution to non-school canteens and retail stores during $aturdays. This is because very few schools operate on a $aturday. uring semester brea5s and school holidays, the business shall intensify selling efforts to non-school canteens and retail stores. &ollection from school canteens shall be made on the following delivery, that is, on the following day. To encourage non-school canteens and retail stores, however, collection from these customers shall be made on the ne"t $aturday of delivery.
. Business #ocation The banana chips production shall be home based. The products shall be made at the place where the proponent resides. It is a meter by K meter house being rented by the proponent from a relative, located in 04 $an (ose 8oad, Baliwasan, 9amboanga &ity. It is one of the two houses in the lot with area of 412 sDuare meters. The other is a two-storey house with a total floor area of @2 sDuare meters. %ne-half of the area of house shall be retained as the personal and sleeping Duarter of the proponent and the other half shall be made into a pac5aging area. &oo5ing shall be held outside, in an outdoor 5itchen adHacent to the pac5aging area.
VII.
Organi)ational Plan
A. Business %rgani6ation Initial Organization The business, a sole proprietorship, shall initially employ only two employees. The proHect proponent shall be the first and the manager and shall be responsible for the purchase of raw materials and supplies, delivery of finished goods, dealing with customers and prospective customers, and managing the finance of the business. The second employee shall be responsible for the productionG coo5ing in the morning and pac5aging in the afternoon. >e shall maintain the cleanliness of the 5itchen, the utensils and coo5ing wares and the production process in general. >e must beG -
5nows coo5ing
-
able to wor5 with minimum supervision
-
clean and neat in loo5s and ways
-
willing to undergo training
-
willing to wor5 and receive per piece wage
-
observant and patient
Future Organizational Chart ?ive to si" year from now, the following will be the business organi6ation chartG
Manager
Marketing
-
promotes and delivers
Finance
-
products -
deals with customers and prospective customers
maintains the boo5s of the
Production
-
business -
oversees the overall financial condition of the
)roduces banana chips and maintains its Duality
-
schedules production to increase productivity
business
B. )ersonnel &ompensation Employees of the business shall receive wage eDuivalent to the minimum daily wage of employees of retail establishments employing not more than 02 employees in 9amboanga )eninsula.
age %rder o. 8IO-0 prescribes the granting of )K:.22
minimum to these employees. The employees of Martin &ompany are also entitled to government mandated benefits and privilegesG 0 th Month )ay, $$$, )hil >ealth and )ag-ibig. The following is a summary of the personnel compensation of the business, indicating basic compensation and personnel benefits, factored annuallyG
?or the monthly basic pay, the proHect proponent, the owner of the business receives an eDual pay to that of the other employee. &ompensation of the manager is charged to operating e"pense while the compensation of the other employee is partly charged against cost of goods sold and partly against operating e"penses. ?or the compensation charged to cost of goods sold, he shall receive : centavos for every unit of product completed. The remainder thereof shall be charged to operating e"pense.
VIII.
*inancial Plan
A. 'nit &osting 'nit cost is derived from the batch cost divided by the number of units each batch produces. 'nit cost is as followsG 8aw Materials 2 5ilogram banana peeled, bunch and 4 hands of bananasJ 4 botles of honey .: 5ilogram brown sugar liter coo5ing oil to be used only twice to maintain DualityJ Total 8aw Materials 'nits )roduced of :2 gramsJ 8aw Materials )er 'nit )ac5aging &ost )er 'nit )lastic #abel irect #abor )er 'nit ?actory %verhead ood &oalJ
)@2 per bunch, : per hand )1:.22 per bottle )[email protected]
)
)30.1: ) ) )2.3 per piece )2.2: per pice
)
2.3 2.23
.33 022.33 K2 .:3
2.4@ 2.:
): per coo5ing, : 5ilogram of banana per coo5ingJ
'nit &ost
12.22 :2.22 0K.22
2.K )
4.3
P 22F input in 5ilograms Q K:F outputs in 5ilogram
%ne hundred percent of banana as an input will produce only ninety-five percent of banana chips as an output. This may be due to the loss of moist content of banana when fried and cooled. The 2,222 5ilograms of banana, therefore, will produce K,:22 grams of banana chips, or K2 pac5s of :2 grams of banana chips.
%. )roduction /olume aily production for the first year of operation is K2 units. Annual increase is proHected at 2 units for the four J additional school canteens to be captured each year.
#. Mar5-up esired gross profit per unit is 1:F. )rice of the banana chips, therefore, for the first year is )@.22 per unit.
D. Merchandise Inventory %nly the goods produced at the last wor5ing day of the year are e"pected to remain unsold at year end. This based on the assumption that delivery of goods produce during the day will be delivered on the following day. Ending merchandise units will be sold in the first wor5ing-school day of the year.
+. %n Account %nly goods delivered to non-school canteen customers on the last $aturday of the year are considered to be on account. ?or proHection, a daily sale multiplied by @ days credit term for non-school canteen customers is eDual to the Accounts 8eceivable at year end. $ince all purchases are on cash basis, there shall be accounts payable at the end of the year.
*. ?i"ed Assets
The following the fi"ed assets to be used in the conduct of the business and their corresponding acDuisition cost, useful life, annual depreciationG
$chedule of ?i"ed Assets Assets
&ost
&oo5ware $teel Tungku- welded $ealer %ther 5itchen utensils ?urniture Motor /ehicle Total
) 4,:22.22 @22.22 4:2.22 :22.22 ,222.22 ::,[email protected] ) :K,K2.22
'seful #ife in =earsJ
: : : : : 2
Annual epreciation ) :22.22 42.22 :2.22 22.22 422.22 :,:[email protected] ) @,[email protected]
The straight line method of depreciation is used in computing for annual depreciation e"pense. The motorcycle vehicle to be used in the delivery of product shall be purchased from EM&%8 /eterans, 9amboanga &ity on installment basis. own payment for the purchase is )0, :22 and eDual monthly installment is )4, :22 inclusive of interest, for 4 months. The present value of this future payments based on the :F per annum interest offer of EM&%8 is ) :, :@2.22. This amount added to the down payment amount is eDual to ):@, :@2.22, the cost of the motor vehicle.
,. )roHect &ost and ?inancing Initial proHect cost is estimated at ) 4K,421.00 and shall be financed through a cash gift from parents upon graduation of the proponent. or5ing capital of one J month is allotted for both production cost and operation e"pense. The cost to acDuire manufacturing eDuipment and the necessary down
payment and installment payment for the first month for the delivery eDuipment are also factored as a capital e"pense. )re-operating e"penses include deposit on rental of the business area and licensing cost. A brea5down of the initial investment is shown below.
&apital %utlay - )roduction and elivery EDuipment &oo5ware $teel Tungku- welded $ealer %ther 5itchen utensils ?urnitures Motor /ehicle own )ayment st Month Installment
) 0:22.22 4:22.22
) 4,:22.22 @22.22 4:2.22 :22.22 ,222.22
@,222.22
) 2,3:2.22
4,22.22 ,222.22
@,22.22
,K2 4.3
2,11.2
,@K.32 ,@K.32 @@.@1 4,@@.@1 122.22
4,004.K0
)re-%perating E"penses 8ental eposits-0 months )ermits and #icences or5ing &apital - )roduction &ost monthJ 'nits to be )roduced 'nit &ost or5ing &apital - %perating E"penses monthJ ages E"pense - Martin ages E"pense -or5er %ffice $upplies E"pense as, %il, Transportation 8ent E"pense Total Initial Investment
-. %perating E"penses
) 4K,421.00
%perating e"penses include wages e"pense, licenses and permits, oil, gasoline, and transportation e"pense, supplies, and rent e"pense. All operating e"penses, e"cept wages e"pense, increase by :F annually. This is based on the inflation rate of :F. ages e"pense increases by 2F annually.
I.
I. ?inancial $tatements !send $e your ecel file" Projected Income Statements
The following income statements summari6e the revenue, cost of goods sold and e"penses of the business. The profitability report shows increasing annual sales and steady operating e"penses. Annual net income increases every year, by more than )4:, 222.22.
Miles &ompany I/#OM+ STAT+M+/T 422K-420 in )hilippine )esosJ
$ales &ost of oods $old ross )rofit %perating E"penses Income before ta" and interest Interest E"pense Income before ta" Income ta" - 0:F ET I&%ME
200
20!0
20!!
20!2
20!"
0:,:2.22 43,3@.42 44:,140.32
@@,23:.22 @,@.01 02,K03.@0
:@3,4K4.:2 424,0.1 0@:,K3.00
@1@,@K4.:2 40,K:.03 04,1.4
1K,004.:2 43K,40.: :24,K.2:
1,K0.4@
30,K03.2@
K1,2KK.:1
4,:0.2K
441,02:.1@
:0,32.: @,01.@K 1,@14.3: 3,300.@K 43,30K.@
3,222.:1 4,02.14 :,@K3.3: ,022.42 1,0K3.@:
@3,33.1@ 2.22 @3,33.1@ :K,2K1.21 2K,1:.12
44,443.2 2.22 44,443.2 11,4K.3 0,1K3.44
41,30.4K 2.22 41,30.4K K@,3.@: 13,@43.@
Projected Cash Flo#s Statements The business reports its cash flow statements using indirect method. The cash flow statements summari6e the firm
Miles &ompany #AS- *&OWS STAT+M+/TS 422K-420 in )hilippine )esosJ 200
&ash, Beginning of the =ear Add7 &ash Inflows &ash Initially Invested in Business &ash from customers Total Inflows #ess G &ash %utflows &ash paid for manufacturing cost &ash paid for operating e"pense &ash used to acDuire manufacturing eDuipment &ash used to acDuire motor vehicle &ash paid for interest &ash paid to BI8 for Income Ta" Total %utflows &ash, End of the =ear
20!0
20!!
20!2
20!"
0,33K.10
1,4K2.2
4K,441.:1
:,@@.42
01,122.22 01@,K21.00
@0,K::.22 @0,K::.22
:@@,041.:2 :@@,041.:2
@1,@21.:2 @1,@21.:2
13K,41.:2 13K,41.:2
4K,402.2
@,4:3.@
424,@@.@0
4,23.11
43K,0:3.:@
@:,01.42
11,@4.22
K2,@40.:
42:,201.20
442,34K.12
41,[email protected]
41,@K3.43
2.22
2.22
2.22
@,01.@K
4,02.14
2.22
2.22
2.22
2.22 3,300.@K ,022.42 :K,2K1.21 000,21.@2 0K2,::.00 0,0K2.0 :23,43.3@ 0,33K.10 1,4K2.2 4K,441.:1 :,@@.42
11,4K.3 :31,@3.21 @1,4:.@0
2.22
4K,421.00
,3:2.22
Projected $alanced Sheets Miles &ompany BA#A&E $>EET$ 422K-420 in )hilippine )esosJ 200
20!0
20!!
20!2
20!"
ASSETS &ash Accounts 8eceivable Merchandise Inventory
Total current assets ?i"ed Assets #ess G Accumulated epreciation
T%TA# A$$ET$
0,33 K.10 @,3 2.22 .42 :, 0.K0
1,4K 2.2 3,K1 2.22 :4 @.1 4@,13 @.31
4K,44 1.:1 2,K0 :.22 @ 3.K0 4@2,3 .:2
:,@ @.42 0,24 2.22 13 4.04 4K, 3.:0
@1,4: .@0 :,44: .22 K41 .0 @00,413 .2@
:K,K 2.:K @,1 @.2@ :0,0 .:0 2,:1 3.@
:K,K 2.:K 4,K: 4.4 @,K: 3.1 10,1 :.0
:K,K 2.:K K,4 3.3 2,3 4. 02,4K 0.K
:K,K 2.:K 4:,K2 .40 0,22 @.0: @0,4 .33
:K,K2 .:K 04,032 .4K 41,:02 .4K @@2,323 .0@
41,@K 3.43 3,30 0.@K @,:0 .K1
,02 2.42 ,02 2.42
:K,2K 1.21 :K,2K 1.21
11,4 K.3 11,4 K.3
K@,3 .@: K@,3 .@:
4K,42 1.00 43,30 K.@ :3,2 @.K 2,:1 3.@
:3,2 @.K 1,0K 3.@: 04, :. 10,1 :.0
04, :. 2K,1: .12 44,K @.3 02,4K 0.K
44,K @.3 0,1K 3.44 03:,KK :.2@ @0,4 .33
03:,KK: .2@ 13,@43 .@ :@,@40 .12 @@2,323 .0@
LA!LTES " #A$TAL Installment )ayable Income Ta" )ayable
Total #iabilities &apital, Beginning of the =ear
AddG et Income &apital, End of the =ear T%TA# #IABI#ITIE$ &A)ITA#
The table in the preceding page shows a summary of the assets and the corresponding liabilities and capital of the business. It shows an increasing asset value due primarily to the increase of cash balance. Its only liability is the income ta" payable which increases as net income increases. &apital or net worth also increases because of the increasing profitability of the business.
0. ?inancial 8atio 1. A))I&AB#E ?IA&IA# $TATEMET 8ATI%$ 4.1 4
0 .21
.
: .::
@. :3
:,0.K0
4@,[email protected]
4@2,3.:2
4K,3.:0
@00,413.2@
3,300.@K
,022.42
:K,2K1.21
11,4K.3
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2. 3
2 .4
2 .42
2 .1
2. :
3,300.@K
,022.42
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02,4K0.K
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2.: @
2 .1@
2 .32
2 .30
2. 3:
Total EDuity
:3,2@.K
04,:.
44,[email protected]
03:,KK:.2@
:@,@40.12
Total Assets
2,:13.@
10,1:.0
02,4K0.K
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2.0 4
2 .0
2 .4
2 .42
2. 1
Total #iabilities
3,300.@K
,022.42
:K,2K1.21
11,4K.3
K@,3.@:
Total EDuity
:3,2@.K
04,:.
44,[email protected]
03:,KK:.2@
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2.@
2.@:
2.@
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ross )rofit
44:,140.32
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0:,:2.22
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. &urrent 8atio &urrent Assets &urrent #iabilities
4. ebt 8atio Total #iabilities Total Assets
0. EDuity 8atio
. ebt to EDuity 8atio
:. ross )rofit Margin
@. %perating )rofit Margin Income before Interest Ta" $ales
1. &ash ?low Margin &ash flow from operations $ales
3. et )rofit Margin et Income et $ales
K. Asset Turnover
2.:
2.4:
2.02
2.00
2.0:
:0,32.:
3,222.:1
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44,443.2
41,30.4K
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2.1
2.42
2.44
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:2,41.43
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0.0K
et $ales
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Ave. Total Assets
2,:13.@
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02,4K0.K
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2.0
2.0@
2.0
2.41
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02,4K0.K
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2. 8ate of 8eturn %n Assets et Income Ave. Total Assets
2.43
&urrent ratio measures the ability of the business to meet current obligations as they become due. The increasing balance of cash and non-incurring of liability to trade creditors and lenders contribute to the increasing solvency or current ratio of the business. The increasing current ratio of Miles &ompany indicates that the company will be more and more liDuid in the coming years. ebt ratio, eDuity ratio, and debt to eDuity ratio measure the proportion of liability to assets, capital to assets, and liability to capital, respectively. These ratios measure the financial strength of the business and cautions to creditors. The debt ratio of Martin &ompany increases because of the increasing income ta" payable and shall result to
increase in the debt to eDuity ratio. Inversely, the increasing debt ratio of the business results to decreasing eDuity ratio. The financial ratios table in the preceding page shows that the company will be financially strong in the coming operating years because of the larger proportion of capital than liabilities in the financial structure of the business. ross profit margin, operating profit margin, cash flow margin and net profit margin ratios used to measure the profitability of the business. ross profit margin measures the ability of a firm to control manufacturing costs and to pass along price increases through sales to customers. But since pricing of the Martin >oneydipped Banana &hips is based on a desired gross profit rate, the gross profit margin of the business is relatively consistent throughout the years. The operating profit margin of the Miles &ompany is on an increasing trend. This indicates the ability of the company to control operating e"penses while sharply increasing sales. Also, the increasing cash flow margin shows that the business shall have no problem in converting sales to cash to enable it to e"pand and obtain mar5et share. There is also an increasing trend of the net profit margin of the business due to increased sales and control in all costs and e"penses. The rate of return of investment shall assure prospective investors or partners that there is money in the business. Miles &ompany has an increasing rate of return of investment because of its overall efficiency in managing assets and generating profits.
&. &apital Budgeting Analysis ?or the purpose of capital budgeting analysis, net future cash inflows of the business shall be matched with the initial proHect cost of ) 4K,421.00. The following cash flow
table shows the short paybac5 period, positive net present vale and a high internal rate of return of the proposed businessG
&A)ITA# B'ETI &A$> ?#% $&>E'#E ?or the =ears 4223-420 %n $hilippine $eso& )re%perating Initial Investment Amorti6ation /ehicle et Income after ta"es addG depreciation AddG salvage value of motor et &ashflow &ash Balance
422K
422
42
424
420
4,[email protected]J
41,@K3.43J
43,30K.@
1,0K3.@:
2K,1:.12
0,1K3.44
13,@43.@
@,[email protected]@
@,[email protected]@
@,[email protected]@
@,[email protected]@
@,[email protected]@
4K,421.00J
04,032.4K 4K,421.00J
0,K:4.K
:0,1@.0
:,4:.4J
01,K44.2
@,441.1@
:2,41.43
41,3.KK
PAY BACK PERIOD NET PRESENT
.4K ) 041,432.24
VALUE INTERNAL RATE OF RETURN*
1!"
P4:F is the most li5ely rate of return is the the computed rate of return on investment
The above table shows that the high cash inflows provided by the business operation shall result to a paybac5 period of .4K years. This means that initial investment shall be recovered by Miles &ompany within .4K years.
The net present value of a proHect is the present value of the e"pected cash flows that the business will receive as result of investing into the proHect. The et )resent /alue of the proHect is ) 041,432.24, and this is the value that will be added to the initial investment. $ince, the )/ is positive, the proHect could be considered financially viable. Internal rate of return is defined as the discount rate that eDuates the present value of the proHects future net cash flows with the proHects initial cash outlay. If the I88 is compared with the interest offered by ban5s or other ris5-free investment instruments, the I88 of :F is much higher than the rate offered by investing to government bonds such as T-bills. This means that this proHect is a more attractive investment.
