Continuation

 Continuation

 

Projected Profit and Loss Estimates for the first five years

	Year1	Year2	Year3	Year4	Year5
Volume (Tones)	xxx	xxx	xxx	xxx	xxx
Less % Waste	xxx	xxx	xxx	xxx	xxx
Net sales value per kilo	xxx	xxx	xxx	xxx	xxx
Direct Production	xxx	xxx	xxx	xxx	xxx
Raw Materials	xxx	xxx	xxx	xxx	xxx
Labour	xxx	xxx	xxx	xxx	xxx
Contribution of Administration	xxx	xxx	xxx	xxx	Xxx
Cost and profit	xxx	xxx	xxx	xxx	xxx
Administrative Costs	xxx	xxx	xxx	xxx	xxx
Loans repayment	xxx	xxx	xxx	xxx	xxx
Finance Charges	xxx	xxx	xxx	xxx	xxx
Administrative and general expenses	xxx	xxx	xxx	xxx	xxx
Depreciation	xxx	xxx	xxx	xxx	xxx
Net Profit before taxation	xxx	xxx	xxx	xxx	Xxx
% Return on sales	xxx	xxx	xxx	xxx	xxx
% Return on total investment	xxx	xxx	xxx	xxx	xxx
Run-over on fixed assets (No of times)	xxx	xxx	xxx	xxx	xxx

Note that we did not put figure because, you know the figure you are to compute.

(a)    Liquidity

Good management requires that heavy reliance on bank overdraft for working capital be discouraged as soon as practicable.  In that case, the surplus cash generated from the operations in the first five years may be estimated.  See five years projection below.

Five Years Surplus Cash Projection

	Year1	Year2	Year3	Year4	Year5
Projected Net Profit Before tax	xxx	xxx	xxx	xxx	xxx
Company tax %	xxx	xxx	xxx	xxx	xxx
Net profit alter tax	xxx	xxx	xxx	xxx	xxx
Depreciation	xxx	xxx	xxx	xxx	xxx
Annual funds generated and retained in the business	xxx	xxx	xxx	xxx	xxx
Cumulative funds generated and retained in the business	xxx	xxx	xxx	xxx	xxx

This is followed by a brief analysis as to whether the total capital investments in the business, at least literally, can be repaid within the first five years, at the projected level of operations.

Projected Cash Flow for 5 years

	Year1	Year2	Year3	Year4	Year5
CASH INFLOW
Cash sales	xxx	xxx	xxx	xxx	xxx
Receipts from debtors	xxx	xxx	xxx	xxx	xxx
Total Cash received	xxx	xxx	xxx	xxx	xxx
CASH OUTFLOW
Acquisition of Fixed Assets	xxx	xxx	xxx	xxx	Xxx
Initial operating expenses	xxx	xxx	xxx	xxx	xxx
Raw materials	xxx	xxx	xxx	xxx	xxx
Labour	xxx	xxx	xxx	xxx	xxx
Loan Repayment
Financial Charges	xxx	xxx	xxx	xxx	Xxx
Admin and general expenses	xxx	xxx	xxx	xxx	xxx
Total payments	xxx	xxx	xxx	xxx	xxx
Year cash balance	xxx	xxx	xxx	xxx	xxx
Cash balance at close	xxx	xxx	xxx	xxx	xxx

Note again, I did not put figure because you know the figures to fix.

 PART III: ECONOMIC AND LEGAL REQUIREMENT

The economic and legal feasibility of the project must be ascertained.  The project, apart from being economically feasible, should be in consonance with the land.  Analysis of the following should be done thus:

(a)    Analysis of value added

The feasibility and profitability of the project should be ascertained through the following methods;

-          Net present value (NPV)

-          Return on investment (ROI)

-          Internal Rate of Return (IRR)

-          Cost-Benefit Analysis (Profitability Index)

-          Pay Back Method

The gestation period should be ascertained, so as to know whether long or short term loan should be obtained, because of the rate of cash generation.

(b)   Analysis of the impact of foreign exchange position:

The entrepreneur should analyze the effect or the impact the sourcing of foreign exchange will have on the investment, if some raw materials must be imported.

(c)    Analysis of Employment Effect:

The multiplier effect the employment will have on the society should be analyzed and evaluated.

(d)   Analysis of Environmental Implication

The comprehensive analysis of the environment should be done to ascertain the benefit the local sourcing of raw materials may have in the sourcing country.

(e)    Physical and Fiscal implication

The legal implications of the physical development, that in the zoning pattern and urban development, should be known.  The fiscal policies of the government as regards the raw materials to be used should equally be known and emphasized.

 RECOMMENDATIONS AND CONCLUSION

On the basis of thorough evaluation of the whole project and of its particular situation in the market, list recommendations that should be taken most seriously by promoters of the project to facilitate successful execution.  Make sure that all the measures recommended and plans laid out fall within legal limits.  In this wise, the researcher is expected to have a good knowledge of the company, commercial or industrial laws of the land as they affect the type of business in question.   A contravention of the law may not augur well for the venture.

Do not totally be optimistic but some measure of objectivity is recommended.  Be critical and assume that something may go wrong; raw materials may go up while consumer price remains unchanged; there may be strike and loss of production time.  In such circumstances only percentage of the planned turnover may be realized. 

Finally, say whether the evaluation indicates that the proposed project is a feasible and viable economic venture worthy of being invested upon.

Visit www.okadabooks.com for the book titled “The Other Woman In Marriage”.