Semester Project Financial Management (69621)Summer-2015

Prepared By:

Muhammad Asif Khan (51271)

MBA (Operations Management)

Evening Program

PAF-KIET (City Campus)

Introduction:

After having a careful and thorough analysis of the increasing demand of the e-solutions to the business needs, we have been decided to establish the international standard software house to address those

business needs.

Name of Business:

Business Solution Providers (A Software Developer Company)

Our Vision:Would like to become an agile organization and wants to maintain ourselves as second to none.

Our Mission:We are committed to digitalize the each of every and every transaction of the organizations according their nature of business and as per their needs.

Objectives:

• To develop world class software for every customer.• To provide extraordinary after sales

services & support.• Acquisition & retention of customers

and transferring them into strategic business partner.

SWOT Analysis:

Strengths:Our exceptional software developers.Our updated software licenses.Our success on existing projects.Our exceptional offer of lifetime support & services to our valued customers.

SWOT Analysis:

Weaknesses:Lack of awareness among entrepreneurs effectiveness of technological development.Considering it as cost center rather than profit center.

SWOT Analysis:

Opportunities:A large potential market is available to serve.Currently less competitors existing in the market.Have an opportunity to capitalize the market through rendering exceptional services.

SWOT Analysis:

Threats:Entrance of multinational software houses in to the market.Introduction of new software technologies other than our licensors.

Costing Estimates:

Acquisition of Office: 21.00 PKR millionOffice Furniture, Fixtures & Equipment: 09.50 PKR millionPurchasing of Software Licenses: 32.50 PKR millionMarketing & Sales Activities: 06.50 PKR millionPurchasing of Office Vehicles: 12.50 PKR millionOffice Staff Salaries and Benefits: 04.00 PKR millionOther Office Overheads: 02.00 PKR millionTotal 88.00 PKR million

Proposed Financial Statements:Income Statement for the period ended Year 1 Year 2Net Sales Revenue 30.00 45.00

Less: Cost of Goods Sold (10.87) (20.00)Gross Profit 19.13

25.00Less: Fixed Operating expenses

except depreciation (21.03) (16.00)Depreciation Expenses (03.02) (03.02)Earnings before Interest & Expenses (EBIT) (04.92)

05.98Less: Interest Expense (00.60) (00.60)

Earnings before taxes (EBT) (05.52) 05.38Less: Taxes (40 %) (00.00)(02.15)

Net Income/Loss (05.52)03.23

Proposed Financial Statements:Balance Sheet as on June 30th

ASSETS Year 1Year 2

Current Assets:Cash & equivalents 05.00 07.00Accounts Receivables 15.00 25.00

Total Current Assets 17.00 32.00Fixed Assets:Office Building & Equipments 75.50 72.48

Less: Accumulated Depreciation (03.02) (03.02)Total Fixed Assets 72.48 69.46

Total Assets 89.48101.46

Proposed Financial Statements:Balance Sheet As on

(Amounts in millions of PKR)

LIABILITIES & EQUITIES Year1Year2

Current Liabilities:Account Payables 05.00 13.75Total Current Liabilities 05.00 13.75Long term Liabilities:Banks Loans 60.00 60.00Total Long Term Liabilities 60.00 60.00Total Liabilities 65.00 73.75Owners’ Equity:Initial Investment 30.00 24.48Retained Earning (05.52) 03.23Total Equities 24.48 27.71

Total Liabilities & Equities 89.48101.46

Proposed Financial Statements:Cash Flow Statement (Amounts in millions of PKR)

 Year1 Year2

Operating ActivitiesRevenue through Sales 30.00 45.00

Less:Cost of Goods Sold (10.87) (20.00)Fixed operating expenses (21.03) (16.00)

Interest Charges (00.06) (00.06)Net cash flow Generated through operating activities (01.96) 08.94

Net Cash flow (01.96) 08.94

Proposed Financial Statements:Statement of Owner’s Equity

(Amounts in millions of PKR) 

Year 1 Year2Opening Balance 30.00 24.48  Add/Less: Net Profit or Loss (05.52) 03.23 Less: Drawings (00.00) (00.00) 

Total Owner’s Equities 24.48 27.71

 

Financial Ratios:

LIQUIDITY RATIOS:

Current Ratios= Current Assets =32.00

Current Liabilities 13.75 = 2.32 : 1

Working Capital= Current Assets – Current Liabilities= 32.00 - 13.75= 18.25 PKR Million

Financial Ratios:

ACTVITY / TURNOVER RATIOS:

Receivable Turnover= Sales

Average Receivable= 45.0020.00= 2.25 : 1

Financial Ratios:PROFITABILITY RATIOS:

Gross Profit Margin= Gross Profit = 25.00Sales

55.00 = 0.45 : 1

Operating Profit Margin=Operating Profit or EBITSales= 05.9845.00= 0.13 : 1

Financial Ratios:PROFITABILITY RATIOS:

Pre Tax Margins= EBT = 05.38Sales 45.00 = 0.11 : 1

Net Profit Margin= Net IncomeSales= 03.2345.00= 0.07 : 1

Financial Ratios:

LEVERAGE RATIOS:

Debt to Assets Ratio= Debt = 60.00Total Assets

101.46= 0.591 : 1

Debt to Equity Ratio= Debt = 60.00Equity

27.71= 2.165 : 1

Financial Ratios:

LEVERAGE RATIOS:

Times Interest Expenses= EBIT (Operating Income)

Interest Expenses = 05.980.60= 9.966 : 1

QUESTIONS &

ANSWERS