FOLDING BAG FEASIBILITY STUDY
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Transcript of FOLDING BAG FEASIBILITY STUDY
CHAPTER I
SUMMARY OF THE PROJECT
Name of Firm
THE FOLDING BAG CO. its name came after the product itself, a folding
bag. A bag that can be folded to be in form of another bag, shoulder bag to
be a back pack, shoulder bag to purse, travelling bag to tote bag.
Location
The location of the firm would be in the heart of the University belt. It
will secure a working and selling place near Ever Mall in Morayta Sampaloc
Manila.
Head Office
The head office would still be in the same place, near the Ever Mall in
Morayta Sampaloc Manila, a 30 square meter building that would be divided
to the shop and the office.
Plant Size
PRODUCTION SITE
Place to put the sample bags and the office where wholesalers can order.
DOOR
DOOR
DIPLAY
Brief Description of the Project
Folding Bag Co. concept is a fast and simple folding mechanism which
allows the bag to be quickly folded around its base and secured. So it can be
reduced to a slim, pocket sized package in just a few seconds. And because
the base is rigid, the package always stays neat and flat.
Folding Bag Co. product bags differ from other reusable bags because
they:
Have no awkward storage pouch
Fold-away flat for easy storage
Have a proper gusset and semi-rigid base
Do not crumple or lose shape
Project Summary
Market Feasibility
The over all marketing aspect of the business is suitable of the supply
and demand but more or less capture the markets situation.
The future operation will not be a problem in view of the supply and
demand but more or less capture the market situation.
We will acquire an implement current strategies in the bag product to
make sure that the business will remain competitive.
Technical Feasibility
Technical capabilities in the product service vary widely across the
developing world. The level of technology applied being highly dependent on
the over all status of technology development within a particular country.
The partners will be applying modern technology in the establishment
of our business. They will be using modern tools and equipment and
providing new facilities to the demands of the customer.
Management Feasibility
The project would be managed by newly graduates or newbies that
would try on conquering the world of bags using materials that are earth
friendly. To distribute econo-bags that are in style and can be folded if not
use. Space free, affordable and attractive designs would be introduce in the
market.
Financial Feasibility
The total investment of the project will amount to Php. 8,000,000
partner’s capital. The initial investment will be used in purchasing the
materials, machines and equipment, supplies, building renovation and other
requirement in the operation of the business.
Most of the money would be used mainly for production cost as stated
above. The financial status is said to be stable since the income is
continuously increasing as the business progresses.
Socio-Economic Impact
The project is calculated to have a big contribution in the economy. It
will be a source of employment to brought young people and old in the
community, creating substantial income for individual and families aside
from providing income. It also makes the employees productive and a better
person in the society.
It will also provide a formal job training and experience to college
students who requires for their course before they graduate.
Lastly, the project will help the government because of taxes that will
be paying that lead to the development of communities and other
government service, and the main course of all, this bag would help the
country to avoid plastic use in department stores and small stores
nationwide. An earth-friendly bag would be introduce by Folding Bag Co.
CHAPTER 2
BACKGROUND OF THE STUDY
Brief Background of the study
Global awareness of environmental issues such as climate change and
resource depletion has grown dramatically in recent years. As a result, there
has been a surge of interest in developing alternative building techniques
and materials which are capable of meeting our structural needs with lower
energy and material consumption. These technologies are particularly
attractive for housing. Much of the global demand for housing is currently
being driven by economic growth in developing countries. Additionally,
natural disasters such as the 2004 Indian Ocean tsunami have destroyed
houses in many countries where limited economic wealth makes
reconstruction a challenge. This has resulted in shortages of permanent
housing in these areas. This thesis explores the structural behaviour of
earthbag housing under vertical compressive loading, in an attempt to
broaden our quantitative understanding of this alternative building
technique.
In recent years, environmental degradation has emerged as one of the
most significant challenges facing global civilization. There are several
drivers of this degradation, including greenhouse gas emissions due to fossil
fuel consumption for energy and transportation (IPCC, 2007), and depletion
of natural resources (Gordon et al., 2006). The construction industry
accounts for a large portion of total global consumption (Roodman &
Lenssen, 1994). This consumption has been estimated to be 50% of global
material use, and 40% of global energy use (Price Waterhouse Cooper,
2008). Growth in this consumption is tied directly to global economic
growth. Additionally, the current state of the world economy is such that
growth in developing nations, especially in Asia, is driving global growth for
the first time in modern history (Callen, 2007).
Objectives of the study
The following are the main objectives of the study to be understand
and analyze:
Size – the proponents expects that the establishment will increase in
size, due to the people that increases and also for the smooth flow of the
service.
Capacity – for the next 5 years, the capacity also increases due to
insisted public demands. It’s the time that we expand and produce more
maximized space.
Volume – the proponents expect that the volume on sales will increase,
for new product, activities and marketing strategies, for the convenience of
more people.
Worth – for the next 5 years, the establishment’s worth will be proven
because the place on where it stands will contribute to the business
economy.
Role in the Industry of the Economy – the establishment’s role in the
industry will be witnessed by the people that surround us. It can contribute
for the business industry. About the economy it will help for promoting the
country for its beautiful achievements for the economy.
Operational Definition of Terms
Performance – the act of performing or the state of being performed
Profitability – is a technical analysis term used to compare
performances of different trading system of investment
w/ one system
Quality – folding bag co. reputation for quality is internationally known.
It is
unique because the highest quality standard are maintained are
reasonable prices.
Facility – convenient advantages maybe in the form of instrument or
method.
Productivity – it is an environment conductive to employees.
Services – is best when you think like a customer. A caring and
respectful attitude and sincere smile builds are value in our customer
and value of folded bags
History. It’s all about the beginning of the entire Industry.
Customer Care. It is how you handled a customer satisfaction.
Internal customer. A person that is part of the team.
External Customer. It’s a person who will be the guest.
Customer. Is the lifeblood of business. Without them they have no
reason to open a business. It also refers to the buyer or user of goods
and service.
Management. Is the process by which people in the business makes
use of both human and material resources to achieve the desired or
set goals.
Strategy. A customer care blueprint based on the discovery
information.
Quality. It is the prices based on the product offered.
Cleanliness. The sanitation and ambiance of surroundings.
Value. The traits and attitude of people.
Survey. In statistics, a method of collecting data in which people were
asked to answer a number of question (usually in the form of
questionnaires).
Scope and Limitation of the Study
The study is limited to the information gathered in putting up a
company that would make and distribute folding bag or bag that can be
folded in different forms. From the history of bags the benefits of this kind of
business and how it profitable for the proponents upon putting up this kind of
business.
CHAPTER 3
MARKET STUDY
Objectives of the study
- To gather appropriate information need for the technical operation of the
business.
- To research for the supply of raw materials
- To know the needs of unhampered flow of operation will be the rate
prominent consideration in the plant layout
- To know what kind of product will be offered by the business
Methodology
The research is a combination of a descriptive-quantitative design.
The descriptive method is designed for the investigator to secure responses
to questions that are factual and practices of which the respondents are
presumed to have knowledge.
The research is geared towards the fulfillment of a common goal that
included the study habits of the respondents in relation to their academic
performance. This descriptive design was used as the method of research
since it describes the nature of a prevailing conditions and practices, and
seeks accurate description of activities, objects, persons and processes. This
method is believed to be the most appropriate in securing evidences about
the present condition of a group of persons, class or events and may involve
conduction, analysis and measurement. The researcher decided to utilize
the descriptive method because the study tried to find out the present facts,
concerning the present status of Folding Bag Co.
Demand
As electricity and other related products have been an essential in
every Filipinos craved for memories, it is consider as a prime commodity. It if
therefore safe to assumed that the demand for the function room is always
at the right time. Especially now that there are so many people who are busy
with their professions and needs a right hand for their occasions.
The rising cost of electricity bill proved that the demand continue to
rise or grow.
Projected demand for five(5) years
==============================
YEAR COST/SALES
==============================
1st year2010 895,280.00
2nd year2011 940,044.00
3rd year2012 987,046.20
4th year2013 1,036,398.51
5th year2014 1,088,218.44
==============================
The demand is believed to increase 10% in each year because having
an increase in electricity bill.
3.4 Supply
3.4.1 Supply for the past years
The projected supply for five year is believed to be the following;
======================================
YEAR SALES % of DEMAND
======================================
2010 895,280.00 10%
2011 940,044.00 10%
2012 987,046.20 10%
2013 1,036,398.51 10%
2014 1,088,218.44 10%
======================================
Accordingly, the demand is also the supply analysis and that there are
increase of 10% in every supply in each year.
3.5 Demand and supply analysis, demand/supply gap
Accordingly, this table tells the true history for this kind of business.
This business would definitely boom for the fact that there are more students
and parents who would be more willing to own this kind of bag that is low-
cost, space-less and is handy, and thus school’s who will require this kind of
bag would like to recommend our bag because it is an eco-friendly bag.
And thus Folding Bag Co. would meet their needs for demand and
supply for the years to come.
Marketing Strategies
Product
The product is the name itself FOLDING BAG. There are different types
of bag that would be made to sell these are the following
PURE RANGE
BRIGHT RANGE
BENRI RANGE
Product Category
The following are the product category.
Bag size 410 x 330 x 110 mm 410 x 330 x 110 mm 370 x 300 x 95 mm
Approx size when folded 110 x 85 x 25 mm 110 x 85 x 20 mm 105 x 75 x 15 mm
Bag weight 90g 80g 50g
Volume ~15 litres ~15 litres ~10.5 litres
Fabric Organic cotton Nylon / polyester mix Ripstop nylon
Waterproof? No Shower proof Shower proof
Washing Instructions Not recommended. Due to the organic properties of our cotton bags the fabric can shrink when washed, even at a low temperature
Machine wash on low temperature
Machine wash on low temperature
Handle Info Short and long handled versions available
Short and long handled versions available
Short handles only
Fastening method Free fastening cotton strap
Velcro strap Elastic loop
Biodegradable? Yes, natural fabrics biodegrade easily
Not really Not really
Disposal Instructions Remove the plastic base sections and dispose for recycling with your other household plastics. You can dispose of the bag as you wish or return it to
Please return your bag to us. We will recycle the plastic base sections and promise to reuse or recycle the fabric
Please return your bag to us. We will recycle the plastic base sections and promise to reuse or recycle the fabric
us. We will ensure that the fabric is reused or recycled
Branch
The Folding Bag Co. would not have a branch until after 3 years of
operation to be able to give out the financiers capital and to have more
investments for future branches.
Packaging
Folding Bag Co. prepare eco-bag and boxes. It will have a logo of
Folding Bag Co.
Pricing
RETAILERS
SIZES (backpack to shoulder bag) PRICE
SMALL 150.00
MEDIUM 200.00
LARGE 250.00
SIZES (shoulder bag to hand bag) PRICE
SMALL 80.00
MEDIUM 120.00
LARGE 150.00
WHOLESALERS (100pcs up)
SIZES (backpack to shoulder bag) PRICE
SMALL 100.00
MEDIUM 150.00
LARGE 200.00
SIZES (shoulder bag to hand bag) PRICE
SMALL 50.00
MEDIUM 90.00
LARGE 120.00
Place of Distribution
The place of distribution would be in the University Belt. Wholesalers
are welcome, the product could be distributed to any part of the country
because of the wholesalers.
Promotions and Advertising
Promotion is one of the major components of the company total marketing
mixture. The proposed business establishment will be promoted not only personally and
verbally, but it will also be promoted through flyers or brochures its advantage to us to
promote our company because the nearby mall also located in our vicinity.
The establishment will concentrate on producing high quality bags and providing
excellent services to make sure that the customers will get a delightful from the products
that they would by and from the word of mouth of patrons, there would be new
customers that would like to try our products.
Chapter IV –Technical Study
4.1 Objectives of the study
- To know Sizing and structuring of the shop
- To know the product and services of the business
- To know about the market competition
- To be knowledgeable about major advertisement that would help the business
4.2 Product / service
Folding Bag Inc. has a variety of services to offer and from which to choose.
During the first two years, the product line will include:
4.2.1 Uses of Products
The bags can use for shopping bag,gift bag,carrier bag,packaging bag,
promotional bag,advertising bag,etc
4.3 Manufacturing Process
Pre –Operations
This is the first stage of manufacturing process, these are several factors to be
considered to achieve the minimum time effort, materials and workers, the preparation
may require the following activities.
“Organization”
- Setting up the working area
- Preparing tools and equipment
- Checking up, warming up large equipments
- Checking proper equipment temperature
Assembling all raw materials or ingredients needed for production.
Pattern/Frames of the
Product & Cutting of
Leather
Skiving
Folding of edges
Sticking of different
Parts
Stitching
Fixing of locks &
Accessories
Finishing quality check
& Packing
4.3.2 Alternative Process Considered
The location of the firm would be in the heart of the University belt. It
will secure a working and selling place near Ever Mall in Morayta Sampaloc
Manila.
Head Office
The head office would still be in the same place, near the Ever Mall in
Morayta Sampaloc Manila, a 30 square meter building that would be divided
to the shop and the office.
Plant Size
PRODUCTION SITE
Place to put the sample bags and the office where wholesalers can order.
DOOR
DOOR
DIPLAY
4.7 Plant Size and layout
The Folding Bag Inc. would have 1 storey building with total lot area of 700 sqm.
The proposed establishment would be well equipped and will have complete facilities for
the convenience of both customers and personnel. The establishment would have
spacious display area, which can accommodate many person as possible. The building
and the facilities of the proposed establishment are designed for the convenience of the
customers and employees. Air conditioning unit are installed to provide outmost cool
effect on the entire establishment.
4.8 raw Materials and supplies
4.9 utilities
4.10 waste disposal
4.11 direct labor requirements
Chapter V – Management Study
5.1 Objectives of the study
1. Getting Maximum Results with Minimum Efforts - The main objective of
management is to secure maximum outputs with minimum efforts & resources.
Management is basically concerned with thinking & utilizing human, material &
financial resources in such a manner that would result in best combination. This
combination results in reduction of various costs.
2. Increasing the Efficiency of factors of Production - Through proper utilization
of various factors of production, their efficiency can be increased to a great
extent which can be obtained by reducing spoilage, wastages and breakage of all
kinds, this in turn leads to saving of time, effort and money which is essential for
the growth & prosperity of the enterprise.
3. Maximum Prosperity for Employer & Employees - Management ensures
smooth and coordinated functioning of the enterprise. This in turn helps in
providing maximum benefits to the employee in the shape of good working
condition, suitable wage system, incentive plans on the one hand and higher
profits to the employer on the other hand.
4. Human betterment & Social Justice - Management serves as a tool for the
upliftment as well as betterment of the society. Through increased productivity &
employment, management ensures better standards of living for the society. It
provides justice through its uniform policies
5.2 Form of business ownership
The proponents chose to form Limited Partnership because all the
individuals involved in the project are willing to share or provide not only the
capital requirements but also their ability and skills to perform the obligation
assigned for the effective and efficient operation of the business. The
proponents have a General partner and the rest are a limited partner. The
General manager will contribute 25% of the capital and the other partners will
contribute 18.75% each with a total of 100%
The staff of this business has equal duties and responsibilities in operating the
business to provide coordination. The profit loss will also be divided according to the
capital contribution of each of the proponents.
As for the company’s liability the general partner will be liable for debts which
may extend beyond his capital contribution while the limited partners liability is only up
to the extend of their capital contribution.
5.3 Capitalization
The capital of Cliques Resto-bar would be 5 Million Pesos which will be
contributed by 5 partners.
5.4 Organizational structure
General Manager
Telephone operators Production control supervisor Wover
Machine operators
Raw materials handler
Production Head
Quality Control
Assistant Quality Control
Janitor
Packer
Counter
Repairer
Security Guard
5.5 Manpower requirements
General Manager
responsible for directing and controlling the work and personnel of a business or a
particular department with in the business.
Monitor and check the performance of all outlets against target, take note of
variances.
Attends to staff concerns and problems, build morale and teamwork in his/her
department.
Responsible for maintaining good public and client image.
Production Control Supervisor
Checking all the materials
Checking of quality control products
Checking of packed products
Training new hired employees
Production Head
Responsible in checking all the raw materials
Checking of the machine operations
Quality Control
Checking all the materials
Checking of quality control products
Checking of packed products
Assistant Quality Control
Re-check all the materials
Re-checking of quality control products
Re-checking of packed products
Packer
Responsible in packing finished products
Machine Operators
Responsible in operating the machines that makes the bag1
Counter
After all the checking of quality control, the counter is responsible in counting
bags as it is packed by the packer.
Wover
Responsible in woving the bags before and after it was seen by the quality
control
Make sure that all bags are properly woven.
Telephone Operator
Answers all call from orders
Write down orders in a order form
Write purchase orders in receipts
Raw Materials Handler
Responsible in handling raw materials to the machine operators
Counter of the raw materials stock.
Repairer
Repairer of the bags that was rejected by the quality control
Janitor
To secure the place in its feature
Make the work place clean
Security Guard
responsible for the safety of the establishment.
Assigned to secure the smooth flow of the working areas.
Responsible for handling any violence inside the store.
Makes a daily report for what incident during their work.
Qualifications
General Manager
Male/Female
College graduate, preferably with a business management degree
Between 27 – 35 years of age
Should have started a career in a service – oriented industry
Must be hardworking and self – motivated
With 3 years experience
Articulate in English and Filipino
Must be good in handling subordinates
Production Control Supervisor
Male / Female between 24 – 34 years of age
With at least 2 years work experience
Knowledgeable in foldingbags
Graduate of any course
Willing to train everything related in their work
Production Head
preferred management graduate but not required
Male/Female between 25 – 35 years old of age
Familiar with Folding bag
With at least 2 years in experience
Dependent and can work well with minimum supervision
Assistant Quality Control
Female, 20 years of age
Graduate of any course
Can work on flexible hours
Packer
Male, between 25 – 30 years of age
Graduate in any course
Must be good in handling co – workers
Machine Operators
Male, between 22 – 27 years of age
Must be a college graduate with any course
With 1 year experience in servicing machine operations
Woover
Female, between 20 – 25 years of age
2 years vocational course
Telephone operator
female, 22 – 27 years of age
graduate of any related course
Should have knowledge to communicate with the customer
Can work in flexible hours
Raw Materials Handler
Male, 21 – 27 years of age
Graduate in ant 2 years vocational course
Can work in flexible hours
Knowledge in a service industry
Repairer
Male, 21 – 27 years old
Any 2 years course graduate
Can work in flexible hours
Must be hard working
Janitor
Male, Female 21 – 27 years of age
At least 2 years college degree
Can work in flexible hours
Must be hardworking
Security Guard
Male, 25 – 35 years old
Well trained in security agency
Physically fit
At least vocational graduate
Preferably with similar work experience
Hardworking and courteous
No criminal records
5.6 Compensation
PERSONNEL NO.
REQUIRED
Project Engineer 1
Payroll Manager 1
General Foreman 1
Head Carpenter 1
Carpenter 4
With in 120 Days 8
Welder 2
Assistant Welder 2
Mixer 2
Steal Man 3
Lead Mason 1
Mason 4
Laborer 10
With In 90 Days 24
Master Plumber 1
Assistant Plumber 2
Master Electrician 1
Electrician Helper 2
Painter 5
With in 60 days 11
Operational Period
PERSONNEL NO.
REQUIRED
SALARY/
DAY
SALARY/
MONTH
SALARY
ANNUALLY
General Manager 1 600 15,600 187,200
Production Control
Supervisor
1 400 10,400 124,800
Production Head 1 550 14,300 171,600
Quality Control 1 350 9,000 109,200
Assistant Quality Control 2 400 18,200 218,400
Packer 3 840 21,840 262,080
Machine Operators 2 560 14,560 174,720
Counter 3 840 21,840 262,000
Woover 10 2,800 72,800 873,600
Telephone Operator 1 280 7,280 873,600
Raw Materials Handler 2 560 14,560 174,720
Repairer 2 560 14,560 174,720
Janitor 2 560 14,560 174,720
Security Guard 2 600 15,600 187,200
Total Salary 33 9,900 192,400 2,308,800
5.7 Organization Policies
Benefits of the Employees
All hired employees of the business are entitled to the ff. benefits:
1. 13th month pay for every employee is entitled for the 13 th month pay, which has
equivalent to ½ of the basic salary of an employee within a month.
2. SSS benefits a social security contribution will be providing for the employees.
3. Phil. Health will be provided for the hospitalization of employees.
4. Incentives/bonuses – all employees with one year of service are entitled to any
yearly bonuses.
5. Annual vacation leave – regular employees are entitled to annual service leave
of 5 days with pay for every one year of service.
6. Sick Leave – any employees had a right to leave for the medicine.
7. Paternity/Maternity leave – issue for the employees needs an emergency leave.
Managerial Benefits
The managers are also entitled to benefits and privileges environmental to
employees plus the following:
1. Salary increase depending on the state of the business every year.
2. They will provide 10% discount on all food item.
3. They will be given a vacation, sick or emergency leave.
4. Paternity/maternity leave will also provided.
5. 13th month pay, SSS benefits, Phil. Health, Pag – ibig benefits will be given.
5.8 Legal requirements
In starting the operation of the business, the owners should complete the
necessary documents and requirements needed for the legalization; this stage of
business is organized in a formal manner, which requires registration in various
regulating government agencies.
Before a partnership can operate legally, it must first to comply with certain level
registration that are summarized as follows:
Place of Registration
1. Security and Exchange Commission (SEC)
2. Department of Trade and Industry (DTI)
3. City of Municipal Hall Permit (Mayor’s Permit)
4. Bureau of Internal Revenue
5. Social Security System
6. Other Agencies as may be required
In building business there are certain requirements to make specific business
legal. If the following cannot be obtained the operation will not function well.
BIR 1902 DTI application
Business Permit For employees: SSS,PhilHealth,Pag- ibig
Barangay Clearance Declaration of real property tax
Fire Inspection Certificate SEC
Building Permit
Chapter VI – Financial Study
6.1 Objectives of the study
The financial study is important because it is tasked to find out whether the business
ventured will be profitable even in the place of competition and unfavorable conditions.
The study will also show in detail the upward movement of the ventures finances a
period. The financial study after undertaken, is best presented by showing the
statements and schedules of the profits that are presented by showing the statements
and schedules of the profits that are intended to be realized. It must also show the
sources and kind of financing and the ways in which to repay what it owed. The study
will also reflect other financial information and data, which are needed in order for the
business venture to succeed. The financial study has several parts, initially; there is the
portion which status assumptions. These are very important for these assumptions
become the bases for the estimates.
To come up with a good assumptions, one must look into business practices that
are currently followed in the same industry as the proposed business. Also previous
feasibility studies, made in similar ventures as the one proposed might prove helpful.
Another important source of information for assumptions are government
regulations and policies, industry profiles, conferences, business plan, and articles from
business associations may help.
The next portion of the financial study is which discusses the total cost of the
project. A company will need assets. The next part of the study list down the sources
from where money can be borrowed on acquire. The list includes sources from where
long and short term loans can be acquired.
6.2 Total project cost – all items considered consumption made
PRODUCTION COST
FIXED CAPITAL
Machinery and equipment 1,795,658.00
Utilities 585,769.00
Total 2,381,428.00
WORKING CAPITAL
Stocks 78,636.00
Labor cost 21,600.00
Electricity & water 10,000.00
Miscellaneous 60,000.00
Computer advertisement 4,000.00
Taxes & licenses 14,400.00
Repairs & maintenance 586,000.00
Others 58,000.00 832,636.00
TOTAL 3,214,064.00
6.3 Initial capital requirements – all items considered
The proposed business, Folding Bag Inc.is a General Partnership which means
that there are three or more owners of this business. And that the investment cost of
the business are sub divided into the owners capital, which total of:
5,000,000.00
6.4 Sources of financing
6.4.1 Sources selected or proposed for both long-term
and short-term financing
6.4.2 Alternative sources
6.4.3 Amount and terms of financing
The proponents of the project will not seek help from financing or bank loan, but
from their own savings and with the help of their parents. From this the company wont
need to rush up their sales just to pay for their financial loan.
6.4.4 Projected balance sheet
Folding Bag Inc.BALANCE SHEET
For year ended 2011
CURRENT ASSETS
Cash3,000,000.
00
FIXED ASSETS
Gross Fixed AssetAccumulated depreciation
2,195,632.00
Net Fixed asstes 49,869.38
TOTAL ASSETS2145762.6
2
LIABILITIES 854237.38
notes payable
income tax payable117,149.0
0
TOTAL LIABILITIES854237.3
8
PARTNERS CAPITAL
Capital1,000,000.
00
Capital1,000,000.
00
Capital1,000,000.
00
Capital1,000,000.
00
Capital1,000,000.
005000000
Add:Net Income
retained earnings 895,820.00less:drawings 345,695.00Total partners equity 1241515
TOTAL LIABILITIES & CAPITAL
3645762.6
6.5 Financial statements
6.5.1 Assumptions
1. Miscellaneous expenses increase 3% annually.
2. Permit and license increases 5% annually.
3. Advertising expense increase 2% annually.
4. Purchases increase 5% annually.
5. Salaries and wages increase 3% annually.
6. Office supplies increase 3% annually.
7. Utility expenses increase 3% annually.
8. Repair and maintenance increase 5% annually.
9. Depreciation expense computed on a straight line method.
10. Sales increase 5% 6% 7% 8% and 9% on succeeding years.
11. 13th month pay increase 3% annually.
12. Value added taxes 12%.
13. Income tax payable 35% on the Net Income before tax.
6.5.2 Projected income
Folding Bag Inc.Income statement
For December 31, 2011
SALES895,280.0
0LESS COST OF SALESSTOCKS 78,636.00LABOR COST 80,000.00TOTAL COST OF SALES 158,636.00
GROSS PROFIT1,053,916.0
0
less :operating expenseelectricity & water 10,000.00rent expense 60,000.00taxes & licenses 14,400.00selling expense 8,000.00repairs & maintenance
586,000.00
miscellaneous 60,000.00comp. advertisement 10,000.00contingencies 85,080.00depreciation 45,233.00TOTAL OPERATING EXPENSE 878,713.00income from operation 174,203.00
LESS: interest expense 23,086.00TOTAL 151,117.00
NET INCOME 151,117.00
6.5.3 Capital cash flow statements
2011 2012 2013 2014 2015
CASH INFLOW
Beginning
Balance
248296 335152 492791 734825
Partners capital 62000
Proceeds from loan
135801
Sales 39380 422688 553488 714138 908934
Others 600 600 800 1000 1000
Total cash inflow 527681 671584 889440 1207929 1644759
Less : cash outflow
Stocks 78636 93372 118456 145956 180525
Labor cost 21600 22680 23812 25008 26256
100236 119052 142268 170964 2006781
Add : operating expense
Electricity & water
4000 - - - -
Miscellaneous 60000 69000 79350 91253 104941
Taxes and licenses
14400 14832 15276 15732 16200
Others 1000 1100 1210 1331 1464
Computer advertisement
10000 10500 11025 11576 12155
Selling expense 1000 1100 1210 1331 1464
Repairs & maintenance
1000 1100 1210 1331 1464
Contingencies 1080 1134 1191 1250 1313
Total operating expense
92480 98766 110472 123804 139001
Interest expense 23086 18595 13341 7193 -
Payments of loan 26418 30909 36163 42311 -
Withdrawals 31000 33000 35000 37000 39000
Payment of taxes 36110 59405 91832 131822
Acquisition of machinery & equipment &
utilities
6165 - - - -
CASH ON HAND 248296 335152 492791 734825 1128155
6.5.4 Projected balance sheet
Folding Bag Inc.BALANCE SHEET
For year ended 2011
CURRENT ASSETS
Cash3,000,000.
00
FIXED ASSETS
Gross Fixed AssetAccumulated depreciation
2,195,632.00
Net Fixed asstes 49,869.38
TOTAL ASSETS2145762.6
2
LIABILITIES 854237.38
notes payable
income tax payable117,149.0
0
TOTAL LIABILITIES854237.3
8
PARTNERS CAPITAL
Capital1,000,000.
00
Capital1,000,000.
00
Capital1,000,000.
00
Capital1,000,000.
00Capital 500,000.00
4500000Add:Net Incomeretained earnings 895,820.00less:drawings 345,695.00
Total partners equity 1241515
TOTAL LIABILITIES & CAPITAL
3645762.6
6.5.5 Financial analysis
6.5.5.1 Ratios
I. Test of Profitability
A. Net Profit Margin = Net Income After Tax
Sales
=8,156,381
20,250,000 = .40
B. Gross Profit = Profit before tax
Income
=12,548,277
8,156,381 = 1.54
C. Return on owner’s equity investment = Net Income
Stock Equity
=8,156,381
22,709,467 = .36
D. Turnover Rate of Gross Capital = Gross Sales
Gross Capital
=20,250,000
17,000,000 = 1.19
Test of Liquidity
E. Current Ratio = Current Asset
Current Liabilities
=151,984.03
4,349,896.90 = .35
F. Quick on Acid Test = Asset - Inventories
Current Liabilities
=1,519,845.03 – 192000
4,349,896.90 = .31
G. Liquidity of Inventories = Cost of Sales
Average Inventory
=20,250,000
192,000 = 105.19
H. Deb – To – Net Wale Ratio = Total Liabilities
Total Equities
= 4,349,896.90
22,709,467 = .19
6.5.5.2 Break-even point analysis
Break-even calculations assume a 25% to 30% gross margin. This is a
conservative estimate, and it will be improved as strategic relationships develop and the
benefits of Folding Bag Inc. offerings are realized by customers.
Break-even Analysis
Break-even Analysis:
Monthly Units Break-even 95,000.00
Monthly Revenue Break-even P95,000.00
Assumptions:
Average Per-Unit Revenue P200.00
Average Per-Unit Variable Cost P200.00
Estimated Monthly Fixed Cost P6,000.00
6.5.5.3 Capital recovery, and earnings
Showing the cash payoff period,
The project met the income requirements of 27% (cost of capital) since the total
computer NPV is greater than the total project cost. The total project cost is
344,636.00 and the computer NPV is
Year Annual cash flow 27% net present value PHP
2006 77,968 0.70740 55,154
2007 127,470 0.62000 79,031
2008 196,375 0.48819 95,868
2009 281355 0.38440 108,152
2010 384,018 0.30268 116,234
NPV = 454,439 - 197,801
=256,638
Payback period
The investment will be recovered within 1 year and nine month. This means that
the project is feasible because the capital will be recovered in less than 2 years.
Year Net cash flow
2011 77,968
2012 127,470
2013 196,375
2014 281355
2015 384,018
total project cost 197,801
recovered
first year -77,968
to be recovered 119,833
365
first year -127,470.00
to be recovered 349
119,833
349 =708 days
payback period = 1 year 11 months and 7 days
Rate of return
The computation shows an average of 35.6% which means that the business is
maximizing its assets throughout the operation.
ROI – Net Income/ Total Assets
YEAR NET INCOME ASSETS ROI
2011 76,735 253,228 30.30%
2012 126,237 338,851 37.25%
2013 195,142 495,257 39.40%
2014 280,122 736,058 38.86%
2015 382,785 1,128,155 33.93%
35.79%
Chapter VII – Socio-Economic
7.1 Contribution to the Philippine economy
As we start the business, there will be a benefit to the government
or Municipal and national government. And as of this days more
business owners/establishment gives more taxes, showing to increase the
revenues of the government. So that revenues can be used in the
development of the community. All these taxes are enforced by the
government to every business owners/establishment. The project will help
us increase the business and to outgrow it.
7.2 Employment generation
This can provide jobs so skilled and unskilled person and this is a great
benefit in the society. As for the country suffered a crisis of
unemployment and the business can help the government in decreasing
the unemployment rate in the country.
7.3 Social desirability
Folding Bag Inc. business also plays a big role in the society, because
this business provide good quality of services and recycled bags that the
customers need, sell this is a reasonable price and supply needs of the
people.
7.4 Others – The proponents
The project would be beneficial to the proponents for it gained profit
that would raise the quality of their families. The income generated by the
partners will surely improve the standard of living of themselves and their
families.