Sweet Flavours Ice Candy

SUBMITTED BY:
ALGIE C. DAG-UMAN
GLENN MARC DELA CERNA
 BUSINESS PLAN
INTRODUCTION
Objective: To give brief details about the type of business we are engaging.

1.1 Name of Business

Our business is name “Sweet Flavours Ice Candy” which is decided by our
group for it can catch the customers attention, as well as it is really the true taste
of our product.

1.2 Business Address

Our business will be located in Children’s Park, San Miguel, Iligan City which
is we intend to deliver our products on the stall’s that are currently established in the
area. And the production site will be at Purok 2- C Katipunan,Hinaplanon, Iligan City.

1.3 Nature of Business

We are manufacturers of Ice Candy and we deliver it to our designated area

where stall of store owner’s is our primary customers.

1.4 Form of Business

Our form of business is like we are the producer that delivers the products to
our customers. We are the Ice Candy suppliers to our designated stalls.

1.5 Name of Owner/s

Our group is consist of 8 members, we intend to register our business in sole

proprietorship under the name of Algie C. Dag-uman with its seven silent owners
namely Glenn Marc Dela Cerna, Eliseo Durano, Dale Adam Guadalupe.

1.6 Brief Description of Business

This business is planned to be implemented this year 2013, it was planned at

the year 2012 by our group members that will take part in running the business. We
choose ice candy business because it is suitable to tropical climate and it is a demand
in our area.

1.7 Objectives

Our objective is to create a sustainable business that could benefit us in the

future. And most likely to let our customers enjoy our product that suits their needs
in all season.
 MARKETING PLAN

OBJECTIVE: To sustain our small business and to have gain more profit for any
additional product in the future or for more production.

1.1 Description of the Product

Ice candy nowadays are presently mass produced and has less flavors.
Now, a new variety of Ice Candy that is especially made with bursting flavors and
sold in a reasonable price. This Special Ice Candy will bear the brandname “Sweet
Flavours.”

1.2 Comparison of the product with its competitors

Sweet Flavours special ice candy aims to satisfy the consumers with its
taste and refreshing flavors. Our main goal is to let our consumer appreciate the
quality of our product and compare whether we had the better lead toward our
competitors.

1.3 Location

The production site will be located at Ermac’s Residence, Purok 2 –C

Katipunan, Hinaplanon, Iligan City. Where it’s way of transportation and accessibility
for our raw materials is at ease.

1.4 Market area and customer

Our group plans to sale 8,000 pieces of ice candy per month to our target
location area, at Children’s Park, Barangay San Miguel, Iligan City and we contacted
a particular stall to display our products. where it is less than 20 minutes ride from
our production site. Our group chose this area because there are potential customer
we can acquire. The said target location for our business establishment is a place
where we can assure that there are lots of customers to be found. The said place is
very accessible and the transportation of the goods will be at ease.

1.5 Total Demand

The location has the total population of 10,000 including the by-standers,
students and other by-passers that are seen as our potential customers. We are
targeting about 45% of the total population as our customers. Approximately the
target customers have a frequency of purchase of 667 times a year.

Frequency of Total Market

Year Population
Purchase Requirement
1 4,500 667 3,001,500
2 4,525 667 3,018,175
3 4,550 667 3,034,850
1.6 Total Supply

We conducted a survey that there are 10 ice candy producers in the area
and they can produce 10,000 pieces of ice candy per month or a total supply of
60,000 ice candy per month.

Supply Projections:

Capacities per Available

Year Producers
Month Supply/Year
1 10 10,000 1,200,000
2 10 10,000 1,200,000
3 10 10,000 1,200,000

1.7 Market Share

Our group conducted a GAP analysis to determine if we got a shortages of

supply in our area which will serve as our basis for our target market share.

Market Availability of
Year GAP
Requirement Supply
1 3,001,500 1,200,000 1,801,500
2 3,018,175 1,200,000 1,818,175
3 3,034,850 1,200,000 1,834,850

1.8 Selling Price

Our selling price well be based on cost that is reasonable and very
affordable. And could possibly sustain our business for a long time. Because of its
made Special we sell it at P 10.00 per piece.

1.9 Sales Forecast

A market share of 5% to 10% is estimated as being reasonable. For our

initial operation, we have decided to estimate about 5.33% as our first step.

PROJECTED SALES FORECAST (MP Sched I-A)

Market Estimated Sales

Year GAP Unit Price
Share Units Amount
1 1,801,500 5.33% 96,000 10 P 960,000
2 1,818,175 5.33% 96,910 10 P 969,910
3 1,834,850 5.33% 97,798 10 P 977,980

We believe that the market demand will increased dramatically as our

product will be well-known throughout the place.
2.0 Marketing Strategy

a) Product
 is has a good quality in terms of flavor.
 an appealing brand name which is “Sweet Flavours” where you can really
tell after you try the product.

b) Pricing
 a reasonable price will be placed on our product where it is still affordable.

c) Promotion
 our customer will be our promoters, where they will serve as our
advertisers, through their testimonies with regards of our product.
 we will be giving away free samples to our designated area.

d) Distribution
 regular delivery to our designated stall owner’s.

2.1 Marketing Budget

Our group will adopt a considerable cost of promotion and distribution of our
product. Since we are delivering our product to our designated area and we are also
giving the stall owner a commission.

SCHEDULE I-B MARKETING BUDGET

Month Year 1
Transportation expenses P 480 P 5,760
Stall Owner’s Share P 3,000 P 36,000
Representation’s Expenses P 1,000 P 12,000
Total Marketing expenses P 4,480 P 53,760
 PRODUCTION PLAN

Objective: To meet our sales forecast requirement.

2.1 Production Process

1. Place all the ingredients in a blender.

2. Blend the ingredients till the ingredients are well combined.
3. Pour in a large bowl.
4. Place a funnel spout inside the opening of the Ice Candy plastic casing.
5. Stir the mixture before ladling. Pour in a ladleful of the mango mixture. Make sure
that you are holding the spout and plastic casing connection tightly so that the
mixture won’t spill.
6. Make sure that you have approximately 6-7cm empty gap from the opening of the
plastic to make room for the knotting. Twist the plastic just on top of the cased
mixture, leaving a little bubble is normal. The Ice Candy has to be firm but not too
tight. If it is too tight, it might leak when you freeze it or worst the plastic will rip.
7. Pinching the twisted part with your thumb and forefinger, wrap top end over your
thumb and tuck it under towards your inner palm and swing it underneath back to
your thumb and forefinger.
8. The wrapping around your thumb has to be tight, slowly withdraw your thumb while
you insert the top end part of the plastic through where your thumb has been. Pull
it well till you have a tight knot.
9. Once you have done all your Ice Candy, place them in a flat surface in your freezer
lying down. You can stack them on top of each other (maximum is 3 layers), but
don’t put anything else on top of them as you don’t want them to burst inside your
freezer.

2.2 Fixed Assets

For us to start our business we need to purchase a double door refrigerator

with 18.6 cu.ft capacity which cost P 45,000.00. We also need a blender 1,500 cc
with a price of P 2, 300. We rent a small house for 200 per month and we need to
pay P 600 as a advanced payment for 3 months for our rental deposit in order for
us to start our business. We also be needing utensil used for Ice Candy production
that usually cost P 850.Building Improvements for P5,000. We also need to buy
table and chairs for P 4,500.We decided to invest our own money to establish our
business. Our utensils will last for 4 years and 3 year for our tables and chairs. Our
refrigerator will last for 12 years and 4 years for the gas stove.
SCHEDULE II-A SCHEDULE OF PLANT MACHINERIES AND
EQUIPMENTS

COST LIFE DEPRECIATION

Building Improvements 5,000 6 years 833.00
Refrigerator 45,000 12 years 3,750
Utensils 850 4 years 212.5
Table and Chairs 4,500 3 years 1,500
Blender 2,300 4 years 575
TOTAL 57,650 6,870.50
2.3 Repairs and Maintenance
 We expect the difficulty of repairing and maintaining our equipments, so we
have decided to incur an amount of P 150 per month for our repair and
maintenance.

2.4 Sources of Equipments

We can purchase our equipments locally, because it is available in any

appliance store and suppliers.

2.5 Planned Capacity

We can produce 308 pieces of ice candy per day or 8,000 ice candies each
month. Our factory will operate at 92.53% (285/308)

(* We choose 285 as our number of unit produce per day as our starting
operation over the original amount of 308 pieces per day which is computed as 308 x 26
days = 8008.)

2.6 Factory Location and Layout

Plant Layout

BLENDING/MIXING/
MATERIALS COOKING OF THE
INGREDIENTS

ICE CANDY
WRAPPING
& FREEZING

DELIVERY OF FINISH
PRODUCTS (Final QC)
2.7 Cost of Raw Materials

Raw materials needed to finish one unit of our product cost P 4.78. The cost
of raw material per month (no. of units x cost of raw materials per unit) 8,000 ice
candy x 4. 8 = P 38,400.00

List of Ingredients for Sweet Flavours Ice Candy for 25 pieces.

Ingredients Unit Price

Fruits (should not be keep more 350 g P 28.00
than a week)
Sugar ½ cup or 250 ml 12.50
Cream ½ cup or 250 ml 25.00
Freshmilk 500 ml 50.00
Fruit Essence 1 tspn 1.00
Ice Candy Wrapper 25 pcs 3.00
Total P 119.50
(* 120 / 25 = 4.8 per piece)

2.8 Raw Materials Availability

Thru price canvassing and some conducted group surveys, we know that
the availability of the raw materials needed for product is guaranteed. But, for now
we are avoiding stocking large quantities of raw materials for we are still starting
to make our business.

2.9 Labor

Our group decided that anyone one of us is assigned to deliver and do with
the production by schedule, so that all of us has a part with the business. We
decided to have an even share of monthly salary of 1,500.

Monthly Labor Cost:

Direct Labor (3 workers x 1,500) P 4,500

P 4,500

Indirect Labor Manager/Supervisor P 1,000

Total Labor Cost P 5,500

2.10 Factory Overhead Expenses

Our Ice Candy business will incur the following monthly overhead expenses in
manufacturing our products.

MANUFACTURING OVERHEAD EXPENSES

Indirect Labor P 1,000.00

Light and Water 500.00
Repairs and Maintenance 150.00
Factory rent 200.00
Depreciation Expenses – Building Improvements 833.00
Depreciation Expenses – Refrigerator 3,750.00
Depreciation Expenses – Utensils 212.50
Depreciation Expenses – Furniture 1,500.00
Depreciation Expenses – Blender 575.00
Total Factory Overhead Cost P 7,720.50

SCHEDULE II-B PRODUCTION COST

MONTH 1 YEAR 1
Direct Materials 38,400 460,800.00
Direct Labor 4,500 54,000
Manufacturing Overhead 7,720.50 92,646
Total Production Cost 50,620.50 P 607,446.00

2.11 Production Cost Per Unit

Total Production Cost/Unit = P 50,620.50 = 6.3275 or 6.35

Number of Units Produced 8,000.00

2.12 Inventory

In our case we intend to avoid over production because of our product’s

time of preservation which is not more than a month. So this 3 items will be
provided.
SCHEDULE II-B1 MONTHLY INVENTORIES
Units Cost
* Raw Materials 8,000 38,400.00
** Work in Process 285 603.25
*** Finished Goods 142 901.70
TOTAL 39,904.95

* Cost of Raw Materials = quantity needed x purchase price

= 8,000 x 4.8
= 34,800
** Work in Process = (No. of Days x daily production level x production cost) / 3
= (1day x 285 units/day x 6.35)/3
= 603.25
*** Finished Goods = (142 units to kept x 6.35 production cost)
= 142 x 6.35
= 901.70
 ORGANIZATION AND MANAGEMENT

Objective: To transform the marketing and production aspects of Sweet Flavours Ice
Candy into a sustainable business.

3.1 Form of Business

The business will be registered under the name of Sweet Flavours Ice Candy.
Since our group is composed of 8 members only, that are silent owners also, we decided
to register our business as a sole proprietorship to Algie C. Dag-uman.

3.2 Organizational Structure

Algie C. Dag-uman acts as the General Manager/Supervisor and as one of the

production staff. Since our group starts with a small business the manager also acts as
the bookkeeper/treasurer and manage the remaining 7 workers.

The delivery of finished products is done by the 8 workers, according to a set of

schedules. And also we can hire some reliable delivery boys if necessary.

ORGANIZATIONAL CHART

General Manager
(Algie C. Dag-uman)

Marketing Supervisor Production Supervisor Bookkeeper/ Treasurer

(Algie C. Dag-uman or Any (Algie C. Dag-uman or Dela Cerna) (Algie C. Dag-uman)
Member of the Group)

Stall Owner/Vendor

Production Staff Production Staff Production Staff

(Any member the group) (Any member the group) (Any member the group)

3.3 Business Experience and Qualification of the Entrepreneur

Our group has members which had experience and knowledge in Ice Candy
business. Due to their previous experiences, we are confident to indulge with such
business combined with our resourceful members that conducts researched on improving
our product.
 3.4 Pre – operating activities

1. Preparing the Business Plan 4 weeks

2. Investing our Capital from our own pocket 12 weeks
3. Canvassing the materials, equipments and purchase 4 weeks
4. Constructing building improvements and finish touches 2 weeks
5. Installation of Equipments 1 day
6. Contacting the raw materials suppliers 3 days

GANTT CHART
Timetable in weeks

Pre - Operating Activities WEEKS

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 D
1. Preparing the
Business Plan
2. Investing the
Capital from
own pocket
3. Canvassing the
materials, equip-
ments and pur-
chase
4. Constructing
Building improve
ments and finish
touches
5. Installation of
Equipments
6. Contacting the
raw materials
suppliers

3.5 Pre – Operating Expenses

The following expenses will be incurred in the initial phase of operation.

SCHEDULE III-B SCHEDULE OF PRE-OPERATING EXPENSES

3-year Amortization per

Cost
Amortization Year
Training cost P 1,000
Transportation 480
Business DTI registration 200
Business Permit & Clearances P 3,000
Total P 4,680 3 years 1,760

Our group decided to have one of our staff to conduct a 1 week culinary training
for additional knowledge and can be passed on our production staff. Our group decided
to capitalize the pre-operating expense for a period of 3 years.

3.6 Office Equipment

Our group intends to minimize expenses as much as possible. So equipments like

calculator, computers, etc. are initiatively provided upon availability by the members.
Chair and tables are also provided by the group and some were purchased that last for 3
years.

209884.30048SCHEDULE III-A SCHEDULE OF OFFICE MACHINERIES AND

EQUIPMENT

Cost Life Depreciation

Office Equipment
P 750 3 years P 250
(Calculator)
Computer Set 20,000 5 years P 4,000
Tables and Chairs 2,100 3 years 700
Total P 22, 850 P 4,950

(*Note: PC unit P 16,000 ; Calculator P 500; Furnitures 1,400)

3.7 General and Administrative Expenses

The following administrative expenses are expected to be incurred by the

business.

SCHEDULE III-C GENERAL EXPENSES AND ADMINISTRATIVE EXPENSES

Month 1 Year 1
Communication P 520 P 6,240
Miscellaneous expenses 100 1,200
Depreciation of Calculator 20 250
Depreciation of Computer 333 4000
Depreciation of Tables and Chairs 58 700
Total General & Administrative Expenses P 511 P 6,150

Other Information: Our group decided to have our share of Php 20,000.00 per year
ending. (8 x 20,000 = 160,000)
 FINANCIAL PLAN

Objectives: To coordinate the marketing, production, organization and management

aspects of Sweet Flavours Ice Candy into a viable financial plan.

SWEET FLAVOURS ICE CANDY

PROJECTED TOTAL PROJECT COST

TOTAL EQUITY LOAN

FIXED ASSETS
Building Improvements (PP II-A) 5,000.00 5,000.00
Refrigerator (PP II-A) 45,000.00 45,000.00
Utensils (PP II-A) 850.00 850.00
Tables and Chairs (PP II-A) 4,500.00 4,500.00
Blender (PP II-A) 2,300.00 2,300.00
Office Tables and Chairs (OM III-A) 2,100.00 2,100.00
Office Equipment (OM III-A) 750.00 750.00
Computer (OM III-A) 20,000.00 20,000.00
Total Fixed Assests 80,500.00 80,500.00
WORKING CAPITAL
Raw Materials (PP II-B) 76,800.00 76,800.00
Direct Labor (PP II-B) 4,500.00 4,500.00
Manufacturing Overhead (PP II-B) 7,720.50 7,720.50
Work in Process Inventory (PP II-B) 603.25 603.25
Finished Goods Inventory (PP II-B) 901.70 901.70
Selling/Marketing Expenses (PP II-B) 4,480.00 4,480.00
General and Admin Expenses (OM III-C 5,050.00 5,050.00
Total Working Capital 100,055.45 100,055.45
OTHER ASSETS
Rental Deposit (PP 2.2) 600.00 600.00
Pre-operating expense OM III-B 4,680.00 4,680.00
Total Other Assets 5,280.00 5,280.00

TOTAL PROJECT COST 185,835.45 185,835.45

DEBT-EQUITY RATIO 100% 100%

*Net of Depreciation Expenses

Total Equity 185,835.45
Non-cash equity 17,900.00

Cash Equity 167,935.45

SWEET FLAVOURS ICE CANDY
PROJECTED INCOME STATEMENT

MONTH 1 YEAR 1
A. SALES ( 10 X 8,000 pcs.) (MP I-A) 80,000.00 960,000.00
B. Less: Cost of Goods Sold 50,620.50 607,446.00
C. Gross Profit (A-B) 29,379.50 352,554.00
D. Less: Operating Expenses
Selling expenses (MP-I-B) 4,480.00 6,132.00
General and Admin Expenses (OM III-C) 511.00 59,892.00
Total Operating Expenses 4,991.00 66,024.00

E. Operating Income (C-D) 24,388.50 292,662.00

F. Less: Other expenses
Interest expense
Amortization of pre-op. (OM III-B) 146.67 1,760.04
Total other expenses 146.67 1,760.04
G. Income before income tax (E-F) 24,241.83 290,901.96
H. Less Income Tax - 32,680.39
I. Net Income 24,241.83 258,221.57
 SWEET FLAVOURS MANUFACTURING
Projected Statement of Cost of Goods Manufactured and Sold

Month 1 Year 1

a. Direct Materials
Materials beginning -
Purchases 78,304.95 78,304.95 500,704.95 500,704.95

Less: Purchases returns & allowance - - -

Purchase discounts - - -

Materials available for use 78,304.95 500,704.95

Less: Materials end 38,400.00 38,400.00

Direct materials used/consumed 39,904.95 462,304.95

b. Direct Labor 4,500.00 54,000.00

c. Factory Overhead 7,720.50 92,646.00

d. Total Manufacturing Cost 52,125.45 608,950.95

Add: work in process beginning

e. Goods placed in progress 52,125.45 608,950.95

Less: Work in Process end 603.25 603.25

f. Cost of Goods manufactured 51,522.20 608,347.70

Add: finished goods inventory beg. -

g. Cost of Goods available for sale 51,522.20 608,347.70

Less: finished goods inventory - end 901.70 901.70

h. Cost of Goods Sold 50,620.50 607,446.00

 SWEET FLAVOURS MANUFACTURING
Projected Cash Flow Statement

Pre-Op.Ex Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Year 1

CASH INFLOW
Cash Equity 167,935.45
Cash Sales 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 960,000.00
Credit Sales
Total Cash Flow 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 80,000.00 960,000.00

CASH OUTFLOW
Const. of Bldg. Improv. 5,000.00
Pur. of Refrigerator 45,000.00
Pur. of Utensils 850.00
Pur. of Tables and Chairs 4,500.00
Pur. of Blender 2,300.00
Pur. of Raw Materials 38,400.00 38,400.00 38,400.00 38,400.00 38,400.00 38,400.00 38,400.00 38,400.00 38,400.00 38,400.00 38,400.00 38,400.00 460,800.00
Payment for Dir. Labor 4,500.00 4,500.00 4,500.00 4,500.00 4,500.00 4,500.00 4,500.00 4,500.00 4,500.00 4,500.00 4,500.00 4,500.00 54,000.00
Payment for Rent Dep. 600.00 600.00
Payment for Mftg. Ovhd 7,720.50 7,720.50 7,720.50 7,720.50 7,720.50 7,720.50 7,720.50 7,720.50 7,720.50 7,720.50 7,720.50 7,720.50 92,646.00
Inv. of Raw Materials 38,400.00 38,400.00
Inv. of Finished Goods 901.70 901.70
Selling Expenses 4,480.00 4,480.00 4,480.00 4,480.00 4,480.00 4,480.00 4,480.00 4,480.00 4,480.00 4,480.00 4,480.00 4,480.00 53,760.00
Gen. Adm. Expenses 511.00 511.00 511.00 511.00 511.00 511.00 511.00 511.00 511.00 511.00 511.00 511.00 6,132.00
Payment of pre-operating 4,680.00
Payment of Income Tax
W/drawal of Group Share 160,000.00 160,000.00
Total Cash Outflow 62,930.00 94,913.20 55,611.50 55,611.50 55,611.50 55,611.50 55,611.50 55,611.50 55,611.50 55,611.50 55,611.50 55,611.50 215,611.50 866,639.70
Net Cash Flow 105,005.45 (14,913.20) 24,388.50 24,388.50 24,388.50 24,388.50 24,388.50 24,388.50 24,388.50 24,388.50 24,388.50 24,388.50 (135,611.50) 93,360.30
Add: Cash Balance Beginning 105,005.45 90,092.25 114,480.75 138,869.25 163,257.75 187,646.25 212,034.75 236,423.25 260,811.75 285,200.25 309,588.75 333,977.25 105,005.45
CASH BALANCE END 105,005.45 90,092.25 114,480.75 138,869.25 163,257.75 187,646.25 212,034.75 236,423.25 260,811.75 285,200.25 309,588.75 333,977.25 198,365.75 198,365.75
 SWEET FLAVOURS MANUFACTURING
Projected Balance Sheet

Pre-Operating/Expansion Month 1 Year 1

ASSETS
Current Assets
Cash 105,005.45 90,092.25 358,365.75
Inventories
Raw Materials 38,400.00 38,400.00
Work-in-Process 603.25 603.25
Finished Goods 901.70 39,904.95 901.70 39,904.95
Total Current Assets 105,005.45 129,997.20 398,270.70
Fixed Assets
Refrigerator 45,000.00 45,000.00 45,000.00
Less: Accu. Dep'n-Ref. 45,000.00 312.50 44,687.50 3,750.00 41,250.00
Building Improvements 5,000.00 5,000.00 5,000.00
Less: Accu. Dep'n-BI 5,000.00 69.42 4,930.58 833.00 4,167.00
Factory Utensils 850.00 850.00 850.00
Less: Accu. Dep'n-Utensils 850.00 17.71 832.29 212.50 637.50
Blender 2,300.00 2,300.00 2,300.00
Less: Accu. Dep'n - Blender 2,300.00 47.92 2,252.08 575.00 1,725.00
Tables and Chairs 4,500.00 4,500.00 4,500.00
Less: Accu. Dep'n- T and C 4,500.00 125 4,375.00 1,500.00 3,000.00
Office Equipment 750.00 750.00 750.00
Less: Accu. Dep'n-Office Equipment 250.00 500.00 291.67 267.36 313.95 436.05
Office Tables and Chairs 2,100.00 2,100.00 2,100.00
Less: Accu. Dep'n Office T and C 700.00 1,400.00 816.67 748.61 879.05 1,220.95
Computer Set 20,000.00 20,000.00 20,000.00
Less: Accu. Dep'n Computer Set 4,000.00 16,000.00 5,333.33 4,888.89 5,740.74 14,259.26
Total Fixed Assets

Other Assets
Rental Deposit 600.00 600.00 600.00
Pre-operating Expenses 4,680.00 4,680.00 3,520.00
Total other Assets 5,280.00 5,280.00 4,120.00
TOTAL ASSETS 185,835.45 198,259.52 469,086.46

LIABILITIES AND OWNERS EQUITY

Current Liabilities
Taxes Payable 32,680.39
Total Current Liabilities 32,680.39
Total Liabilities 32,680.39
Owner's Equity
Owner's Equity - Beginning 185,835.45 185,835.45 185,835.45
Add: Net income 24,241.83 290,901.96
TOTAL 185,835.45 210,077.28 476,737.41
Less: Group Share per Annum 160,000.00
Owner's Equity End 185,835.45 210,077.28 316,737.41
TOTAL LIABILITIES AND OWNER'S EQUITY 185,835.45 210,077.28 349,417.80

(since we don’t have a loan that makes it into a liability, our total liabilities and owner’s
equity would definitely not equal to the Total Assets)
FINANCIAL RATIOS ANALYSIS

- Is the systematic uses of ratios to interpret financial statements in order to

determine strengths and weakness of a firm as well as historical and current
condition.

Type of Financial Ratios

1. Liquidity Ratios
2. Profitability Ratios
3. Leverage Ratios

1. LIQUIDITY RATIOS – reflects the firms capacity to meet short term obligations

a. Current Ratio – measures the ability to meet maturing and short term obligation.

b. Quick ratio – measures the firm’s ability to pay off short-term obligations without
relying on the sales of inventories

(since we don’t have liabilities we neglect this two ratios)

2. PROFITABILTY RATIOS – indicates the margin on sales and overall efficiency of

assets and capital employed.

a. GROSS PROFIT MARGIN – reflects the firm’s policy relating to pricing and
production efficiency. Indicates average mark-up of product sold.

Month 1

= Sales – Cost of Goods Sold = 80,000 – 50,620.50 = 36.72% mark-up

SALES 80,000

b. RETURN ON OWNER’S EQUITY – measures the profit generated on funds

provided by the owner.

Month1 Year 1

= NET PROFIT 24, 241.83 258,221.57

OWNER’S INVESTMENT 185,835.45 185,835.45

13% 139%
 c. RETURNS ON TOTAL ASSETS - measures the earning power of the business

Month 1 Year 1
= PROFIT BEFORE INTEREST
AND TAXES 24,388.50 292,662
TOTAL ASSETS 210,077.28 317,737.41

12% 92%

3. DEBT RATIO ( SOLVENCY RATIO) – reflects the firm’s degree of dependence

on external debt fund and its ability to meet the corresponding debt – service.

a. DEBT EQUITY RATIO

- determine the extend of use of long-term debt to finance firm’s requirements.
- high ratio is not desirable/rule of thumb : 32:68