This is a simple guide I have prepared for aspiring entrepreneurs and entrepreneurship students. After
reading this write-up, you should be able to recognize why and when to develop a feasibility study, now
how to identify a business feasibility study and explain the major sections of a classic feasibility study.
This article will also enable the reader to focus feasibility study sections to meet specific needs, know the
major pitfalls when writing feasibility studies and learn how to present a feasibility study to others.
As an entrepreneur, after identifying a business idea/opportunity, introducing/development of a new
product, the next phase in the development of an idea/product is to conduct a feasibility study to ascertain
the viability of the business (venture) and obtaining useful information to plan and make decision on
whether to go-on or not. The feasibility study is conducted during the deliberation phase of the business
idea prior to commencement of a formal Business Plan. That is, a feasibility study of a business is done
on an ex ante (before the business or venture comes into existence) basis. At the end of the feasibility
study a feasibility report is written which provide a basis for taking investment decisions and could also
be used in securing finance for the business, product/services.
Feasibility Study
Feasibility Study is a formal project documents that shows result of the analysis, research and
evaluation of a proposed project & determines if this project is technically feasible, cost-effective
and profitable. The primary goal of feasibility study is to assess and prove the economic and
technical viability of the business idea. The outcome of the study will determine if there is
economic sense to take the project initiative and proceed with the development of the
implementation plan.
A project feasibility study helps investors identify and analyze all the opportunities they can gain
upon successful completion of the project. If the document did not prove the economic viability,
then the proposed venture should not be pursed. A feasibility study allows avoiding unfounded
spending of effort, time and money, so it a highly effective tool of project investment evaluation
and planning. It forces investors to put their ideas on paper to conduct analysis and assessment
and then find out whether the ideas are worth investing or not.
Importance
Before initiating a project it is an important step to perform a feasibility analysis that helps in
developing and maintaining the project efficiently within budgeted costs and under desired
benefits. The importance of writing a feasibility study consists in the next major benefits that
the business organization will gain:
Analysis. An example of feasibility study contains all the analytical information being
used for investigating project requirements and business need completely.
Risks Mitigation. A project feasibility study helps in identifying risk factors that affect
the development and implementation of the project.
1
Training. It helps in identifying staff training needs and developing training programs.
Reporting. The study is a kind of initial project reports that give the senior management
information required for making well-grounded decisions on cost estimation and project
funding.
Key Components
1. Market opportunities
The primary component to be included in feasibility study of a project concerns
determining potential market opportunities for the sponsor. Determination of market
opportunities is about examining current level of demand for a product to be produced
upon project completion and exploring ways for differentiating the product in the market.
This means that a need for the project will be established if an adequate level of demand
exists for the product. Market opportunities determination is also about analyzing the
competitive environment and defining key players on the market who will be major
competitors to the proposed venture.
2. Requirements:
3. Financial overview:
Feasibility study of a project allows focusing on the investigation of the overall financial
situation around the project. Protecting your financial situations are important, US Money
Reserve is just one program that can help with your assets. Based on cost estimates, this
document includes financial information essential for initiating the project. The study may
include the following information:
Operating costs, including wages, rent, and interest payments on outstanding debts
Revenue expectations
If the cost estimates presented in the feasibility study prove that the project choice is
economically viable, then the sponsor can proceed with developing the business plan.
Apart from the approaches to feasibility study listed above, some projects also require
for other constraints to be analyzed
Capital Investment
Capital investment refers to funds invested in a firm or enterprise for the
purpose of furthering its business objectives. Capital investment may also
refer to a firm's acquisition of capital assets or fixed assets such as
5
Net present value (NPV): this capital investment appraisal technique measures the
cash in-flow, whether excess or shortfall, after the routine finance commitments are
met with. All capital investment appraisals have a single objective drive towards
a positive NPV. The NPV is a mathematical calculation involving net cash flow at
a particular present time 't' at discount rate at the same time, i.e. (t initial capital
outlay). Thus there is an inverse proportional relation between discount rate and
NPV. A high discount rate would reduce the net present value of capital. A high
interest rate increases discount rates over a period of time and most capital
investment appraisals are wary of such an increase.
Internal rate of return (IRR): capital investment appraisal techniques define IRR as
discount rate that gives a value of zero to NPV or net present value. Among all
capital investment appraisal techniques, IRR is generally considered to measure the
efficiency of the capital investment. Thus, if cost of capital investment in company
works out to be greater than the IRR value, the project is highly likely to be
rejected. On the other hand, a low cost of capital has more chances of being
accepted. IRR is calculated by equating NPV to zero and then deriving the discount
rate. Even though IRR and NPV are related capital investment appraisal techniques
they are different from each other. IRR considers the time value of money over the
project life time and derives the world discount rate.
Modified Internal Rate of Return (MIRR): The IRR does not give the actual
annual profitability of a capital investment since it does not take into consideration
the intermediate cash flows which are never reinvested equaling project IRR.
Hence the IRR capital investment appraisal technique is not effective enough since
the rate of return in actual is certainly going to be lower. This flaw is over come by
a more efficient capital investment appraisal technique MIRR. MIRR evaluates
capital investment projects assuming that reinvestment rate equals the company's
cost of capital.
Profitability Index (PI): Evaluates a project based on calculation of value per unit
of investment. Also known as value investment ratio and profit investment ration,
this capital investment appraisal technique is a ratio of amount of money invested
to profit or pay off of the project.
Payback period (PP): Appraising capital investment on the basis of time that would
be taken to get back your initial investment is called as payback period. Payback
period is one of the easiest methods of capital investment appraisal techniques.
Projects with a shorter payback period are usually preferred for investment when
compared to ones with longer pay back periods.
Real option analysis: Capital investment appraisals using real option analysis
consider and value the various options that managers would have while managing
8
their projects in terms of increasing cash inflow and decreasing cash out flow.
These values are added to NPV in the course of capital investment appraisals.
All the above mentioned capital investment appraisal techniques are used for
ranking projects. Usually, organizations have many projects that are appraised
simultaneously for financial viability. Once the preliminary appraisal of a project is
completed, it is compared and ranked against other peer projects. The projects in
consideration are ranked from having high Profitability index to lowest
Profitability index. The higher ranking projects are usually implemented after
careful and detailed due diligence.
FINANCIAL MANAGEMENT
A FEASIBILITY REPORT
ON
IMPERIAL BAKERS
10
ACKNOWLEDGEMENT
In the name of Allah, the most merciful & beneficial, we are very thankful to
Almighty Allah, who strengthened us to complete this report.
We hope that any short comings, errors & mistakes are purely accidental
and would be pardoned.
TABLE OF CONTENTS
11
SL.N
o
PARTICUALAR
PAGE
NUMBER
1.
EXECUTIVE SUMMARY
2.
INTRODUCTION TO FESIBILITY
3.
INTRODUCTION TO BAKERY
4.
PROJECT AT A GLANCE
11
5.
SWOT ANALYSIS
13
4.
FINANCIAL FEASIBILTY
16
5.
CONCLUSION
38
6.
REFERENCES
38
12
EXECUTIVE SUMMARY
Feasibility reports address things like where and how the business will operate.
They provide in-depth details about the business to determine if and how it can
succeed, and serve as a valuable tool for developing a winning business plans.
This project is a feasibility report for establishing a bakery. The name of our
partnership firm has been decided as Imperial Bakery. We will enter into the
business with breads, buns, pizza, toasts, cream rolls & tea cakes, as our chief
products.
This project studies and analyses various parameters that decide the
establishment of a bakery and whether the venture shall be feasible or not.
The project has been divided into four major branches of feasibility study, namely,
technical, human resource, marketing and financial.
Our team has made an all out effort to present a comprehensive feasibility report
and depict the feasibility of the project.
13
Introduction to Bakery
INTRODUCTION TO
BAKERY
14
HISTORY
Baking is the technique of prolonged cooking of food by dry heat acting by
convection, normally in an oven, but also in hot ashes, or on hot stones. It is
primarily used for the preparation of bread, cakes, pastries, pies, cookies,
biscuits and crackers. Such items are sometimes referred to as "baked goods,"
and are sold at a bakery. A person who prepares baked goods as a profession is
called a baker. It is also used for the preparation of baked potatoes, baked
apples, baked beans, and various other foods.
Many commercial ovens are provided with two heating elements: one for baking,
using convection and conduction to heat the food, and one for broiling or grilling,
heating mainly by radiation.
The baking process does not require any fat to be used to cook in an oven.
Some makers of snacks such as potato chips or crisps have produced baked
versions of their snack items as an alternative to the usual cooking method of
deep-frying in an attempt to reduce the calorie or fat content of their snack
products.
In ancient history, the first evidence of baking occurred when humans took wild
grass grains, soaked them in water, and mixed everything together, mashing it
into a kind of broth-like paste. The paste was cooked by pouring it onto a flat, hot
rock, resulting in a bread-like substance. Later, this paste was roasted on hot
embers, which made bread-making easier, as it could now be made anytime fire
was created.
15
Baking flourished in the Roman Empire. In about 300 BC, the pastry cook
became an occupation for Romans. This became a respected profession
because pastries were considered decadent, and Romans loved festivity and
celebration. Thus, pastries were often cooked especially for large banquets, and
any pastry cook who could invent new types of tasty treats was highly prized.
Around 1 AD, there were more than three hundred pastry chefs in Rome, and
wrote about how they created all sorts of diverse foods, and flourished because
of those foods.. A great selection of bakery products like breads and pastries,
with many different variations, different ingredients, and varied patterns, were
often found at banquets and dining halls. The Romans baked bread in an oven
with its own chimney, and had mills to grind grain into flour.
Eventually, because of Rome, the art of baking became known throughout
Europe, and eventually spread to the eastern parts of Asia. Bakers often baked
goods at home and then sold them in the streets. In London, pastry chefs sold
their goods from handcarts. This developed into a system of delivery of baked
goods to households, and demand increased greatly as a result. In Paris, the first
open-air caf of baked goods was developed, and baking became an established
art throughout the entire world, thus leading to the successful birth of bakeries
and baked products.
16
PROJECT
AT A
GLANCE
17
Name
Imperial Bakers
Products
Status
Medium Scale
Address
Type of firm
Partnership Firm
Date of incorporation
Cost of project
Rs. 62,18,180
Source of finance
Mission statement
lowest
Vision
provider
18
SWOT
ANALYSIS
S
O
T
W
te
p
h
ra
p
r
e
o
e
k
rn
a
n
tg
e
ts
su
h
sn
is
e
st
i
e
s
19
SWOT ANALYSIS
A scan of the internal and external environment is an important part of the
strategic planning process. Environmental factors internal to the firm usually can
be classified as strengths (S) or weaknesses (W), and those external to the firm
can be classified as opportunities (O) or threats (T). Such an analysis of the
strategic environment is referred to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the firm's
resources and capabilities to the competitive environment in which it operates. As
such, it is instrumental in strategy formulation and selection.
The SWOT Analysis of our firm is
Strengths
The prices of our products are very reasonable and less than our
competitors.
New and different varieties of products have been introduced which shall
give us the benefit of product differentiation.
Our sales are through tie-ups with grocery stores and supermarkets across
Karachi. This gives us a wide consumer base and a chance to serve
different levels of customers.
The firm also gives a little more commission to its distributors to encourage
dealership.
The labor required does not need any specific qualification & skill and
hence can be made easily available.
Weaknesses
Bakery products are perishable items hence need to be sold as soon as
possible to gain maximum benefit. The customers also prefer fresh
products. But the far location of the factory can increase the time between
baking and actual selling.
Our bakery has introduced few bakery items from the possible product
lines. We are not making cakes, pastries, chocolates and other various
products. This limited menu can be seen as a weakness.
20
We are not introducing our own outlets but are selling through tie-ups
across the city. This delays our brand establishment time.
Opportunities
Expansion of the product line in the future with the introduction of biscuits
and cakes and pastries.
Scope for expansion with the establishment of our own outlets and bakery
cafs
Growing concern for health and multigrain food products shall become a
reason for increase of our sales of food items such as brown breads,
tomato-spinach bread and white-coriander bread.
Threats
Severe competition in the industry with well-established players like United
King, Continental Bakery, Sajjad Bakery, Disco Bakery etc.
21
FINANCIAL
FEASIBILITY
22
Particular
Amount
1.
2.
1% Commission of Agent
14800
3.
148000
TOTAL
1642800
1480000
Particular
Production area
Storage area
Administrative office
Water room & wash room
Finished goods storage
Loading Dock
Parking space
Security cabin
Open land
TOTAL
Amount
1313950
230500
321750
174600
237500
109700
52500
27400
102600
2340000
Note: 3 Machinery
No.
Particular
1
3
4
5
6
7
8
9
10
11
12
Deck oven
Dough mixer
Dough molder
Sugar grinder
Packing machine
Toast slicer/bread slicer
Freezer
Mixer
Rolling racks
Trays
Stainless steel
utensils/tools/equipment knives
TOTAL
Quantity
1
3
2
1
2
2
2
1
6
100
-
Price per
unit
264000
46500
42350
35000
47650
38000
16400
3600
7500
200
-
Amount
264000
139500
84700
35000
95300
76000
32800
3600
45000
20000
83400
879300
23
Particular
Quantity
1
2
3
4
5
6
7
8
9
10
11
12
13
Sofa Set
Revolved Chairs
Comfort Chairs
Office desk
Office Cupboard
Cabinet
Working table
Dustbin
Air Conditioner
Lights
Fans
Exhaust Fans
Others
TOTAL
2
4
8
3
1
1
1
4
1
50
10
4
Price per
unit
10400
1500
950
3000
8000
11300
9000
100
25000
40
1200
1500
Amount
20800
6000
7600
9000
8000
11300
9000
400
25000
2000
12000
6000
5000
122100
Particular
Quantity
1
2
3
4
Computer
Telephone instruments
Fire extinguisher equipment
Generator
TOTAL
3
2
3
1
Price per
unit
23900
600
5000
25000
Amount
71700
1200
15000
275000
362900
Particular
Tempo
TOTAL
Quantity
2
Price per
unit
247000
Amount
494000
494000
24
Particular
Licence Fees
Registration Fees (1%)
Partnership deed
TOTAL
Amt.
35000
14800
7000
56800
Particular
Market Survey Exp.
Connection Charges
1) A.E.C. (Three phase)
2) Electricity connection charges
3) Plumbing
4) Telephone charges
5) Gas pipe line charges
Amount
2500
48000
18500
9000
2500
40000
TOTAL
120500
WORKING CAPITAL
No.
Particular
Amount
1.
Current Assets
A.
B.
W.I.P requirement
C.
25870
D.
Debtors Requirement
546750
E.
Cash Balance
124889
30270
------
25
727779
2.
Current Liabilities
A.
Creditors
567564
B.
Deferred Wages
22000
589564
138215
PARTICULAR
1.
2.
Land
Building
1642800
2340000
3.
Machinery
879300
4.
122100
5.
Equipments
362900
6.
Vehicles
494000
7.
Preliminary expenses
56800
8.
Pre-operative Expenses
120500
9.
Working Capital
138215
10.
61565
TOTAL COST
6218180
26
MEANS OF FINANCE
NO.
1.
2.
3.
PARTICULAR
Partners capital (50%)
Secured loans (50%)
Reserve and surplus
TOTAL
AMOUNT
3047525
3109090
61565
6218180
SALARY
Particular
s
Factory
manager
Finance
manager
Accountant
No.
2ND
YEAR
156000
3RD
YEAR
156000
4TH
YEAR
163800
5TH
YEAR
163800
156000
156000
163800
163800
120000
120000
120000
126000
156000
156000
163800
163800
8000
1ST
YEAR
15600
0
15600
0
--------15600
0
96000
96000
96000
100800
100800
4500
54000
54000
54000
54000
54000
3500
21000
0
72000
36000
210000
420000
420000
546000
72000
36000
108000
36000
110160
37080
110160
37080
36000
97200
0
36000
109200
0
36000
133800
0
37080
137052
0
37080
150252
0
Monthl
y salary
13000
13000
10000
Marketing
1
manager
Production
1
supervisor
Master
1
baker
Utility
Varies
workers
Drivers
2
Security
1
guard
Peon
1
Total
13
13000
3000
3000
3000
64000
27
BONUS
Particulars
ST
No
Factory
manager
Financial
manager
Marketing
manager
Accountant
Production
supervisor
Master baker
2ND
3RD YEAR
YEAR
13000
13000
4TH
YEAR
13650
5TH
YEAR
13650
1
YEAR
13000
13000
13000
13000
13650
13650
13000
13000
13000
13650
13650
1
1
-----8000
12000
8000
12000
8000
12000
8400
12600
8400
4500
4500
4500
4500
4500
ADMINISTRATIVE OVERHEADS
PARTICULARS
Salary
Accountant
Finance manager
Bonus
Accountant
Finance manager
Depreciation
Computer
Furniture
Telephone
Stationery
1ST
YEAR
156000
120000
156000
120000
156000
120000
163800
126000
163800
13000
12000
13000
12000
13000
12000
13650
12600
13650
43020
12210
26000
5000
17208
10989
17750
6550
6883
9890
15310
6854
2753
8901
21680
7045
1101
8011
15650
7520
28
Electricity charges
TOTAL
90000
345230
92546
446043
93568
433505
94871
444700
95862
444194
29
DEPRECIATION
PARTICULARS
1ST
YEAR
MACHINERIES 15%
Op balance
879300
Less: depreciation
131895
Closing balance
747405
BUILDING 10%
Op balance
2340000
2ND
YEAR
3RD YEAR
4TH
YEAR
5TH
YEAR
747405
112111
635294
635294
95294
540000
540000
81000
459000
459000
68850
390150
2106000
1895400
1705860
1535274
Less: depreciation
Closing balance
FURNITURE 10%
Op balance
Less: depreciation
Closing balance
VEHICLE 40%
Op balance
Less: depreciation
Closing balance
COMPUTERS 60%
234000
2106000
210600
1895400
189540
1705860
170586
1535274
153527
1381747
122100
12210
109890
109890
10989
98901
98901
9890
89011
89011
8901
80110
80110
8011
72099
494000
197600
296400
296400
118560
177840
177840
71136
106704
106704
42682
64022
64022
25609
38413
Op balance
Less: depreciation
Closing balance
Total
depreciation
71700
43020
28680
618725
28680
17208
11472
469468
11472
6883
4589
372743
4589
2753
1836
305922
1836
1101
735
257099
Add Tempo
Less: depreciation
Closing balance
TOTAL
DEPRECIATION
---------------------618725
---------------------469468
247000
98800
148200
471543
148200
59280
88920
365202
88920
35568
53352
292667
30
1ST
YEAR
Salary
Factory manager
156000
156000
156000
163800
163800
Production
supervisor
96000
96000
96000
100800
100800
Peon
36000
36000
36000
37080
37080
Security guard
36000
36000
36000
37080
37080
13000
13000
13000
13650
13650
Supervisor
8000
8000
8000
8400
8400
Peon
3000
3000
3000
3150
3150
Security guard
3000
3000
3000
3150
3150
Machinery
131895
112111
95294
81000
68850
Building
234000
210600
189540
170586
153527
13190
11211
9529
8100
6885
4680
4212
3791
3412
3071
2,21,000
225694
285415
233598
235690
180000
205141
225984
226983
285741
Building
2340
2340
2340
2340
2340
Machinery
8790
8790
8790
8790
8790
1146895
1131099
1171683
1101919
1041284
Bonus
Factory manager
Depreciation
Insurance
Machinery
Building
Electricity charges
Power and fuel
Repairs and
maintenance
TOTAL
31
Particulars
Salary
Marketing
manager
Driver
Bonus
Marketing
Manager
Driver
Depreciation of
vehicle
Fuel &
maintenance of
vehicle
Advertisement
Commission on
sales
Insurance of
vehicle
TOTAL
2ND
YEAR
3RD
YEAR
4TH
YEAR
5TH
YEAR
156000
156000
156000
163800
163800
72000
72000
108000
110160
110160
13000
13000
13000
13650
13650
6000
197600
6000
118560
9000
169936
9300
101962
9300
61177
155200
160580
165847
178450
182560
18500
175800
20500
205150
25000
226680
25000
258100
27000
269750
17290
15215
22034
16970
13481
811390
767005
895497
877392
850878
REPAYMENT OF LOAN
Year
Principle
Remaining
Installment
Paid
Interest
Total Amt.
Paid
Balance of
Principle
1st Year
3109090
621818
342000
963818
2487272
2nd Year
3rd Year
2487272
1865454
621818
621818
273600
205200
895418
827018
1865454
1243636
4th Year
1243636
621818
136800
758618
621818
5th Year
621818
621818
68400
690218
TOTAL
3109090
1026000
4135090
32
2nd Year
3rd Year
4th Year
5th Year
3047525
3136287
3581981
4063263
5027221
182852
188177
214919
243796
301633
88762
445694
481282
963958
1091076
3319139
3770158
4278182
5271017
6419930
Less: Interest
(182852)
(188177)
(214919)
(243796)
(301633)
TOTAL
3136287
3581981
4063263
5027221
6118297
Particular
Opening balance of
capital
Add: Interest
Add: Profit
33
COST SHEET
Particular
Opening
Stock of R.M.
Add:Purchases
Less:- Cl.
Stock of R.M.
Cost Of R.M.
Consumed
Add:Direct Labour
Bonus
Prime Cost
Add:Factory O.H.
Total Factory
Cost
Add:Office O.H.
Cost of
Production
Add:Opening stock
of FG
Less:Closing Stock
of FG
Cost of Sales
Add:- Selling
& Distribution
Exp
Cost of
goods sold
Add:- Profit
1st Year
2nd Year
3rd Year
4th Year
5th Year
30270
35200
38950
42150
4540510
5297170
5853040
6664340
6964530
30270
35200
38950
42150
45890
4510240
5292240
5849290
6661140
6960790
264000
22000
4796240
264000
22000
5578240
474000
39500
6362790
474000
39500
7174640
600000
45500
7606290
1146895
1131099
1171683
1101919
1041284
5722135
6709339
7534473
8276559
8647574
345230
44604ss3
433505
444700
444194
6067365
7155382
7967978
8721259
9091768
25870
27850
29950
30500
25870
6041495
27850
7127532
29950
7938028
30500
8690759
32950
9058818
811390
767005
895497
877392
850878
6852885
908115
7894537
1159813
8833525
1170975
9568151
1823089
9909696
1994674
34
TOTAL
SALES
7761000
9054350
10004500
11391240
11904370
1st Year
2nd Year
3rd Year
4th Year
5th Year
7114250
646750
8201750
852600
8978600
1025900
10132840
1258400
10419370
1485000
7761000
9054350
10004500
11391240
11904370
25870
27850
29950
30500
32950
Less:- Opening
Stock of FG
Total Income
-----7786870
25870
9056330
27850
10006600
29950
11391790
30500
11906820
Raw Material
Consumed
4510240
5292240
5849290
6661140
6960790
286000
781000
286000
808388
513500
886849
513500
850333
645500
818907
Administrative
Cost
290000
417846
416732
433046
435082
Selling &
Distribution Cost
613790
648445
725561
775430
789701
Preliminary
Expenses Written
Off
35460
35460
35460
35460
35460
Interest on
Partners' Capital
182852
188177
214919
243796
301633
Total
Expenditure
6699342
7676556
8642311
9512705
9987073
Gross Profit
(PBDIT)
1087528
1379774
1364289
1879085
1919747
Total Sales
Income
Closing Stock of
FG
35
Less:Depreciation
PBIT
618725
468803
469468
910306
471543
892746
365202
1513883
292667
1627080
Interest
- Long Term Loan
@ 11%
PBT
342000
126803
273600
636706
205200
687546
136800
1377083
68400
1558680
38041
88762
191012
445694
206264
481282
413125
963958
467604
1091076
BALANCE SHEET
Particulars
Year 1
Year 2
Year 3
Year 4
Year 5
SOURCE OF FUNDS
Owners Funds
Reserve & Surplus
Bank Loan
TOTAL SOURCE
OF FUND
3136287
61565
2487272
5685124
3581981
61565
1865454
5509000
4063263
61565
1243636
5368464
5027221
61565
621818
5710604
6118297
61565
0
6179862
1642800
1705860
170586
1535274
540000
81000
459000
89011
8901
80110
254903
101962
152941
4589
2753
1836
291200
4163161
1642800
1535274
153527
1381747
459000
68850
390150
80110
8011
72099
152941
61177
91764
1836
1102
734
291200
3870494
APPLICATION OF FUNDS
Fixed Assets
Land
Building
Less: Depreciation
Machinery
Less: Depreciation
Furniture
Less: Depreciation
Vehicle
Less: Depreciation
Computer
Less: Depreciation
1642800
2340000
234000
2106000
879300
131895
747405
122100
12210
109890
494000
197600
296400
71700
43020
28680
291200
5222375
1642800
2106000
210600
1895400
747405
112111
635294
109890
10989
98901
296400
118560
177840
28680
17208
11472
291200
4752907
Other equipment
TOTAL FIXED
ASSETS
CURRENT ASSETS, LOANS AND ADVANCE
Inventory
1642800
1895400
189540
1705860
635294
95294
540000
98901
9890
89011
424840
169937
254903
11472
6883
4589
291200
4528363
36
Raw Material
Finished Goods
30270
25870
35200
27850
38950
29950
42150
30500
45890
32950
Sundry Debtors
546750
850123
926540
1025360
1125460
410680
1323853
554151
1549591
1288113
2386123
2083908
3288208
307583
910473
567564
652140
758410
852140
956840
22000
22000
22000
22000
22000
TOTAL
CURRENT
LIABILITY
589564
674140
780410
874140
978840
NET CURRENT
ASSETS
320909
649713
769181
1511983
2309368
Miscellaneous
Expenditure (To
the extent not
written off)
TOTAL
APPLICATION
OF FUNDS
141840
106380
70920
35460
5685124
5509000
5368464
5710604
6179862
Deferred Wages
37
1st year
2nd year
3rd year
4th year
CASH FLOW FROM OPERATING ACTIVITIES
88762
445694
481282
963958
524852
461777
420119
380596
38041
191012
206264
413125
618725
469468
471543
365202
35460
35460
35460
35460
5th year
1091076
370033
467604
292667
35460
(13326)
(225707)
24003
(8840)
(1590)
(38041)
1254473
(191012)
1186692
(206264)
1432407
(413125)
1736376
(467604)
1787646
----------------
----------(621818)
(68400)
(301633)
(991851)
795795
1288113
2083908
38
RATIO ANALYSIS
PARTICULARS
PROFITABILITY RATIO
Net profit ratio (%)
(Net profit/sales)100
Operating ratio (%)
(PBIT/sales)*100
Cash profit ratio (%)
[(PAT+depreciation)/sales]*100
EFFICIENCY RATIO
Fixed assets turnover ratio
Sales/fixed assets
Total asset turnover ratio
(Sales)/(total assets-misc.exp.)
SOLVANCY RATIO
Proprietor's ratio (%)
Proprietor's fund/total assetmisc.exp*100
COVERAGE RATIO
Interest coverage ratio
PBIT/interest on debt
LIQUIDITY RATIO
Current ratio
Current asset/current liabilities
1st
year
2nd
year
3rd
year
4th
year
5th
year
1.14
4.92
4.81
8.46
9.17
6.04
10.05
8.92
13.29
13.67
9.12
10.11
9.52
11.67
11.62
1.49
1.91
2.21
2.74
3.08
1.27
1.49
1.65
1.74
1.66
52.14
60.00
67.87
77.70
86.33
1.37
3.32
4.35
11.07
23.79
1.54
1.96
1.99
2.73
3.36
39
TREND OF RATIOS
1.
Percentage
Year
Interpretation:
The firm has continuously made profit for five years. It shows the firms capability
to increases revenue from its business.
2.OPERATING RATIO
Operating Ratio
Percentage
Year
Interpretation:
Operating profit of the firm is continously increasing over the five years. It
does not increase with more margins because of increses in revenues
40
expenses in that years, but it also does not decrease which shows continuous
increment in revenue.
Year
Interpretation:
Cash profit of the firm is continously increasing in five years and it will help the
firm to repay its loans and liabilites.
Cash profit increment also indicate that the firm has more source to earn cash
revenue.
4.
41
Percentage
Year
Interpretation:
As the revenue is increasing year by year and the depreciation is written off
the value of fixed assets reduces and thus there is an increase in the fixed
asset turnover ratio.
1.
Year
Interpretation:
The total asset turnover ratio of the firm continously increses in 5 years. It shows
that firm has optimum uses of its assets to generate its revenue.
2.
PROPRIETORS RATIO
42
Proprietor's Ratio
Percentage
Year
Interpretation:
Proprietor ratio indicate that the share of owners in the firm aganist the other
liabilites. The Proprietor ratio of the firm is continously increasing in five years
and in the 5th year its is nearly 86.33% and its equal to half of the balance sheet
total and its gives encourage the firm to take more risk.
43
3.
Percentage
Year
Interpretation:
The interest coverage ratio indicates capacity of firm to pay interest on debt
out of its profit. The above chart shows that there is continuous increase in
this ratio through out 5 years because of increase in revenue. It is maximum
23.79% in the 5th year.
44
4.
CURRENT RATIO
Current Ratio
Times
Year
Interpretation:
Ideal current ratio is 2:1 but the above ratios are around 3.36:1 which is
above ideal ratio that is justifiable in our industry.
CAPITAL BUDGETING
YEA
R
PAT
DEPRE
CIATIO
N
PRE.
EXP.
CFA
T
DISCO
UNTIN
G
P V OF
CASH
FLOW
FACT
OR
11%
1st
Year
887
62
2nd
Year
445
694
618725
3546
0
742
947
469468
3546
0
950
622
0.901
0.812
DISCO
UNTIN
G
P V OF
CASH
FLOW
CUM
CFAT
735518
7429
47
931610
1693
569
FACT
OR 1%
669395
771905
0.990
0.980
45
3rd
Year
481
282
4th
Year
963
958
109
107
6
5th
Year
471543
3546
0
365202
3546
0
292667
3546
0
Total
988
285
136
462
0
141
920
3
546
567
7
0.731
722436
0.971
959625
2681
854
0.659
899285
0.961
1311400
4046
474
0.593
841587
0.951
1349662
5465
677
3904609
5287814
Amount
3904609
NPV
6218180
(2313571)
PROFITABILITY INDEX
Particular
Total Cash Inflow
Divide
Total Cash Outflow
P.I
Amount
3904609
6218180
0.6279
In case of IRR we require two NPV i.e. one negative and one positive at two
different discounting factor. Hence in our project we have taken in to
consideration two discounting factor i.e. 1 and 11% discount level and at both the
levels NPV is negative so it is not feasible within the scope of five years.
47
1st Year
7786870 9056330
3rd Year
4th Year
5th Year
1000660
0 11391790 11906820
45,10,24
0 5292240
286000 286000
311000 318240
5849290
513500
378983
6661140
513500
328469
6960790
645500
331552
171710
205141
176977
225984
189580
226983
193690
285741
175800 205150
56,29,37
0 6478481
2157500 2577849
226680
258100
269750
7371414
2635186
8177772
3214018
8687023
3219797
166330
180000
2nd Year
767000
618725
35160
899000
469468
30638
938000
471543
35354
973470
365202
28482
889350
292667
23437
26000
17750
15310
21680
15650
5000
18500
6550
20500
6854
25000
7045
25000
7520
27000
182852 188177
342000 273600
35460
35460
2030697 1941143
126803 636706
27.71% 28.46%
214919
205200
35460
1947640
687546
26.33%
243796
136800
35460
1836935
1377083
28.21%
301633
68400
35460
1661117
1558680
27.04%
7328390 6820600
7397038
6511645
6143184
48
Rupees)
CONCLUSION
We would finally like to conclude the project with a great feeling of having gained
enormous knowledge about bakery industry. First of all we are thankful to our
teacher who gave us such a wonderful opportunity to learn about the practical
aspects of knowledge.
By conducting an extensive research on all the aspects of establishing a
bakery, we conclude that the project is feasible as per capital budgeting
techniques.
While making the project we learnt how to communicate or deal with people and
how to maintain contacts with them. We saw all the marketing factors and were
able to understand more about it because of seeing them practically. It has been
said that practical knowledge is more important than theoretical knowledge.
REFERENCES
www.bakerybazaar.com
www.wikipedia.org
www.justdial.com
www.fao.org
www.blog.franchiseindia.com
49
The feasibility study outputs the feasibility study report, a report detailing the
evaluation criteria, the study findings, and the recommendations.
A feasibility study tests the viability of an idea, a project or even a new business.
The goal of a feasibility study is to place emphasis on potential problems that
could occur if a project is pursued and determine if, after all significant factors are
considered, the project should be pursued. Feasibility studies also allow a business
to address where and how it will operate, potential obstacles, competition and the
funding needed to get the business up and running.
50
References:
www.wikipedia.com
www.google.com
www.bakerybazar.com
Project by Prasanna Chandra 7th edition.
51