Richie`s Kids Wear Financial Plan for 2012-13
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Richie`s Kids Wear PTE LTD Financial Plan for 2012-13
LB 5212 FINANCIAL FOUNDATION FOR MANAGERS Page 1
Financial Plan For Richie`s Kids Wear PTE LTD for 2012-13
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LB 5212 FINANCIAL FOUNDATION FOR MANAGERS Page 2
Contents
Executive Summary3-4 Income Statement & Balance Sheet20125-6 Income Statement & Balance Sheet20137-8 Ratios Analysis .9-10 Sales Budget for the year 2012 & 2013....11 Sales Revenue Budget for the year 2012 & 2013.12 Debtors Budget for 2012 & 2013..13 Cash Budget for the year 2012..14 Interpretation of Ratio Analysis.15-16 Assumptions17 Conclusion...18 Recommendations...18
References19
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Executive Summary
Ritchie`s is a retail brand for kids wear with good quality and latest trends owned by Mr. Guy
Ritchie. This business will cater to the needs of kids in the age group of 5 to 11. Location of the
factory is at Woodlands Industrial area.
The Target audiences of the business are:
Age Population
5 to 8 years - 218,522 9to 11 years - 224,012 Total (5 to 11 Years) 442,534
Slogan of the business is Kids wear, with care.
Business Overview
Ritchie s Kids Wear (RKW) is a retail store for kids wear with good quality and latest trends. We
present an extensive range of kids wear that are manufactured using different fabrics such as
Cotton, Silk, Wool and others. Available in a wide range of colors, designs and prints, these
apparels are designed keeping in mind the most up-to-date fashion trends.
VisionTo be a distinguished kid-wear manufacturer known worldwide for the quality of products,
setting new trends and lifestyles.
MissionTo offer continuous value added products to our customers. To accomplish this, we focus on
exceptional design, innovation, quality, convenience and interactive communication.
Strengths and Core CompetenciesThe foundation parameters on which we ensure the excellence of our garments are:
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Material Cut Design Conformation Embroidery Stitching Stability Finish Color fastness Challenges Increasing competition, especially from big chains like Lilliput, Baby Forest and
Limited.
Incorporations. High cost materials. Changing demands and catering to this demand. Changing fashions and changing behavior of demographics. Services
Our variety of children wear is offered in different sizes and is tremendously comfortable to
wear. Our offered clothing collections for kids are:
Hooded T-Shirts: We offer an exceptional range of t-shirts with hoods that are offered ina multitude of colors and patterns.
Printed T-Shirts: We make an extensive range of in print t-shirts that are offered indiverse colors and prints.
Children's T-Shirts: An exclusive range of full sleeve children's t-shirts Half Sleeve T-Shirts. We offer a broad range of half-sleeve t-shirts
Cotton Knickers: Knickers are one of the trendiest as well as the most comfortablegarment for kids, available in eye catching prints and colors.
Why people need this service?A number of the factors that will make us the ideal choice of our customers are:
Various variety under a single roof Quality guaranteed goods
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Capacity to accept mass orders Well-timed delivery Easy payment mode of Cash and Credit.
INCOME STATEMENT FOR THE YEAR 2012
PARTICULARS Amount Amount
Sales 500000
Cost of Goods Sold
Raw materials 200000
Power 85600
Less: Closing stock 14400 300000
Gross profit 200000
Selling & Distribution Expenses
Vehicle hire charges 8365
Chemicals 2135
10500
Administration Expenses
Salary 50000
50000
General expenses
Rent 15000
Repair 10000
Telephone 3000
43000
Manufacturing Expenses
Labour 9900
Materials 9500
19400
Depreciation
Land buildings 3000
Computer 600Furniture and Fittings 1800
Plant and Machinery 2700 8100
Total Expenses 131000
Net Profit 69000
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BALANCE SHEET AS ON YEAR ENDED 2012
PARTICULARS AMOUNT AMOUNTCurrent Assets
Cash in hand 18000
Bank 8000
Debtors 64600
Stock 14400
Total current assets (A) 105000
Fixed Assets
Computer 20000
Less: Depreciation 60021400
Furniture & Fittings 60000
Less: Depreciation 1800
58200
Plant & Machinery 90000
Less: Depreciation 2700
87300
Land and buildings 100000
Less: Depreciation 3000
97000
Total Fixed Assets (B) 263900
Total Assets (A+B) 368900
Current Liability
Creditors 20000
Bank Overdraft 20000
Total Current Liabilities 40000
Non-Current Liabilities
Bank Loan 100000
100000Share Capital 150000
Profit made during the year 69000
Reserves and Surplus 9000
228000
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Total Non-Current Liabilities 328000
Total Liabilities 368900
INCOME STATEMENT FOR THE YEAR 2013
PARTICULARS Amount Amount
Sales 800000
Cost of Goods Sold
Raw materials 200000
Power 200000
Less: Closing stock 42400 357600
Gross profit 442400
Selling & Distribution Expenses
Vehicle hire charges 7875
Chemicals 2625
10500
Administration Expenses
Salary 60000
65250
General expenses
Rent 20000
Repair 22000
Telephone 10000
52000
Manufacturing Expenses
Labour 11,000
Materials 11,600
22,600
Depreciation
Land buildings 2619Computer 1746
Furniture and Fittings 642
Plant and Machinery 2910
8208
Total Expenses 158558
Net Profit 289092
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BALANCE SHEET AS ON YEAR ENDED 2013
PARTICULARS AMOUNT AMOUNTCurrent Assets
Cash in hand 127917
Bank 51217
Debtors 102000
Stock 42200
Total current assets (A) 323334
Fixed Assets
Computer 20758
Less: Depreciation 64220116
Furniture & Fittings 56454
Less: Depreciation 1746
54708
Plant & Machinery 84681
Less: Depreciation 2619
82062
Land and buildings 94090
Less: Depreciation 2910
91180
Total Fixed Assets (B) 248066
Total Assets (A+B) 571400
Current Liability
Creditors 20000
Bank Overdraft 22000
Total Current Liabilities 42000
Non-Current Liabilities
Bank Loan 82000 82000
Share Capital 150000
Profit made during the year 289092
Reserves and Surplus 8400
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Total Non-Current Liabilities 529492
Total Liabilities 571492
Ratio Analysis
Ratio Name 2012 2013
PROFITABILITY RATIOS
Gross Profit
Gross Profit Ratio = --------------------x 100
Sales
200000
--------------- x100 = 40%
5000000
442400
--------------- x100 = 55.3%
800000
Net Profit
Net Profit Ratio = --------------------x 100
Sales
69000
------------- x100 = 13.8%
5000000
289092
------------- x100 = 36.13%
800000
LIQUIDITY RATIOS
Total Current Assets
Current Ratio = -------------------------------
Total Current Liabilities
105000
--------------- = 2.625:1
40000
315417
--------------- = 7.5:1
42000
Total quick Assets
Quick Ratio = -------------------------------
Total Current Liabilities
76200
------------- = 1.905:1
40000
273217
------------- = 6.50:1
42000
EFFICIENCY RATIOS
Cost of goods soldStock Turnover Ratio= ------------------------------
Average Stock
300000--------------- = 20.83 times
144000
400000--------------- = 9.47 times
42200
Debtors
Debtors Collection Period= ----------------x 365
Credit Sales
64600
---------------x365 =47 days
500000
102000
---------------x365 = 47 days
800000
Creditors
Creditors Payment Period= -----------------x 365
Credit Purchases
20000
--------------x365 = 36 days200000
20000
--------------x365 = 37 days200000
Sales
Total Asset Turnover Ratio= ------------------
Total Net Asset
500000
-------------- = 1.35 times
368900
800000
-------------- = 1.4 times
571400
Credit Sales
Debtors Turnover Ratio= -----------------------
500000--------------- = 7.74times
800000--------------- = 7.8 times
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Debtors 64600 102000
SOLVENCY/ INVESTMENT RATIOS
Long term liabilitiesCapital Gearing Ratio= -------------------------x100
Share Capital +Reserves+ Long Term Liabilities
100000------------x 100 = 38.61%100000+9000+150000
82000------------x 100 = 34.1%82000+8400+150000
Long term liabilities
Debt-Equity Ratio = -----------------------------x100
Share holders Equity
100000
--------------x 100= 66.66%
150000
82000
--------------x 100 = 54.6%
150000
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Sales Budget for the year 2012 and 2013
Sales Budget for the year 2012 Sales Budget for the year 2013
Quantity Price Amount Quantity Price Amount
Q1 Jan 3000 10 30000 Q1 Jan
Credit Credit 4000 10 40000
Feb 4000 10 40000 Feb
Credit Credit 6500 10 65000
March 2500 10 25000 March
Credit Credit 7000 10 70000
Q2 April 4500 10 45000 Q2 April
Credit Credit 5000 10 50000
May 3000 10 30000 May
Credit Credit 5500 10 55000
June 4000 10 40000 June
Credit Credit 8000 10 80000
Q3 July 2000 10 20000 Q3 July
Credit Credit 9000 10 90000
August 3000 10 30000 August
Credit Credit 6500 10 65000
Sept 3500 10 35000 SeptCredit Credit 5000 10 50000
Q4 Oct 5000 10 50000 Q4 Oct
Credit Credit 7000 10 70000
Nov 7500 10 75000 Nov
Credit Credit 8000 10 80000
Dec 8000 10 80000 Dec
Credit Credit 8500 10 85000
50000 500000 80000 800000
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SALES REVENUE BUDGET FOR THE YEAR2012
Year 1
Q1 Q2 Q3 Q4 Total
Category 1 Units Sold 85000 115000 85000 205000 490000
Sales Price per unit $10.00 $10.00 $10.00 $10.00
Category 1 Total $85,010.00 $115,010.00 $85,010.00 $205,010.00 $490,040.00
SALES REVENUE BUDGET FOR THE YEAR2013
Year 2
Q1 Q2 Q3 Q4 Total
Category 1 Units Sold 175000 185000 205000 235000 800000
Sales Price per unit $10.00 $10.00 $10.00 $10.00Category 1 Total $175,010.00 $185,010.00 $205,010.00 $235,010.00 $800,040.00
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Debtors Budget for 2012
ParticularsJan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12 Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec12
Opening Balance 0 30000 40000 25000 45000 30000 40000 20000 30000 35000 50000 7500
Credit Sales 30000 40000 25000 45000 30000 40000 20000 30000 35000 50000 75000 8000Less Cashreceipts 0 30000 40000 25000 45000 30000 40000 20000 30000 35000 50000 7500
Less Bad debts 0 0 0 0 0 0 0 0 0 0 0 0
Closing balance 30000 40000 25000 45000 30000 40000 20000 30000 35000 50000 75000 8000
Debtors Budget for 2013
Particulars Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec13
Opening Balance 80000 40000 65000 70000 50000 55000 80000 90000 65000 50000 70000 8000
Credit Sales 40000 65000 70000 50000 55000 80000 90000 65000 50000 70000 80000 8500
Less Cashreceipts 80000 40000 65000 70000 50000 55000 80000 90000 65000 50000 70000 8000
Less Bad debts 0 0 0 0 0 0 0 0 0 0 0 0
Closing balance 40000 65000 70000 50000 55000 80000 90000 65000 50000 70000 80000 8500
NOTE: Debtors are given 1 month time to settle their amount
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Cash Budget of the year 2012
Jan-12
Feb-
12
Mar-
12
Apr-
12
May-
12 Jun-12 Jul-12
Aug-
12 Sep-12 Oct-12
Nov-
12 D
ceipts
eninglance 100000 67209 72561 87913 88088 100474 105826 121178 109220 113739 124091 14
sh Sales 0 0 0 0 0 0 0 0 0 0 0 0
shceived
m Debtors 30000 40000 25000 45000 30000 40000 20000 30000 35000 50000 75
tal
ceipts 100000 97209 112561 112913 133088 130474 145826 141178 139220 148739 174091 22
yments
rchases 16667 16667 16667 16667 16667 16667 16667 16667 16667 16667 16667 16
aff Salaries 4167 4167 4167 4167 4167 4167 4167 4167 4167 4167 4167 41
fice Rent 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250 12
pair 833 0 0 833 0 0 0 833 0 0 83
lephone
penses 250 250 250 250 250 250 250 250 250 250 250 25wer andel 7133 0 0 0 7133 0 0 7133 0 0 0 71
bour 825 825 825 825 825 825 825 825 825 825 825 82
aterials 791 791 791 791 791 791 791 791 791 791 791 79
emicals 177 0 0 177 0 0 0 177 0 0 177 0
ansport 698 698 698 698 698 698 698 698 6986
698 69
talyment 32791 24648 24648 24825 32614 24648 24648 31958 25481 24648 24825 32
sh at
nk/osinglance 67209 72561 87913 88088 100474 105826 121178 109220 113739 124091 149266 19
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Interpretation of Ratio Analysis
Gross Profit Ratio
The Gross Profit Margin of the company is 40% and 55.3% for the 2years respectively. Higher
the gross profit shows that the company has started earning profit in a long run and becoming
stable.
Net Profit Ratio
The net profit margin for the 1st year is 13.8% and the 2nd year is 36.31%, which means the net
profit margin has increased and shows the stable operational performance of the company.
Higher the net profit margin is better for the companys operation.
Current Ratio
The current ratio for the year 2012 is 2.62:1 and for the year 2013 it is 7.5:1 and the benchmark
for current ratio is 2:1 and the calculated ratio shows that the company has enough current assetsto meet the current liabilities and in 2013 it has double the amount that is required and proves
that the company is in very good position to meet the needs.
Quick Ratio
The Quick ratio of the company in 2012 is 1.9:1 and 2013 is 6.5:1 and the ideal quick ratio is 1:1
and the calculated ratio shows that the company has significant amount of quick assets to meet
the current liabilities.
Stock Turnover Ratio
The stock turnover ratio for the year 2012 is 20.83times and for 2013 is 9.47 times; the
difference is more because the cost of goods sold is high.
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Debtors Collection Period
The debtors collection period for the year 2012 is 47 days and 2013 is 47 days, it is same for
both the year. The company is stable.
Creditors Payment Period
The Creditors Payment period for the year 2012 is 36 days and in 2013 is 37 days, the difference
is insignificant, but lower the creditors payment period means lower the risk of liability.
Total Asset Turnover ratio
The total asset turnover ratio for the year 2012 is less than 2013, this is showing that the sales in
the year 2013 have overpowered the total assets and that shows the grown efficiency of the
company.
Debtors Turnover Ratio
The Debtors turnover ratio for the year 2012 is higher than 2013 but the difference is not very
high, and higher the debtors turnover ratio leads to better working capital and in 2013 the ratio is
7.8 times and in 2012 it is 7.74 times, so in 2013 the working capital is very efficient.
Capital Gearing Ratio
The higher a company's degree of leverage, the more the company is considered risky. The
capital gearing ratio for the year 2012 is 38.61% whereas the ratio for the year 2013 is 34.1%.
Hence, the ratio of 2013 is lesser than 2012 there by leading the company away from risks.
Debt-equity ratio
The debt-equity ratio of a company should be higher than the previous year. The debt-equity
ratio also depends on the industry in which the company operates. The ratio in 2013 is lesser
than the ratio in 2012, however the difference is insignificant.
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Assumptions
All the values are assumed in dollars ($). The companys capital is assumed to be entirely in cash apart from which it has an asset
worth of $270000.
From the commencement of the business until the second year, it has been assumed that thecompany would gain a profit of 15% in the second year.
The sales have been significantly increased from 2012 to 2013 thus showing the growth ofthe company.
The company assumes that the sales are made on credit base and that the debtors have a lagperiod of one month.
It is assumed that the company is away from risk as the ratio of 2013 is lesser than 2012. The company purchases its good on credit basis. Raw materials such as linen, cotton and lycra has been purchased for the goods. Although machines have been used in the company, labours are also involved for
operational purposes.
It has been assumed that the salary has an increased from the previous year to the currentyear with the effect of new labours which has been employed in the company for increasingthe efficiency of the work and to meet the production.
Depreciation has been calculated based on the Companies Act. It is assumed that the debtors turnover ratio is higher in the current year than the previous
year this making the working capital efficient.
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It is assumed that the company has a target audience with a specific age group.
Conclusion
The company has been showing a significant increase in the profit from the commencement of the
business. With reference to the sales budget, the demand for the product can be viewed which
ensures the success of the company. The current assets over the current liabilities will help the
company to finance by itself in the long run. From this project, we have learned the various formsof budgets, the importance of financial ratios without which it is difficult to forecast the companys
financial status. Also in the process, we have learnt to prepare effective report of the companys
accounts to request for loans from the banks in the future.
Recommendations
Even though the company has fetched a significant profit to from the commencement ofbusiness, however Branding has not been focused. Branding is an important factor to sustainthe business in the long run. So focusing on branding in the future will add on to the
efficiency of the business.
Getting a license for the Brand and registering it should also be done in the long run.
The company is recommended to reduce the current liability and increase its current asset tofinance itself for the working capital
The company is recommended to reduce the cost of goods sold so as to increase the salesrevenue which will automatically increase the gross profit.
To reduce the risk of liability, the company should reduce the credit purchasing.
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References
Financial Accounting: An Introduction to Concepts, Methods and Uses by Stickney,Weil, Francis and Schipper. Publisher: South-Western Publishing Co, Year Published: 2010
Corporate Accounting, Author: Maheshwari Sn, Duraipandian K,Edition : 2001.
Financial Accounting-Eighth Edition-Kalyani Publication S.pJain, K.L Narang(2007)
Accounting an Introduction-Fourth edition-Pearson Education Australia, Atrill Mc LaneyHarvey Jennu (2009)
http://www.textbooks.com/Author/Stickney.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Stickney.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Weil.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Francis.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Schipper.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Schipper.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Francis.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Weil.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Stickney.php?CSID=DZQCZJUOTDCO2U22DUQDAQKS
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