Semester Project- Financial Management

1. Muhammad Asif Khan (51271) MBA (Operations Management)
Semester Project of
Financial Management (69621)
Prepared By: Muhammad Asif Khan
Student ID: 51271
Program: MBA (Operations Management)
Semester: Summer-2015
Submitted to: Mr. Faisal Dhedhi
Submission Date: 28-July-2015
Financial Management (69621)
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2. Muhammad Asif Khan (51271) MBA (Operations Management)
Business Idea:
Development of International Standard Software house to provide e-solution to business
problems and to fulfill the needs of all types of organization.
Name of Business:
Business Solution Providers
Introduction:
After having a careful and thorough analysis of the increasing demand of the e-solutions to the
business problems, we have decided to establish an international standard software house to
address those business needs.
Vision:
Would like to become an agile organization and wants to maintain ourselves as second to none.
Mission:
We are committed to digitlize each and every transaction of organizations' according to their
nature of business and as per their needs.
Objective:
• To develop world class softwares for our each customer.
• To provide extraordinary after sales services & support.
• Acquisition & retention of customers and transferring them into a strategic business
partner.
SWOT Analysis:
Strengths:
• Our exceptional software developers.
• Our updated software licenses.
• Our success on existing projects.
• Our exceptional offer of lifetime support & services to our valued customers.
Weaknesses:
• Lack of awareness of the effectiveness of technological development among
entrepreneurs.
• Considering it as a cost center rather than a profit center.
• Our exceptional offer lifetime support & services.
Opportunities:
• A large potential market is available to serve.
• Currently, less competitors existing in the market.
• Have an opportunity to capitalize the market through rendering exceptional services.
Financial Management (69621)
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3. Muhammad Asif Khan (51271) MBA (Operations Management)
Threats:
• Entrance of multinational software houses into the market.
• Introduction of new software technologies other than our licensors.
Size of Capital:
Equity:
Initial Investment made by the owner = PKR 30.00 (million)
Debt:
Borrowed from Bank @10% annual interest (for 10 years) = PKR 60.00 (million)
Total Equities = PKR 90.00 (million)
Financial Management (69621)
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4. Muhammad Asif Khan (51271) MBA (Operations Management)
Costing Estimates
(Amounts in millions of PKR)
Acquisition of Office: 21.00
• Purchase of Office Building 20.00
• Registration fee of the company 00.50
• Registration fee of the Trade Mark (Logo) 00.50
Office Furniture, Fixtures & Equipment: 09.50
• Chairs, Tables & Cupboards 01.00
• Desktop Computers 01.00
• Laptop Computers 02.00
• Midrange Computer (Main Frame) 05.00
Purchasing of Software Licenses: 32.50
• SAP (ERP)(in Dollars) 30.00
• JAVA (in Dollars) 00.50
• Visual Basic (in Dollars) 00.50
• Oracle (in Dollars) 00.50
• C++ (in Dollars) 00.50
• .Net (in Dollars) 00.50
Marketing & Sales Activities: 06.50
• Inauguration Ceremony 05.00
• Newspaper Adds 01.00
• Bill Boards & Other Written Materials 00.50
Purchasing of Office Vehicles: 12.50
• Office Van 02.50
• Cars for Executives 10.00
Office Staff Salaries and Benefits: 04.00
• Salaries& Wages (6 months) 03.00
• Mobile Phone Bills (6 months) 00.50
• Fuel Charges (6 months) 00.50
Other Office Overheads: 02.00
• Acquisition of Telephone Lines 00.50
• Acquisition of Internet Connections 00.50
• Administrative Expenses 01.00
Total Estimates 88.00
Financial Management (69621)
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5. Muhammad Asif Khan (51271) MBA (Operations Management)
PROFORMA FINANCIAL STATEMENTS
Business Solution Providers
Income Statement
For the period ended
(Amounts in PKR millions)
Year1 Year2
Net Sales Revenue 30.00 45.00
Less: Cost of Goods Sold (10.87) (20.00)
Gross Profit 19.13 25.00
Less: Fixed Operating expenses, except depreciation (21.03) (16.00)
Depreciation Expenses (03.02) (03.02)
Earnings before Interest & Expenses (EBIT) (04.92) 05.98
Less: Interest Charges (00.60) (00.60)
Earnings before taxes (EBT) (05.52)
05.38
Less: Taxes (40 %) (00.00) (02.15)
Net Income (05.52) 03.23
Financial Management (69621)
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6. Muhammad Asif Khan (51271) MBA (Operations Management)
Business Solution Providers
Balance Sheet As on
(Amount in millions of PKR)
Year 1 Year2
ASSETS
Current Assets:
Cash & equivalents 05.00 07.00
Accounts Receivables 15.00 25.00
Total Current Assets 20.00 32.00
Fixed Assets:
Office Building & Equipments 75.50 72.48
Less: Accumulated Depreciation (03.02) (03.02)
Total Fixed Assets 72.48 69.46
Total Assets 89.48 101.46
LIABILITIES & EQUITIES
Current Liabilities:
Account Payables 05.00 13.75
Total Current Liabilities 0.500 13.75
Long term Liabilities:
Banks Loan 60.00 60.00
Total Liabilities 60.00 60.00
Owners’ Equity:
Initial Investment 30.00 24.48
Add / Less: Net Profit or Loss (05.52) 03.23
Total Equities 24.48 27.71
Total Liabilities & Equities 89.48 101.46
Financial Management (69621)
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7. Muhammad Asif Khan (51271) MBA (Operations Management)
Business Solution Providers
Cash Flow Statement
For the period ended
(Amounts in millions of PKR)
Year1 Year2
Operating Activities
Revenue through Sales 30.00 45.00
Less: Cost of Goods Sold (10.87) (20.00)
Fixed operating expenses (21.03) (16.00)
Interest Charges (00.06)
(00.06)
Net cash flow Generated through operating activities (01.96) 08.94
Financing Activities
Cash received from financing 00.00 00.00
Less: Cash paid for financing activities (00.00) (00.00)
Net Cash flow from Financing Activities 00.00 00.00
Investment Activities
Cash received from investments 00.00 00.00
Less: Cash Paid for investments (00.00) (00.00)
Net Cash flow generated from investment activities 00.00 00.00
Net Cash flow (01.96) 08.94
Financial Management (69621)
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8. Muhammad Asif Khan (51271) MBA (Operations Management)
Business Solution Providers
Statement of Owner’s Equity
For the period ended
(Amounts in millions of PKR)
Year 1 Year2
Opening Balance 30.00 24.48
Add/Less: Net Profit or Loss (05.52) 03.23
Less: Drawings (00.00) (00.00)
Total Owner’s Equities 24.48 27.71
Financial Management (69621)
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9. Muhammad Asif Khan (51271) MBA (Operations Management)
Business Solution Providers
Financial Ratios
(Amounts in PKR Million)
LIQUIDITY RATIOS:
Current Ratios= Current Assets = 32 = 2.32
Current Liabilities 13.75
Working Capital= Current Assets – Current Liabilities = 18.25
= 32.00 - 13.75
ACTVITY / TURNOVER RATIOS:
Receivable Turnover= Sales = 45 = 2.25
Average Receivable 20
PROFITABILITY RATIOS:
Gross Profit Margin= Gross Profit = 25 = 0.55
Sales 45
Operating Profit Margin= Operating Profit or EBIT or EBIT
Sales Sales
= 5.98 = 0.13
45
Pre Tax Margins= EBT = 5.38 = 0.12
Financial Management (69621)
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10. Muhammad Asif Khan (51271) MBA (Operations Management)
Sales 45
Net Profit Margin= Net Income = 3.23 = 0.07
Sales 45
LEVERAGE RATIOS:
Debt to Assets Ratio= Debt = 60 = 0.59
Total Assets 101.46
Debt to Equity Ratio= Debt = 60 = 2.16
Equity 27.49
Times Interest Expenses= EBIT (Operating Income)
Interest Expenses
= 5.98 = 9.96
0.6
Financial Management (69621)
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