TITLE : KANDIES HORTICULTURAL ENTERPRISE

NAME : REUBEN KANDIE

DEPARTMENT : PHARMACY AND CHEMICAL SCIENCE

INSTITUTION : RIFT VALLEY TECHNICAL TRAINING INSTITUTE.

SUBMITTED TO : KENYA NATIONAL EXAMINATION COUNCIL IN

PARTIAL FULFILMENT FOR THE DIPLOMA IN CHEMICAL

ENGINEERING.

COURSE CODE: 24291

SERIES : NOVEMBER 2017

i
DEDICATION
Special dedication goes to my beloved parents for they being a pillar in my life. Also to
my brother and sisters for their prayers, encouragement and financial support with
special reasons.

With a lot of thanks, I also dedicate to Mr Aliaka for her encouragement and moral
support, thank you madam.

ii
DECLARATION
I Jacklyne Jeruto, hereby declare that the work here is both style and substance is the
original produce of my intellectual input by way, knowledge and has never been
presented to any examination goods.

NAME : REUBEN KANDIE

SIGNATURE:

DATE :

DECLARATION OF SUPERVISOR

This business plan has not been submitted to knec with approval as the college
supervisor .

NAME : MR ALIAKA

SIGNATURE :

DATE :

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ACKNOWLEDGEMENT
I thank my almighty God for His protection, guidance and blessings all through my three
year course that he be bestowed on me. My special gratitude goes to my parents for their
great support; moral and encouragement in addition, I thank my brothers for their great
support and prayer may Almighty bless them all.

iv
Table of Contents
DEDICATION....................................................................................................................ii
DECLARATION................................................................................................................iii
ACKNOWLEDGEMENT..................................................................................................iv
CHAPTER ONE..................................................................................................................1
1.0 EXECUTIVE SUMMARY.......................................................................................1
1.1 BUSINESS DESCRIPTION.....................................................................................1
1.2 MARKETING PLAN................................................................................................1
1.3 ORGANIZATION AND MANAGEMENT PLAN......................................................2
1.4 PRODUCTION / OPERATION PLAN........................................................................2
1.5. FINANCIAL PLAN.....................................................................................................2
CHAPTER TWO.................................................................................................................3
2.0. BUSINESS DESCRIPTION....................................................................................3
2.1 BUSINESS NAME AND LOGO..............................................................................3
2.2 BUSINESS LOCATION AND ADDRESS..............................................................3
2.3 BUSINESS OWNERSHIP........................................................................................5
2.3.1 FORM OF OWNERSHIP...................................................................................5
2.3.2 PROPRIETOR’S PROFILE...............................................................................5
2.3.3 CAPITAL INVESTMENT.................................................................................5
2.4 TYPE OF BUSINESS...............................................................................................6
2.5 BUSINESS PRODUCTS AND SERVICES.............................................................6
2.6. INDUSTRY..............................................................................................................6
2.7 JUSTIFICATION OF OPPORTUNITY...................................................................7
2.8 BUSINESS GOALS AND OBJECTIVES................................................................7
2.9 ENTRY AND GROWTH STRATEGY....................................................................8
2.9.1 ENTRY STRATEGY.........................................................................................8
2.9.2 GROWTH SRATECHY.....................................................................................8
2.9.3 SWOT ANALYSIS............................................................................................9
CHAPTER THREE...........................................................................................................10
3.0 MARKETING PLAN..............................................................................................10
3.1 MARKETING OBJECTIVES.................................................................................10
3.2. POTENTIAL CUSTOMERS.................................................................................10
3.3 MARKET SHARE..................................................................................................11
3.4. COMPETITION.....................................................................................................13
3.5 METHODS OF PROMOTIONS AND ADVERTIMSING....................................15
3.5.1 ADVVERTTISING..........................................................................................15
3.5.2 PROMOTION...................................................................................................15
3.6 PRINCING STRATEGY:.......................................................................................15
3.7 SALES TACTICS...................................................................................................16
3.8 DISTRIBUTION STRATEGY...............................................................................16
CHAPTER FOUR.............................................................................................................17
4.0 ORGANISATION AND MANAGEMENT............................................................17
4.1 ORGANISATION...................................................................................................17
4.2 KEY MANAGEMENT PERSONEL......................................................................18
4.3 OTHER PERSONNEL............................................................................................18
4.4.0 TRAINING.......................................................................................................19

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 4.4.1 PROMOTION...................................................................................................20
4.5 REMUNERATIONS AND INCENTIVES.............................................................20
4.5 RECRUITMENT, TRAINING AND PROMOTION.............................................21
4.5.1 RECRUITMENT..............................................................................................21
4.6 LEGAL REQUREMENTS......................................................................................22
4.7 SUPPORT SERVICES............................................................................................22
4.8 PRODUCTION PLAN...........................................................................................23
4.8..1 PRDUCTION OBJECTIVES..........................................................................24
4.8.2 PRODUCTION FACILITIES AND CAPACITY...........................................24
4.9 PRODUCTION PROCESS....................................................................................26
4.9.1 REGULATIONS AFFECTING OPERATIONS.............................................28
CHAPTER 5......................................................................................................................29
5.0 FINANCIAL OPERATION/ PLAN........................................................................29
5.1 PRE-OPERATIONAL COSTS...............................................................................29
5.2 WORKING CAPITAL...........................................................................................30
5.2.1 LOAN REPAYMENT SCHEDULE................................................................30
5.3 PRO-FORMA INCOME ST....................................................................................31
5.4 PRO-FORMA CASH FLOW..................................................................................34
5.5 BALANCE SHEET.................................................................................................37
5.6 Break Even Level....................................................................................................38
Year 1................................................................................................................................38
Year 2................................................................................................................................38
Year 3................................................................................................................................38
5.7 Proposed Capital......................................................................................................39
Total 170,000 170,000...........................................................................................39
Gross Profit Ratio............................................................................................................39
Year 1 Year 2 Year 3..........................................................................................39
Year 1 Year 2 Year 3..........................................................................................39
Year 1 Year 2 Year 3....................................................................................40

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7
CHAPTER ONE
1.0 EXECUTIVE SUMMARY
1.1 BUSINESS DESCRIPTION
The propose business shall be Horticulture farm. Its name shall be Kandie Horticulture
Enterprise. It shall be located along River Kipsangui on your right hand side on the way
to Ziwa that is Uasin–Gishu District, Moiben Location and Mometet Sub-location.

The proposed business shall be a sole proprietorship and shall require a capital of Kshs.
280,000 in order to start. This money will be raised as follows:-
- Personal savings - Kshs. 100,000
- Contribution from family members - Kshs. 50,000
- Contribution from friends - Kshs. 50,000
- Loan from National Bank of Kenya - Kshs. 80,000

The business will engage in selling a variety of vegetables like Kales, Cabbages,
Tomatoes and Onions.

1.2 MARKETING PLAN

At the beginning, the business captured 50% of the entire population and at the end of 2-3
years it would have captured up to 75% of the entire population. The competitors will be
Bandaptai and Baltany General Horticulture Farms.
s
The business will be advertised through posters and verbal advertisements at various
meetings, i.e. weddings, crusades, field days etc. the targeted groups or customers are
schools. i.e., Mumetet, Moiben, Kalyet and Kisangui secondary, Eldoret urban dwellers
who will receive the products at the market and individual customers in the area who will
buy direct from the farm.

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1.3 ORGANIZATION AND MANAGEMENT PLAN
The business will be managed by the owner; that is REUBEN KANDIE. The enterprise will
require four (4) employees at the start; i.e. the farm manager, 2 farm attendants and 1
security guard. The employees’ remuneration will be Kshs. 22,000 per month.

The business will have a post office box, an insurance, lawyer, account at National Bank
of Kenya, electricity from Kenya Power and Lighting Company, Telephone serve from
Telecom Kenya and a license in order to meet the legal requirements from the county
council of Wareng.

1.4 PRODUCTION / OPERATION PLAN

The business will operate in a family farm granted to the proprietor by his father and after
2-3 years shall will hire some acres and buy after 4years. To start up, the business will
require a total amount of Kshs. 141,700.

Kandie Horticulture Enterprise will be affected by some factors like; floods, draughts and
government regulations. Thus, a license will be acquired to avoid confrontation with the
government.

1.5. FINANCIAL PLAN

The finances for the business will be efficiently managed in order to maximized profit
and prevent losses. The breakeven points of all the three years will be as follows:-

YEAR BREAKEVEN POINTS

2008 89.4%

2009 91.2%

2010 92.2%

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CHAPTER TWO
2.0. BUSINESS DESCRIPTION
2.1 BUSINESS NAME AND LOGO
The proposed business will be called Kandie Horticulture enterprise. This name originate
from his own name, he chose this name because of its’ familiarity to friends, relatives,
family members and more so her potential customers. This name will be unique in the
area and whenever anybody is directed or heard it being advertised then it will be easily
identified.

The Logo of the business will be:-

2.2 BUSINESS LOCATION AND ADDRESS

Kandie Horticulture Enterprise will be situated in Mumetet Sub-Location, Moiben
Location and in Uasin-Gishu District at the bank of river Kipsangui at the right hand side
on your way to Ziwa. Its 12 Km away from Eldoret Town and 200 m away from the main
road.This place is a central common place for the targeted customers like institutions,
vegetable vendors and the people around the place.

The proprietors chose this place because of factors such as;

i. Infrastructural facilities e.g. good roads, reliable electricity and
telecommunication services also the security is good.
ii. Social amenities such as health centers, schools, sports centers and churches.

The above mentioned factors will favour the business in one way or another since these
are some of the basic requirements for a good business prospect.

In this area there are potential people who can provide manpower therefore Kandie
Enterprise will not lack people to employ.

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 The address of the Enterprise will be;

KANDIE HORTICULTURE ENTERPRISE

P.O BOX 1228

ELDORET

PHONE NUMBER: 0711 452 595

The location of the business in a map will be ;

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2.3 BUSINESS OWNERSHIP
2.3.1 FORM OF OWNERSHIP
The owner of the proposed business will be Rueben kandie .He is a single man and he
will run the business as a sole proprietor. She resides in Merewet village, Moiben
Location and Mumetet Sub-Location.

2.3.2 PROPRIETOR’S PROFILE

The owner of the business attained his secondary education with a mean grade of C-
and he is at the final stage of completing his certificate course in Library and Information
Studies. The proprietor has relevant experience since she has attended several National
Shows i.e. Eldoret A.S.K Show, Kitale A.S.K. Show and Nakuru A.S.K. Show.

2.3.3 CAPITAL INVESTMENT

Kandie Horticulture Enterprise is estimated to have a capital of Ksh.280, 000. This will
be obtained from various sources such as
SOURCE AMOUNT
Own savings Kshs 100,000
Family contribution Kshs 50,000
Friends contribution Kshs 50,000
Loan from NBK Kshs 80,000
TOTAL Kshs 280,000

Loan from national bank of Kenya will be repaid beginning from the mid year of the first
year and it will take one year and four months to be completed. That is Kshs 5,000 per
moth. The interest will be earned at the rate of 15% per year.

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 2.4 TYPE OF BUSINESS
Kandie horticulture enterprise will be a sole proprietorship under farming. There will be
close supervision and decision making will be easy thus quality product and services will be
expected. The proprietor will have relationships with the employees and a close contact with
customers in order to achieve maximum satisfaction in the operations.

2.5 BUSINESS PRODUCTS AND SERVICES

Kandie horticulture enterprise will basically deal with vegetables such as cabbages, kales,
onions and tomatoes. The enterpriser in its capacity will strive to serve the customers
interests in discharging responsibilities and constantly seek to deserve and enjoy the highest
measure of public interest and esteem.

Since the products are basic in nature, its designed to meet all types of social classes
depending on their economic welfare that is some products will be sold cheaply and
others will be expensive. The products are supposed to reach the market very ear5ly in
the morning in order to be sold while they are still fresh.

2.6. INDUSTRY
Kandie horticulture enterprise will be under agricultural industry, a sub section of
horticulture. In fact, Agriculture is the main stay of many developed countries like Kenya;
the population depends on Agriculture for food. With the current lifestyle in Kenya, the
horticulture industry has been realized to be on decline. Therefore, the few that exist are very
stable.
The government has tried to enhance this by establishing Agricultural Centres such as;
Kenya Research Institute (KARI), Kenya Seed Company (KSCO) in order to offer modern
techniques on Agriculture to the people.
This is also done in Agricultural shows Nationwide, which reaches its climax at the Nairobi
International show where the representatives comes from different countries like
Netherlands, South Afica, U.S.A and Germany who offer specialized techniques in farming
at a subsidized prices.

6
The business is chosen owing the Research carried out and observed that there are only
two horticulture farms namely Bandaptai and Baitany General Horticulture farms,
whereby the new farm will beat them because of their seasonal operations. Indeed, from
competitors’ point of view, the business is promising to venture as well as the need of
vegetables. Competitors have little skills of marketing their products and use their poor
traditional technology.

The targeted markets are; the institutions, vegetable vendors and the people who dwell
around the place. The future forecasting shows that the prices of the products are likely to
shot up due to the increasing population. Therefore, it requires more output to anticipate
future demand.

2.7 JUSTIFICATION OF OPPORTUNITY

KANDIE HORTICULTURE is situated in a central point where many customers are captured
i.e. the institutions around the place, vegetable vendors from various parts and people
living around the place

There is good infrastructure, reliable electricity, therefore the business can operate very
well also there are many people in the area who are willing to provide efficient
manpower, thus the business will take advantage of its competitors’ weaknesses like poor
technological methods, lack of skills etc.

2.8 BUSINESS GOALS AND OBJECTIVES

Brian Horticulture Enterprise has various goals and objectives to be accomplished as time
goes by.

Short Term Objectives

i. Produce quality products that will meet the interest of the target customers.
ii. Provide services that are reliable at all times in order to maintain its
customers.

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 iii. Enhance good relationship between the employees and the customers in order
to
be in close contact.

Long Term Objectives

i. Buying of irrigation pump and other advanced related irrigation equipments.
ii. Purchase a tractor and a pick up van for transporting products to various
destinations by the end of fourth year of operation.
iii. Expand the plot of land by buying more acres in the region or any other region by
the end of the fifth year of operation.

2.9 ENTRY AND GROWTH STRATEGY

2.9.1 ENTRY STRATEGY
Having conducted feasibility study, the researcher found out that the area is missing
horticulture products thus need to be supplied with. Therefore the business will start by
advertising its products by the use of posters at the bus terminals and trading centres.
Also, a sign post will be put on the highway having the business name, address and its
distance indicate from the main road in order to inform people on the new launch.

Other strategies will include visiting the targeted i.e. the nearby schools like Mumetet
primary school and Kalyet secondary school in order to inform them on the quality of the
products and its prices.

The most strategic pricing factor at first will be break even analysis where total revenue
is equal to total cost. Then thereafter, the law of demand and supply will determine the
price of products. Efficiency and effectiveness in supplying the products at the right time,
and at the right time, at the right quality will be another strategy.

8
2.9.2 GROWTH SRATECHY.
Research findings show that an estimate of 15000 people is greatly in need of horticulture
products. Therefore, the firm intended to have the following materials in order to meet
the future demand and to intensify its business
(i) Incorporation of irrigation pump and related irrigation pump and related
irrigation equipment.
(ii) Purchase a tractor and a pick up van for transporting the products. These are
long term strategies which should be considered in order to put the business
on the expansion trend.

2.9.3 SWOT ANALYSIS

Kandie Horticultural Enterprises have various strengths, weaknesses, opportunities and
threats. These are as follows:-

STRENGTHS WEAKNESS OPPORTUNITIES THREATS

- Located in a central - Limited funds may be - Kandie horticulture - The products are
place where targeted a hindrance to enterprise will have a subjected to risk such
customers are captured. expansion. wider market because as being perishable.
of high demand of
products.

- Good infrastructure - The business is new - The Gov tries to - Weather conditions
security and electricity therefore may not be boost the agricultural may reduce the
is reliable. known at early stages. sector since it’s the quality and quantity
backbone of the of the products.
country.
-The enterprise is in a
position to do well
because its competitors
lack a lot.

9
 CHAPTER THREE
3.0 MARKETING PLAN.
3.1 MARKETING OBJECTIVES.
The proposed business has got various objectives that it should accomplish day by day as
time goes.
The objectives include:-
(i). To sell quality products which are good
(ii). To increase sales by cultivating good will from its potential customers.
(iii). To compare favorably with its competitors
(iv). To grow much bigger than how it was at the beginning.

3.2. POTENTIAL CUSTOMERS.

Customers are essential to any business concerns.Kandie horticulture enterprise shall not be
an exemption. Its customers shall comprise of:-
(i). local community- These are people who will come directly to the farm to buy the
products.
(ii). Vegetable vendors- These are the people who will get the products at the market
site in Eldoret town and others will come to buy directly from farm.
(iii). Institutions – The institutions around like Kisangui Secondary School, Kalyet
Secondary School and Mometet Primary School. They shall be receiving the products
at their destinations. Therefore, the enterprise will hire a car for supplying the
products and bicycles will be bought to dispatch these products to their respective
customers.
After successful operation, report oriented products will be launched in. Therefore,
estimates of 30,000 potential customers are expected to give a third of the entire market
share.

10
The targeted potential customers, which are the institutions i.e. Kisangui Secondary
School, Kalyet Secondary School and Mometet Primary School all are boarding schools
and have an average of 250-400 students.
Therefore, each school needs two or three bags of vegetables especially sukuma wiki
(kale) every week and one crate of tomatoes. Another targeted group is the surrounding
community. These customers buy in small quantities daily. Most vendors will get their
products at the market in Eldoret town and few will come to buy at the farm.
To maintain these customers, the enterprise will ensure that the products are reliable and
available always. Also, customers should be treated nicely.

3.3 MARKET SHARE

From the research carried out it was found out that, there are only two horticulture farms
namely; Bandaptai and Baitany Generation around the place. The business does not
satisfy their customers because of few weaknesses like running short of the products
mostly during the dry seasons due to lack of water hence allowing other competitors from
Nandi hills and Timborua to come and sell their products. Therefore this gives a good
market to a new firm.
At the beginning, the enterprise is expected to capture 1,500 customers which is 50% of
the entire population and at the end of three years, it would have captured 75% of the
entire population that is approximately 2500 customers.

CUSTOMERS AT THE STATE OF THE YEAR

0%
30%

50%

20%
Carol Horticulture
11 Bandaptai
baitany generation
 CUSTOMERS AT THE 3RD YEAR OF OPERATION

14% 0%

11%
Bandaptai

Carol horticalture

Baitaney Generation
75%

Kandie horticultural enterprise will capture these markets share because of ;

i. Quality products which are available always
ii. Good conduct with the potential customers.
iii. Reliable services.

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3.4. COMPETITION.
The enterprise has two competitors namely Bandaptai and Baitany Generation
horticulture farms:-
PARTICULARS AGE TIME OF FORM OF STAFF
OPERATION BUSINESS
I Bandaptai, it’s 2 2 years Rainy season Partnership Have qualified
acres only staff but are few
II Baitany 3 years Rainy season Sole The staff are not
generations. It’s only proprietorship qualified
2.5 acres
III Kandie New All seasons Sole Have qualified
horticultural proprietorship staff
enterprise

IMAGE PRODUCTS?SERVICES EQUIPMENT LOCATION

Fair Deals with cabbages. Have few Its located far away from

Kales, onions and equipments but Eldoret town 10 km ahead

passion fruits. they are advanced of Carol Enterprise

Fair Deals with cabbages, Have many It is located 6 km away from

kales and onions equipments but the main road interior from

they are old Kabenes Trading Centre

Good Deals with kale, Have advanced It is located 12 km away

cabbages. Onions, equipments and from Eldoret town near

tomatoes, and carrots are enough Ziwa-Eldoret road along

river Kipsangui

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 ADVERTISING &
PROMOTION WEAKNESSES STRENGTH
METHODS
.Advertising and - Seasonal operation. - Have experience in the field
promotion methods. - Have poor pricing strategy - Have workers who are influential
- Use child labor hence low - Have good infrastructural
output facilities
- Deal with certain class of
customers

Have poor advertising -Use ancient technology - Offer a wide variety of goods.
and promotion -Seasonal operation - Has a well established market
methods -Poor transportation of products - Have experience in the field.
-Lack of managerial skills use
They advertise and ancients technology
promote very well -seasonal operation
-poor transportation of products
-lack of managerial skills

Advertising and -Not known well since its new -Have experienced staff in the field
promotion is reliable -Management is still slow -Have a permanent river crossing
and reaches many -Lack of finances through it
people -Good infrastructural facilities

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3.5 METHODS OF PROMOTIONS AND ADVERTIMSING.
The enterprise would like to reach all people and make well known to all it’s potential
customers. To make the potential customers into actual ones the following should be
done.

3.5.1 ADVVERTTISING
The following shall be used in advertising:
(i)Have a sign board showing the name, address and distance from the main road at a cost
of Kshs 250.
(ii)Posters will be put at strategic places such as bus terminus, trading centers, etc at a
cost of Kshs 150.
(iii)Visiting the targeted customers like schools and informing them by word of mouth at
a cost of Kshs 100.
Once the business is well established, the enterprise will publish and distribute business
prospectors to actual and prospective customers so as to ensure that customers are well
acquainted with the products on sale.

3.5.2 PROMOTION
The enterprise will use the following tools in order to promote its products:
1. Giving out discounts to varies customers
-Having trade fairs and exhibitions at A.S.K shows.
-The prices will be fair and affordable by many people.

3.6 PRINCING STRATEGY:

The pricing of those products will be based on the expenses anticipated for the operation
and the quality or type of the products rendered. Also the low of supply and demand shall
determine the price of the product.
The following factors to be considered:
- The cost of transporting that is the selling price should be able to anticipate the total
cost of transporting that unit.

15
- Demand of the product and it’s supply that is to say if the demand of the product is
higher than supply the price of the product will be high and vice versa.
The total cost of production shall reflect the price to be used in selling the product. The
prices of the products will vary according to seasons throughout the year. The Average
price is as follows:

ITEMS WHOLE SALE PRICE RETAIL PRICE

Cabbages (Gloria per bag) Kshs 500.00 Kshs 550.00

Other cabbages per bag Kshs 450.00 Kshs 500.00

Kales sukuma-wiki per bag Kshs 360.00 Kshs 410.00

Onions per bag Kshs 400.00 Kshs 500.00

Tomatoes per bag Kshs 300.00 Kshs 400.00

The enterprise will offer discount to customers who bay in large qualities and frequently
credits will not be given except to know the consult customers.

3.7 SALES TACTICS

Kandie enterprise will markets its products directly to the dealers in the town at the
market side. The enterprise will also sell its products to customers who come directly to
the farm to buy them. It is also intending to use sole representatives.

3.8 DISTRIBUTION STRATEGY

Since the business is a new one then it will take its products to schools and surrounding
community some times using bicycles but large qualities shall be transported by hired
vehicles to market place at Eldoret town at schools sometimes. All this will cost Kshs
6000 per month. Most of the surrounding community will come and buy at the farm.

16
CHAPTER FOUR.
4.0 ORGANISATION AND MANAGEMENT
For the success of the enterprise, the following organizational and management
objectives have been set:-
(i) To employ well trained and experienced workforce for the betterment of the
business.
(ii) To constantly serve the customers diligently by maintaining good relationship
with them.
(iii) To motivate the staff through training as well as rewarding them generously
so as to maintain them in the enterprise hence achieving high returns.
(iv) To ensure that the working conditions are contusive for the staff by using
pouter approach while correcting them and also when giving direction and
passing an information.

4.1 ORGANISATION
Kandie horticultural enterprise being a sole proprietorship based business and the farm
attendants together with security guard will be employed within the area.

Manager’s qualification
- He is 24 – 28 years
- Is at his final stages of completing Diploma in Chemical engineer
- Has experience in the field of farming
- Is creative and innovative
- Is hardworking

Duties and responsibilities

- Monitor all activities in the business and provide a bearing for it by
laying down strategies and steps on how to run the business.
- Should make annual renewals and decisions which include
innovation of new objectives

17
 - Manage the working time effectively in the farm & plan for future
business programs
- Motivate employees
- Check on the discipline of the employees, assign them work and
supervise them
- Organize for seminars, send employees to A.S.K shows, field days
and local meetings for farmers
- Control the in-flow and outflow of money
- Keep records of books of accounts i.e. sales, purchases and control
finance
- List the items needed with the help of employee and order them

Remuneration
- Basic salary Kshs.7000
- House allowance Kshs.2000 per month
- Medical allowance of Kshs.1000 per month

4.2 KEY MANAGEMENT PERSONEL.

Key management personnel will be the manager only.

4.3 OTHER PERSONNEL.

Kandie horticulture enterprise will employ other two farm attendants and one security
guard.
Qualification of farm attendants
- All are form four leavers
- All did agriculture as an option
- Aged above 20 years

Duties and responsibilities

- Perform assigned work and duties

18
 - Sell the products to the concerned customers
- Report to work on time
- Deal courteously and faithfully to customers
- Weeding the vegetables
- Repairing any breakage in the farm
Remunerations
- Basic salary of Kshs 3000 per month.
- House allowance of Kshs 750 per month.
- Medical allowance of Kshs 250 per month.

Security guard qualifications

- He is a Kenyan citizen aged 25years and above
- He has worked in the same field for not less than one year.

Duties and responsibilities

- Safeguard the business facilities at night
-should be honest, faithful and trustworthy in dealing with business properties

Remuneration
- Basic salary of Kshs3000 per month
- House allowance of Kshs 750 per month
- Medical allowances of Kshs 260 per month

4.4.0 TRAINING
Training plans will be organized Kandie horticulture enterprises in such a way that at the
end of the year all employees would have attended at least two seminars of which the
enterprise would sponsor them in the field days , ASK shows and horticulture
seminars .Also the enterprise will have job rotation and division of the duties in order to
motivate employees would have attended at least two seminars of which the enterprise
will be sponsor them in field days, A.S.K. shows and horticulture seminars. Also, the
enterprise will have job rotation and division of duties in order to motivate employees.

19
 4.4.1 PROMOTION
Employees will be promoted depending on their skills, hard work, experience and
qualifications.
After 2-3 years, the business would have expanded hence more job vacancies are created
therefore employees who would be having the required qualifications will be given high
posts and their salaries will be increased and others shall also be given positions
depending on their qualifications.

4.5 REMUNERATIONS AND INCENTIVES.

Kandie horticultural enterprise will remunerate

POST/ POSITION. NO OF STAFF BASIC PAY ALLOWANCE NET PAY

Manager 1 Ksh 7000 Ksh 3000 Ksh 10000
Farm attendant 2 Ksh 3000 each Ksh 1000 each Ksh 4000 each
Security 1 Ksh 3000 Ksh 1000 Ksh 4000
TOTAL 4 Ksh 16000 Ksh 6000 Ksh 22000

Generally, the earning will be subject to adjustment depending on the future progress,
space of the business also, the employees of the business will have the following
incentives:-
i. Free tea to all employees at work costing Ksh 1920 per month.
ii. Giving sick employees sick leave.
iii. Providing them with working aprons to be worn when one is on duty.
iv. Paying them generously
v. Words of appreciations should be used i.e. well done or thank you,
congratulations in order to make them feel good and work much harder.
vi. Organization chart at the start of the year will be as follows.

As time goes by, the business will employ more people to work and organizational
chart will be as follows after three years:-

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 MANAGER

SUPERVISOR/
CLERK

4 FARM 2 SECURITY Guards

ATTENDANTS

4.5 RECRUITMENT, TRAINING AND PROMOTION

4.5.1 RECRUITMENT
Kandie horticultural enterprise will obtain its qualified employees from within the
area i.e. form four leavers. The enterprise will advertise for vacancies thro’ word of
mouth in meeting such as churches, wedding, and anybody who wishes to be
employed will be interviewed in a few areas pertaining agriculture and should be
having a form four certificate and a National Identity card .Some employees will be
obtained from collages and polytechnics

4.6 LEGAL REQUREMENTS

Kandie horticulture Enterprise will obtain its legal documents at a cost of 1,870/=

21
 Per year that is the portrait of the president of the Republic of Kenya at El-fem
Designers and the license will be obtained from the country council of Wareng, their
office is at Eldoret town. All employees should have National Identity cards.

4.7 SUPPORT SERVICES

1. The enterprise will get it’s loan from National Bank of Kenya of Ksh 80,000/-
Eldoret Branch and a deposit account in the same Bank at a cost of Kshs 1,000/-
The address is
NATIONAL BANK OF KENYA
P.O BOX 3780-304100
ELDORET.

Other support services are

2. Lawyer – the enterprise will have a lawyer who will be called in times of need
and this will be MIYENDA AND CO.ADVOCATE at K.V.D.A plaza at Eldoret
town .He will be paid Ksh 5,000/- per consult
MIYENDA & CO. ADVOCATES
P.O BOX 2762-30100
ELDORET.

3. Postal cooperation of Kenya

The business will have its services i.e. email from Postal Cooperation of Kenya at
Eldoret. The cost will be Kshs 200 per month.
POSTA COOPERATION OF KENYA
P.O BOX 6024-32100
ELDORET.

4. Telecommunication services will be provided by Kenya Telecom i.e. telephone

services at a cost of Ksh 2,000/- per month
KENYA TEL-KOM

22
 P.O BOX 6220-301100
ELDORET.

5. Insurance company.
The business will insure its products and its fixed assets against risks like fire,
theft, etc with Chebii and Associates Insurance Company at Eldoret town at a cost
of Ksh 2000/- per month.
CHEBII AND ASSOCIATES INSURANCE COMPANY
P.O BOX 2627-30100,
ELDORET.

6. Kenya Power and Lighting Company.

The enterprise will have electricity from Kenya Power and Lighting Company at a
cost of Kshs 600/- per month.
KENYA POWER & LIGHTING COMPANY.
P.O BOX 1621-30100,
ELDORET.

4.8 PRODUCTION PLAN

Production operation plan will play a great role for the success of the business
by:-
I. Providing fresh products to the esteemed customers.
II. Providing available & reliable services like transporting the products to
various destinations i.e. schools.
III. Provision of products at available prices.

4.8..1 PRDUCTION OBJECTIVES.

Kandie Horticulture Enterprise will have various operational objectives to be
accomplished and those objectives are:-

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 I. To utilize the appropriate technology in the production and provision of
quality products and services.
II. To acquire high quality seeds so as to ensure high quality products that are
healthy and fresh always.
III. To acquire modern equipment and facilities so as to make work easier and
increase output.

4.8.2 PRODUCTION FACILITIES AND CAPACITY.

Kandie Horticulture Enterprise will require the following physical facilities for the
smooth running of the operations:-
ITEM QUANTITY UNIT COST TOTAL COST SOURCE
Panga 4 100 400 Jua Kali sector
Jembe 5 150 750 Jua Kali sector
Knapsack 1 5,000 5,000 Jua Kali sector
Sacks(big) 10 600 600 Bright Star Ent
Water pump 1 34,000 34,000 Bright Star Ent
Bicycle 2 10,000 10,000 Bright Star Ent
Wheelbarrows 2 5,000 5,000 Bright Star Ent

1. Crop rotation – This is done after every harvest of crops. The crops are rotated after
one another as follows
MONTS SEASON PLOT 1 PLOT 2 PLOT 3 PLOT 4
Dec – March Dry Tomatoes Cabbages Onions Kales
April – July Rainy Cabbages Onions Kales Tomatoes
Aug – Nov Rainy/Dry Onions Kales Tomatoes Cabbages

2. Watering – During dry seasons, vegetables will be watered regularly. This is early in
the morning and late in the evening.

3. Applying animal manure – This is done annually after harvesting

Transport – Kshs 6,500
Advertisement -Kshs 500
Labour (wages/salaries) – Kshs 22,000
Total - Kshs 37,350

24
The total production cost per month will be Kshs 104,300

Farm clearing Farm clearing

Ploughing Ploughing

Harrowing Harrowing

Seedbed preparation Seedbed preparation

Planting Planting
4.9 PRODUCTION PROCESS
The production process will be as follows:-
Transplanting Transplanting

Kales and tomatoes Cabbages and onions

Weeding / Spraying Weeding / Spraying

Harvesting Harvesting

Temporary storage Temporary storage

25

Selling the product Selling the product

The farm is cultivated and manure is applied. This is done to maintain a satisfactory
productive state of the farm.

The monthly production overhead will be:-

ITEM COST
Telephone Kshs 2,000
Electricity Kshs 2,000
Postage Kshs 600
Insurance Kshs 2,000

26
 Bank charges Kshs 450
Maintenance Kshs 600
Miscellaneous Kshs 550

The enterprise will ensure that quality is maintained by using proper equipments in the
farm and in employing well trained employees who have skills and are experienced in
horticultural farming.

In order to sell fresh products the enterprise will sell first the products that were removed
first from the farm.

The external factors that are likely to affect the business include:
I) Drought- the enterprise will control the effect of drought on production by
having a permanent source of water for irrigation.
II) Frost- to prevent frost the products will be sprayed using acrobat and milzar
chemicals.
III) Flood- the farm should have good drainage system in order to reduce floods.
IV) Market competition- the enterprise will use marketing concepts so as to
capitalize on competitors’ weaknesses in order to have a large market size.
Also they will offer quality products to the market at a fair price

The internal factors include

I) poor co-ordination among the employees and can be improved by division of
duties
II) delay / wastage of time – this can be improve by having close supervision in
the farm

4.9.1 REGULATIONS AFFECTING OPERATIONS

There are various regulations affecting the enterprise
Those include:

27
 1. Government regulations – These are the legal requirements for the business to be
registered.
i) Trade license
The enterprise will get its license from District Headquarters Office in the
ministry of trade and Industry at a cost of Ksh. 1,000. Also a public health
certificate will be obtained from the District Health Officer at a cost of Ksh
200
ii) Local Authority License.
This certificate will be obtained from Wareng County Council licensing
department at a cost of Ksh 500.
2) Local Taxes - The local authority tax is Ksh 650 per annum for service charges

3) Approval and Compliance - To ensure fairness between employees relationship

there are special Government Acts that needs to be observed.
These are;
- Employment Act.
- Health Regulation Requirement
Brian will have the following plan to ensure that it complies with these regulations.
- Pay 2% in proportion to each employee’s salary to N.S.S.F.
- Provide employees with aprons and dust coats at a cost of Ksh 1,000
each.
Total cost incurred will be Ksh 3,000.
CHAPTER 5
5.0 FINANCIAL OPERATION/ PLAN.
The main objective of kandie Horticulture Enterprise is to maximize profit out of the
available finances. In order to achieve this, the enterprise should:-
 Adhere to proper book keeping. These books should be accessed by the manager alone
and should be kept under a lock.
 Commit itself on loan repayment and ensure that it starts paying during the first year
of operation.

28
 Ensures that it observes the growth rate of business at various stages in order to
maintain it well.
 Evaluate the various projects available at the right time in order to maximize the
returns out of its investments.

5.1 PRE-OPERATIONAL COSTS

Kandie Horticulture Enterprise will incur the following pre-operational costs.
AMOUNT
ITEM KSHS CTS
Trading license and permit 60,000 00
Electricity meter 4,500 00
Installation of telephone line 3,550 00
Deposit for post office 2,000 00
Equipment 66,950 00
Uniforms 3,000 00
Furniture 3,700 00
Stock 10,500 00
Service charge 2,000 00
Transport 3,000 00
Office and farm structure 36,000 00
Miscellaneous expenditure 500 00
TOTAL 141,700 00

5.2 WORKING CAPITAL

ITEM 2008 2009 2010

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 Kshs Kshs Kshs
Current assets
Cash at bank 306,411 775,351 462,611
Cash in hand 30,000 35,000 47,000
Stock 10,500 11,550 12,705
Debtors 19,500 10,000 25,500
TOTAL CURRENT ASSETS 366,411 831,901 1547,816
Current liabilities
Creditors 8,000 12,700 10,500
NET WORKING CAPITAL 358,411 819,201 1537,316

5.2.1 LOAN REPAYMENT SCHEDULE

Principle Amount Installment Interest Paid Balance

80,000 5,000 1,000 75,000
75,000 5,000 938 70,000
70,000 5,000 875 65,000
65,000 5,000 813 60,000
60,000 5,000 750 55,000
55,000 5,000 688 50,000
50,000 5,000 625 45,000
45,000 5,000 563 40,000
40,000 5,000 500 35,000
35,000 5,000 438 30,000
30,000 5,000 375 25,000
25,000 5,000 313 20,000
20,000 5,000 250 15,000
15,000 5,000 188 10,000
10,000 5,000 125 5,000
5,000 5,000 63 -

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5.3 PRO-FORMA INCOME ST
5.3.1 kandie’s horticultural Enterprise, Proforma Income Statement as at 31 st DEC
2018.
Shs. Shs. Shs.
Sales 360,000 - -
Less Return Outwards 120,000 480,000
Less Cost of Goods
Opening Stock 45,200
Add Purchase 34,700 79,900
Less Return Inward 3,060
Less Closing Stock 40,200 36,640
Gross Profit 443,360
Add Income 120,000
Net Income 563,360

Less expense
i) Depreciation
Motor Vehicle 20,100
Fixtures 10,450 30,550
ii) Telephone 2,400
iii) Postage 1,200
iv) House Rent 30,000
v) Stationery 7,200
vi) Bank Charges 2,400
vii) Wages and Salaries 170,000
viii) Water 48,000
ix) Electricity 12,000
x) Raw Materials 32,800
xi) Machinery 173,000
509,550
Net Profit 53,810

31
5.3.2 Kandie’s Horticultural Enterprise, Proforma Income Statement as at 31 st DEC
2019.

Shs Shs Shs

Sales 400,000
Less Return Outwards 106, 200 506,200
Less Cost of Goods
Opening Stock 50,200
Add Purchase 42,000 92,200
Less Return Inward 5,700
Less Closing Stock 45,200 41,300
Gross Profit 454,900
Add Income 150,700
Net Income 505,600

Less Expenses
i) Depreciation
Motor Vehicle 14,600
Fixtures 15,200 19,800
ii) Telephone 2,400
iii) Postage 1,200
iv) House Rent 30,700
v) Stationary 7,200
vi) Bank Charges 2,400
vii) Wages and Salary 170,000
viii) Water 48,000
ix) Electricity 12,000
x) Raw Materials 32,800
xi) Machinery 173,000 489,500

32
5.3.3Kandie Horticultural Enterprise, Proforma Income Statement as at 31 st DEC
2020.

Shs Shs Shs

Sales 440,000
Less Return Outwards 150, 000 590,000
Less Cost of Goods
Opening Stock 45,200
Add Purchase 47,800 93,000
Less Return Inward 42,700
Less Closing Stock 36,300 14,000
Gross Profit 576,000
Add Income 106,350
Net Income 682,350

Less Expense
i) Depreciation
Motor Vehicle 19,800
Fixtures 20,400 40,200
ii) Telephone 2,400
iii) Postage 1,200
iv) House Rent 30,700
v) Stationery 7,200
vi) Bank Charges 2,400
vii) Wages and Salary 170,000
viii) Water 48,000
ix) Electricity 12,000
x) Raw Materials 32,800
xi) Machinery 173,000 519,900
Net Profit 162,450

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 5.4 PRO-FORMA CASH FLOW
5.4.1kandie horticultural Enterprise Proforma Cash Flow as the first year ending 2018
RECEIPT JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC
Opening Balance 2,700,000 2,580,550 2,391,300 2,191,200 1,990,900 1,776,200 1,575,400 1,374,600 1,246,300 1,139,500 1,041,300 917,500
Sales 30,000 30,200 31,500 32,200 33,300 30,200 30,200 35,700 36,200 30,000 31,700 48,800
Debtors 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000
TOTAL 2,900,000 2,780,750 2,592,800 2,393,400 2,194,200 1,976,400 1,775,600 1,580,300 1,452,500 1,339,500 1,243,000 1,136,300
Less Expenses
Machinery 173,000 213,000 250,000 250,500 265,000 250,000 250,000 180,000 160,000 150,200 175,000 240,000
Furniture & Fitting 10,450 10,450 15,600 16,000 17,000 15,000 15,000 18,000 17,000 12,000 14,500 21,200
Materials 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800
Electricity 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
Telephone 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400
Postage 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200
House Rent 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Stationery 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200
Bank Charge 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400
Water 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000
TOTALS 319,450 389,450 401,600 402,500 418,000 401,000 401,000 34,000 313,000 298,200 325,500 397,200
Balance 2,580,550 2,391,300 2,191,200 1,990,900 1,776,200 1,575,400 1,374,600 1,246,300 1,139,500 1,041,300 917,500 739,100

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 5.4.2 Kandie Horticultural Enterprise Proforma Cash Flow as the first year ending 2019
RECEIPT JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC
Opening Balance 739,100 578,600 467,600 376,200 299,200 243,700 176,100 147,500 145,200 150,900 154,500 171,500
Sales 46,000 40,000 30,000 28,200 26,500 28,000 30,200 33,700 33,500 26,500 37,400 40,000
Debtors 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000
TOTAL 955,100 788,600 667,600 574,400 495,700 441,700 376,300 351,200 348,700 347,400 361,900 381,500
Less Expenses
Machinery 220,000 170,000 145,200 130,500 110,000 90,000 87,200 65,000 57,200 52,400 50,200 47,800
Furniture & Fitting 20,500 15,000 10,200 9,200 6,000 6,800 5,600 5,000 4,600 4,500 4,200 4,000
Materials 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800
Electricity 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
Telephone 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400
Postage 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200
House Rent 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Stationery 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200
Bank Charge 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400
Water 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000
TOTALS 376,500 321,000 291,400 275,200 252,000 265,600 228,800 206,000 197,800 192,900 190,400 187,800
Balance C/D 578,600 467,600 376,200 299,200 243,700 176,100 147,500 145,200 150,900 154,500 171,500 193,700

35
 5.4.3kandie Horticultural Enterprise Proforma Cash Flow as the year ending 2020
RECEIPT JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC
Opening Balance 193,700 219,500 249,200 268,050 290,700 327,070 353,920 376,820 401,820 428,320 447,720 470,170
Sales 41,000 41,700 30,000 32,050 32,270 31,200 31,500 34,700 33,700 26,000 29,850 36,030
Debtors 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000
TOTAL 404,700 431,200 449,200 470,100 492,970 528,270 555,420 581,520 605,520 624,320 646,570 676,200
Less Expenses
Machinery 45,200 42,300 41,900 40,200 36,700 35,200 34,800 33,200 30,700 30,200 30,000 31,500
Furniture & Fitting 4,000 3,700 3,250 3,200 3,200 3,150 2,800 2,500 2,500 2,400 2,400 2,700
Materials 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800 32,800
Electricity 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000
Telephone 2,400 2,400 2,400 2,400 2,400 2,400 2,400 10,400 10,400 10,400 10,400 10,400
Postage 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200
House Rent 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Stationery 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200 7,200
Bank Charge 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400
Water 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000 48,000
TOTALS 185,200 182,000 181,150 179,400 165,900 174,350 178,600 179,700 177,200 176,600 176,400 178,200
Balance C/D 219,500 249,200 268,050 290,700 327,070 353,920 376,820 401,820 428,320 447,720 470,170 498,000

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 5.5 BALANCE SHEET
KANDIE HORTICULTURAL ENTERPRISE AS AT 2018,2019,2020.
Percentage 25%
2018 2019 2020
Fixed Assets Costs Depression NBR Costs Depreciation NBR Cost Depression NBR
Machinery 1,000,090 250,022.50 750,067.50 173,000 43,250 129,750 550,000 137,500 412,500
Furniture & Fittings 20,100 5,025 15,075 5,200 1,300 3,900 10,620 2,655 7,965
Motor vehicle 50,000 12,500 37,500 4,600 1,150 3,450 65,380 16,345 49,035
Raw Materials 340,000 85,000 255,000 32,800 8,200 24,600 393,600 98,400 295,200
Stationary 36,600 9,150 27,450 7,200 1,800 5,400 86,400 21,600 64,800
Current Assets s
Stock 5,000 1,250 3,750 5,200 1,300 3,900 8,900 2,225 6,675
Debtors 2,400,000 600,000 1,800,000 200,000 50,000 150,000 780,100 195,025 585,075
Cash 739,100 184,775 554,325 700,000 175,000 525,000 100,000 225,000 675,000
Bank 480,000 120,000 360,000 500,000 125,000 475,000 750,000 187,500 572,500
Insurance 20,000 5,000 15,000 15,800 3,950 11,850 53,950 13,487.50 40,462.50
Current Liability
Salaries 980,000 245,000 735,000 500,000 125,000 475,000 980,000 245,000 735,000
Loan 2,200,000 550,000 1,650,000 500,000 125,000 475,000 2,500,000 625,000 1,875,000
Creditors 170,000 42,500 127,500 240,000 60,000 180,000 260,000 65,000 195,000
Interest 2,720,000 680,000 2,040,000 3,056,300 764,075 2,292,225 2,500,000 625,000 1,875,000
Rates 50,000 12,500 37,500 60,000 15,000 45,000 20,000 5,000 15,000
Calls Unpaid 70,000 17,500 52,500 90,500 22,625 67,875 80,000 20,000 60,000
Bank Overdraft 150,000 37,500 112,500 9,500 2,375 6,125 15,500
Working Capital = C.L. – C.A. 6,340,000 1,244,100 5,095,900 4,456,300 1,421,000 3,035,300 6,355,500 4,862,550
Capital Employed = W.C – F.A 5,095,900 1,446,790 3,649,110 3,035,300 212,800 2,822,500 4,862,550 1,106,000 3,656,550
Financed by/ Capital 2,700,000 2,700,000 2,700,000
Net Profit 53,810 16,800 162,450
Loan 895,300 105,700 794,100
3,649,110 2,822,500 3,656,550

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5.6 Break Even Level

Break Even Level = Overhead / Expenses x 100

Gross Profit

1st Year
= 509, 550 x100% GPM = G.P x 100 = 443,360 x 100
123.16 S 360,000
= 123.16

Year 1
Break Even Level

413,730.11
Year 2
Break Even Level =Overhead /Expenses x 100%
Gross Profit Margin

= 489,500 x 100% GPM =G.P x 100% = 454,900 x 100

113.725 S 400,000
= 113.725
= 430, 424.27

Year 3
Break Even Level =Overhead /Expenses x 100%
Gross Profit Margin

= 519,900 x 100 GPM =G.P x 100% = 576,000 x 100

130.91 S 440,000
= 130.91
= 397,143.08

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5.7 Proposed Capital
Item Amount Amount
Friends & Relatives 60,000
Family Bank 50,000
National Bank 60,000
Capital 170,000
Total 170,000 170,000

5.7.1 Expected Profitability Ratio

Gross Profit Ratio
Gross Profit Ratio = Gross Profit x 100%
Sales

Year 1 Year 2 Year 3

443,360 x 100 454,900 x 100 576,000 x 100%
480,000 506,200 590,000

= 92.4% = 89.9% 97.6%

5.7.2 Return on Equity

Return on Equity = Net Profit after Tax x 100%
Capital Introduced

Year 1 Year 2 Year 3

53,810 x 100% 16,100 x 100 162,450 x 100
170,000 170,000 170,000

= 31.7% = 9.5% = 95.6%

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5.7.3 Return on Investment
= Net Profit after Tax + Interest x 100
Total Investment
Year 1 Year 2 Year 3
= 60,000 x 100 = 25,000 x 100 = 165,000 X 100%
170,000 170,000 170,000
= 35.3% = 14.7% = 97.1%

40