I.

Introduction

Banana
Bananas
s are vigorous
vigorously
ly growing,
growing, herbaceo
herbaceous
us plants
plants growing
growing in every
every humid
humid

tropical region. Edible bananas are believed to have originated in the Indo-Malaysian

region reaching to northern Australia. They constitute the fourth largest fruit crop of the

world, following the grape, citrus fruits and the apple. orld production is estimated to

be twenty-eight million tons!si"ty-five percent from #atin America, twenty-seven percent

from $outheast Asia,

Asia, and seven percent from Africa. %ne-fifth of the crop is e"ported to

Europe, &anada,
&anada, the 'nited $tates and (apan as fresh fruit. India is the leading banana

produ
producer
cer in Asia,
Asia, follo
followe
wed
d by Indo
Indone
nesia
sia and
and then
then by )hili
)hilippi
ppine
nes.
s. The )hili
)hilippi
ppine
nes
s

produces about one-half million tons, e"porting mostly to (apan.

The )hilippines,
)hilippines, being one of the contenders
contenders for the title, *Banana

&apital of the orld,+ has innumerable banana plantations scattered across Mindanao.

Biggest producing region is $outhern Mindanao capturing almost half of the countrys

total production. )roduction of banana is mainly concentrated in Mindanao where the

biggest banana producing

producing provinces of avao del orte, avao del $ur and avao &ity

of $outhern Mindanao region. %utside Mindanao, the biggest producing provinces are

Iloilo in estern /isayas

/isayas and Isabela of &agayan /alley
/alley.. Most of the 001,234 hectares

of bana
banana
na are mostl
mostly
y bac5y
bac5yard
ard or smallh
smallhold
older
er opera
operatio
tions
ns.. Acco
Accordi
rding
ng to a study
study

conducted
conducted by orld Ban5, the few commercial plantings are located in Mindanao
Mindanao where

there are about 43,222 hectares of &avendish bananas being produced for e"port.

Banana has many uses especially in the human diet. 'tili6ation of 

banana as food can be in many ways -- from simply being peeled and eaten out of-hand

to being sliced and served in fruit cups and salads, sandwiches, custards and gelatins7

being mashed and incorporated into ice cream, bread, muffins, and cream pies. 8ipe
bana
banana
nas
s are often
often slice
sliced
d length
lengthwi
wise,
se, fried
fried in coo5in
coo5ing
g oil,
oil, and
and re-co
re-coo5e
o5ed
d in sugar 
sugar 

caramel. Banana puree is important as infant food and can be successfully canned by

the addition of ascorbic acid to prevent discoloration. Because of seasonal gluts and

peris
perisha
habil
bility
ity and
and the
the tonn
tonnag
ages
es of bana
banana
nas
s and
and planta
plantains
ins that
that are not
not suita
suitable
ble for 
for 

mar5eting or e"port because of overripeness

overripeness or stained peel or other defects, there has

been tremendous interest in the development of modes of processing and preserving

these fruits.

'nripe banana has many food uses as well. In 9amboanga

9amboanga &ity,
&ity, green

unripe bananas, boiled in s5in and served with * haleia+

haleia + or coconut mil5 caramel, are

popular.
popular. $un-drying slices of unripe fruits and pulveri6ing
pulveri6ing ma5e banana or plantain flour 

or powder. %ne of the most popular unripe banana products is banana chips.

&ommercia
&ommerciall producti
production
on and mar5etin
mar5eting
g of banana
banana chips
chips has been
been

increasing in various parts of the world over the past 4: years and these products are

commonly
commonly found in retail
retail grocerie
groceries
s alongsid
alongside
e potato
potato chips
chips and other snac5
snac5 foods.
foods.

&arinosa and Bungulan bananas are favored for chip-ma5ing in #atin Amerca. In the

)hilippines, the ;$aba< and ;&ardava< varieties are chosen for this purpose.

This paper proposes a banana chips production business in 9amboanga

&ity
&ity. The
The idea
idea stemme
stemmed
d from
from the
the propo
propone
nent<
nt<s
s fondn
fondnes
ess
s for the
the produ
product
ct and
and the

prodigious source of banana in the area. The business and its initial product shall be

named MI#E$ &%M)A= and M8. ='MM= BAAA &>I)$, respectively. The banana

chips shall be distributed mainly to the canteens of the different primary, secondary, and

tertiary schools in 9amboanga &ity. Miles &ompany will also deliver to the grocery stores

as well as the canteens of the different companies or offices in the city.

II. Product Description

The Mr. =ummy

=ummy banana chips are delicious, crispy, and healthy snac5s.

The banana chips have a sweet taste. They are made from the ?ilipino banana of 

the $aba and &ardava variety. $mooth delicious bananas are pic5ed in their mature

green stage, peeled, thinly sliced, honey sweetened and then fried in vegetable oil.

 They are a nutritious snac5 because of the honey content. They do not contain

artificia
artificiall additive
additives.
s. They
They are a nutrien
nutrient-de
t-dense
nse food,
food, contribu
contributing
ting to a healthy
healthy diet by

providing not only potassium but also calcium, carotene, vitamin &, and vitamin B@.

Each chip has an average si6e of 4:-02 millimeters in diameter and thic5ness of 

0- millimeters. The thin chips are deep-fried,

deep-fried, and naturally cooled
cooled before pac5aging
pac5aging

restoring the product<s crispiness.

The banana chips are pac5ed by :2 grams in plastics. The label indicates the

business and product name, ingredients, weight, and business address and number.

Each pac5 is well-sealed to maintain the product<s crispiness.

III. VMO and SWOT Analysis

Vision

In seven to eight years, Miles &ompany will be the biggest banana chips

manufacturer in estern Mindanao and will contribute to the )hilippines banana chips

e"port mar5et.

.
Mission

Miles &ompany manufactures honey-dipped banana chips and distributes them

to the different school canteens, office canteens and grocery stores in 9amboanga &ity.

Values

. E"cellence C in producing high Duality honey-dipped banana chips

4. >onesty - in relating with customers and paying ta"es to the government

0. &leanliness and sanitation C in the preparation of ingredients, coo5ing of the

chips and in the pac5aging of the product

. >ardwor5 C in devoting energy and talents for the growth and success of the

business

Objectives

. enerate an annual sale of ) 4:2,222 and net income of ):2,222.

4. )roduce the best tasting banana chips in 9amboanga &ity

0. istribute to :2F of the school canteens in 9amboanga &ity

. ain access to the office canteens and the grocery stores in 9amboanga &ity

: .E"port products to other countries

SWOT Analysis

 A scan of the internal and e"ternal environment of the business indicates the

followingG
StrengthsG

− ith 5now-how in the manufacturing of banana chips

− 'niDue in 9amboanga &ity because bananas are sweetened with honey

before frying

− The snac5 product is nutritious. Its nutritional contents include potassium

and protein

WeaknessesG

− #ac5s access to grocery stores and office canteens

− o established supplier of honey in 9amboanga &ity

Opportunities G

− There are more and more schools that are being put up in the city

−  A supportive government indicates that there is a bright future for the firm

in the e"port mar5et

ThreatsG

− The preference of students and young people to eat Hun5 foods

− The prices of coo5ing oil, sugar and honey are increasing

Strategies

Strength-Opportunities:
 − E"tensively promote nutritious product to students of the different schools

by Hoining trade fairs during school fiesta or palaro

−  Accumulate profit and reinvest it for e"pansion of business and

distribution in the neighboring places of 9amboanga &ity

Weaknesses-Opportunities:

− &oncentrate mar5eting efforts on the distribution to school canteens

− hen sales volume increases due to increased demand for the product,

find suppliers outside 9amboanga &ity and negotiate terms.

Strengths-Threats:

− Invest in 8esearch and evelopment activities to obtain cost efficiency

and optimal productivity

− )ac5age and label product differently to attract even Hun5 food eaters

Weakness-Threats:

− 8esearch on the feasibility of processing own honey made from banana

IV. Profile of Target Maret!s"

9amboanga &ity is the center for education in estern Mindanao. It is a home to

three universities, three computer colleges, ad numerous colleges and institutes in the

9amboanga )eninsula region. The epartment of Education C 9amboanga &ity ivision

records a total of three hundred fifty-two schools in all education level including pre-
school in school year 4221-4223. Two hundred forty-five 4:J and one hundred one

2J of these schools are government-owned and privately-owned, respectively. This

number is si" less than the recorded number of schools in school year 422@-4221. The

closing of twelve private elementary schools and the opening of one public high school,

three public pre-elementary schools and two private pre-elementary schools contributed

to the decrease.

The epartment of Education C 9amboanga &ity ivision has in record 1:,0K

and 1@,21K students in the preschool, primary and secondary level in school years

422@-4221 and 4221-4223, respectively.

More than ninety percent of the schools in 9amboanga &ity have their own

school canteens. A survey was conducted to thirty different schools located in the city

proper, east and west coast in 9amboanga &ity. Twenty-eight of the thirty schools have

canteens located inside the school and these canteens are owned by a cooperative of 

teachers and staff members.

Ten students for each of the twenty-eight schools were handed out

Duestionnaires to determine their purchases and purchase level from the canteens. ?ive

out of ten :2FJ students visit and buy from the school canteen once a day either for 

snac5s, lunch, or school supplies7 three students 02FJ seldom go to the canteen less

freDuent than once a wee5lyJ and buy school supplies and drin5s. The remaining two

students 42FJ never go to the canteen because they bring their own food and school

supplies or because they do not have money at all.

 Three out of the five regular canteen goers are li5ely to buy snac5 food. Two out

of these three snac5 buyers prefer commerciali6ed chips li5e &hippy and )iatos and
 other Hun5 foods. %ne prefers home made snac5s li5e bico, cassava ca5es, sandwiches,

and bananaDue.

Eleven of the twenty-eight school canteens were selected as targeted place of 

distribution of the product. ine out of eleven pre-selected school canteens committed to

buy the product from the business. The Brent >ospital and &ollege Inc. and Immaculate

&onception Archdiocese $chool are the two schools who responded *o+ when as5ed if 

they will buy the proposed product. All nine prefer the goods to be on consignment basis.

This term provides that each pac5 of :2 grams honeydipped banna chips is priced at

)@.22. )ayment on the delivered goods for the day shall be made on the ne"t day<s

delivery. The schools were chosen for their large population and the nearness of each

school from another. The latter reason will generate efficiency in the delivery and

collection of payment.

The following are schoolsLcanteens which committed to buy the product, with

their corresponding population and locationG

$chools #ocation )opulation

 &laret >$ $an (ose 8d, Baliwasan, 9amboanga &ity ,13
4 M$' #ab >igh  &ollegeJ ormal 8d, Baliwasan, 9amboanga &ity 44,222
0 9>$ est 8T. #im Blvd., Baliwasan, 9amboanga &ity :,321
 )ilar &ollege All levelsJ 8T. #im Blvd., Baliwasan, 9amboanga &ity ,0K3
: $TI &ollege ov. #im Ave., 9amboanga &ity :K
@ $&& >$  &ollegesJ )ilar $treet, 9amboanga &ity ,K1
1 'niversidad de 9amboanga ). #oren6o $treet, 9amboanga &ity :,KK
&ity &ollegeJ
3 'niversidad de 9amboanga on Toribio $treet, 9amboanga &ity 3,@2K
Tetuan >$  &ollegeJ
K 9&>$ Main on Alfaro $treet, 9amboanga &ity K,K@
V. Mareting Plan

 A. Mar5eting Mi"

Product 

Mr. =ummy banana chips are healthy and delicious snac5s. Bananas are dipped

in honey syrup before fried. The product does not contain any preservative or additive.

The banana chips are pac5ed by :2 grams in plastics and are each pac5 is

individually labeled.

Price

Each pac5 of :2 grams of banana chips is priced at )@.22. This is because the

desired gross profit margin is 1:F. A unit cost of )4.3 with a gross margin of this rate

will result to a rounded off-price of )@.22.

The price of the Mr. =ummy Banana &hips is not greatly different from the price

of the products of the competitors. In fact, the wholesale price of the Member ?ood

ealer and uiwan $pecial Banana &hips, which distributes to retail and convenience

stores, is also )@.22. )rices of other competitors range from )@.:2 to )2.22.

$uch differences in the prices, however, shall have the least significant effect in

the competition. )rice is neither the competency nor strategy of the proposed business.
It shall focus instead in delivering banana chips product, uniDue and special for its honey

content.

?urthermore, the main distribution lin5s of the competitors are the grocery stores

and convenience centers. These stores will sell the products at )K.22 to ):.22. Miles

&ompany shall do direct delivery of its products to the school canteens and stores at

)@.22.

Place or Distribution

The delicious and healthy banana chips product will be distributed mainly to

canteens of the different schools in 9amboanga &ity. Initially, it shall deliver to the

canteens of &laret >igh $chool, estern Mindanao $tate 'niversity, 9amboanga

ational >igh $chool est, )ilar &ollege, Brent >ospital and &ollege, $TI &ollege

9amboanga, $outhern &ity &ollege, 'niversidad de 9amboanga - &ity &ampus and '9

Tetuan &ampus, 9amboaga &ity >igh $chool Main and Immaculate &onception

 Archdiocese $chool.

The first five schools above are located in the west area of the city while the last

three schools are located in the east. $TI &ollege, $outhern &ity &ollege and

'niversidad de 9amboanga are found within the city proper.

$ince the business aims to ma5e it 5nown also to non-school canteen customers,

it will deliver to retail stores in uiwan, Tumaga, &anelar, $ta. Maria, and $an 8oDue.

&anteens of $I$ and BI8 are also targeted.

&ash collection shall be made on the following delivery. iven that delivery shall

be made daily, collection of the day<s delivery shall be made on the following day.

&ollection from these non-school canteens and retail stores shall be made on the ne"t
$aturday of delivery. This is to encourage these customers to buy and patroni6e the

proposed product.

Promotion

The business shall be promoted by word of mouth and through personal selling

efforts of the business proponent. )ac5aging and labeling will be enhanced more to

further promote the product.

B. &ompetition

The following are the competitors of the Miles &ompany7

Price
Place of 
#o$petitors %usiness
Distribution !of '(g
&ocation
pac"
. NuNuh<s Banana &hips $ta. Maria, &anteens of ) 1.22
9amboanga &ity schools and
offices7
&onvenience
stores
4. Member ?ood ealer Banana &hips &anelar, &anteens of @.22
9amboanga &ity schools and
offices7
&onvenience
stores in 9&
0. Ecoco Banana &hips Manila &ity rocery 2.22
$tores
ationwide
. uiwan $pecial Banana &hips uiwan, 8etail $tores7 @.22
9amboanga &ity Ba5eries
:. ?ood Trade &enter Banana &hips Isabela &ity &anteens of @.:2
schools and
offices7
&onvenience
stores in
Isabela &ity
 and 9&

The banana chips products of the competitors listed in the foregoing page are

almost ali5e. E"cept E&%&% banana chips, which uses table banana or sweet plantain

of the Musa acuminata  group li5e the lady finger  sulaybaguioJ and ;<ros Michael+

lakatanJ bananas, all of the companies use saba and cardava. )eeled and sliced

bananas of these varieties are deep fried and pac5ed in plastics. Miles &ompany,

however, shall soa5 the banana in honey syrup before frying. This shall result more

delicious and nutritious banana chips. This gives Miles &ompany edge over all its

competitors.

&. ?actors in the E"ternal Environment that Affect the Business

Political Factors

The #ocal overnment of 9amboanga &ity as well as national government

agencies li5e the epartment of Trade and Industry and epartment of $cience and

Technology are supportive to entrepreneurs and the whole business sector. The current

political issue involving the 9TE proHect does affect the business directly or indirectly.

Economic Factors

Inflation is a problem of all businesses. Although inflation does affect the

business in the costing of the raw materials and pricing of the finished goods to a great

e"tent, it significantly affects the purchasing power of the money given to students as

allowance.
Socio-Cultural Factors

Mr. =ummy banana chips product competes with other snac5s in capturing the

taste and preference of students who are the end customers of its mar5et. These other 

snac5s include the potato chips of (ac5 and (ill &orporation, cheese curls and other Hun5

foods. They are often preferred by students.

Technological Factors

Training on banana chip production in the future, can open doors to the use of 

technology in the business. Technology, automation can increase the efficiency of the

production, in volume and Duality and can therefore pave the way to banana chips

e"port.
VI. Operational Plan

 A. )roduction )rocess

The Mr. =ummy Banana &hips production process shall be as followsG

Raw
Materials
Inventory

Peeling of the bananas

Slicing of the banana

Soaking in honey and

sprinkling of sugar 

Cooking in vegetable oil

Cooling
 Packaging

Finished
Goods
Inventory
)roduction shall be daily, the coo5ing in the morning and manual pac5aging in

the afternoon. ?inished goods for the day shall be delivered the following day. oods

produced on ?ridays are distributable to non-school canteens on $aturday while goods

made on $aturdays are to be delivered on Monday the following wee5.

Bananas will be peeled and sliced. )eeling and slicing of one bunch and two

hands of bananas will ta5e one hour and fifteen minutes. Ten 5ilograms of peeled and

sliced bananas shall be soa5ed in honey and sprin5led with sugar. The sliced bananas

will be soa5ed in honey syrup for thirty minutes and then drained. They shall be fried,

five 5ilograms first and then the remaining five. A coo5ing strainer shall be used to

facilitate the emerging and sieving from oil of coo5ed banana chips. ?rying will only ta5e

02 minutes for all ten 5ilograms. The coo5ed banana chips will then be spread over large

*bilao+ atop with absorbent paper and will be cooled for one hour without manual or 

electric fanning to maintain its crispiness.

&ooled banana chips are then pac5aged by :2 grams in plastics. They are

measured first using a small but precise weighing scale and should be :2 grams in

weight before sealing. )ac5s are sealed and labeled.

The following table summari6es the banana chips production process with the

length for each stepG

 B. $uppliers

The business shall buy its wee5ly supply of seven and a half bunches of bananas

from the farmers in ungcaan, east of 9amboanga &ity. The contact person in the area

is Ms. Marie Atilano, a relative of the business proponent. $he resides in the area and

5nows the residents of the barrage.

&. $chedule of %perations

The business shall operate from Monday to $aturday, from 3 A.M. to :G22 ).M.

)urchase of raw materials and supplies shall be made every $aturday before the

production wee5. Banana chips produced during the day shall be sold in the following
day. )roducts completed during ?ridays are made so for distribution to non-school

canteens and retail stores during $aturdays. This is because very few schools operate

on a $aturday. uring semester brea5s and school holidays, the business shall intensify

selling efforts to non-school canteens and retail stores.

&ollection from school canteens shall be made on the following delivery, that is,

on the following day. To encourage non-school canteens and retail stores, however,

collection from these customers shall be made on the ne"t $aturday of delivery.

. Business #ocation

The banana chips production shall be home based. The products shall be made

at the place where the proponent resides. It is a  meter by K meter house being rented

by the proponent from a relative, located in 04 $an (ose 8oad, Baliwasan, 9amboanga

&ity. It is one of the two houses in the lot with area of 412 sDuare meters. The other is a

two-storey house with a total floor area of @2 sDuare meters.

%ne-half of the area of house shall be retained as the personal and sleeping

Duarter of the proponent and the other half shall be made into a pac5aging area.

&oo5ing shall be held outside, in an outdoor 5itchen adHacent to the pac5aging area.
VII. Organi)ational Plan

 A. Business %rgani6ation

Initial Organization

The business, a sole proprietorship, shall initially employ only two employees.

The proHect proponent shall be the first and the manager and shall be responsible for the

purchase of raw materials and supplies, delivery of finished goods, dealing with

customers and prospective customers, and managing the finance of the business.

The second employee shall be responsible for the productionG coo5ing in the

morning and pac5aging in the afternoon. >e shall maintain the cleanliness of the 5itchen,

the utensils and coo5ing wares and the production process in general. >e must beG

- 5nows coo5ing

- able to wor5 with minimum supervision

- clean and neat in loo5s and ways

- willing to undergo training

- willing to wor5 and receive per piece wage

- observant and patient

 Future Organizational Chart 

?ive to si" year from now, the following will be the business organi6ation chartG

Manager 

Marketing Finance Production

- promotes and delivers - maintains the boo5s of the - )roduces banana chips

products business and maintains its Duality

- deals with customers and - oversees the overall - schedules production to

prospective customers financial condition of the increase productivity

business

B. )ersonnel &ompensation

Employees of the business shall receive wage eDuivalent to the minimum daily

wage of employees of retail establishments employing not more than 02 employees in

9amboanga )eninsula. age %rder o. 8IO-0 prescribes the granting of )K:.22

minimum to these employees. The employees of Martin &ompany are also entitled to

government mandated benefits and privilegesG 0 th Month )ay, $$$, )hil >ealth and

)ag-ibig.

 The following is a summary of the personnel compensation of the business,

indicating basic compensation and personnel benefits, factored annuallyG

 ?or the monthly basic pay, the proHect proponent, the owner of the business

receives an eDual pay to that of the other employee. &ompensation of the manager is

charged to operating e"pense while the compensation of the other employee is partly

charged against cost of goods sold and partly against operating e"penses. ?or the

compensation charged to cost of goods sold, he shall receive : centavos for every unit

of product completed. The remainder thereof shall be charged to operating e"pense.

VIII. *inancial Plan

A. 'nit &osting

'nit cost is derived from the batch cost divided by the number of units each batch

produces. 'nit cost is as followsG

8aw Materials
2 5ilogram banana peeled,
 bunch and 4 hands of
bananasJ )@2 per bunch, : per hand ) 12.22
4 botles of honey )1:.22 per bottle :2.22
.: 5ilogram brown sugar )4@.22 0K.22
liter coo5ing oil to be used
only twice to maintain
DualityJ )30.1: .33
Total 8aw Materials ) 022.33
'nits )roduced of :2 gramsJ K2
8aw Materials )er 'nit ) .:3
)ac5aging &ost )er 'nit
)lastic )2.3 per piece ) 2.3
#abel )2.2: per pice 2.23 2.4@
irect #abor )er 'nit 2.:
?actory %verhead ood ): per coo5ing, : 5ilogram of
&oalJ banana per coo5ingJ 2.K
'nit &ost ) 4.3

P 22F input in 5ilograms Q K:F outputs in 5ilogram

%ne hundred percent of banana as an input will produce only ninety-five percent of 

banana chips as an output. This may be due to the loss of moist content of banana when

fried and cooled. The 2,222 5ilograms of banana, therefore, will produce K,:22 grams

of banana chips, or K2 pac5s of :2 grams of banana chips.

 %. )roduction /olume

aily production for the first year of operation is K2 units. Annual increase is

proHected at 2 units for the four J additional school canteens to be captured each year.

#. Mar5-up

esired gross profit per unit is 1:F. )rice of the banana chips, therefore, for the first

year is )@.22 per unit.

D. Merchandise Inventory

%nly the goods produced at the last wor5ing day of the year are e"pected to

remain unsold at year end. This based on the assumption that delivery of goods produce

during the day will be delivered on the following day. Ending merchandise units will be

sold in the first wor5ing-school day of the year.

+. %n Account

%nly goods delivered to non-school canteen customers on the last $aturday of the

year are considered to be on account. ?or proHection, a daily sale multiplied by @ days

credit term for non-school canteen customers is eDual to the Accounts 8eceivable at

year end.

$ince all purchases are on cash basis, there shall be accounts payable at the end of 

the year.

*. ?i"ed Assets
 The following the fi"ed assets to be used in the conduct of the business and their 

corresponding acDuisition cost, useful life, annual depreciationG

$chedule of ?i"ed Assets

'seful #ife  Annual
 Assets &ost
in =earsJ epreciation
&oo5ware ) 4,:22.22 : ) :22.22
$teel Tungku- welded  @22.22 : 42.22
$ealer 4:2.22 : :2.22
%ther 5itchen utensils :22.22 : 22.22
?urniture ,222.22 : 422.22
Motor /ehicle ::,2@2.22 2 :,:2@.22
Total ) :K,K2.22 ) @,1@.22

The straight line method of depreciation is used in computing for annual depreciation

e"pense.

The motorcycle vehicle to be used in the delivery of product shall be purchased from

EM&%8 /eterans, 9amboanga &ity on installment basis. own payment for the

purchase is )0, :22 and eDual monthly installment is )4, :22 inclusive of interest, for 4

months. The present value of this future payments based on the :F per annum interest

offer of EM&%8 is ) :, :@2.22. This amount added to the down payment amount is

eDual to ):@, :@2.22, the cost of the motor vehicle.

,. )roHect &ost and ?inancing

Initial proHect cost is estimated at ) 4K,421.00 and shall be financed through a cash

gift from parents upon graduation of the proponent.

or5ing capital of one J month is allotted for both production cost and operation

e"pense. The cost to acDuire manufacturing eDuipment and the necessary down
payment and installment payment for the first month for the delivery eDuipment are also

factored as a capital e"pense. )re-operating e"penses include deposit on rental of the

business area and licensing cost.

 A brea5down of the initial investment is shown below.

&apital %utlay - )roduction

and elivery EDuipment
&oo5ware ) 4,:22.22
$teel Tungku- welded    @22.22
$ealer 4:2.22
%ther 5itchen utensils :22.22
?urnitures ,222.22
Motor /ehicle
own )ayment ) 0:22.22
st Month Installment 4:22.22 @,222.22 ) 2,3:2.22

)re-%perating E"penses

8ental eposits-0 months 4,22.22

)ermits and #icences ,222.22 @,22.22
or5ing &apital - )roduction &ost
 monthJ
'nits to be )roduced ,K2
'nit &ost 4.3 2,11.2
or5ing &apital - %perating E"penses
 monthJ
ages E"pense - Martin ,@K.32
ages E"pense -or5er  ,@K.32
%ffice $upplies E"pense @@.@1
as, %il, Transportation 4,@@.@1
8ent E"pense 122.22 4,004.K0

Total Initial Investment ) 4K,421.00

-. %perating E"penses
 %perating e"penses include wages e"pense, licenses and permits, oil, gasoline, and

transportation e"pense, supplies, and rent e"pense.

 All operating e"penses, e"cept wages e"pense, increase by :F annually. This is

based on the inflation rate of :F. ages e"pense increases by 2F annually.

I. I. ?inancial $tatements !send $e your ecel file"

Projected Income Statements

The following income statements summari6e the revenue, cost of goods sold and

e"penses of the business. The profitability report shows increasing annual sales and

steady operating e"penses. Annual net income increases every year, by more than )4:,

222.22.

Miles &ompany
I/#OM+ STAT+M+/T
422K-420
in )hilippine )esosJ
200 20!0 20!! 20!2 20!"

$ales 0:,:2.22 @@,23:.22 :@3,4K4.:2 @1@,@K4.:2 1K,004.:2

&ost of oods $old 43,3@.42 @,@.01 424,0.1 40,K:.03 43K,40.:
ross )rofit 44:,140.32 02,K03.@0 0@:,K3.00 04,1.4 :24,K.2:
%perating
E"penses 1,K0.4@ 30,K03.2@ K1,2KK.:1 4,:0.2K 441,02:.1@
Income before ta"
and interest :0,32.: 3,222.:1 @3,33.1@ 44,443.2 41,30.4K
Interest E"pense @,01.@K 4,02.14 2.22 2.22 2.22
Income before ta" 1,@14.3: :,@K3.3: @3,33.1@ 44,443.2 41,30.4K
Income ta" - 0:F 3,300.@K ,022.42 :K,2K1.21 11,4K.3 K@,3.@:
ET I&%ME 43,30K.@ 1,0K3.@: 2K,1:.12 0,1K3.44 13,@43.@
 Projected Cash Flo#s Statements

The business reports its cash flow statements using indirect method.

The cash flow statements summari6e the firm<s cash inflows and cash outflows or 

cash receipts and cash disbursements, respectively. &ash inflows include cash

investments and cash from customers for products sold, while cash outflow include cash

paid for manufacturing costs and operating e"penses, income ta" payment to BI8, and

cash used in acDuiring fi"ed assets.

There are no additional cash investments. )ayment of ta" for the current year 

operation shall be paid on the following year before the deadline, April : of the year.

Miles &ompany will have an increasing cash balance at year end because of 

increasing sales. The table in the ne"t page is a summary of the company<s cash

transactions.
Miles &ompany
#AS- *&OWS STAT+M+/TS
422K-420
in )hilippine )esosJ
200 20!0 20!! 20!2 20!"

&ash, Beginning of the

=ear 2.22 0,33K.10 1,4K2.2 4K,441.:1 :,@@.42
 Add7 &ash Inflows
&ash Initially
Invested in Business 4K,421.00
&ash from
customers 01,122.22 @0,K::.22 :@@,041.:2 @1,@21.:2 13K,41.:2
Total Inflows 01@,K21.00 @0,K::.22 :@@,041.:2 @1,@21.:2 13K,41.:2
#ess G &ash %utflows
&ash paid for
manufacturing cost 4K,402.2 @,4:3.@ 424,@@.@0 4,23.11 43K,0:3.:@
&ash paid for
operating e"pense @:,01.42 11,@4.22 K2,@40.: 42:,201.20 442,34K.12
&ash used to
acDuire manufacturing
eDuipment ,3:2.22
&ash used to
acDuire motor vehicle 41,0@4.0 41,@K3.43 2.22 2.22 2.22
&ash paid for
interest @,01.@K 4,02.14 2.22 2.22 2.22
&ash paid to BI8
for Income Ta" 2.22 3,300.@K ,022.42 :K,2K1.21 11,4K.3
Total %utflows 000,21.@2 0K2,::.00 0,0K2.0 :23,43.3@ :31,@3.21
&ash, End of the =ear 0,33K.10 1,4K2.2 4K,441.:1 :,@@.42 @1,4:.@0
 Projected $alanced Sheets

Miles &ompany
BA#A&E $>EET$
422K-420
in )hilippine )esosJ
200 20!0 20!! 20!2 20!"
 ASSETS
  0,33 1,4K 4K,44 :,@ @1,4:
&ash K.10 2.2 1.:1 @.42 .@0
 Accounts   @,3 3,K1 2,K0 0,24 :,44:
8eceivable 2.22 2.22 :.22 2.22 .22
Merchandise  :4 @ 13 K41
Inventory .42 @.1 3.K0 4.04 .0
  :, 4@,13 4@2,3 4K, @00,413
Total current assets 0.K0 @.31 .:2 3.:0 .2@

  :K,K :K,K :K,K :K,K :K,K2

?i"ed Assets 2.:K 2.:K 2.:K 2.:K .:K
#ess G Accumulated   @,1 4,K: K,4 4:,K2 04,032
epreciation @.2@ 4.4 3.3 .40 .4K
:0,0 @,K: 2,3 0,22 41,:02
.:0 3.1 4. @.0: .4K
  2,:1 10,1 02,4K @0,4 @@2,323
T%TA# A$$ET$ 3.@ :.0 0.K .33 .0@

LA!LTES "
#A$TAL

  41,@K
Installment )ayable 3.43 - - - -
Income Ta"   3,30 ,02 :K,2K 11,4 K@,3
)ayable 0.@K 2.42 1.21 K.3 .@:
  @,:0 ,02 :K,2K 11,4 K@,3
Total #iabilities .K1 2.42 1.21 K.3 .@:

&apital, Beginning   4K,42 :3,2 04, 44,K 03:,KK:

of the =ear  1.00 @.K :. @.3 .2@
  43,30 1,0K 2K,1: 0,1K 13,@43
 AddG et Income K.@ 3.@: .12 3.44 .@
&apital, End of the   :3,2 04, 44,K 03:,KK :@,@40
=ear  @.K :. @.3 :.2@ .12
T%TA# #IABI#ITIE$   2,:1 10,1 02,4K @0,4 @@2,323
 &A)ITA# 3.@ :.0 0.K .33 .0@
 The table in the preceding page shows a summary of the assets and the corresponding

liabilities and capital of the business. It shows an increasing asset value due primarily to

the increase of cash balance. Its only liability is the income ta" payable which increases

as net income increases. &apital or net worth also increases because of the increasing

profitability of the business.

0. ?inancial 8atio

1.

 A))I&AB#E ?IA&IA#
$TATEMET 8ATI%$
4.1 0  : @.
. &urrent 8atio 4 .21 . .:: :3
&urrent Assets :,0.K0 4@,13@.31 4@2,3.:2 4K,3.:0 @00,413.2@
&urrent
#iabilities 3,300.@K ,022.42 :K,2K1.21 11,4K.3 K@,3.@:

2. 2 2 2 2.
4. ebt 8atio 3 .4 .42 .1 :
Total #iabilities 3,300.@K ,022.42 :K,2K1.21 11,4K.3 K@,3.@:
Total Assets 2,:13.@ 10,1:.0 02,4K0.K @0,4.33 @@2,323.0@

2.: 2 2 2 2.
0. EDuity 8atio @ .1@ .32 .30 3:
Total EDuity :3,2@.K 04,:. 44,K@.3 03:,KK:.2@ :@,@40.12
Total Assets 2,:13.@ 10,1:.0 02,4K0.K @0,4.33 @@2,323.0@

2.0 2 2 2 2.
. ebt to EDuity 8atio 4 .0 .4 .42 1
Total #iabilities 3,300.@K ,022.42 :K,2K1.21 11,4K.3 K@,3.@:
Total EDuity :3,2@.K 04,:. 44,K@.3 03:,KK:.2@ :@,@40.12
:. ross )rofit Margin 2.@ 2.@: 2.@ 2.@ 2.@0
ross )rofit 44:,140.32 02,K03.@0 0@:,K3.00 04,1.4 :24,K.2:
$ales 0:,:2.22 @@,23:.22 :@3,4K4.:2 @1@,@K4.:2 1K,004.:2
@. %perating )rofit Margin 2.: 2.4: 2.02 2.00 2.0:
Income before Interest
Ta" :0,32.: 3,222.:1 @3,33.1@ 44,443.2 41,30.4K
$ales 0:,:2.22 @@,23:.22 :@3,4K4.:2 @1@,@K4.:2 1K,004.:2

1. &ash ?low Margin 2.2 2.1 2.42 2.44 2.40

&ash flow from operations 0:,0:.44 32,31.1 @,441.1@ :2,41.43 3:,2.12
$ales 0:,:2.22 @@,23:.22 :@3,4K4.:2 @1@,@K4.:2 1K,004.:2

3. et )rofit Margin 2.23 2.@ 2.K 2.4 2.40

et Income 43,30K.@ 1,0K3.@: 2K,1:.12 0,1K3.44 13,@43.@
et $ales 0:,:2.22 @@,23:.22 :@3,4K4.:2 @1@,@K4.:2 1K,004.:2

K. Asset Turnover 0.0K 4.@3 .3K .@ .42

et $ales 0:,:2.22 @@,23:.22 :@3,4K4.:2 @1@,@K4.:2 1K,004.:2
 Ave. Total Assets 2,:13.@ 10,1:.0 02,4K0.K @0,4.33 @@2,323.0@

2. 8ate of 8eturn %n

 Assets 2.43 2.0 2.0@ 2.0 2.41
et Income 43,30K.@ 1,0K3.@: 2K,1:.12 0,1K3.44 13,@43.@
 Ave. Total Assets 2,:13.@ 10,1:.0 02,4K0.K @0,4.33 @@2,323.0@

&urrent ratio measures the ability of the business to meet current obligations as

they become due. The increasing balance of cash and non-incurring of liability to trade

creditors and lenders contribute to the increasing solvency or current ratio of the

business. The increasing current ratio of Miles &ompany indicates that the company will

be more and more liDuid in the coming years.

ebt ratio, eDuity ratio, and debt to eDuity ratio measure the proportion of liability

to assets, capital to assets, and liability to capital, respectively. These ratios measure the

financial strength of the business and cautions to creditors. The debt ratio of Martin

&ompany increases because of the increasing income ta" payable and shall result to
increase in the debt to eDuity ratio. Inversely, the increasing debt ratio of the business

results to decreasing eDuity ratio. The financial ratios table in the preceding page shows

that the company will be financially strong in the coming operating years because of the

larger proportion of capital than liabilities in the financial structure of the business.

ross profit margin, operating profit margin, cash flow margin and net profit margin

ratios used to measure the profitability of the business. ross profit margin measures

the ability of a firm to control manufacturing costs and to pass along price increases

through sales to customers. But since pricing of the Martin >oneydipped Banana &hips

is based on a desired gross profit rate, the gross profit margin of the business is

relatively consistent throughout the years.

The operating profit margin of the Miles &ompany is on an increasing trend. This

indicates the ability of the company to control operating e"penses while sharply

increasing sales. Also, the increasing cash flow margin shows that the business shall

have no problem in converting sales to cash to enable it to e"pand and obtain mar5et

share. There is also an increasing trend of the net profit margin of the business due to

increased sales and control in all costs and e"penses.

The rate of return of investment shall assure prospective investors or partners that

there is money in the business. Miles &ompany has an increasing rate of return of 

investment because of its overall efficiency in managing assets and generating profits.

&. &apital Budgeting Analysis

?or the purpose of capital budgeting analysis, net future cash inflows of the business

shall be matched with the initial proHect cost of ) 4K,421.00. The following cash flow
table shows the short paybac5 period, positive net present vale and a high internal rate

of return of the proposed businessG

&A)ITA# B'ETI &A$> ?#% $&>E'#E

?or the =ears 4223-420
%n $hilippine $eso&

)re-
%perating 422K 422 42 424 420
Initial
Investment 4K,421.00J
 Amorti6ation -
/ehicle 4,0@4.0J 41,@K3.43J

et Income
after ta"es 43,30K.@ 1,0K3.@: 2K,1:.12 0,1K3.44 13,@43.@
addG
depreciation @,1@.2@ @,1@.2@ @,1@.2@ @,1@.2@ @,1@.2@
 AddG salvage
value of motor 04,032.4K
et
&ashflow 4K,421.00J 0,K:4.K :0,1@.0 @,441.1@ :2,41.43 41,3.KK
&ash
Balance :,4:.4J 01,K44.2

PAY BACK
PERIOD   .4K

NET PRESENT ) 041,432.24

VALUE
INTERNAL RATE OF
RETURN* 1!"
P4:F is the most li5ely rate of return is the the computed rate of return on investment

The above table shows that the high cash inflows provided by the business

operation shall result to a paybac5 period of .4K years. This means that initial

investment shall be recovered by Miles &ompany within .4K years.

 The net present value of a proHect is the present value of the e"pected cash flows

that the business will receive as result of investing into the proHect. The et )resent

/alue of the proHect is ) 041,432.24, and this is the value that will be added to the initial

investment. $ince, the )/ is positive, the proHect could be considered financially viable.

Internal rate of return is defined as the discount rate that eDuates the present value

of the proHects future net cash flows with the proHects initial cash outlay. If the I88 is

compared with the interest offered by ban5s or other ris5-free investment instruments,

the I88 of :F is much higher than the rate offered by investing to government bonds

such as T-bills. This means that this proHect is a more attractive investment.