Course and Section: FIN 440.7Semester: Fall 2013 Date of Submission: 31st October, 2013 ID# 1120212030 1120240030 1120083030 1130047030

Executive Summary:Small businesses are privately owned business, sole proprietorship etc. They may or may not have employees but if they have the number of employees are less, normally less than fifteen members. For our financial analysis of small business we have analyzed the small business of four street shops which sell tea, cigarette, biscuits, banana, cake etc. We have chosen them from Uttara, Mirpur, Badda and Moghbazar. Though they are on the same industry but they are different in case of the starting time of business. Some of them doing business for almost 10 years and some are four and half years. Some face the bad effects of strikes on the other hand some are not. Some took loan when they start their business; Md.Mojebur Rahman from Moghbazar area took 3,000/- loan from his elder brother to establish the business. None of them paid any interest on that loan as it is restricted within the family members. They are happy with their business but want to increase their business if possible but that needs investors, according to some of them.This report aims to provide insights into the financial management of these four street tea-stalls. The following is what our findings reveal.

Methodology and findingsFor our primary research, we interviewed 4 tea stalls from 4 areas of Dhaka city: Uttara, Mirpur, Badda and Moghbazar. The survey consisted of 10 questions which elicited mostly quantitative responses. We asked the questions to each tea stall and recorded their responses. The raw data collected are tabulated below:SLQuestionsMd. Mojebur RahmanMd Goffur MiaZakir HossainMojibul Islam

1How long is he/she in business?10 year 5 months4 Years 6 Months5 years 7 months10 Year

2a. How much funds did he start with? 5,000/-

15,000/-

15,000/-

10,000/-

b. Their investment today? (inventory)4,500/-

40,000/-

20,000/-

30,000/-

3Equity or Debt funds?60% debt from brother and 40% personal finance50 % debt from relatives and 50% by personal finance 100% equity 50% bakery owner 50% personal

4Repayments and Terms, Interest rates?Repaid as soon as the money came in hand from salesRepayment will be made as soon as he gets money from sales N/ARepaid within 1 year

Interest RatesN/AN/AN/AN/A

5How do they carry out their business/trade?a. What time do they start?8 AM - 12 PM8 AM 10 PM10 AM-1 AM7 AM-12 PM

b. How much cash do they carry with them? Why?500/- for change purpose800/- for change and daily transaction purposes 2,000/- For Change, transaction and emergency500/- for change purpose

c. How much cash they invest in the morning?About 3,000 3500/- per day

d. Where do they sell? Why?Modhubag, Moghbazar as it is near to home.Sector 11, Sonargaon Janapath Road, Uttara Model TownKa 44/2, Kalachandpur School Road, Gulshan, Dhaka-1212Mirpur 11, Near to home, Putting stall in other places needs more money than this place, known in the area

e. How do they price their goods?Market priceMarket PriceMarket PriceMarket Price

f. How long does it take them to recover cash?2 days1 2 Days 1-2 Days 1-2 days

6What are the risks they face?a. Business risks?Limited profit and new competitorsNot getting back the money in actual amount and in time in case of credit salesLimited profits & Increase Competitors New competitors arrival, some food get spoiled

b. Mastaans /Criminal risks?N/AN/AN/AN/A

a. Political riskN/AN/AIn hartal days, he cannot generate his desired level of sales.1,000/- less sale due to strike

b. OthersAccount receivable becomes large as the known person and students buy on creditN/AN/AN/A

7Expenses in carrying out their business?a. Business Expenses?400/-+ 3500/-( Monthly rent)+ 400/- utility per month1,500/- per month for rent & utility 3,000/- per month for rent & Utility600/-+500/- utility per month

b. Personal Expenses?500/-200 /- for conveyance and food150/- for food+ 400/-400/- per day

8Earnings Net Income?1500-1700/-Around 1,000/- Per dayAbout 1,600 - 1800 /- per day1,500/- per day

9Can they increase their business? How? What would they need?Yes, by introducing new product e.g. Soft drinks, Packet biscuit but a lot of money is needed for that.Yes, he can expand his business by increasing product lines with bigger shop space. But it will require additional investment; therefore some risks are associated with it. Yes, by buying the adjacent spaces. A lot of money is required and the expenses would go up, so its risky.Yes, but it needs investors.

10Is it their only business? Is it enough to support them?YesYes. But profit earned from it is not enough to support his family.Yes it is his only business & it is enough to support his family.Yes,

Financial Analysis:According to our collected primary data, tabulated above, it can be observed that, there are some differences as well as some similarities in the answers of the questions. However to get a uniform standardized picture of business, we have collected data from tea stall owners. Based on them, we have prepared financial statements which are presented below. Since products of different prices are usually sold in a tea stall, we have considered the amount of sales based on a basket of products that are typically bought from a tea stall. The COGS figure shown in the Income Statement has been computed in a similar manner. Zakir HossainIncome Statement (Monthly)For the Month ended October 31, 2013DetailsAmount (Tk.)

Sales ( Average per day 5,000/- )1,50,000

(less) Cost of Goods Sold (Average per day 3,300/- )(99,000)

Gross Profit51,000

Operating Expenses:

Rent Expenses(1,500)

Electricity Expenses(1,500)

Net Income48,000

Zakir HossainStatement of Owners Equity (Monthly)October 31, 2013DetailsAmount (Tk.)

Owners Equity, Beginning (October 1, 2013)1,02,000

Add: Net Income48,000

Less: Dividend ( 550*30)16,500

Owners Equity, Ending1,33,500

As here shareholder is only Zakir Miah so the amount of money he uses on daily basis has been converted to dividend monthly basis.Return on Equity (ROE) = Net Income / Total Equity = 48000 / 102,000 x 100 = 47.05%Here ROE is 47.05% so the reinvest door becomes wide open for Mr. Zakir Miah. Taking this ratio into account our next ratio shows how much he can reinvest by PBR ratio.Plough-back Ratio (PBR) = Retained Earnings / Net Income = 31,500/48,000 * 100 =65.6%.So, he reinvests 65.60% of his net income monthly into the business.Internal growth rate = ROE x PBR = 30.08%

ConclusionWe can conclude that Zakir Miahs business is growing by 30.08% due to the plough-back monthly basis. Thats why he is satisfied with his business.

Page | 7