richie`s kids wear financial plan for 2012-13

8/2/2019 Richie`s Kids Wear Financial Plan for 2012-13

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Richie`s Kids Wear PTE LTD Financial Plan for 2012-13

LB 5212 FINANCIAL FOUNDATION FOR MANAGERS Page 1

Financial Plan For Richie`s Kids Wear PTE LTD for 2012-13


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Contents

Executive Summary3-4 Income Statement & Balance Sheet20125-6 Income Statement & Balance Sheet20137-8 Ratios Analysis .9-10 Sales Budget for the year 2012 & 2013....11 Sales Revenue Budget for the year 2012 & 2013.12 Debtors Budget for 2012 & 2013..13 Cash Budget for the year 2012..14 Interpretation of Ratio Analysis.15-16 Assumptions17 Conclusion...18 Recommendations...18

References19


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Executive Summary

Ritchie`s is a retail brand for kids wear with good quality and latest trends owned by Mr. Guy

Ritchie. This business will cater to the needs of kids in the age group of 5 to 11. Location of the

factory is at Woodlands Industrial area.

The Target audiences of the business are:

Age Population

5 to 8 years - 218,522 9to 11 years - 224,012 Total (5 to 11 Years) 442,534

Slogan of the business is Kids wear, with care.

Business Overview

Ritchie s Kids Wear (RKW) is a retail store for kids wear with good quality and latest trends. We

present an extensive range of kids wear that are manufactured using different fabrics such as

Cotton, Silk, Wool and others. Available in a wide range of colors, designs and prints, these

apparels are designed keeping in mind the most up-to-date fashion trends.

VisionTo be a distinguished kid-wear manufacturer known worldwide for the quality of products,

setting new trends and lifestyles.

MissionTo offer continuous value added products to our customers. To accomplish this, we focus on

exceptional design, innovation, quality, convenience and interactive communication.

Strengths and Core CompetenciesThe foundation parameters on which we ensure the excellence of our garments are:


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Material Cut Design Conformation Embroidery Stitching Stability Finish Color fastness Challenges Increasing competition, especially from big chains like Lilliput, Baby Forest and

Limited.

Incorporations. High cost materials. Changing demands and catering to this demand. Changing fashions and changing behavior of demographics. Services

Our variety of children wear is offered in different sizes and is tremendously comfortable to

wear. Our offered clothing collections for kids are:

Hooded T-Shirts: We offer an exceptional range of t-shirts with hoods that are offered ina multitude of colors and patterns.

Printed T-Shirts: We make an extensive range of in print t-shirts that are offered indiverse colors and prints.

Children's T-Shirts: An exclusive range of full sleeve children's t-shirts Half Sleeve T-Shirts. We offer a broad range of half-sleeve t-shirts

Cotton Knickers: Knickers are one of the trendiest as well as the most comfortablegarment for kids, available in eye catching prints and colors.

Why people need this service?A number of the factors that will make us the ideal choice of our customers are:

Various variety under a single roof Quality guaranteed goods


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Capacity to accept mass orders Well-timed delivery Easy payment mode of Cash and Credit.

INCOME STATEMENT FOR THE YEAR 2012

PARTICULARS Amount Amount

Sales 500000

Cost of Goods Sold

Raw materials 200000

Power 85600

Less: Closing stock 14400 300000

Gross profit 200000

Selling & Distribution Expenses

Vehicle hire charges 8365

Chemicals 2135

10500

Administration Expenses

Salary 50000

50000

General expenses

Rent 15000

Repair 10000

Telephone 3000

43000

Manufacturing Expenses

Labour 9900

Materials 9500

19400

Depreciation

Land buildings 3000

Computer 600Furniture and Fittings 1800

Plant and Machinery 2700 8100

Total Expenses 131000

Net Profit 69000


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BALANCE SHEET AS ON YEAR ENDED 2012

PARTICULARS AMOUNT AMOUNTCurrent Assets

Cash in hand 18000

Bank 8000

Debtors 64600

Stock 14400

Total current assets (A) 105000

Fixed Assets

Computer 20000

Less: Depreciation 60021400

Furniture & Fittings 60000


58200

Plant & Machinery 90000


87300

Land and buildings 100000


97000

Total Fixed Assets (B) 263900

Total Assets (A+B) 368900

Current Liability

Creditors 20000

Bank Overdraft 20000

Total Current Liabilities 40000

Non-Current Liabilities

Bank Loan 100000

100000Share Capital 150000

Profit made during the year 69000

Reserves and Surplus 9000

228000


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Total Non-Current Liabilities 328000

Total Liabilities 368900

INCOME STATEMENT FOR THE YEAR 2013

PARTICULARS Amount Amount

Sales 800000

Cost of Goods Sold

Raw materials 200000

Power 200000

Less: Closing stock 42400 357600

Gross profit 442400

Selling & Distribution Expenses

Vehicle hire charges 7875

Chemicals 2625

10500

Administration Expenses

Salary 60000

65250

General expenses

Rent 20000

Repair 22000

Telephone 10000

52000

Manufacturing Expenses

Labour 11,000

Materials 11,600

22,600

Depreciation

Land buildings 2619Computer 1746

Furniture and Fittings 642

Plant and Machinery 2910

8208

Total Expenses 158558

Net Profit 289092


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BALANCE SHEET AS ON YEAR ENDED 2013

PARTICULARS AMOUNT AMOUNTCurrent Assets

Cash in hand 127917

Bank 51217

Debtors 102000

Stock 42200

Total current assets (A) 323334

Fixed Assets

Computer 20758


Furniture & Fittings 56454


54708

Plant & Machinery 84681


82062

Land and buildings 94090


91180

Total Fixed Assets (B) 248066

Total Assets (A+B) 571400

Current Liability

Creditors 20000

Bank Overdraft 22000

Total Current Liabilities 42000

Non-Current Liabilities

Bank Loan 82000 82000

Share Capital 150000

Profit made during the year 289092

Reserves and Surplus 8400


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Total Non-Current Liabilities 529492

Total Liabilities 571492

Ratio Analysis

Ratio Name 2012 2013

PROFITABILITY RATIOS

Gross Profit

Gross Profit Ratio = --------------------x 100

Sales

200000

--------------- x100 = 40%

5000000

442400

--------------- x100 = 55.3%

800000

Net Profit

Net Profit Ratio = --------------------x 100

Sales

69000

------------- x100 = 13.8%

5000000

289092

------------- x100 = 36.13%

800000

LIQUIDITY RATIOS

Total Current Assets

Current Ratio = -------------------------------

Total Current Liabilities

105000

--------------- = 2.625:1

40000

315417

--------------- = 7.5:1

42000

Total quick Assets

Quick Ratio = -------------------------------

Total Current Liabilities

76200

------------- = 1.905:1

40000

273217

------------- = 6.50:1

42000

EFFICIENCY RATIOS

Cost of goods soldStock Turnover Ratio= ------------------------------

Average Stock

300000--------------- = 20.83 times

144000

400000--------------- = 9.47 times

42200

Debtors

Debtors Collection Period= ----------------x 365

Credit Sales

64600

---------------x365 =47 days

500000

102000

---------------x365 = 47 days

800000

Creditors

Creditors Payment Period= -----------------x 365

Credit Purchases

20000

--------------x365 = 36 days200000

20000

--------------x365 = 37 days200000

Sales

Total Asset Turnover Ratio= ------------------

Total Net Asset

500000

-------------- = 1.35 times

368900

800000

-------------- = 1.4 times

571400

Credit Sales

Debtors Turnover Ratio= -----------------------

500000--------------- = 7.74times

800000--------------- = 7.8 times


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Debtors 64600 102000

SOLVENCY/ INVESTMENT RATIOS

Long term liabilitiesCapital Gearing Ratio= -------------------------x100

Share Capital +Reserves+ Long Term Liabilities

100000------------x 100 = 38.61%100000+9000+150000

82000------------x 100 = 34.1%82000+8400+150000

Long term liabilities

Debt-Equity Ratio = -----------------------------x100

Share holders Equity

100000

--------------x 100= 66.66%

150000

82000

--------------x 100 = 54.6%

150000


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Sales Budget for the year 2012 and 2013

Sales Budget for the year 2012 Sales Budget for the year 2013

Quantity Price Amount Quantity Price Amount

Q1 Jan 3000 10 30000 Q1 Jan

Credit Credit 4000 10 40000

Feb 4000 10 40000 Feb


March 2500 10 25000 March


Q2 April 4500 10 45000 Q2 April


May 3000 10 30000 May


June 4000 10 40000 June


Q3 July 2000 10 20000 Q3 July


August 3000 10 30000 August


Sept 3500 10 35000 SeptCredit Credit 5000 10 50000

Q4 Oct 5000 10 50000 Q4 Oct


Nov 7500 10 75000 Nov


Dec 8000 10 80000 Dec


50000 500000 80000 800000


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SALES REVENUE BUDGET FOR THE YEAR2012

Year 1

Q1 Q2 Q3 Q4 Total

Category 1 Units Sold 85000 115000 85000 205000 490000

Sales Price per unit $10.00 $10.00 $10.00 $10.00

Category 1 Total $85,010.00 $115,010.00 $85,010.00 $205,010.00 $490,040.00

SALES REVENUE BUDGET FOR THE YEAR2013

Year 2

Q1 Q2 Q3 Q4 Total

Category 1 Units Sold 175000 185000 205000 235000 800000

Sales Price per unit $10.00 $10.00 $10.00 $10.00Category 1 Total $175,010.00 $185,010.00 $205,010.00 $235,010.00 $800,040.00


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Debtors Budget for 2012

ParticularsJan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12 Jul-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec12

Opening Balance 0 30000 40000 25000 45000 30000 40000 20000 30000 35000 50000 7500

Credit Sales 30000 40000 25000 45000 30000 40000 20000 30000 35000 50000 75000 8000Less Cashreceipts 0 30000 40000 25000 45000 30000 40000 20000 30000 35000 50000 7500

Less Bad debts 0 0 0 0 0 0 0 0 0 0 0 0

Closing balance 30000 40000 25000 45000 30000 40000 20000 30000 35000 50000 75000 8000

Debtors Budget for 2013

Particulars Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec13

Opening Balance 80000 40000 65000 70000 50000 55000 80000 90000 65000 50000 70000 8000

Credit Sales 40000 65000 70000 50000 55000 80000 90000 65000 50000 70000 80000 8500

Less Cashreceipts 80000 40000 65000 70000 50000 55000 80000 90000 65000 50000 70000 8000

Less Bad debts 0 0 0 0 0 0 0 0 0 0 0 0

Closing balance 40000 65000 70000 50000 55000 80000 90000 65000 50000 70000 80000 8500

NOTE: Debtors are given 1 month time to settle their amount


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Cash Budget of the year 2012

Jan-12

Feb-

12

Mar-

12

Apr-

12

May-

12 Jun-12 Jul-12

Aug-

12 Sep-12 Oct-12

Nov-

12 D

ceipts

eninglance 100000 67209 72561 87913 88088 100474 105826 121178 109220 113739 124091 14

sh Sales 0 0 0 0 0 0 0 0 0 0 0 0

shceived

m Debtors 30000 40000 25000 45000 30000 40000 20000 30000 35000 50000 75

tal

ceipts 100000 97209 112561 112913 133088 130474 145826 141178 139220 148739 174091 22

yments

rchases 16667 16667 16667 16667 16667 16667 16667 16667 16667 16667 16667 16

aff Salaries 4167 4167 4167 4167 4167 4167 4167 4167 4167 4167 4167 41

fice Rent 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250 1250 12

pair 833 0 0 833 0 0 0 833 0 0 83

lephone

penses 250 250 250 250 250 250 250 250 250 250 250 25wer andel 7133 0 0 0 7133 0 0 7133 0 0 0 71

bour 825 825 825 825 825 825 825 825 825 825 825 82

aterials 791 791 791 791 791 791 791 791 791 791 791 79

emicals 177 0 0 177 0 0 0 177 0 0 177 0

ansport 698 698 698 698 698 698 698 698 6986

698 69

talyment 32791 24648 24648 24825 32614 24648 24648 31958 25481 24648 24825 32

sh at

nk/osinglance 67209 72561 87913 88088 100474 105826 121178 109220 113739 124091 149266 19


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Interpretation of Ratio Analysis

Gross Profit Ratio

The Gross Profit Margin of the company is 40% and 55.3% for the 2years respectively. Higher

the gross profit shows that the company has started earning profit in a long run and becoming

stable.

Net Profit Ratio

The net profit margin for the 1st year is 13.8% and the 2nd year is 36.31%, which means the net

profit margin has increased and shows the stable operational performance of the company.

Higher the net profit margin is better for the companys operation.

Current Ratio

The current ratio for the year 2012 is 2.62:1 and for the year 2013 it is 7.5:1 and the benchmark

for current ratio is 2:1 and the calculated ratio shows that the company has enough current assetsto meet the current liabilities and in 2013 it has double the amount that is required and proves

that the company is in very good position to meet the needs.

Quick Ratio

The Quick ratio of the company in 2012 is 1.9:1 and 2013 is 6.5:1 and the ideal quick ratio is 1:1

and the calculated ratio shows that the company has significant amount of quick assets to meet

the current liabilities.

Stock Turnover Ratio

The stock turnover ratio for the year 2012 is 20.83times and for 2013 is 9.47 times; the

difference is more because the cost of goods sold is high.


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Debtors Collection Period

The debtors collection period for the year 2012 is 47 days and 2013 is 47 days, it is same for

both the year. The company is stable.

Creditors Payment Period

The Creditors Payment period for the year 2012 is 36 days and in 2013 is 37 days, the difference

is insignificant, but lower the creditors payment period means lower the risk of liability.

Total Asset Turnover ratio

The total asset turnover ratio for the year 2012 is less than 2013, this is showing that the sales in

the year 2013 have overpowered the total assets and that shows the grown efficiency of the

company.

Debtors Turnover Ratio

The Debtors turnover ratio for the year 2012 is higher than 2013 but the difference is not very

high, and higher the debtors turnover ratio leads to better working capital and in 2013 the ratio is

7.8 times and in 2012 it is 7.74 times, so in 2013 the working capital is very efficient.

Capital Gearing Ratio

The higher a company's degree of leverage, the more the company is considered risky. The

capital gearing ratio for the year 2012 is 38.61% whereas the ratio for the year 2013 is 34.1%.

Hence, the ratio of 2013 is lesser than 2012 there by leading the company away from risks.

Debt-equity ratio

The debt-equity ratio of a company should be higher than the previous year. The debt-equity

ratio also depends on the industry in which the company operates. The ratio in 2013 is lesser

than the ratio in 2012, however the difference is insignificant.


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Assumptions

All the values are assumed in dollars ($). The companys capital is assumed to be entirely in cash apart from which it has an asset

worth of $270000.

From the commencement of the business until the second year, it has been assumed that thecompany would gain a profit of 15% in the second year.

The sales have been significantly increased from 2012 to 2013 thus showing the growth ofthe company.

The company assumes that the sales are made on credit base and that the debtors have a lagperiod of one month.

It is assumed that the company is away from risk as the ratio of 2013 is lesser than 2012. The company purchases its good on credit basis. Raw materials such as linen, cotton and lycra has been purchased for the goods. Although machines have been used in the company, labours are also involved for

operational purposes.

It has been assumed that the salary has an increased from the previous year to the currentyear with the effect of new labours which has been employed in the company for increasingthe efficiency of the work and to meet the production.

Depreciation has been calculated based on the Companies Act. It is assumed that the debtors turnover ratio is higher in the current year than the previous

year this making the working capital efficient.


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It is assumed that the company has a target audience with a specific age group.

Conclusion

The company has been showing a significant increase in the profit from the commencement of the

business. With reference to the sales budget, the demand for the product can be viewed which

ensures the success of the company. The current assets over the current liabilities will help the

company to finance by itself in the long run. From this project, we have learned the various formsof budgets, the importance of financial ratios without which it is difficult to forecast the companys

financial status. Also in the process, we have learnt to prepare effective report of the companys

accounts to request for loans from the banks in the future.

Recommendations

Even though the company has fetched a significant profit to from the commencement ofbusiness, however Branding has not been focused. Branding is an important factor to sustainthe business in the long run. So focusing on branding in the future will add on to the

efficiency of the business.

Getting a license for the Brand and registering it should also be done in the long run.

The company is recommended to reduce the current liability and increase its current asset tofinance itself for the working capital

The company is recommended to reduce the cost of goods sold so as to increase the salesrevenue which will automatically increase the gross profit.

To reduce the risk of liability, the company should reduce the credit purchasing.


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LB 5212 FINANCIAL FOUNDATION FOR MANAGERS P 19

References

Financial Accounting: An Introduction to Concepts, Methods and Uses by Stickney,Weil, Francis and Schipper. Publisher: South-Western Publishing Co, Year Published: 2010

Corporate Accounting, Author: Maheshwari Sn, Duraipandian K,Edition : 2001.

Financial Accounting-Eighth Edition-Kalyani Publication S.pJain, K.L Narang(2007)

Accounting an Introduction-Fourth edition-Pearson Education Australia, Atrill Mc LaneyHarvey Jennu (2009)
http://www.textbooks.com/Author/Stickney.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Stickney.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Weil.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Francis.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Schipper.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Schipper.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Francis.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Weil.php?CSID=DZQCZJUOTDCO2U22DUQDAQKShttp://www.textbooks.com/Author/Stickney.php?CSID=DZQCZJUOTDCO2U22DUQDAQKS

richie`s kids wear financial plan for 2012-13

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