Introduction

This is a simple guide I have prepared for aspiring entrepreneurs and entrepreneurship students. After
reading this write-up, you should be able to recognize why and when to develop a feasibility study, now
how to identify a business feasibility study and explain the major sections of a classic feasibility study.
This article will also enable the reader to focus feasibility study sections to meet specific needs, know the
major pitfalls when writing feasibility studies and learn how to present a feasibility study to others.
As an entrepreneur, after identifying a business idea/opportunity, introducing/development of a new
product, the next phase in the development of an idea/product is to conduct a feasibility study to ascertain
the viability of the business (venture) and obtaining useful information to plan and make decision on
whether to go-on or not. The feasibility study is conducted during the deliberation phase of the business
idea prior to commencement of a formal Business Plan. That is, a feasibility study of a business is done
on an ex ante (before the business or venture comes into existence) basis. At the end of the feasibility
study a feasibility report is written which provide a basis for taking investment decisions and could also
be used in securing finance for the business, product/services.

Feasibility Study
Feasibility Study is a formal project documents that shows result of the analysis, research and
evaluation of a proposed project & determines if this project is technically feasible, cost-effective
and profitable. The primary goal of feasibility study is to assess and prove the economic and
technical viability of the business idea. The outcome of the study will determine if there is
economic sense to take the project initiative and proceed with the development of the
implementation plan.
A project feasibility study helps investors identify and analyze all the opportunities they can gain
upon successful completion of the project. If the document did not prove the economic viability,
then the proposed venture should not be pursed. A feasibility study allows avoiding unfounded
spending of effort, time and money, so it a highly effective tool of project investment evaluation
and planning. It forces investors to put their ideas on paper to conduct analysis and assessment
and then find out whether the ideas are worth investing or not.

Importance
Before initiating a project it is an important step to perform a feasibility analysis that helps in
developing and maintaining the project efficiently within budgeted costs and under desired
benefits. The importance of writing a feasibility study consists in the next major benefits that
the business organization will gain:

Analysis. An example of feasibility study contains all the analytical information being
used for investigating project requirements and business need completely.

Risks Mitigation. A project feasibility study helps in identifying risk factors that affect
the development and implementation of the project.
1

Training. It helps in identifying staff training needs and developing training programs.

Reporting. The study is a kind of initial project reports that give the senior management
information required for making well-grounded decisions on cost estimation and project
funding.

Key Components
1. Market opportunities
The primary component to be included in feasibility study of a project concerns
determining potential market opportunities for the sponsor. Determination of market
opportunities is about examining current level of demand for a product to be produced
upon project completion and exploring ways for differentiating the product in the market.
This means that a need for the project will be established if an adequate level of demand
exists for the product. Market opportunities determination is also about analyzing the
competitive environment and defining key players on the market who will be major
competitors to the proposed venture.

2. Requirements:

This component represents two groups of requirements, including technical requirements

and organizational requirements. The first group covers requirements for equipment &
technology to produce the product; costs involved in purchasing and installation;
operational costs of running the equipment, and others.
The second groups identify the following:

Qualifications are required for managing operations

Sources of supply
Key staff positions to be filled
Type of experience the management should have
Others

3. Financial overview:

Feasibility study of a project allows focusing on the investigation of the overall financial
situation around the project. Protecting your financial situations are important, US Money
Reserve is just one program that can help with your assets. Based on cost estimates, this
document includes financial information essential for initiating the project. The study may
include the following information:

Total start-up costs required for beginning the project

Operating costs, including wages, rent, and interest payments on outstanding debts

Financial credit standing of the company to determine possible sources of funding

Revenue expectations

Possible sources of project financing

Expected project profit

If the cost estimates presented in the feasibility study prove that the project choice is
economically viable, then the sponsor can proceed with developing the business plan.

Five Areas of Project Feasibility

1. Technical Feasibility - assessment is centered on the technical resources
available to the organization. It helps organizations assess if the technical
resources meet capacity and whether the technical team is capable of converting
the ideas into working systems. Technical feasibility also involves evaluation of
the hardware and the software requirements of the proposed system.

2. Economic Feasibility - helps organizations assess the viability, cost, and

benefits associated with projects before financial resources are allocated. It also
serves as an independent project assessment, and enhances project credibility, as a
3

result. It helps decision-makers determine the positive economic benefits to the

organization that the proposed system will provide, and helps quantify them. This
assessment typically involves a cost/ benefits analysis of the project .

3. Legal Feasibility - investigates if the proposed system conflicts with legal

requirements like data protection acts or social media laws.

4. Operational Feasibility - this involves undertaking a study to analyze and

determine whether your business needs can be fulfilled by using the proposed
solution. It also measures how well the proposed system solves problems and takes
advantage of the opportunities identified during scope definition. Operational
feasibility studies also analyze how the project plan satisfies the requirements
identified in the requirements analysis phase of system development. To ensure
success, desired operational outcomes must inform and guide design and
development. These include such design-dependent parameters such as reliability,
maintainability, supportability, usability, disposability, sustainability, affordability,
and others.
5. Scheduling Feasibility - is the most important for project success. A project will
fail if not completed on time. In scheduling feasibility, we estimate how much time
the system will take to complete, and with our technical skills we need to estimate
the period to complete the project using various methods of estimation.

Benefits of Conducting a Feasibility Study

Conducting a feasibility study is always beneficial to the project as it gives you and other
stakeholders a clear picture of your idea. Below are the key benefits of conducting a
feasibility study:

Gives project teams more focus and provides an alternative outline.

Narrows the business alternatives.

Identifies a valid reason to undertake the project.

4

Enhances the success rate by evaluating multiple parameters.

Aids decision-making on the project.

Apart from the approaches to feasibility study listed above, some projects also require
for other constraints to be analyzed

Internal Project Constraints: Technical, Technology, Budget, Resource, etc.

Internal Corporate Constraints: Financial, Marketing, Export, etc.

External Constraints: Logistics, Environment, Laws and Regulations, etc.

Feasibility Study: an important Ingredient for Capital Investment

To discuss this section we need to know what capital investment is and what
the relation with feasibility study is. Capital investment is essential topic in
today business world. Because without knowing capital investment we cant
say this topic. Now I am discussing Capital Investment.

Capital Investment
Capital investment refers to funds invested in a firm or enterprise for the
purpose of furthering its business objectives. Capital investment may also
refer to a firm's acquisition of capital assets or fixed assets such as
5

manufacturing plants and machinery that is expected to be productive over

many years.
There has ten Capital Investment Appraisal Techniques. They are:
Net present value.
Accounting rate of return.
Internal rate of return.
Modified internal rate of return.
Adjusted present value.
Profitability index.
Equivalent annuity.
Payback period.
Discounted payback period.
Real option analysis.

Net present value (NPV): this capital investment appraisal technique measures the
cash in-flow, whether excess or shortfall, after the routine finance commitments are
met with. All capital investment appraisals have a single objective drive towards
a positive NPV. The NPV is a mathematical calculation involving net cash flow at
a particular present time 't' at discount rate at the same time, i.e. (t initial capital
outlay). Thus there is an inverse proportional relation between discount rate and
NPV. A high discount rate would reduce the net present value of capital. A high
interest rate increases discount rates over a period of time and most capital
investment appraisals are wary of such an increase.

Accounting rate of return (IRR): This capital investment appraisal technique

compares the profit that can be earned by the concerned project to the amount of
initial investment capital that would be required for the project. Projects that can
earn a higher rate of return is naturally preferred over ones with low rate of return.
ARR is a non discounted capital investment appraisal technique in that it does not
take into consideration the time value of money involved.

Internal rate of return (IRR): capital investment appraisal techniques define IRR as
discount rate that gives a value of zero to NPV or net present value. Among all
capital investment appraisal techniques, IRR is generally considered to measure the
efficiency of the capital investment. Thus, if cost of capital investment in company
works out to be greater than the IRR value, the project is highly likely to be
rejected. On the other hand, a low cost of capital has more chances of being
accepted. IRR is calculated by equating NPV to zero and then deriving the discount
rate. Even though IRR and NPV are related capital investment appraisal techniques
they are different from each other. IRR considers the time value of money over the
project life time and derives the world discount rate.

Modified Internal Rate of Return (MIRR): The IRR does not give the actual
annual profitability of a capital investment since it does not take into consideration
the intermediate cash flows which are never reinvested equaling project IRR.
Hence the IRR capital investment appraisal technique is not effective enough since
the rate of return in actual is certainly going to be lower. This flaw is over come by
a more efficient capital investment appraisal technique MIRR. MIRR evaluates
capital investment projects assuming that reinvestment rate equals the company's
cost of capital.

Adjusted Present value (APV): APV capital investment appraisal technique

overcomes the shortcomings of NPV technique and evaluates a project on the basis
of risks associated to prospective company undertaking the investment.

Profitability Index (PI): Evaluates a project based on calculation of value per unit
of investment. Also known as value investment ratio and profit investment ration,
this capital investment appraisal technique is a ratio of amount of money invested
to profit or pay off of the project.

Equivalent Annuity (EA): Capital investment appraisals done using equivalent

annuity usually compares projects with different life spans. In cases where two
projects have different time spans, NPV would not justify a fair comparison. This
capital investment appraisal technique divides the NPV value with annuity factor
resulting in expressing NPV in relation to annualized cash flow.

Payback period (PP): Appraising capital investment on the basis of time that would
be taken to get back your initial investment is called as payback period. Payback
period is one of the easiest methods of capital investment appraisal techniques.
Projects with a shorter payback period are usually preferred for investment when
compared to ones with longer pay back periods.

Discounted payback period (DPP): Capital investment appraisals using discounted

payback period is similar to payback period but here, the time value of money or
discounted value of cash flow is considered for calculation of payback period.

Real option analysis: Capital investment appraisals using real option analysis
consider and value the various options that managers would have while managing
8

their projects in terms of increasing cash inflow and decreasing cash out flow.
These values are added to NPV in the course of capital investment appraisals.

All the above mentioned capital investment appraisal techniques are used for
ranking projects. Usually, organizations have many projects that are appraised
simultaneously for financial viability. Once the preliminary appraisal of a project is
completed, it is compared and ranked against other peer projects. The projects in
consideration are ranked from having high Profitability index to lowest
Profitability index. The higher ranking projects are usually implemented after
careful and detailed due diligence.

Sample of a feasibility study:

This study is based on Bakery. Food is the essential basic need for the human. Nobody can
survive more days without food. Thats why I choose feasibility study on food. The sample are
attached below.

FINANCIAL MANAGEMENT

A FEASIBILITY REPORT
ON
IMPERIAL BAKERS

10

ACKNOWLEDGEMENT
In the name of Allah, the most merciful & beneficial, we are very thankful to
Almighty Allah, who strengthened us to complete this report.

We acknowledge our sincere gratitude to our subject teacher, without his

kind guidance, support & encouragement; we may not be able to complete
this report.

We hope that any short comings, errors & mistakes are purely accidental
and would be pardoned.

TABLE OF CONTENTS
11

SL.N
o

PARTICUALAR

PAGE
NUMBER

1.

EXECUTIVE SUMMARY

2.

INTRODUCTION TO FESIBILITY

3.

INTRODUCTION TO BAKERY

4.

PROJECT AT A GLANCE

11

5.

SWOT ANALYSIS

13

4.

FINANCIAL FEASIBILTY

16

5.

CONCLUSION

38

6.

REFERENCES

38

12

EXECUTIVE SUMMARY
Feasibility reports address things like where and how the business will operate.
They provide in-depth details about the business to determine if and how it can
succeed, and serve as a valuable tool for developing a winning business plans.
This project is a feasibility report for establishing a bakery. The name of our
partnership firm has been decided as Imperial Bakery. We will enter into the
business with breads, buns, pizza, toasts, cream rolls & tea cakes, as our chief
products.
This project studies and analyses various parameters that decide the
establishment of a bakery and whether the venture shall be feasible or not.

The project has been divided into four major branches of feasibility study, namely,
technical, human resource, marketing and financial.
Our team has made an all out effort to present a comprehensive feasibility report
and depict the feasibility of the project.

13

Introduction to Bakery

INTRODUCTION TO
BAKERY

14

HISTORY
Baking is the technique of prolonged cooking of food by dry heat acting by
convection, normally in an oven, but also in hot ashes, or on hot stones. It is
primarily used for the preparation of bread, cakes, pastries, pies, cookies,
biscuits and crackers. Such items are sometimes referred to as "baked goods,"
and are sold at a bakery. A person who prepares baked goods as a profession is
called a baker. It is also used for the preparation of baked potatoes, baked
apples, baked beans, and various other foods.
Many commercial ovens are provided with two heating elements: one for baking,
using convection and conduction to heat the food, and one for broiling or grilling,
heating mainly by radiation.
The baking process does not require any fat to be used to cook in an oven.
Some makers of snacks such as potato chips or crisps have produced baked
versions of their snack items as an alternative to the usual cooking method of
deep-frying in an attempt to reduce the calorie or fat content of their snack
products.
In ancient history, the first evidence of baking occurred when humans took wild
grass grains, soaked them in water, and mixed everything together, mashing it
into a kind of broth-like paste. The paste was cooked by pouring it onto a flat, hot
rock, resulting in a bread-like substance. Later, this paste was roasted on hot
embers, which made bread-making easier, as it could now be made anytime fire
was created.

Baker putting bread into an oven with a peel, 1568

15

Baking flourished in the Roman Empire. In about 300 BC, the pastry cook
became an occupation for Romans. This became a respected profession
because pastries were considered decadent, and Romans loved festivity and
celebration. Thus, pastries were often cooked especially for large banquets, and
any pastry cook who could invent new types of tasty treats was highly prized.
Around 1 AD, there were more than three hundred pastry chefs in Rome, and
wrote about how they created all sorts of diverse foods, and flourished because
of those foods.. A great selection of bakery products like breads and pastries,
with many different variations, different ingredients, and varied patterns, were
often found at banquets and dining halls. The Romans baked bread in an oven
with its own chimney, and had mills to grind grain into flour.
Eventually, because of Rome, the art of baking became known throughout
Europe, and eventually spread to the eastern parts of Asia. Bakers often baked
goods at home and then sold them in the streets. In London, pastry chefs sold
their goods from handcarts. This developed into a system of delivery of baked
goods to households, and demand increased greatly as a result. In Paris, the first
open-air caf of baked goods was developed, and baking became an established
art throughout the entire world, thus leading to the successful birth of bakeries
and baked products.

16

PROJECT
AT A
GLANCE

17

Name

Imperial Bakers

Products

Breads, Buns, Pizza, Toasts, Cream Rolls & Tea

cakes

Status

Medium Scale

Address

Main University Road, Gulshan-e-Iqbal, Karachi.

Type of firm

Partnership Firm

Date of incorporation

1st April, 2013

Cost of project

Rs. 62,18,180

Source of finance

Mission statement
lowest

Partners capital - Rs.30, 47,525

Bank Loan
- Rs.31, 09,090
:

Our mission is to provide quality products at

prices .

Vision
provider

To be the leader of quality bakery products

in the region. This will be achieved by the
dedication of each employee in conjunction with
supportive participation from management at all
levels.

18

SWOT
ANALYSIS
S
O
T
W
te
p
h
ra
p
r
e
o
e
k
rn
a
n
tg
e
ts
su
h
sn
is
e
st
i
e
s

19

SWOT ANALYSIS
A scan of the internal and external environment is an important part of the
strategic planning process. Environmental factors internal to the firm usually can
be classified as strengths (S) or weaknesses (W), and those external to the firm
can be classified as opportunities (O) or threats (T). Such an analysis of the
strategic environment is referred to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the firm's
resources and capabilities to the competitive environment in which it operates. As
such, it is instrumental in strategy formulation and selection.
The SWOT Analysis of our firm is

Strengths
The prices of our products are very reasonable and less than our
competitors.
New and different varieties of products have been introduced which shall
give us the benefit of product differentiation.
Our sales are through tie-ups with grocery stores and supermarkets across
Karachi. This gives us a wide consumer base and a chance to serve
different levels of customers.
The firm also gives a little more commission to its distributors to encourage
dealership.
The labor required does not need any specific qualification & skill and
hence can be made easily available.

Weaknesses
Bakery products are perishable items hence need to be sold as soon as
possible to gain maximum benefit. The customers also prefer fresh
products. But the far location of the factory can increase the time between
baking and actual selling.
Our bakery has introduced few bakery items from the possible product
lines. We are not making cakes, pastries, chocolates and other various
products. This limited menu can be seen as a weakness.
20

 We are not introducing our own outlets but are selling through tie-ups
across the city. This delays our brand establishment time.

Opportunities
Expansion of the product line in the future with the introduction of biscuits
and cakes and pastries.
Scope for expansion with the establishment of our own outlets and bakery
cafs
Growing concern for health and multigrain food products shall become a
reason for increase of our sales of food items such as brown breads,
tomato-spinach bread and white-coriander bread.

Threats
Severe competition in the industry with well-established players like United
King, Continental Bakery, Sajjad Bakery, Disco Bakery etc.

21

FINANCIAL
FEASIBILITY

22

Note: 1 Cost of Land

No.

Particular

Amount

1.

Basic Cost of Land

2.

1% Commission of Agent

14800

3.

Stamp duty @ 10%

148000

TOTAL

1642800

1480000

Note: 2 Cost of Construction

No
1.
2.
3.
4.
5.
6.
7.
8.
9.

Particular
Production area
Storage area
Administrative office
Water room & wash room
Finished goods storage
Loading Dock
Parking space
Security cabin
Open land
TOTAL

Area(in sq. feet)

1813
300
375
244
300
168
150
56
194
3600

Amount
1313950
230500
321750
174600
237500
109700
52500
27400
102600
2340000

Note: 3 Machinery
No.

Particular

1
3
4
5
6
7
8
9
10
11
12

Deck oven
Dough mixer
Dough molder
Sugar grinder
Packing machine
Toast slicer/bread slicer
Freezer
Mixer
Rolling racks
Trays
Stainless steel
utensils/tools/equipment knives
TOTAL

Quantity
1
3
2
1
2
2
2
1
6
100
-

Price per
unit
264000
46500
42350
35000
47650
38000
16400
3600
7500
200
-

Amount
264000
139500
84700
35000
95300
76000
32800
3600
45000
20000
83400
879300

23

Note: 4 Cost of Furniture

No.

Particular

Quantity

1
2
3
4
5
6
7
8
9
10
11
12
13

Sofa Set
Revolved Chairs
Comfort Chairs
Office desk
Office Cupboard
Cabinet
Working table
Dustbin
Air Conditioner
Lights
Fans
Exhaust Fans
Others
TOTAL

2
4
8
3
1
1
1
4
1
50
10
4

Price per
unit
10400
1500
950
3000
8000
11300
9000
100
25000
40
1200
1500

Amount
20800
6000
7600
9000
8000
11300
9000
400
25000
2000
12000
6000
5000
122100

Note: 5 Cost Of equipments

No.

Particular

Quantity

1
2
3
4

Computer
Telephone instruments
Fire extinguisher equipment
Generator
TOTAL

3
2
3
1

Price per
unit
23900
600
5000
25000

Amount
71700
1200
15000
275000
362900

Note: 6 Cost Of Vehicle

No.

Particular

Tempo
TOTAL

Quantity
2

Price per
unit
247000

Amount
494000
494000

24

Note: 7 Preliminary Exp.

No.
1
2
3.

Particular
Licence Fees
Registration Fees (1%)
Partnership deed
TOTAL

Amt.
35000
14800
7000
56800

Note: 8 Pre-operatives Exp.

No.
1
2

Particular
Market Survey Exp.
Connection Charges
1) A.E.C. (Three phase)
2) Electricity connection charges
3) Plumbing
4) Telephone charges
5) Gas pipe line charges

Amount
2500
48000
18500
9000
2500
40000

TOTAL

120500

WORKING CAPITAL
No.

Particular

Amount

1.

Current Assets

A.

Raw material requirement

B.

W.I.P requirement

C.

Finished Goods requirement

25870

D.

Debtors Requirement

546750

E.

Cash Balance

124889

30270
------

25

Total Current Assets

727779

2.

Current Liabilities

A.

Creditors

567564

B.

Deferred Wages

22000

Total Current Liabilities

589564

TOTAL WORKING CAPITAL

138215

A STATEMENT SHOWING COST OF PROJECT

SR. NO

PARTICULAR

1.
2.

Land
Building

1642800
2340000

3.

Machinery

879300

4.

Furniture & Fixtures

122100

5.

Equipments

362900

6.

Vehicles

494000

7.

Preliminary expenses

56800

8.

Pre-operative Expenses

120500

9.

Working Capital

138215

10.

Reserves for contingency

61565

TOTAL COST

AMOUNT (in Rs.)

6218180

26

MEANS OF FINANCE
NO.
1.
2.
3.

PARTICULAR
Partners capital (50%)
Secured loans (50%)
Reserve and surplus
TOTAL

AMOUNT
3047525
3109090
61565
6218180

SALARY
Particular
s
Factory
manager
Finance
manager
Accountant

No.

2ND
YEAR
156000

3RD
YEAR
156000

4TH
YEAR
163800

5TH
YEAR
163800

156000

156000

163800

163800

120000

120000

120000

126000

156000

156000

163800

163800

8000

1ST
YEAR
15600
0
15600
0
--------15600
0
96000

96000

96000

100800

100800

4500

54000

54000

54000

54000

54000

3500

21000
0
72000
36000

210000

420000

420000

546000

72000
36000

108000
36000

110160
37080

110160
37080

36000
97200
0

36000
109200
0

36000
133800
0

37080
137052
0

37080
150252
0

Monthl
y salary
13000

13000

10000

Marketing
1
manager
Production
1
supervisor
Master
1
baker
Utility
Varies
workers
Drivers
2
Security
1
guard
Peon
1
Total
13

13000

3000
3000
3000
64000

27

BONUS
Particulars

ST

No

Factory
manager
Financial
manager
Marketing
manager
Accountant
Production
supervisor
Master baker

2ND
3RD YEAR
YEAR
13000
13000

4TH
YEAR
13650

5TH
YEAR
13650

1
YEAR
13000

13000

13000

13000

13650

13650

13000

13000

13000

13650

13650

1
1

-----8000

12000
8000

12000
8000

12000
8400

12600
8400

4500

4500

4500

4500

4500

ADMINISTRATIVE OVERHEADS
PARTICULARS
Salary
Accountant
Finance manager
Bonus
Accountant
Finance manager
Depreciation
Computer
Furniture
Telephone
Stationery

1ST
YEAR

2ND YEAR 3RD YEAR 4TH YEAR 5TH YEAR

156000

120000
156000

120000
156000

120000
163800

126000
163800

13000

12000
13000

12000
13000

12000
13650

12600
13650

43020
12210
26000
5000

17208
10989
17750
6550

6883
9890
15310
6854

2753
8901
21680
7045

1101
8011
15650
7520
28

Electricity charges
TOTAL

90000
345230

92546
446043

93568
433505

94871
444700

95862
444194

29

DEPRECIATION
PARTICULARS

1ST
YEAR

MACHINERIES 15%
Op balance
879300
Less: depreciation
131895
Closing balance
747405
BUILDING 10%
Op balance
2340000

2ND
YEAR

3RD YEAR

4TH
YEAR

5TH
YEAR

747405
112111
635294

635294
95294
540000

540000
81000
459000

459000
68850
390150

2106000

1895400

1705860

1535274

Less: depreciation
Closing balance
FURNITURE 10%
Op balance
Less: depreciation
Closing balance
VEHICLE 40%
Op balance
Less: depreciation
Closing balance
COMPUTERS 60%

234000
2106000

210600
1895400

189540
1705860

170586
1535274

153527
1381747

122100
12210
109890

109890
10989
98901

98901
9890
89011

89011
8901
80110

80110
8011
72099

494000
197600
296400

296400
118560
177840

177840
71136
106704

106704
42682
64022

64022
25609
38413

Op balance
Less: depreciation
Closing balance
Total
depreciation

71700
43020
28680
618725

28680
17208
11472
469468

11472
6883
4589
372743

4589
2753
1836
305922

1836
1101
735
257099

Add Tempo
Less: depreciation
Closing balance
TOTAL
DEPRECIATION

---------------------618725

---------------------469468

247000
98800
148200
471543

148200
59280
88920
365202

88920
35568
53352
292667

30

FACTORY OVERHEAD EXPENSES

PARTICULARS

1ST
YEAR

2ND YEAR 3RD YEAR 4TH YEAR 5TH YEAR

Salary
Factory manager

156000

156000

156000

163800

163800

Production
supervisor

96000

96000

96000

100800

100800

Peon

36000

36000

36000

37080

37080

Security guard

36000

36000

36000

37080

37080

13000

13000

13000

13650

13650

Supervisor

8000

8000

8000

8400

8400

Peon

3000

3000

3000

3150

3150

Security guard

3000

3000

3000

3150

3150

Machinery

131895

112111

95294

81000

68850

Building

234000

210600

189540

170586

153527

13190

11211

9529

8100

6885

4680

4212

3791

3412

3071

2,21,000

225694

285415

233598

235690

180000

205141

225984

226983

285741

Building

2340

2340

2340

2340

2340

Machinery

8790

8790

8790

8790

8790

1146895

1131099

1171683

1101919

1041284

Bonus
Factory manager

Depreciation

Insurance
Machinery
Building
Electricity charges
Power and fuel
Repairs and
maintenance

TOTAL

31

SELLING & DISTRIBUTION OVERHEAD

1ST
YEAR

Particulars
Salary
Marketing
manager
Driver
Bonus
Marketing
Manager
Driver
Depreciation of
vehicle
Fuel &
maintenance of
vehicle
Advertisement
Commission on
sales
Insurance of
vehicle
TOTAL

2ND
YEAR

3RD
YEAR

4TH
YEAR

5TH
YEAR

156000

156000

156000

163800

163800

72000

72000

108000

110160

110160

13000

13000

13000

13650

13650

6000
197600

6000
118560

9000
169936

9300
101962

9300
61177

155200

160580

165847

178450

182560

18500
175800

20500
205150

25000
226680

25000
258100

27000
269750

17290

15215

22034

16970

13481

811390

767005

895497

877392

850878

REPAYMENT OF LOAN
Year

Principle
Remaining

Installment
Paid

Interest

Total Amt.
Paid

Balance of
Principle

1st Year

3109090

621818

342000

963818

2487272

2nd Year
3rd Year

2487272
1865454

621818
621818

273600
205200

895418
827018

1865454
1243636

4th Year

1243636

621818

136800

758618

621818

5th Year

621818

621818

68400

690218

TOTAL

3109090

1026000

4135090

32

STATEMENT OF INTEREST ON PARTNERS

CAPITAL
1st Year

2nd Year

3rd Year

4th Year

5th Year

3047525

3136287

3581981

4063263

5027221

182852

188177

214919

243796

301633

88762

445694

481282

963958

1091076

3319139

3770158

4278182

5271017

6419930

Less: Interest

(182852)

(188177)

(214919)

(243796)

(301633)

TOTAL

3136287

3581981

4063263

5027221

6118297

Particular
Opening balance of
capital
Add: Interest
Add: Profit

33

COST SHEET
Particular
Opening
Stock of R.M.
Add:Purchases
Less:- Cl.
Stock of R.M.
Cost Of R.M.
Consumed
Add:Direct Labour
Bonus
Prime Cost
Add:Factory O.H.
Total Factory
Cost
Add:Office O.H.
Cost of
Production
Add:Opening stock
of FG
Less:Closing Stock
of FG
Cost of Sales
Add:- Selling
& Distribution
Exp
Cost of
goods sold
Add:- Profit

1st Year

2nd Year

3rd Year

4th Year

5th Year

30270

35200

38950

42150

4540510

5297170

5853040

6664340

6964530

30270

35200

38950

42150

45890

4510240

5292240

5849290

6661140

6960790

264000
22000
4796240

264000
22000
5578240

474000
39500
6362790

474000
39500
7174640

600000
45500
7606290

1146895

1131099

1171683

1101919

1041284

5722135

6709339

7534473

8276559

8647574

345230

44604ss3

433505

444700

444194

6067365

7155382

7967978

8721259

9091768

25870

27850

29950

30500

25870
6041495

27850
7127532

29950
7938028

30500
8690759

32950
9058818

811390

767005

895497

877392

850878

6852885
908115

7894537
1159813

8833525
1170975

9568151
1823089

9909696
1994674
34

TOTAL
SALES

7761000

9054350

10004500

11391240

11904370

TRADING AND PROFIT & LOSS A/C

Particulars
INCOME:Cash Sales
Credit Sales

1st Year

2nd Year

3rd Year

4th Year

5th Year

7114250
646750

8201750
852600

8978600
1025900

10132840
1258400

10419370
1485000

7761000

9054350

10004500

11391240

11904370

25870

27850

29950

30500

32950

Less:- Opening
Stock of FG
Total Income

-----7786870

25870
9056330

27850
10006600

29950
11391790

30500
11906820

Raw Material
Consumed

4510240

5292240

5849290

6661140

6960790

Direct Labour &

Bonus
Factory Cost

286000
781000

286000
808388

513500
886849

513500
850333

645500
818907

Administrative
Cost

290000

417846

416732

433046

435082

Selling &
Distribution Cost

613790

648445

725561

775430

789701

Preliminary
Expenses Written
Off

35460

35460

35460

35460

35460

Interest on
Partners' Capital

182852

188177

214919

243796

301633

Total
Expenditure

6699342

7676556

8642311

9512705

9987073

Gross Profit
(PBDIT)

1087528

1379774

1364289

1879085

1919747

Total Sales
Income
Closing Stock of
FG

35

Less:Depreciation
PBIT

618725
468803

469468
910306

471543
892746

365202
1513883

292667
1627080

Interest
- Long Term Loan
@ 11%
PBT

342000
126803

273600
636706

205200
687546

136800
1377083

68400
1558680

Tax Paid @ 30%

PAT

38041
88762

191012
445694

206264
481282

413125
963958

467604
1091076

BALANCE SHEET
Particulars

Year 1

Year 2

Year 3

Year 4

Year 5

SOURCE OF FUNDS
Owners Funds
Reserve & Surplus
Bank Loan
TOTAL SOURCE
OF FUND

3136287
61565
2487272
5685124

3581981
61565
1865454
5509000

4063263
61565
1243636
5368464

5027221
61565
621818
5710604

6118297
61565
0
6179862

1642800
1705860
170586
1535274
540000
81000
459000
89011
8901
80110
254903
101962
152941
4589
2753
1836
291200
4163161

1642800
1535274
153527
1381747
459000
68850
390150
80110
8011
72099
152941
61177
91764
1836
1102
734
291200
3870494

APPLICATION OF FUNDS
Fixed Assets
Land
Building
Less: Depreciation
Machinery
Less: Depreciation
Furniture
Less: Depreciation
Vehicle
Less: Depreciation
Computer
Less: Depreciation

1642800
2340000
234000
2106000
879300
131895
747405
122100
12210
109890
494000
197600
296400
71700
43020
28680
291200
5222375

1642800
2106000
210600
1895400
747405
112111
635294
109890
10989
98901
296400
118560
177840
28680
17208
11472
291200
4752907

Other equipment
TOTAL FIXED
ASSETS
CURRENT ASSETS, LOANS AND ADVANCE
Inventory

1642800
1895400
189540
1705860
635294
95294
540000
98901
9890
89011
424840
169937
254903
11472
6883
4589
291200
4528363

36

Raw Material
Finished Goods

30270
25870

35200
27850

38950
29950

42150
30500

45890
32950

Sundry Debtors

546750

850123

926540

1025360

1125460

410680
1323853

554151
1549591

1288113
2386123

2083908
3288208

Cash & Bank

Balance
TOTAL
CURRENT
ASSETS

307583
910473

LESS : CURRENT LIABILITIES AND PROVISION

Creditors

567564

652140

758410

852140

956840

22000

22000

22000

22000

22000

TOTAL
CURRENT
LIABILITY

589564

674140

780410

874140

978840

NET CURRENT
ASSETS

320909

649713

769181

1511983

2309368

Miscellaneous
Expenditure (To
the extent not
written off)
TOTAL
APPLICATION
OF FUNDS

141840

106380

70920

35460

5685124

5509000

5368464

5710604

6179862

Deferred Wages

37

CASH FLOW STATEMENT

Particular
PAT
Interest
Tax Provision
Depreciation
Preliminary
Expenses
CHANGES IN
WORKING
CAPITAL
Tax Paid
Net Cash Flow
From Operating
Activities

1st year
2nd year
3rd year
4th year
CASH FLOW FROM OPERATING ACTIVITIES
88762
445694
481282
963958
524852
461777
420119
380596
38041
191012
206264
413125
618725
469468
471543
365202
35460
35460
35460
35460

5th year
1091076
370033
467604
292667
35460

(13326)

(225707)

24003

(8840)

(1590)

(38041)
1254473

(191012)
1186692

(206264)
1432407

(413125)
1736376

(467604)
1787646

CASH FLOW FROM INVESTMENT ACTIVITIES

Purchase of Assets
(5841100)
-----(247000)
-----Preliminary
(177300)
---------------Activities
Net Cash Flow
(6018400)
-----(247000)
-----From Investing
Activities
CASH FLOW FROM FINANCIAL ACTIVITIES
Capital
3109090
---------------Term Loan Taken
3109090
---------------Repayment of
(621818)
(621818)
(621818)
(621818)
Term Loan
Interest on Loan
(342000)
(273600)
(205200)
(136800)
Interest on Capital
(182852)
(188177)
(214919)
(243796)
Net Cash Flow
5071510
(1083595)
(1041937)
(1002414)
From Financial
Activities
Total
307583
103097
143470
733962
Add:- Opening
0
307583
410680
554151
Balance
Closing Balance
307583
410680
554151
1288113

----------------

----------(621818)
(68400)
(301633)
(991851)
795795
1288113
2083908

38

RATIO ANALYSIS
PARTICULARS
PROFITABILITY RATIO
Net profit ratio (%)
(Net profit/sales)100
Operating ratio (%)
(PBIT/sales)*100
Cash profit ratio (%)
[(PAT+depreciation)/sales]*100
EFFICIENCY RATIO
Fixed assets turnover ratio
Sales/fixed assets
Total asset turnover ratio
(Sales)/(total assets-misc.exp.)
SOLVANCY RATIO
Proprietor's ratio (%)
Proprietor's fund/total assetmisc.exp*100
COVERAGE RATIO
Interest coverage ratio
PBIT/interest on debt
LIQUIDITY RATIO
Current ratio
Current asset/current liabilities

1st
year

2nd
year

3rd
year

4th
year

5th
year

1.14

4.92

4.81

8.46

9.17

6.04

10.05

8.92

13.29

13.67

9.12

10.11

9.52

11.67

11.62

1.49

1.91

2.21

2.74

3.08

1.27

1.49

1.65

1.74

1.66

52.14

60.00

67.87

77.70

86.33

1.37

3.32

4.35

11.07

23.79

1.54

1.96

1.99

2.73

3.36

39

TREND OF RATIOS
1.

NET PROFIT RATIO

Net Profit Ratio

Percentage

Year

Interpretation:
The firm has continuously made profit for five years. It shows the firms capability
to increases revenue from its business.

2.OPERATING RATIO

Operating Ratio

Percentage

Year

Interpretation:
Operating profit of the firm is continously increasing over the five years. It
does not increase with more margins because of increses in revenues
40

expenses in that years, but it also does not decrease which shows continuous
increment in revenue.

3.CASH PROFIT RATIO

Cash Profit Ratio
Percentage

Year

Interpretation:
Cash profit of the firm is continously increasing in five years and it will help the
firm to repay its loans and liabilites.
Cash profit increment also indicate that the firm has more source to earn cash
revenue.

4.

FIXED ASSETS TURNOVER RATIO

41

Fixed Assets Turnover Ratio

Percentage

Year

Interpretation:
As the revenue is increasing year by year and the depreciation is written off
the value of fixed assets reduces and thus there is an increase in the fixed
asset turnover ratio.

1.

TOTAL ASSETS TURNOVER RATIO

Total Assets Turnover Ratio
Percentage

Year

Interpretation:
The total asset turnover ratio of the firm continously increses in 5 years. It shows
that firm has optimum uses of its assets to generate its revenue.

2.

PROPRIETORS RATIO
42

Proprietor's Ratio

Percentage

Year

Interpretation:
Proprietor ratio indicate that the share of owners in the firm aganist the other
liabilites. The Proprietor ratio of the firm is continously increasing in five years
and in the 5th year its is nearly 86.33% and its equal to half of the balance sheet
total and its gives encourage the firm to take more risk.

43

3.

INTEREST COVERAGE RATIO

Interest Coverage Ratio

Percentage

Year

Interpretation:
The interest coverage ratio indicates capacity of firm to pay interest on debt
out of its profit. The above chart shows that there is continuous increase in
this ratio through out 5 years because of increase in revenue. It is maximum
23.79% in the 5th year.

44

4.

CURRENT RATIO
Current Ratio

Times

Year

Interpretation:
Ideal current ratio is 2:1 but the above ratios are around 3.36:1 which is
above ideal ratio that is justifiable in our industry.

CAPITAL BUDGETING
YEA
R

PAT

DEPRE
CIATIO
N

PRE.
EXP.

CFA
T

DISCO
UNTIN
G

P V OF
CASH
FLOW

FACT
OR
11%
1st
Year

887
62

2nd
Year

445
694

618725

3546
0

742
947

469468

3546
0

950
622

0.901
0.812

DISCO
UNTIN
G

P V OF
CASH
FLOW

CUM
CFAT

735518

7429
47

931610

1693
569

FACT
OR 1%
669395
771905

0.990
0.980

45

3rd
Year

481
282

4th
Year

963
958
109
107
6

5th
Year

471543

3546
0

365202

3546
0

292667

3546
0

Total

988
285
136
462
0
141
920
3
546
567
7

0.731

722436

0.971

959625

2681
854

0.659

899285

0.961

1311400

4046
474

0.593

841587

0.951

1349662

5465
677

3904609

5287814

NET PRESENT VALUE

Particular
Total Discounted Cash Inflow
Less
Total Cash Outflow

Amount
3904609
NPV

6218180
(2313571)

PAY BACK PERIOD

In our project Pay Back Period is beyond 5 years. As at the end of the 5 years
net cumulative Cash flow is Rs. 5465677 and our initial investment is of Rs.
6218180.

PROFITABILITY INDEX
Particular
Total Cash Inflow
Divide
Total Cash Outflow
P.I

Amount
3904609
6218180
0.6279

INTERNAL RATE OF RETURN

46

In case of IRR we require two NPV i.e. one negative and one positive at two
different discounting factor. Hence in our project we have taken in to
consideration two discounting factor i.e. 1 and 11% discount level and at both the
levels NPV is negative so it is not feasible within the scope of five years.

47

BREAK EVEN ANALYSIS

Particular
Total Income
Less : Variable
Cost
Direct Material
Direct Labour
Electricity Charges
Repairs
Maintenance
Power and Fuel
Commission on
sales
Total Variable
Cost
Contribution
Less : Fixed Cost
Salary & Wages
Depreciation
Insurance
Telephone &
Internet
Stationery &
Postage
Advertisement
interest on
Partner's Capital
Interest on Loan
Preliminary Exp.
Total Fixed Cost
Profit
PV Ratio
=Contribution/Sale
s
BES=Fixed
cost/PV ratio (In

1st Year

7786870 9056330

3rd Year
4th Year
5th Year
1000660
0 11391790 11906820

45,10,24
0 5292240
286000 286000
311000 318240

5849290
513500
378983

6661140
513500
328469

6960790
645500
331552

171710
205141

176977
225984

189580
226983

193690
285741

175800 205150
56,29,37
0 6478481
2157500 2577849

226680

258100

269750

7371414
2635186

8177772
3214018

8687023
3219797

166330
180000

2nd Year

767000
618725
35160

899000
469468
30638

938000
471543
35354

973470
365202
28482

889350
292667
23437

26000

17750

15310

21680

15650

5000
18500

6550
20500

6854
25000

7045
25000

7520
27000

182852 188177
342000 273600
35460
35460
2030697 1941143
126803 636706
27.71% 28.46%

214919
205200
35460
1947640
687546
26.33%

243796
136800
35460
1836935
1377083
28.21%

301633
68400
35460
1661117
1558680
27.04%

7328390 6820600

7397038

6511645

6143184

48

Rupees)

CONCLUSION
We would finally like to conclude the project with a great feeling of having gained
enormous knowledge about bakery industry. First of all we are thankful to our
teacher who gave us such a wonderful opportunity to learn about the practical
aspects of knowledge.
By conducting an extensive research on all the aspects of establishing a
bakery, we conclude that the project is feasible as per capital budgeting
techniques.
While making the project we learnt how to communicate or deal with people and
how to maintain contacts with them. We saw all the marketing factors and were
able to understand more about it because of seeing them practically. It has been
said that practical knowledge is more important than theoretical knowledge.

REFERENCES
www.bakerybazaar.com
www.wikipedia.org
www.justdial.com
www.fao.org
www.blog.franchiseindia.com

49

Conclusion of the report

Feasibility study is the essential for todays business world. We cant imagine
starting a new business without feasibility study. A feasibility study is an analysis
of a proposal, explaining why it will work. It tells interested parties why your
business idea is solid and worth investing in. Learn how to draw on and summarize
conclusions from the information you've included in a feasibility study, creating a
professional and polished final product. This is one of the most important sections
of the feasibility study as it examines the marketability of the product or services
and convinces readers that there is a potential market for the product or services. If
a significant market for the product or services cannot be established, then there is
no project. Typically, market studies will assess the potential sales of the product,
absorption and market capture rates and the project's timing.

The feasibility study outputs the feasibility study report, a report detailing the
evaluation criteria, the study findings, and the recommendations.

A feasibility study tests the viability of an idea, a project or even a new business.
The goal of a feasibility study is to place emphasis on potential problems that
could occur if a project is pursued and determine if, after all significant factors are
considered, the project should be pursued. Feasibility studies also allow a business
to address where and how it will operate, potential obstacles, competition and the
funding needed to get the business up and running.

So it is fundamentally needed. So we should make feasibility study on the basis of

basic knowledge about it.

50

References:
www.wikipedia.com
www.google.com
www.bakerybazar.com
Project by Prasanna Chandra 7th edition.

51