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Field Assignment

Spring 2012 Course: FIN 440 Sec: 2 Instructor: Mr. JUNAID KHAN Group Assignment # 1 Date: 7th Feb 2012

EXECUTIVE SUMMARY This group field assignment on a small business financial survey includes how a daily vegetable hawker finances their business. For this report we have interviewed four vegetable hawkers from Shantinager Bazaar and Bashundhara Residential Area Bazaar. After collecting and analyzing the data, we have found that the financial perspectives of all the hawkers are almost more or less the same, i.e. funds with which they have started their business, equity funds and debts, risks, expansion plan, etc. So for the data collection and analysis part we have randomly selected ones information.

From the analysis we have found that four of the vegetable hawkers are in this business for a long period of time and each of them have started their business with their personal funds, which means Debt funds are nil. So, they are quite flexible with their business. Whatever they earn goes in their pocket, except of some expenses. It is also found that besides investing for purchasing the raw materials they carry extra Tk.150 to Tk.200 cash for other activities.

They price of the goods they sell is determined by the market and their Cash Conversion Cycle is very efficient, i.e. they are recovering their cash on a daily basis with profits. Besides they have got very little scope of expanding their business as their profit margin is low.

The daily hawkers who we have interviewed do not desire to expand their business. Though this is their only business, both of them mentioned that they are quite happy and what they earn is quite enough to support them throughout the year.

DATA COLLECTION
We have interviewed four vegetables hawkers (from Shantinagar and Bashundhara Bazaar) based on their business and financial matters.Summery of the collection of interviews: Serial
Questions Asked Siddiqur Rahman Area: Shantinagar Shah Alam Area: Bashundhara Liton Sarkar Ratan Bashundhara R/A 4yrs 3yrs 4 years

Kalachadpur Howladar

How long is he/she in business?

6yrs

2 3 4 5 6

How much funds did he start with?

Tk.1500 cash

Tk. 800 cash Tk. 2300 Equity None

Tk. 12000 cash Tk. 1200013000 cash Equity None

2000 TK. cash 2000-3000 TK. Equity None

Today their funds are? Tk. 2100 Equity or Debt funds? Repayments and Terms, Interest rates? What time do they start? 7am.-8am. Invest all his TK.2100 He keeps 100 tk with him in the morning as changes & others expenses. Shantinagar as he lives nearby. Keeping a little profit. Equity None

6am. Invest all his TK 2300 He keeps 80100 tk with him in the morning as changes. Bashundhara as he lives nearby. Price is determined by the market.

6am.-7 am. Tk. 3000 Spends from business

6 am.-7am. Tk. 2500 He keeps 200 Tk. with him in morning

7 8

How much cash they invest in the morning? How much cash do they carry with them? Why?

9 10

Where do they sell? Why? How do they price their goods?

Norda Determine by the buying price

Bashundhora R/A Keeping a little profit

11

How long does it take them to recover cash?

9-10 hours.

One day.

One day-one And a half day

One day

12

What are the Business risks? Risk of eradication

May be unable to sell the whole goods. Police, Mastaans

Goods get rotten

May be unable to sell the whole goods.

13

What are the Mastaans /Criminal risks?

Police, Mastaans

No

Bashundhora Security Guard

14 15 16 17

Business Expenses? Personal Expenses? Earnings Net Income? Can they increase their business? How? What would they need?

Around 100 tk for rent of ven. 50 tk 200-300 tk He wishes to buy a fix place in a bazaar, Which will require 1500020000 taka. Yes, this is his only business and it is enough to support him throughout the year.

Tk.250 to Tk.300 50 tk 300-400 tk

200-300 Tk. 300-400 Tk. 500-800 Tk.

100-200 Tk. 200 Tk. Around 300 Tk. No.

Possibilities No to increase his business by purchasing a space in a bazaar. Yes, it is his only business and sometimes it is not enough to support him. Yes

18

Is it their only business? Is it enough to support them? Throughout the year?

Yes

After gathering the four interviews, we have randomly selected a particular interview to do our financial analysis. The statistics showed that almost both of the vegetable hawkers have more or less the same kind of information pattern.

Limitations:
As this report is written on the basis of interview there is a question of reliability of the interview, provided by the hawkers. As the hawkers run day to day business, they are very busy during their business time and they did not want to give enough time for the interview session. The hawkers were not willing to disclose their proper information (income source).

Scope:
Due to time constraint, we could not do thorough analysis of the interviewed data. The group has to convince the hawkers for the interview session.

DATA ANALYSIS

Business started with: Cash amount of TK. 800. No Equity or Debt.

Present Day: Net Working Capital = Current Assets Current Liabilities. Net Working Capital = (Tk. 2,300 Tk 0) Net Working Capital = Tk. 2,300

Day 1 Taka Daily Cash 2,300

Day 2 Taka 2,300

Equity or Debt

Inventory bought

2,300

2,300

Ending cash balance

2,700

2,700

4 years back he started saving a little amount from this ending cash balance (Tk. 1000 +) to reach at his present fund Tk. 2,300.

CASH CONVERSION CYCLE

Cash Conversion Cycle is the number of days between paying for raw materials and receiving cash from selling goods made from that raw materials.

The higher the number, the longer money is tied up in business operations and unavailable for other activities such as investing.

Cash Conversion Cycle of this vegetable hawker: Cash Conversion Cycle = (Days of Sales Outstanding + Days of Sales Inventory Days of Payable Outstanding) Cash Conversion Cycle = 1 day + 0 day 0 day Cash Conversion Cycle = 1 day.

Income Statement Of a Daily Vegetable Hawker (Figures Taka) Net sales Cost of Goods Sold Gross Profit Operating Expenses : 2,900 (2,300) 600

Transportation Cost Food and Refreshment Other Expenses Total Operating Expenses

80 80 20 (180)

Net Income

420

Net Profit Margin = Net Income/Sales = 420/2900 = 15%

Recommendation and Conclusion

Though all hawkers business strategy is same but they can maximize their value by developing certain activities.1) they can invest more money to expand their business. 2) For expanding business, it is essential to diversify their business product to get higher profit. 3) It is better to borrow some money with minimum interest or without interest to expand their business. 4) They must keep in mind that they should try to achieve economies of scale according to market demand. 5) For expanding business, they can hire unpaid family member to increase their sales in different location. 6) They should minimize their refreshment cost to increase profit. We think, being a poor, they are just wasting their money for smoking.