DEPARTMENT OF SOFTWARE ENGINEERING

BTECH (HONS) INFORMATION TECHNOLOGY

CAR SHOWROOM DEALERSHIP MANAGEMENT SYSTEM

BY:

Mia Mudzingwa H200026Q

Monah Chimwamafuku H200069N
Simon Makowa H200306T
Flobert Munobvaneyi H200074T
Takudzwa T Ganda H200148X
Brilliant T Ngirandi H200319T
Talent Nhapata H200284Y
Simbarashe Makoni H190121H

HIT 2201
SUPERVISOR: Mrs. Dzapasi

Page 1 of 24
Table of contents
Table of contents.....................................................................................................................2
Executive summary................................................................................................................4
Chapter 1: Business description............................................................................................4
1.1 Business ownership....................................................................................................................................................................4
1.2 Industry analysis.........................................................................................................................................................................4
Product analysis...........................................................................................................................................................................4
1.3 Idea conception..........................................................................................................................................................................5
1.4 Vision.........................................................................................................................................................................................5
1.5 Mission.......................................................................................................................................................................................5
1.6 Values.........................................................................................................................................................................................5
1.7 Objectives...................................................................................................................................................................................5
1.8 Product/service description........................................................................................................................................................5
Chapter 2: Management and organisation...........................................................................6
2.1 Legal structure........................................................................................................................................................................6
2.2 Shareholding structure...........................................................................................................................................................6
2.3 Key personnel.........................................................................................................................................................................6
2.4 Organizational structure.........................................................................................................................................................7
2.5 Human resource requirements................................................................................................................................................7
2.6 Professional support...............................................................................................................................................................8
Chapter 3: Marketing plan....................................................................................................9
3.1 Market description.................................................................................................................................................................9
3.2 Customer profile.....................................................................................................................................................................9
3.3 Competition............................................................................................................................................................................9
Competitor analysis......................................................................................................................................................................9
SWOT analysis.............................................................................................................................................................................9
3.4 Marketing mix......................................................................................................................................................................10
Marketing Objectives.................................................................................................................................................................10
Marketing Strategies..................................................................................................................................................................10
Summary budget........................................................................................................................................................................11
Chapter 4: Operational plan................................................................................................11
4.1 Location...............................................................................................................................................................................11
4.2 Business operational time....................................................................................................................................................11
4.3 Workforce............................................................................................................................................................................11
4.4 Product projections..............................................................................................................................................................11

Page 2 of 24
 4.5 Equipment and materials......................................................................................................................................................11
4.6 Supply requirements............................................................................................................................................................12
Supply sheet...............................................................................................................................................................................12
Production / operational cost......................................................................................................................................................13
4.7 Operations flowchart............................................................................................................................................................13
4.8 Internal policies....................................................................................................................................................................13
4.9 Intellectual property.............................................................................................................................................................13
4.10 Quality and service quality standards..............................................................................................................................14
4.11 Action plan.......................................................................................................................................................................14
4.12 Operational budget...........................................................................................................................................................14
Chapter 5: Financial plan....................................................................................................14
5.1 Financial Objectives.............................................................................................................................................................14
5.2 Sources of Funds..................................................................................................................................................................14
5.3 Financial Assumptions.........................................................................................................................................................14
5.4 Sales and purchases forecast................................................................................................................................................15
5.5 Statement of Changes in Equity...........................................................................................................................................15
5.6 Cash Flow Projection...........................................................................................................................................................16
5.7 Projected Income Statement.................................................................................................................................................17
5.8 Projected Statement of Financial Position...........................................................................................................................17
5.9 Projected Statement of Cash Flows.....................................................................................................................................18
5.10 Ratio Analysis..................................................................................................................................................................19
Profitability ratios......................................................................................................................................................................19
Liquidity ratios...........................................................................................................................................................................20
Leverage ratios...........................................................................................................................................................................21
Activity ratios.............................................................................................................................................................................21
5.11 Contribution.....................................................................................................................................................................21
5.12 Break-even Point.............................................................................................................................................................22
5.13 Margin of Safety..............................................................................................................................................................23

1.

Page 3 of 24
Executive summary

Chapter 1: Business description

1.1 Business ownership

Bebe Car Showroom Dealership is a private limited start-up company whose main purpose is to help car
firms manage all their car sales, billing, servicing and maintenance using the Car Showroom Dealership
Management System. The SDG millennium goal is ‘industry, innovation and infrastructure’- our
organisation already pursued a modern solution to the car dealership industry by developing the car
showroom dealership management system which paved way for a digitalised way of transacting.

1.2 Industry analysis

Our business idea covers 2 different industries that is the ICT industry and the automotive industry.
Currently, there is low competition in the industry and the threat of new entrants is notably minimal in the
automotive business. The reason being that most companies go for Bespoke Software, thereby making new
entries very few as there isn’t a record of existing off the shelf software systems.

Product analysis

Strengths Weaknesses
 Shrinkage reduction  Cost of web access
 Specials management  Increased maintenance costs
 Sales tracking  Security risks
 Remote access
management
 Customer satisfaction
improvement
 Increased efficiency
 Maintain control
Opportunities Threats
 Marketing  Mature markets
 Accurate reports  Adaptability
 Flexible expansion options  Small target market

Page 4 of 24
1.3 Idea conception

During our research we noticed there are many problems being faced by car dealerships such as lack of
transparency, inefficiency and slow services, not to mention on top of that the usual day to day problems
that affect every business which include bad economy, unhappy clients, order mix-up, etc.
Through a process of research and the basics of idea generation techniques such as brainstorming, reverse
brainstorming, brain writing, and brain netting, the Car Showroom Dealership Management System was
born.

1.4 Vision

To build a car showroom dealership management system that will become the choice for both corporate
clients and individual clients.

1.5 Mission

Our mission is establishing a car showroom dealership management system that will make available a wide
range of cars from top manufacturing brands at affordable prices. We are Dedicated to Quality, Committed
to Excellence.

1.6 Values

 Reliability
 Accountability
 Trustworthiness
 Dependability
 Relationships

1.7 Objectives

 To attain a market share of at least 10% in the industry, one year after its official launch
 To achieve product awareness on at least 40% of the Zimbabwean population in 2 years

1.8 Product/service description

The Car Showroom Dealership Management System is a system designed to manage and control all car
records. This management system stores the information of all the available cars, car accessories and
possible rentals. It makes it easier to keep track of the servicing, maintenance, sale, and purchase of the
cars. The Car Showroom Dealership Management System helps the company notify its customers of new
cars available for sale, that way they can book the car.

Page 5 of 24
Chapter 2: Management and organisation
2.1 Legal structure

Bebe Car showroom dealership Pvt Ltd is a company to be in the automotive industry.

2.2 Shareholding structure

SHAREHOLDER PERCENTAGE OF CAPITAL INVESTED

NAME SHARES (%) (USD)
Chimwamafuku Monah 10 100
Ganda Takudzwa 10 100
Harare Institute of 20 200
Technology
Makoni Simbarashe 10 100
Makowa Simon 10 100
Mudzingwa Mia 10 100
Munobvaneyi Flobert 10 100
Ngirandi Brilliant 10 100
Nhapata Talent 10 100
100 1000

2.3 Key personnel

1. Chairman – Monah Chimwamafuku

She is aged 21 and is currently working on her B-Tech Honors Degree in Software Engineering. She
possesses human relations skills. Her responsibilities are to set clear expectations concerning the
company’s culture, values, and behaviours.

2. Chief Executive Officer – Simon Makowa

He is aged 21 and is currently working on his B-Tech Honors Degree in Software Engineering. He
possesses leadership qualities, good decision making skills and is able to work under pressure. His
responsibilities are to develop the company’s culture and vision, oversee the company’s fiscal activity,
and to monitor compliance with laws and regulations.

3. Marketing Director – Brilliant Ngirandi

He is aged 21 and is currently working on his B-Tech Honors Degree in Software Engineering. He is
very good at paying attention to detail. His responsibilities are to develop marketing strategies and
marketing plan. He will also work on developing promotions, and researching demand for our products
and services

4. Finance Director – Mia Mudzingwa

Page 6 of 24
 She is aged 21 and is currently working on her B-Tech Honors Degree in Software Engineering. She
studied Accounting in high school. Her responsibilities are to prepare financial statements, and to
analyse market trends to discover business opportunities that help maximize profits.

5. Operations Director – Flobert Munobvaneyi

He is aged 21 and is currently working on his B-Tech Honors Degree in Software Engineering. He
possess both management and communication skills. His responsibilities are to oversee budgeting,
reporting, and planning. He will also work to improve quality, productivity, and efficiency in the
company

6. Procurement Director – Takudzwa Ganda

He is aged 21 and is currently working on his B-Tech Honors Degree in Software Engineering. He
possesses excellent communication skills, negotiation skills, as well as planning schools. His
responsibilities are to develop car purchasing strategies, maintain good relationships with the
company’s suppliers, and to ensure that all procured items are of the required standards and
specifications.

2.4 Organizational structure

2.5 Human resource requirements

Salespeople - responsible for selling cars to customers as per their need and they should possess good
communication skills, a persuasive nature, and have knowledge of the capabilities and features of the cars to
be sold.
Customer service representative - responsible for supervising car deliveries to customers, addressing any
questions the customer may have about the cars sold, and handling any customer complaints.

Page 7 of 24
 Security - responsible for ensuring the safety of the cars in the showroom.
Service technicians - responsible for all automotive repairs.
Support staff - help serve customers, clean the cars, or perform administrative tasks.

2.6 Professional support

Attorney
LawyerUp Zim Legal Practitioners
Harare, Zimbabwe
Contact: +263 716 349 076

LawyerUp Zim Legal Practitioners will provide law advice and legal assistance to the company. They
will also help in claiming insurances from insurance companies.

Accountants and Auditors

Point Guard Group of Auditors
Harare, Zimbabwe
Contact: +263 778 452 900

Point Guard Group of Auditors will oversee the finances and the available stock of vehicles. They will
also prepare financial statements for the company and take care of financial transactions. They will also
take care of checking the accuracy of financial records and ensure that the company complies with tax
laws.

Bankers
CBZ Bank
Harare, Zimbabwe
Contact: +263 777 450 123

These provide banking services and give financial advice to the company. They also help the company
on issues of savings, investments, loans and security. Their knowledge and advice will help the
company solve financial problems.

Page 8 of 24
Chapter 3: Marketing plan
3.1 Market description

Car customers(buyers and those who wish to rent)

Car companies(Impala, Croco, ZIMOCO)
Individual car and parts sellers

3.2 Customer profile

Targeted customer – Impala Car Rental

Services- self driven rental, chauffeur driven rentals, airport transfers, shuffle services
Location - available around Zimbabwe with its headquarters located at 40 Chiremba Rd,Harare
Values – professionalism, reliability, flexibility, excellence, service

3.3 Competition

Competitor analysis

BE FORWARD CO.LTD

It is a global car export company based in Japan. It offers the sale of brand-new cars, used cars and auto car
parts. The process of importing cars is made easy for customers abroad by the use of their online website
without the use of third-party agents.

SWOT analysis

STRENGTHS WEAKNESS
 Skilled and innovative personnel Delays in car exports to
 Young personnel with good customers
communication skills to lure Only offers car sales and not
customers rentals
 Availability of a system that
allows customer to carry out all

Page 9 of 24
 necessary transactions online

OPPORTUNITIES THREATS
 The use of social media as a  High level of competition from
marketing tool other companies
 Unavailability of many  Inflation
competitors

Solutions To Threats and Weaknesses

- Offer rental services platform to rental companies to offer a variety of services

- Lure the best car rental and car sale companies to use our system to offer quality.

3.4 Marketing mix

Marketing Objectives

1. To attain a market share of at least 10% in the industry, one year after its official launch

Marketing Strategies

Product Strategy
The Car Showroom Dealership Management System is a system designed to manage and control all car
records. This management system stores the information of all the available cars, car accessories and
possible rentals. It makes it easier to keep track of the servicing, maintenance, sale, and purchase of the
cars. The Car Showroom Dealership Management System helps the company notify its customers of
new cars available for sale, that way they can book the car.

Pricing Strategy
$250USD Monthly licencing. The company will enter the market using penetrative pricing of our
service since it is new. The lower price will be an advantage because it will attract customers to our
product.

Distribution Strategy

Direct distribution - This channel removes intermediaries therefore it allows us to know our
customers on a personal level so that a relationship might be established and strengthened. This channel
also reduces costs since we do not have to pay agents to help us advertise our product.

Promotion Strategies
Offering free trials
Percentage discounts
Social media advertising

Page 10 of 24
Summary budget
*******************************

Chapter 4: Operational plan

4.1 Location

Bebe Car Showroom Dealership Pvt Limited is located in Harare, Belvedere’s Showgrounds .Showroom is
positioned in an area where it is surrounded by well-known big and start-up Car sales and rental firms,
which can increase its marketing trends and quick services to our customers . It is located near the Vehicle
Inspection Department, (VID), Showroom can also be stretching out its billing and car maintenance systems
to the Driving Schools , The location is highly accessible and has more potential customers to the company

4.2 Business operational time

The service will be available 24/7.

4.3 Workforce

Operation team
They deal with system development, maintenance and upgrades.

Customer service representative

They handle any customer complaints. These will be contract based.

Receptionist
The company will need 1 receptionist to serve the customers, and will work full time.

4.4 Product projections

A minimum of 5 minutes is needed to access the services and complete all the necessary processes.

4.5 Equipment and materials

Name Purpose Stage in lifecycle

Hardware equipment
Microsoft Visual studio Provides an environment Development and testing
for coding and testing
the system
Firebase Provide a manageable Development and testing

Page 11 of 24
 database for the
prototype of the system
Edraw Drawing wireframes, Investigating and analysis and
flowcharts and other diagrams designing
used for designing and
analyses of the project
Microsoft Word Documentation of the project Whole development cycle
Windows 2010 It supports the software Whole development cycle
required to develop the
system
Software equipment
iPhone (iOS 12 and above) It is a compatible hardware Implementation of system if
for the software when the approved
system is to be implemented
Android phone (android 5 It is a compatible hardware Implementation of system if
and above) for the software when the approved
system is to be implemented
Live server Provide a manageable Implementation of app if
database for the application approved
when it has been approved
2.0GHz processor Immediate and fast Whole development cycle
processing
Windows 2010 compatable It supports the software Whole development cycle
PCs required to develop the
system
DVD RW AD-7760H SATA Reading and writing data and Whole development cycle
DVD Rom information on compact disks

4.6 Supply requirements

Supply sheet

Name of Item Quantity Unit cost Total

supplier supplied (USD)
INNET Windows 10 5 450 2250
Technologies(offers compatable
cheap and quality laptops
products)
GetHost(Fast, Live server 1 40 40
cheap and reliable)
Microsoft Microsoft N/A free free
Visual studio,
Microsoft
Word

Page 12 of 24
 Production / operational cost

Item Fixed asset Monthly expense

Rent 100
Office fittings 4500
Salaries 1000
Insurance 75
Patent fee 2700
Total 7200 1175

4.7 Operations flowchart

4.8 Internal policies

Data Protection – The system will encrypt customers’ personal files

Equity – Removal of discrimination and promote a conduce and fair environment

4.9 Intellectual property

PATENT

Patent grants us exclusive rights for our business idea. To get this patent, we prepared technical information
about our business idea which shall be disclosed to the public in a patent application. In principle, the patent
will give us the exclusive right to prevent or stop others from commercially exploiting the patented
invention.

Page 13 of 24
4.10 Quality and service quality standards

The service should meet the following characteristics which are maintainability, reliability, reusability,
portability and efficiency.
Adoption of the ISO 9001:2015 quality standards
Designing a robust training program which helps employees improve the way they work

4.11 Action plan

Surveys – will be conducted after 2 months of launch

Interviews – will be performed after 6 months of launch for example Impala

4.12 Operational budget

Particulars Actual amount for 1 year

Fixed costs $7500
Labour costs $12000
Insurance costs $900
Total expenses $20400

Chapter 5: Financial plan

5.1 Financial Objectives

 To realise profits of 12% by the end of December 2025

 To maintain a sales revenue growth rate of 20%

5.2 Sources of Funds

Equity - Share Capital   $1,000.00

Debt - Friends and Family $3,000.00  
Bank loan $30,000.00  
Total Debt   $33,000.00
EQUITY + DEBT   $34,000.00

5.3 Financial Assumptions

Amortisation of Patent (per annum) 5%

Cost of Sales growth rate to remain at 20%

Page 14 of 24
Depreciation – Laptops (per annum) 7%
Depreciation - Office Fittings (per annum) 5%
Depreciation – Company vehicles (per annum) 10%
Dividends to increase (per annum) by 5%
Interest on Loan (per annum) 5%
Sales Revenue growth rate to remain at 20%
Selling Price to remain at (per month) $250
Tax on profit to remain at 12.5%
Telephone expenses increase (per annum) by 4%
Salaries to increase (per annum) by 5%

5.4 Sales and purchases forecast

TOTA
Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec L

New
companies
added 1 0 1 3 7 10 15 5 0 0 0 0 42
Companies
using the
system 1 1 2 5 12 22 37 42 42 42 42 42
Sales in
Value 250 250 500 1250 3000 5500 9250 10500 10500 10500 10500 10500 72500

Selling Price 250

Production cost 550

Cost of sales (42 2310
*550) 0

5.5 Statement of Changes in Equity

Statement of Changes in
Equity for Year 1 Year 2 Year 3
Share Retained Share Retained Share Retained
  Capital Profit Capital Profit Capital Profit
Balance at 1 January 1000.00   1000.00 18500.00 1000.00 44808.19
Total income for the period   21000.00   28933.19 38198.18
Dividends Paid   2500.00   2625.00 2756.25
Balance at 31 December 1000.00 18500.00 1000.00 44808.19 1000.00 80250.12

Page 15 of 24
5.6 Cash Flow Projection

Jan Feb Mar Apr May JuneAug July

Sept Oct Nov Dec TOTAL
3020
Opening balance 22735 20920 19355 18540 19510 22980 0 38670 47165 55660 64155
CASH INFLOWS
Equity and Debt 34000 34000

1050
Sales Revenue 250 250 500 1250 3000 5500 9250 0 10500 10500 10500 10500 72500
1050
TOTAL INFLOWS 34250 250 500 1250 3000 5500 9250 0 10500 10500 10500 10500 106500

CASH OUTFLOWS

Advertising Expenses 150 150 150 150 115 115 115 115 90 90 90 90 1420
Dividends Payment 2500 2500
Electricity 100 100 100 100 100 100 100 100 100 100 100 100 1200
Insurance 75 75 75 75 75 75 75 75 75 75 75 75 900
Interest on loan 1200 3000
Internet – Wifi 80 80 80 80 80 80 80 80 80 80 80 80 960
Laptops 2250 2250
Live server expense 40 40 40 40 40 40 40 40 40 40 40 40 480
Office Fittings 4500 4500
Office Stationery 100 100 100 100 100 100 100 100 100 100 100 100 1200
Patents 2700 2700
Professional Support 250 250 250 250 250 250 250 250 250 250 250 250 3000
Rent and rates 100 100 100 100 100 100 100 100 100 100 100 100 1200
Telephone Expenses 75 75 75 75 75 75 75 75 75 75 75 75 900
Transport 95 95 95 95 95 95 95 95 95 95 95 95 1140
Salaries 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000
TOTAL OUTFLOWS 11515 2065 2065 2065 2030 2030 2030 2030 2005 2005 2005 5705 37550

Closing Balance 22735 20920 19355 18540 19510 22980 30200 3867 47165 55660 64155 68950
Page 16 of 24
 0

Page 17 of 24
5.7 Projected Income Statement

  Year 1 Year 2 Year 3

Sales Revenue   72500.00   88700.00   104400.00
Cost of Sales   23100.00   27720.00   33264.00
Gross Profit   49400.00   59280.00   71136.00
OPERATING EXPENSES            
Advertising Expenses 1420.00   1080.00   1080.00  
Salaries 12000.00   12600.00   13230.00  
Transport 1140.00   1140.00   1140.00  
Office stationary 1200.00   1200.00   1200.00  
Electricity 1200.00   1200.00   1200.00  
Telephone expenses 900.00   936.00   973.44  
Insurance 900.00   900.00   900.00  
Internet – Wifi 960.00   960.00   960.00  
Live server expense 480.00 480.00 480.00
Rent and Rates 1200.00   1200.00   1200.00  
Professional Support 3000.00   3000.00   3000.00  
Amortization of Patents     135.00   135.00  
Depreciation - Office Fittings     225.00   225.00  
Depreciation – Company Vehicles         600.00  
Depreciation - Laptops     157.50   157.50  
TOTAL OPERATING EXPENSES   24400.00   25213.50   26480.94
EBIT   25000.00   34066.50   44655.06
Interest on loan 1000.00 1000.00 1000.00
Net income before tax 24000.00 33066.50 43655.06
Taxation (12.5% on profit)   3000.00   4133.31   5456.88
NET PROFIT   21000.00   28933.19   38198.18

5.8Projected Statement of Financial Position

YEAR 1 YEAR 2 YEAR 3

ACC ACC ACC
  COST DPN NBV COST DPN NBV COST DPN NBV
Non-Current
Assets            
Tangible Assets            
Office Fittings 4500.00 4500.00 4500.00 225.00 4275.00 4500.00 450.00 4050
Company
Vehicles   0.00 6000.00 6000.00 6000.00 600.00 5400
Laptops 2250.00 2250.00 2250.00 157.50 2092.50 2250.00 315.00 1935.00
  6750.00 6750.00 12750.00 382.50 12367.50 12750.00 1365.00 11385.00
Intangibles            

Page 18 of 24
Assets
Patents 2700.00 2700.00 2700.00 135.00 2565.00 2700.00 270.00 2430.00
Total Non-
Current Assets   9450.00   14932.50   13815.00
             
Current Assets            
Inventory   3000.00     3000.00     3000.00  
Bank and cash   43050.00     62009.00     99892.00  
Total Current
Assets   46050.00   65009.00   102892.00
TOTAL
ASSETS   55500.00   79941.50   116707.00
             
Equity            
Ordinary Shares   1000.00   1000.00   1000.00
Retained Profit   18500.00   44808.19   80250.12
Total Equity   19500.00   45808.19   81250.12

Current
Liabilities            
Tax   3000.00     4133.31     5456.88  
Debt 3000.00
Long term
Liabilities            
4% Loan
Payable (5
years)   30000.00     30000.00     30000.00  
TOTAL
LIABILITIES   36000.00   34133.31   35456.88
      55500.00     79941.50     116707.00

5.9 Projected Statement of Cash Flows

  Year 1 Year 2 Year 3

Cash Flow from Operating
Activities        
Profit before interest and tax 25000.00   34066.50 44655.06  
Adjustments for Depreciation 0.00   382.50 982.50  
Adjustments for Amortisation 0.00   135.00 135.00  
Operating Profit before Working
Capital Changes   25000.00 34584.00   45772.56
Interest paid -1000.00   -1000.00 -1000.00  

Page 19 of 24
 Income tax paid 0.00   -3000.00 -4133.31  
Net Cash from Operating Activities   -1000.00 -4000.00   -5133.31
         
Cash Flow from Investing Activities        
Purchase of intangible Assets 2700.00   0.00 0.00  
Purchase of tangible Assets 6750.00   6000.00 0.00  
Net Cash used in Investing Activities   -9450.00 -6000.00   0.00
         
Cash Flow from Financing Activities        
Proceeds from Issues of Shares 1000.00   0.00 0.00  
Proceeds from Borrowings 30000.00   0.00 0.00  
Dividends Paid -2500.00   -2625.00 -2756.25  
Net Cash from Financing Activities   28500.00 -2625.00   -2756.25
Net Increase in Cash and Cash
Equivalents   43050.00 -21959.00   46823.35
Cash and Cash equivalents at 1
January   0.00 43050.00   65009.00
Cash and Cash equivalents at 31
December   43050.00   65009.00   111832.35

5.10 Ratio Analysis

Profitability ratios

Ratio Year 1 Year 2 Year 3 Comment

Gross profit 49 400 59 280 71 136 The ratio is

∗100 ∗100 ∗100
margin 72 500 87 000 104 400 constant
indicating that
Gross profit = 68.14% = 68.14% = 68.14% the business is
¿ ∗100 generating a
Sales
constant amount
of money for
each dollar of
sale

Operating Profit 25 000 34 066.50 44 655.06 The ratio is

∗100 ∗100 ∗100
Margin 72500 87 000 104 400 increasing
indicating that
EBIT = 34.48 % = 39.16% = 42.77% the company’s
¿ ∗100 profitability is
Sales
increasing

Page 20 of 24
 Net Profit 21000 28 933.19 38198.18 The ratio is
∗100 ∗100 ∗100
Margin 72500 87 000 104 400 increasing
indicating that
Net Profit = 28.97 % = 33.26% = 36.59% the company’s
¿ ∗100 efficiency at
Sales
converting sales
into profit
increases

Return on 21000 28 933.19 38198.18 The ratio is

∗100 ∗100 ∗100
Equity(ROE) 19500 45 808.19 81 250.12 decreasing
indicating that
Net Profit = 107.69% = 63.16% = 47.01% the company
¿ ∗100 becomes less
Owner ’ s Equity
effective at
generating profit
from existing
assets

Liquidity ratios

Ratio Year 1 Year 2 Year 3 Comment

Current ratio 46 050 65 009 102 892 The ratio is increasing

6 000 4 133.31 5 456.88 indicating that the
Current assets company increases its
¿ capability to pay off the
Current liabilities = 7.68 = 15.73 = 18.86
current liabilities using
current assets
Working capital ratio 43 050 60 875.69 97 435.12 The ratio is increasing
72 500 87 000 104 400 indicating that the
Current assets−Current liabilities company has the
¿ financial resources to
Sales = 0.59 = 0.70 = 0.93
meet all of its short-
term financial
obligations

Page 21 of 24
Leverage ratios

Ratio Year 1 Year 2 Year 3 Comment

Debt to equity 55500.00 79 941.50 116707.00 The ratio is

ratio 19500.00 45 808.19 81 250.12 decreasing
indicating that
Total assets = 2.85 = 1.75 = 1.44 the company has
¿ ' less liabilities
Owne r s equity
than assets
Interest coverage 25 000 34 066.50 44 655.06 The ratio is
ratio 1000 1 000 1 000 increasing
indicating
EBIT = 25.00 = 34.07 = 44.66 greater financial
¿ health and the
interest expenses
increase in the
ease to pay
interest on the
company’s
outstanding debt

Activity ratios

Ratio Year 1 Year 2 Year 3 Comment

Stock 365∗3 000 365∗3 000 365∗3 000 The ratio is decreasing
turnover(days) 23 100 27 720 33 264 indicating that the company
is holding its inventory
365∗Average stock = 48 days = 40 days = 33 days longer than the previous
¿ year(slow moving goods)
Cost of sales

5.11 Contribution
Number of units sold 290
Sales $72 500.00
Variable costs $25 000.00
Contribution in dollars $ 72500.00−$ 25 000.00

¿( Sales−Variable costs) ¿ $ 47 500.00

Page 22 of 24
5.12 Break-even Point

Fixed costs $7 500.00

Contribution per unit

Contribution $ 47 500.00
¿
number of units 290

¿ $ 163.79

$ 7 500.00
Break-even point in units $ 163.79

¿ costs ¿ 45.79
¿
Contribution per unit
≈ 4 companies using the
system each year

Break-even point graph

Break-even analysis
$18,000
$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$-
0 5 10 15 20 25 30 35 40 45 50 55 60 65

Fixed costs Variable costs Total costs Sales

5.13 Margin of Safety

Break-even point in dollars 45.79∗$ 250.00

¿(Break even point per unit∗Selling price) ¿ $ 11 447.50

Margin of safety in dollars $ 72500.00 – $ 11 447.50

Page 23 of 24
¿( Sales−Break even point ) ¿ $ 61052.50

Page 24 of 24