OPERATIONS MANAGEMENTOPERATIONS MANAGEMENT

Operation management is a systematic direction and control of the process that transform inputs into finished goods or services.

Operation managementOperation management

• Inputs Transformation

processes

•Manpower•Equipment/Machines

•Money•Energy•Utilities

•Raw materials

Outputs

Performance feedback.Efficiency evaluation

•Goods•Services

Fig.1 The production and operations Management system

OPERATIONS/PRODUCTION TYPES OPERATIONS/PRODUCTION TYPES OF ORGANIZATIONSOF ORGANIZATIONS

1.1 Manufacturing organizationsManufacturing organization include all chemical and process organization, engineering, mining, etcTransformation of inputs in terms of form, shape, structures, etc., to obtain final product.

There are three major categories:(a) Mass production organizations(b) Job shop production organizations(c) Batch manufacturing organizations

1.2 Service Organizations• Service organization change the

state/condition utility of a costumer. These include training institutions, hospitals, prison, hotels and accommodations, etc.

1.3 Supply Organizations• Here there is a change of ownership of

item. Supply organizations includes; shops, fuel station, commercial banks, etc.

1.4 Transport organizations• There is a change in location utility

from location A to B• These includes land transportation,

air and sea transportation.Summary: It is possible to find all four features in one organization, but the core feature is the one which underpin the identity of that particular organization.

2.0 LOCATION OF FACILITIES2.0 LOCATION OF FACILITIES2.1 Basis for choosing a Location• Availability/existence of infrastructure (road &

utilities)• Proximity to markets• Favorable labor climate• Proximity to raw materials• Security (availability)• Cost of land or site

2.2 Basis for choosing an equipment Technical factors Cost (economic) factors

2.2.1 Technical Factors• Competitive advantage;• Demand for product (specific against general

purpose equipment);• Risk of obsolescence;• Quality of the work produced;• Maintenance costs and reliability

2.2.2 Cost (economic) Factors Direct labour Direct materials Other operating costs Interest on capital invested

2.3 Two main categories of identifying the site location

• Quantitative or/and • Qualitative methods

Specific Techniques/Methods Used• Equal Weight method• Variable Weight method• Weight-cum-Rating method• Factor Point Rating method (poor, fair,

adequate, Good, Excellent)• Composite Measurement method (Multiple

criteria technique)

Consider an example Equal Weight MethodConsider an example Equal Weight Method

Factors Max. Point

Site 1 Site 2 Site 3 Site 4

F1 10 3 6 8 2

F2 10 4 5 9 3F3 10 7 2 6 3Sum of site ratings

30 14 13 23 8

Consider an example for Variable Weight Consider an example for Variable Weight MethodMethod

Factors Max. Point

Site 1 Site 2 Site 3 Site 4

F1 400 300 350 350 200

F2 300 150 200 150 100F3 100 50 75 80 40Sum of site ratings

800 500 625 580 340

Consider an example for Weight-cum-Consider an example for Weight-cum-Rating Method Rating Method

Factors Weight to

factor

Site 1 Site 2 Site 3 Site 4

F1 2 4 6 8 3

F2 3 4 4 9 2F3 5 5 3 7 2Site rating 45 39 78 22

Multiple criteria/Composite TechniqueAdvantages- ability to combine all types of criteria under

one denomination;- It is a technique that consider qualitative and

quantitative factors- it forms the basis for discussion.

Disadvantages- it is too subjective for qualitative attributes;- difficulty to perceive the problem in terms of

weight x score.

Consider example which has both qualitative and Consider example which has both qualitative and quantitative Factors – quantitative Factors – Composite Measure or Multiple TechniqueComposite Measure or Multiple Technique

Factors Location A Location B Location CCost of land including building development

55m 49m 45mLabour and raw materials charges

40m 25m 32mPower and water 10m 9m 10mFreight for incoming and outgoing 85m 85m 92m

Total 190m 168m 179mCost of living Moderate Low ModerateHousing Facilities Excellent Poor GoodCommunity Attitude Good Encouraging Indifferent

3. .03. .0 FACILITY LAYOUTFACILITY LAYOUTThere are 4 major kinds of Layout:1. Process Layout

In process Layout all machines/ Facilities Performing similar functions are placed in one location.

Advantages of Process Layout.– It has high Flexibility i.e. can accommodate changes

in production volumes without suffering high costs.– Can be adapted to skilled Labour hence makes

supervision easy.

Cont… FACILITY LAYOUTCont… FACILITY LAYOUTDisadvantages• Occupies a lot of space• It requires people who are well trained.

2. Product LayoutMachines/facilities are placed according to the production requirement. It is used in continuous production systems such as soft drink manufacturing

Cont… FACILITY LAYOUTCont… FACILITY LAYOUT

Advantages• High production efficiency.• Possible to employ semi skilled Labour.

Disadvantages• Lack of Flexibility in terms of ability of cope with

changes in production volume and product variety.

• One needs inventory between work stations to de-couple station interdependence

Cont…. FACILITY LAYOUTCont…. FACILITY LAYOUT

3. Hybrid Layout• This is a mixture of product and process

Layout.• The hybrid layout combines the advantages of

the two Layouts. An example is organization which fabricates components before assembling them into finished products.

• The former can be done through process Layout and the latter by a product Layout

Cont…. FACILITY LAYOUTCont…. FACILITY LAYOUT

4. Fixed Position LayoutThis is possible when the product is so large such that cannot move around work situations, for instance in ship building and dam construction.

Organization and Management

(O&M)

O&MO&M• The Organization and Management

(O&M) study aims at drawing up an effective organisation and management plan to achieve the entrepreneur’s objectives. It distinguishes the organisation and management activities for the pre-operating period from that for the project operation

Organization and Management Organization and Management The O&M study generally encompasses the

following aspects: • Form of organization• Organogram (organizational structure)• Staffing pattern• Pre-operating activities• Pre-operating costs• Schedule of pre-operating activities via

Gantt Chart

Form of OrganizationsForm of Organizations

• Single (sole) proprietorship • Partnership • Private Limited Company or

close corporation or Public Limited Company

Legal PersonalityLegal PersonalitySole

ProprietorshipPartnership Limited Liability

Advantages• Low start-up costs• Owner has direct

control and makes all decisions

• All profits go to the owner

Advantages• Divided start-up costs• Shared managerial

and leadership responsibilities between partners

• Easier access to capital

Advantages• Liability is limited to the

business• Easier to raise capital• Management is more

accountable• Has a board of directors

Disadvantages• Owner is

personally liable for all losses

• Difficult to raise additional capital

• Management is limited

Disadvantages• Partners are

personally liable for losses

• Profits are divided• Confusion in

managerial roles• Partners disputes

Disadvantages• Closely regulated by

Government• Extensive record-

keeping• Most expensive to start• Taxes are charged twice

Single (sole) proprietorship is Single (sole) proprietorship is characterised by:characterised by: • One person is sole owner;• Less government control;• Generally, no income tax on business,

only on owner;• Unlimited personal liability for

business debts;• Termination upon death of owner;• Owner is mostly the entrepreneur and

general manager.

Partnership characterised by:Partnership characterised by: • Two or more persons as owners;• Some owners may be active in

management, others only as financiers;• Partner’s rights and duties defined by

partnership agreement;• Unlimited personal liability for business

debts;• Termination upon death of any one of the

partners;

Company or close corporation (cc) Company or close corporation (cc) characterised by:characterised by: • Corporation has separate and legal

personality distinct from owners (stockholders or shareholders);

• Continuity unaffected by debt or transfer of ownership;

• Subject to more government control than a sole proprietorship or partnership;

• Income tax on profits and dividends;

Cont…Cont… Company or close Company or close corporation (cc) characterised bycorporation (cc) characterised by:: • Corporation mostly managed by

professional managers as distinct from the shareholders;

• Close corporations have mostly family members and/or friends as stockholders;

• A corporation which issues stocks to the public is also called a public company.

The choice of organization The choice of organization depends ondepends on:: • The objectives of the entrepreneur;• Capabilities of the entrepreneur, such as his

managerial and technical expertise, size of investment, desire for financial and management control, ability to attract financing, protection of confidential information;

• Entrepreneur’s view of the liabilities associated with each type of organisation.

How will the business be managed How will the business be managed and operated?and operated? • Some structure of authority and

responsibility (chain of command), • Division of labour (job distribution), and • Definition of what each one must do in

the business (job description). • And therefore, the business needs an

organisational structure. This is mostly depicted through an organisation chart.

Organizational Structure (Organogram)Organizational Structure (Organogram)

An organogram shows:

• The chain of command;• Relationship; and• Positions

Designing an organization structureDesigning an organization structureRequires an understanding of the following elements: • Identification of the major and key activities to be

done to meet business (project) objectives;• Grouping of these activities into related functions;• Assigning of various functions to specific

positions;• Determination of relationships of the various

activities to achieve co-ordination and unity of effort;

• Fixing of responsibility and authority for each task.

Organizational Structure (Organogram)Organizational Structure (Organogram)Owner-Director

Operations AdministrationMarketing Finance

Bot

tling

For

ewom

an

Sal

es-p

erso

n

Exp

endi

ture

Per

sonn

el

Rec

ruitm

ent a

nd

Dev

elop

men

t

Rev

enue

Cas

ting

Fore

man

Staffing PatternStaffing Pattern

Staffing pattern indicates the personnel requirement by function (marketing, production, administration, finance) and an estimate of compensation for work input. Personnel requirement include:

• Position titles;• Necessary qualification, and • Number of personnel for each

position

Lending institutions normally require:Lending institutions normally require:

• Bio-data of the entrepreneur and his key staff;

• Management’s experience, character and capability are crucial factors in loan approval, even in determining collateral requirements and other loan conditions.

What pre-operating activities must be What pre-operating activities must be undertaken before the business can operate?undertaken before the business can operate? • Attendance at a training programme (whether

skill-related, management or entrepreneurship),

• Preparing a business plan, doing a market survey, making trips to machinery and raw materials suppliers,

• Registering the business, • Hiring a consultant, • Trial operation, etc.

Usefulness of a Gantt chartUsefulness of a Gantt chart Helps an entrepreneur to list and document

all pre-operating activities and decides:• When each activity will take place and • How long it will be, and• Who does it,• How much it will cost (determines pre-

operating expenses)

O&M CostsO&M Costs • Pre-operating investments (POI);• Costs of fixed assets such a typewriter, furniture

and fixtures, cabinets, electric fans, calculator, computer, vehicle, etc.

• Administrative costs (other operation costs or indirect costs) include the salary of the office secretary, directors, managers, bookkeeper, driver, security guard, depreciation of fixed assets, furniture and fixtures used in the office, communications, and office supplies, etc.

FinanceFinanceFinance provides:• the needed funds under the most

favourable terms, and • sees to it that the funds are

effectively used

Relationship of Finance with Relationship of Finance with other Business Functionsother Business Functions

Marketing Operations O&MFoundation

Finance

Operations Firms May Need Capital for:Operations Firms May Need Capital for:• Land• Building• Machinery and Equipment • Furniture and Fixtures• Accounts Receivable• Supplies• Finished Goods• Work-in-Process• Raw Materials• Cash• Pre-Operating Costs• Patents• Goodwill

Fixed Assets

Current Assets

Deferred Charges like Fixed Assets (non-tangible)

Sources of FinanceSources of Finance• Bank Credit/Overdrafts• Trade Credit• Instalment Credit • Customer advances• Lease/venture capital• Issue of share/debentures• Loans from banks/institutions • other financial institutions• Ploughing back of profits• Issue of shares• Issue of debentures• Loans from banks and other financial institutions• Ploughing back of profits

Short-term financing

Medium-term financing

Long-term financing

AN OVERVIEW ON FINANCEAN OVERVIEW ON FINANCE

CUSTOMERS

Final FinishedProduction and/or

Services

MARKET

FIXED INVESTMENT

Land

Buildings

Machines & Equipment Furniture, etc.

Depreciation

PRE-OPERATING EXPENSES

Registration & Licenses Business Plan Preparation

Trial Production & Skills Training

WORKING CAPITALRaw Materials Direct Labour (Wages)Utilities (Factory Overheads)

Selling & Administrative Expenses Interest loan repayment, and Tax etc.

PROFIT OR LOSS

CASHSALES

OWNER

Retained

EQUITY

Financial Statement

Investment Plan

Profit & Loss Statement

Cash Flow Statement

Balance Sheet Statement

Financial Analysis

LOAN

Withdrawn

Amortization

INVESTMENT PLANINVESTMENT PLAN

INVESTMENT PLAN (in Tshs) ITEMS

A. FIXED INVESTMENT1. Land 2. Building 3. Machinery & Equipment 4. Office Equipment

6. Others 5. Transport Equipment

Total Fixed Investment

1. Business Plan Preparation B. PRE-OPERATING INVESTMENT

Total Loan Equity

2. Licenses and Registration

Total Pre-Operating Investment (POI) 5. Others

3. Skills and management Training 4. Trial Production

C. TOTAL INVESTMENTS (A + B)

INVESTMENT PLANINVESTMENT PLAN

DIRECT OPERATING COST 1. Raw Materials

3. Salary for Production Staff 2. Salary for Marketing Staff

INDIRECT OPERATING COSTS Total Direct Operating Costs

2. Direct Labour Costs

1. Owner’s Salary

3. Factory Overhead

6. Office Supplies 7. Rentals 8. Other Expenses

4. Salary for Admin. & Finance Staff 5. Selling & Marketing Costs

Total Indirect Operating Costs (1) TOTAL ANNUAL OPERATING COSTS WORKING CAPITAL REQUIREDTOTAL PROJECT COST (C + D)

DEBT TO EQUITY SHARE (%)

(1) NOTE that this Indirect Operating Costs Still needs depreciation and POI amortization

INVESTMENT PLAN (Example of Filling/Service Station)INVESTMENT PLAN (Example of Filling/Service Station)(in Tshs)(in Tshs)

ITEMS A. FIXED INVESTMENT1. Land 2. Building 3. Machinery & Equipment 4. Office Equipment 5. Transport Equipment

Total Loan Equity 0 0

Total Fixed Investments B. PRE-OPERATING INVESTMENT

6. Others

180,000,000 15,789,4740

164,210,526105,000,000 95,789,4749,210,526

0 00 0

0

00

0 0285,000,000 260,000,00025,000,000

1. Business Plan Preparation

C. TOTAL INVESTMENTS (A + B)

5. Others (grills/plastering/etc.) Total Pre-Operating Investment (POI)

2. Licences and Registration

4. Trial Production Costs 3. Skills and Management Training

D. WORKING CAPITAL DIRECT OPERATING COSTS 1. Raw Materials Costs 2. Direct Labour Costs 3. Factory OverheadsTotal Direct Operating Costs INDIRECT OPERATING COSTS

1,699,800,00051,000,00017,412,600

1,768,212,600

1. Owner’s Salary 2. Salary for Marketing Staff

Total Indirect Operating Costs

4. Salary for Adm.& Finance Staff 3. Salary for Production Staff

5. Business Promotion & entertain 6. Office Supplies 7. Rent for Land Lease

WORKING CAPTIAL REQUIREDTOTAL ANNUAL OPERATING C

TOTAL PROJECT COST (C + D)

8. Other Expenses

EQUITY SHARE (%)

4,800,00000

19,140,0000

02,340,000

1,787,352,600

012,000,000

9,372,16550,000,00025,000,00034,372,165

335,152,165 285,152,16515 85

00

0OOOOO

25,000,000 275,780,000

00

15,780,00015,780,000

300,780,000

PROJECTED PROFIT & LOSSPROJECTED PROFIT & LOSS (In Tshs)ITEMS Year1 Year2 Year3 Year4 Year5

Planned Operations(in Units)A.Sales B.Direct Operating Cost1.Raw Materials Costs2.Direct Labour Costs 3.Factory OverheadTotal Direct Operating Costs C. GROSS PROFIT (A-B)

contcont’’d…d… Projected Profit & Loss Projected Profit & LossITEMS Year1 Year2 Year3 Year4 Year5

D.INDIRECT OPERATING COSTS

1.Owner’s Salary2.Salary of Marketing Staff3.Salary of Production Staff4.Salary of Admin.&Finance Staff

5.Selling & Marketing Costs6.Office Supplies7.Rentals8.Other ExpensesTotal Ind.Ope.Cost Bef.Dep.&POI

ContCont’’d… d… Projected Profit & LossProjected Profit & Loss(In Tshs)ITEMS Year1 Year2 Year3 Year4 Year5

9.Depreciation

10.POI AmortizationE.Total Ind.Operating CostsF.Operating Profit (C-E)G.InterestH.Profit Before Tax (F-G)I.TaxK.Profit (H-I)L.Breakeven point (E/C) 100%

DepreciationDepreciation

• Is derived from the Latin word ‘do’ meaning down and ‘pretium’ meaning price;

• In common use it means putting down the value of an asset due to wear, tear, passage of time, obsolescence, etc.,

Characteristic of DepreciationCharacteristic of Depreciation• Is always a fall in the value of asset• This fall is always gradual• The fall is of permanent character and it cannot be

recouped afterwards• It is a continuous process and it does not matter whether

the asset was put to use during the period or not• Is always on fixed assets and not on current or floating

assets• The fall is always in the book value of the asset and not

in market or exchange value• Is a result of the use of assets, passage of time and

obsolescence.

Need for Providing DepreciationNeed for Providing Depreciation

• To know the true profit and loss;

• To show true and fair view of financial position; and

• To provide funds for replacement of assets

Depreciation has Became Depreciation has Became Important in Production for:Important in Production for:

• Fixation of prices;

• Calculation of profit or loss analysis;

• Computation of taxable income;

• Calculation of managerial remuneration; etc.,

Factors to be Considered when Factors to be Considered when Determining DepreciationDetermining Depreciation

• Cost of the asset;• Useful life of the asset;• Salvage value;• Method of depreciation

Methods of DepreciationMethods of Depreciation

In this business plan will use:

Fixed installment or straight line method;

Fixed Installment or Straight Line Fixed Installment or Straight Line MethodMethod

Cost of the asset - Scrap value at the end

Depreciation = ------------------------------------------Life of the asset (number of years)

ContCont’’d… d… Projected Profit & LossProjected Profit & Loss ITEMS

Depreciation Calculator Value (Tsh) Period (yrs) AnnualDep’n

1.BUILDING 2.Machinery & Equipment3.Office Equipment4.Vehicles5.OthersTotalAmortization Calculator Value (Tsh) Period (yrs) Amort/yr

1.Pre-Operating Investment

PROJECTED CASH FLOWPROJECTED CASH FLOW

(In Tshs)ITEMS Year0 Year1 Year2 Year3 Year4 Year5

SalesA.Cash In Flow1.Cash Sales2.Receivable 3.Equity4.Fixed Investment Loan5.Working Capital Loan6. Beginning Cash Balance

Total Cash In Flow

ContCont’’d…. d…. Projected Cash FlowProjected Cash FlowITEMS Year

0Year1

Year2

Year3

Year4

Year5

Sales

B. Cash Out Flow

1.Total Investment

2.Direct Operating Costs 3. Total Ind. Oper. Costs bef. Dep’n and POI

4.Interest

5. Tax

Total Cash Out-Flow

ContCont’’d…. d…. Projected Cash FlowProjected Cash FlowITEMS Year

0Year1

Year2

Year3

Year4

Year5

Sales

C. Net Cash (A-B)

D. Loan Payments

1. Principal for Fixed Investment Loan 2. Principal for Working Cap. LoanTotal Loan Payments

E. Ending Cash Balance (C-D)

BALANCE SHEETBALANCE SHEET

Total Asset = Equity + Liabilities

PROJECTED BALANCE SHEETPROJECTED BALANCE SHEET

(In Tshs)ITEMS Year0 Year

1Year2

Year3 Year4 Year5

1. ASSETS1.1 CURRENT ASSETS1.Cash 2.Receivable3.InventoriesTotal Current Assets(A)

ContCont’’d….. d….. Projected Balance SheetProjected Balance Sheet

ITEMS Year0 Year1

Year2

Year3 Year4 Year5

1.2 Fixed Assets1.Land2.Building3.Machinery & Equipment4.Office Equipment5.Vehicles6.OthersTotal Fixed Assets

ContCont’’d…. d…. Projected Balance SheetProjected Balance Sheet ITEMS Year0 Year1 Year2 Year

3Year4

Year5

Accumulated DepreciationBook Value of Fixed Assets (B)POIAccumulated POIBook Value of POI (C )Total Assets (A+B+C)2. Liabilities & Equity2.1 Current Liabilities1. Account Payable2. Working Capital LoanTotal Current Liabilities(D)

Projected Balance Sheet Projected Balance Sheet ContCont’’d.d.

ITEMS Year0

Year1

Year2

Year3

Year4

Year5

2.2 Long Term Liabilities(E)

1. FIXED Investment Loan

Total Long Term Liabilities (E)

3. Equity 1.Owner’s Equity 2.Profit of Previous Period 3.Current ProfitTotal Equity (F)Total Liabilities & Equity (D+E+F)ROI(Profit/Total Assets)x100%

Financial AnalysisFinancial Analysis Potential entrepreneurs raise the

following issues: • Will the proposed business earn

adequate profits? • Can the future business meet its

obligations promptly? • Will an investment in the proposed

business be safe?

Cont……Cont…… Financial Analysis Financial Analysis Three sets of ratios are normally

measured and examined. These are: • Profitability, • Liquidity, and• Solvency

ProfitabilityProfitability The instruments used to measure

profitability are: – Net Profit Ratio, – Assets Turnover, and – Return on Investment (ROI)

Net Profit RatioNet Profit Ratio

measures the percentage ratio of net profit after taxes to net sales:

Net Profit After Taxes ___________________ = Net Profit Ratio Net Sales

Assets TurnoverAssets Turnover

is the ratio of annual net sales to the total assets used in the business. It measures the volume of sales derived from each unit of money invested in assets:

Net Sales ________________= Assets Turnover Ratio

Total Assets

Return on InvestmentReturn on Investment (ROI) (ROI)ROI is the combination of the two ratios above,

i.e., net profit and assets turnover ratios. It should be noted that neither the net profit ratio nor the assets turnover ratio by themselves provide an adequate analysis of the operating efficiency of the proposed business. The net profit ratio ignores the utilisation of assets, while the assets turnover ratio ignores profitability on sales. The use of the ROI ratio resolves these deficiencies by reflecting both factors in a single ratio.

Cont…Cont… Return on Investment Return on Investment (ROI) (ROI)ROI is given by:

Net Profit Ratio: x Assets Turnover Ratio: =

Net Profit After Taxes x Net Sales =Net Sales Total Assets

Net Profit After Taxes = ROITotal Assets

LiquidityLiquidity Examines the proposed business whether

it can meet all its future obligations promptly? The set consists of the following ratios:

• Current Ratio, • Acid Test (or Quick Ratio), • Average Collection, and • Inventory Turnover.

Current RatioCurrent Ratio Measures the ability of the proposed business to meet

all its short-term debts by relating current assets and current liabilities. A 2:1 ratio seems the most desirable one, but may not necessarily be valid in all cases. Current Ratios are sensitive to the practices within the industry in the country.

Current Assets _______________ = Current RatioCurrent Liabilities

SolvencySolvencyThis ratio assesses the financial strength of a

proposed business regarding its ability to meet its long-term financial obligations .

Total Debt ____________ = Debt-Equity Ratio Total Equity

SolvencySolvency• For bankers, a low debt-equity ratio will

be favourable since it indicates that there are enough assets to protect their principal lending.

• For stakeholders, a high debt-equity ratio may indicate increases in fixed charges against earnings and can consequently lead to decreases in future dividends

Profit & Loss Statement Using Transactions Profit & Loss Statement Using Transactions Cards of Company X in Dar es SalaamCards of Company X in Dar es Salaam

No Item Tshs.1 Office rent 50,000

2 Interest expenses 25,000

3 Sales 1,000,000

4 Selling & Marketing Costs 20,000

5 Tax Payable 10%

6 Depreciation of Office Equipment

50,000

Profit & Loss Statement Using Transactions Profit & Loss Statement Using Transactions Cars of Company X in Dar es SalaamCars of Company X in Dar es Salaam

No Item Tshs.7 Staff Salaries, etc. 130,000

8 Direct Labour 200,000

9 Raw Materials Purchased (in a period)

200,000

10 Raw Materials Beginning 100,000

11 Ending Stock of Materials 50,000

12 Factory Overhead 50,000

P & L Statement for X Company Using P & L Statement for X Company Using Transactions Cards of Company X in Dsm.Transactions Cards of Company X in Dsm.

Item Tshs ‘000Sales: 1,000Less: Cost of goods sold 500Gross Profit 500Less:Operating Expenses Office rent 50 Selling & administration 150 Depreciation of office equp.

50

Total Operating expenses 250

P & L Statement for X Company P & L Statement for X Company ContCont’’d.d.

Item Tshs TshsOperating Profit 250Less: Interest expenses 25Net Profit before tax 225Less: Tax (10%) 22.5Net Profit after tax 202.5

Balance SheetBalance Sheet (Transaction Cards of (Transaction Cards of Juakali Co. as of 31Juakali Co. as of 31stst August 2002) August 2002)

Items Tshs.

1. Cash 450

2. Accounts Receivable 2,000

3. Inventories 6,500

4. Land 1,050

5. Buildings & Improvements (net) 950

Balance SheetBalance Sheet (Transaction Cards Cont(Transaction Cards Cont’’d.)d.)

Items Tshs.6. Machinery (net) 1,000

7. Delivery Equipment (net) 500

8. Accounts Payable 450

9. Notes Payable 5,000

10.Capital 6,000

11. Retained Earnings 1,000

Balance Sheet as of 31Balance Sheet as of 31stst August August 2002 for Juakali Company2002 for Juakali Company

ASSETS

Current Assets Tshs.

Cash 450

Accounts receivable 2,000

Inventories 6,500

Sub-Total 8,950

Balance Sheet as of 31Balance Sheet as of 31stst August August 2002 for Juakali Company2002 for Juakali Company Cont Cont’’d.d.

Fixed Assets

Land 1,050

Building & Improvement (net) 950

Machinery (net) 1,000

Delivery Equipment (net) 500

Sub-Total 12,450

Balance Sheet Juakali CompanyBalance Sheet Juakali Company ContCont’’d.d.

Liabilities & Owner’s Equity

Liabilities

Accounts Payable 450

Long-Term Liabilities

Notes Payable 5,000

Sub-Total 5,450

Balance Sheet Juakali CompanyBalance Sheet Juakali Company ContCont’’d.d.

Owner’s Equity

Capital 6,000

Retained Earnings 1,000

Total Liabilities and Equity 12,450

Finance OverviewFinance Overview

• aschungu@gmail.com