Professional Documents
Culture Documents
1.1 BACKGROUND
For the rapid economic development of Nepal, there is need to increase investment.
As Nepal has adopted liberal, open market economic development policy, the role of
private sectors has increased significantly. A large amount of private investment is
required for the development of industries, business and infrastructures. There is
greater interest in stock market and new business establishment in the recent years
which has increased the investment in such areas significantly so there is growing
interest in such areas as well.
The company aims to mobilize small savings into investment and such savings shall
be invested in stock and a share of profitable companies. The capital collection is
done from both Loan and Equity. There is 1 owner of the company who also work as
manager. Similarly, there will be 2 business analyst and 1 accountant who help to
provide client the necessary information and necessary information of the
organization.
The Kathmandu is the most popular area of Nepal where people from different area
comes to have the facilities here and to do their business. All the people from different
region come here to take the opportunities. Similarly, all kinds of facilities are
available here and there is development of all types of infrastructures. So there are
large no of people who come to Kathmandu for different purposes and invest money
in Kathmandu.
The business would be done in Thapathali as it is one of the business hubs and people
transact in this place regularly. The customers of the products are mainly young and
inspiring entrepreneurs and people who like to invest their money to get profitable
return. The people will invest in different sectors through advice to get profitable
return. The people from different area visit this location frequently so it is a major
hub for transaction of different kinds of business activities encouraging people to visit
this place.
The newly started business is about providing the investment facilities to the people.
It will provide different facilities to cater to the needs and wants of the people to
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maximize the return of the people. The people are looking to invest in various sectors
as the incomes of the people are growing on yearly basis. The people are getting more
interested in investing in stock market and other areas but they are not fully sure on
the sectors they want to invest in so the business will facilitate them to get their
maximum return. It will also support many new ventures that want to start the
business and serve different types of goods and services.
Administration (1 Person)
Manager- owner, manage personnel in the company, is the person all personnel
report to, and oversees all the activities
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1.2.2 ORGANIZATION STRUCTURE
Manager
At the top of the structure is the manager who oversees all the business activities and
monitors the business activities. The accountant and business analyst is under
manager who helps for smooth operation of business. The accountant helps to manage
the fund of the business and also for internal and external reporting of business. The
business analyst will analyze different business sectors that can be profitable and
consult with customers on the analysis of business that s/he will perform.
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Product/Service: The company will provide following services:
Price: The company will follow competition based pricing i.e. it will charge
commission and other charges as per the competitors or even slightly lower to
attract customers to the investment company.
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Promotion: The company will mostly rely on word of mouth to get its
customers. However, it will be promoting the business on digital media mostly
on social sites and business related websites where there are prospect
investors.
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CHAPTER II: ANALYSIS OF SCENARIO
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2.2.3 ECONOMIC ENVIRONMENT
Various economic factors like inflation rate, economic growth, economic stability,
etc. does affect our business. The increase in inflation rate will decrease the real rate
of return people get and people will also have less money to invest in the market
which directly impacts the business operation. Economic growth increases the per
capita income which results in the increasing investing power of the customers. It can
increase the revenue of business.
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CHAPTER III: MARKETS AND COMPETITION
K&B Investment Company has segmented its market on the basis of demographic,
psychographic and behavioral aspects:
• Demographic aspects
• Psychographic aspects
i. Highly social.
ii. Looking to take risk to get higher return.
iii. Reading business magazine and online portals like merolagani, onlinekhabar,
sharesansar etc.
iv. Appearing in business and investment related investments.
• Behavioral aspects
K&B Investment Company has based its behavioral segmentation on the buying
pattern of the customers. They are:
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3.2 MARKET NEEDS
K&B Investment Company is located at Thapathali, Kathmandu which is a business
centered area. It is the place where most of the business houses are located and many
people come there for business activities. Numerous investment companies are
present in this area. Besides this most investment companies only focus on investing
other people money in capital market and very few provide venture capital services
which K&B Investment Company provides. In this emerging world of business the
service of venture capital and venture funding is one of its key advantages. The
people go to Kathmandu area for day to day transaction along with other facilities so
K&B Investment Company will be located in Thapathali area where the people will
come in a regular basis.
3.4 COMPETITORS
Increasing number of investment companies will give a high level of competition for
K&B Investment Company. The investment firms present in Thapathali area along
with some in Lalitpur are the major competitors. They sell their products and services
in almost same price or even in some cases lower prices. Therefore, the customers can
prefer to go these companies as they are already established business rather than
coming to the new investment company. They have been using several pricing and
promotional strategies in order to face competition.
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CHAPTER IV: FINANCIAL PLAN
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different types of expenses like purchase of furniture, registration fees, advance rent,
and the initial marketing expenses. The detail of the start up expenses is shown in
Annex 1.
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total assets with same level of liabilities and equity and the total balance at the end of
year 5 is Rs. 15,645,826. The overall pro forma balance sheet of K&B Investment
Company for five years is disclosed in Annex 5.
Financial Ratios are related to liquidity like current ratio, profitability ratio and
solvency ratio.
K&B Investment Company has maintained its gross profit margin above 65%
throughout the years of operation. The margin is almost consistent with some
deviations in between but the margin is quite profitable.
Initially, the profit margin is 5.20%. It is increasing and reached to 16.71% at the
end of 5 years. The ratio has decreased in last year due to high operating cost in
the last year.
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Return on Asset:
The return on asset is 23.5% in the first year. The return has increased in the next
2 years but it has declined in the next 2 years due to increase of cost and increase
of assets in the last 2 years.
The operating profit margin is 8.28% in the first year and has increased to 22.45%
in the coming years which shows growth in revenue.
Return on Equity:
The return on equity is 46.22% in the beginning and has increased to 69.56% in
the next 2 years with decline in next 2 years due to increase in equity and decrease
in revenue.
Dividend Pay-Out:
The dividend is distributed on the basis of the capital and the income earned. At
first 50% dividend is declared and the next year dividend is decreased a bit for
retaining the profit for expansion. In later years the dividend has been increased to
70%. The company plans to maintain a constant ratio of at least 50%.
Current Ratio:
The current ratio started with 2.61 in the first year and increased to 3.55 within 5
years. The ratio is quite favorable with no sharp increase showing K&B
Investment Company has used its cash effectively as having too much cash is also
not favorable.
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Quick Ratio:
The quick ratio of the company is quite similar to current ratio as there is minimal
inventory of the firm. This is one of the benefits of the firm as it requires low
inventory for its operation.
As the firm has low inventory its inventory turnover is very high. In the first year
the turnover is 243 times and the ratio has increased to 1350 times in next 5 years.
The account receivable turnover ratio is 47 times in the first year and has
decreased in the next 5 years. It shows that the account receivable has increased
sharply while the revenue has increased gradually. The company should focus to
maintain a constant account receivable.
The account payable turnover ratio is 15 times at first and has decreased in the
next 5 years. It shows that the payable has increased in the coming years and also
the cost has not increased so much in the last 5 years so the ratio has decreased.
The total assets turnover ratio is 4.51 times at first and has decreased to 2.52. It
shows that the total asset has increased in the next 5 years so the ratio has
decreased in the coming years.
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Fixed Assets Turnover Ratio:
The fixed assets turnover ratio is 8.83 times in first year and has increased to 93
times as the revenue has grown in the next 5 years and there has been no addition
of fixed assets in the future years.
The debt equity ratio is 56% in the first year and has decreased in the next 5 years
as the debt has decreased in the next 5 years and equity has increased in next 5
years as well.
The total asset to equity ratio is 1.97 times at the beginning and has increased to
2.17 times in the next 5 years. This shows a good balance between assets and
equity as the assets are just higher than equity.
The total net worth to total outside ratio is 1.03 times and has decreased in the last
2 years due to increase in liabilities in the last 2 years. The capital has also
increased but the liabilities have increased in greater proportion than the increase
in capital.
The interest coverage ratio is 6.18 times in the first year. It has increased to 338
times in the next 5 years due to decrease in interest and increase in income for the
next 5 years.
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Debt service coverage ratio:
The debt service coverage ratio is 5.23 times in the beginning and has increased to
29.90 times in the next 5 years. It is due to decrease in debt in the next 5 years and
increase in revenue in the next 5 years.
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CHAPTER V: RISKS AND CONTINGENCIES
To solve these risks, the management will try to motivate its employees by providing
several contingent incentives and target bonuses to its employees and the organization
will be involved along with increase in pay in yearly basis. Agency problem is one of
the common problems where there is conflict of interest between management and
staff. The business will try to not have agency problem by setting an ulterior goal for
all and also have clear communication of goals of both staff and managers to satisfy
the goal. There can also be information leak from within. The information is the most
valuable asset for the firm as information helps to take business decisions in almost all
cases so there should not be information leak to others. To ensure this the company
can have secured connection to prevent leak from online sources and from networked
resources. For leaking from offline sources there should be proper trust of employees
which will be gained from experience and working environment.
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5.3 FUTURE PLAN AND EXIT STRATEGY
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Contents
CHAPTER I: INTRODUCTION ................................................................................................. 1-5
1.1 BACKGROUND .............................................................................................................. 1
1.2 ORGANIZATION AND MANAGEMENT TEAM ....................................................... 2
1.2.1 MANAGEMENT TEAM ......................................................................................... 2
1.2.2 ORGANIZATION STRUCTURE ............................................................................ 3
1.3 PRODUCTS AND SERVICES ....................................................................................... 3
CHAPTER II: ANALYSIS OF SCENARIO ............................................................................... 6-7
2.1 MARKETS AND COMPETITION ...................................................................................... 6
2.2 LEGAL FRAMEWORKS, ENVIRONMENTAL AND SOCIAL FACTORS .................... 6
2.2.1 POLITICAL AND LEGAL ENVIRONMENT ............................................................. 6
2.2.3 ECONOMIC ENVIRONMENT..................................................................................... 7
2.2.4 SOCIO-CULTURAL ENVIRONMENT ....................................................................... 7
2.2.5 TECHNOLOGICAL ENVIRONMENT ........................................................................ 7
CHAPTER III: MARKETS AND COMPETITION ................................................................... 8-9
3.1 MARKET SEGMENTATION AND TARGET MARKET ................................................. 8
3.2 MARKET NEEDS ........................................................................................................... 9
3.3 MARKET TREND................................................................................................................ 9
3.4 COMPETITORS ................................................................................................................... 9
CHAPTER IV: FINANCIAL PLAN ....................................................................................... 10-16
4.1 IMPORTANT ASSUMPTIONS ......................................................................................... 10
4.2 FINANCIAL DETAILS OF STARTUP EXPENSES ........................................................ 10
4.3 SALES FORECAST AND COST OF GOODS SOLD ...................................................... 11
4.4 BUDGETED LOAN REPAYMENT SCHEDULE ............................................................ 11
4.5 PROJECTED INCOME STATEMENT ............................................................................. 11
4.6 PROJECTED BALANCE SHEET ..................................................................................... 11
4.7 PROJECTED CASH FLOW ............................................................................................... 12
4.8 FINANCIAL RATIOS ........................................................................................................ 12
4.8.1 PROFITABILITY RATIOS ......................................................................................... 12
4.8.2 LIQUIDITY RATIOS .................................................................................................. 13
4.8.3 EFFICIENCY RATIOS ................................................................................................ 14
4.8.4 SOLVENCY RATIOS ................................................................................................. 15
4.9 NPV AND IRR.................................................................................................................... 16
4.10 PAYBACK PERIOD ........................................................................................................ 16
CHAPTER V: RISKS AND CONTINGENCIES ................................................................... 17-18
5.1 INTERNAL RISKS............................................................................................................. 17
5.2 EXTERNAL RISKS ........................................................................................................... 17
5.3 FUTURE PLAN AND EXIT STRATEGY ........................................................................ 18
5.3.1 FUTURE PLAN ........................................................................................................... 18
5.3.2 EXIT STRATEGY ....................................................................................................... 18