Executive Summery This project incorporates a thorough interview about four Jhalmuri-wala, how they finance their business and how it is running. They run their business in a small scale with no long term debt. In addition our interview revealed that their business is 100% equity financed. This business has limited risk so return is also limited. Moreover because of investment limitation, the business doesn’t have any growth even they have more money to invest in business. In the long run the business will not sustain, because there is no chance to earn more from the business.
Collected Data | Jhalmuri Wala #1| Jhalmuri Wala #2| Jhalmuri Wala #3| Jhalmuri Wala # 4| General Information| Name| Manik| Hossain| Ali| Forid| Age| 25 years| 26 years| 26 years| 29 years| Business Length| 5 years| 5 years| 3 years| 7 years| Equity/Debt Fund| Equity funding| Equity funding| Equity funding| Equity funding| Initial Investment (Taka)| 750| 900| 1000| 700| Daily Investment (Taka)| 300| 250| 500| 400| Points of Sale| Maghbazar, Modhubag, Mir Bagh| Uttara Sector-4| Bashundhara Gate| Uttara, sector 3| Time To Start| Around 9. 30 a. m. | Around 7:30 a. . | Around 9:00 a. m. | Around 7:00 a. m. | Selling Hours| Approx. 8 hours a day| Approx. 10 hours a day| Approx. 10 hours a day| Approx. 9 hours a day| Risk| Mugging and Can’t runbusiness orgenerate enough salein heavy rain,freezing winter. Salesbecome lowin Ramadan. And due toillness he cannot run thebusiness. | Mugging and Can’t runbusiness orgenerate enough salesin heavy rain,freezing winter. Salesbecome lowin Ramadan. And due toillness he cannot run thebusiness. | Bashundhara authorities, mugging and Can’t runbusiness orgenerate enough salesin heavy rain,freezing winter.
Salesbecome lowin Ramadan. And due toillness he cannot run thebusiness. | Mugging and Can’t runbusiness orgenerate enough salesin heavy rain,freezing winter. Salesbecome lowin Ramadan. And due toillness he cannot run thebusiness. | Average Business Investment| Assets| | Long Term Assets (Taka)| 450| 650| 500| 300| Short term assets | | | | | Cash (Taka)| 50| 75| 150| 100| Inventory (Taka)| 250| 175| 350| 300| Average Financing:| Short Term Finance| N/A| N/A| N/A| N/A| Long Term Financing| | Long Term Debt| N/A| N/A| N/A| N/A|
Owner’s Equity (Taka)| 700| 900| 1000| 700| Average Income Generation: | Pricing Pattern of The Goods| Assumes| Set the price according to his competition| According to his cost| Assumes| Daily Sales (Taka)| 950| 1050| 1250| 850| Net Income (Taka)| 175| 125| 200| 125| Growth| Opportunity| Limited| Limited| Limited| Limited| Required Resources | Capital| Capital| Capital| Capital| Remarks| Lack of capital due to poverty and unable to get debt capital. In addition cannot generate huge amount of sales| Lack of capital due to poverty and unable to get debt capital.
In addition cannot generate huge amount of sales| Lack of capital due to poverty and unable to get debt capital. In addition cannot generate huge amount of sales| Lack of capital due to poverty and unable to get debt capital. In addition cannot generate huge amount of sales| Level of satisfaction throughout the year| Positive Response. | Positive Response. | Positive Response. | Negative Response. | A Sample Income Statement for Jhalmuri Business Income Statement For a day
Sales 1000 Cost of Goods Sold (800) Gross Profit 200 Others Expenses (50) Net Income 150 A Sample Statement of Owner’s Equity Statement of Owner’s Equity For a day
Owner’s Equity, beginning 825 Add: Net income 150 Less: Dividend (150) Owner’s Equity, ending 825 ROE = Net Income / Equity = 19% This means we get a total 19% return on equity Business Description We consider the Jhalmuri business a day to day business. First the jhalmuri wala (businessman) has to make an investment to buy some fixed assets.
In his case he has to buy a bowl, a tool, a bucket, a mug, a knife ; spoons. The current assets are inventories such as muri (Puffed Rice) ; different spices, oil, lemon etc. In addition he has to carry some cash for transportation and transaction cost. As we can see the business is 100% equity owned. There is no long term debt. So there is so interest expense. During the business he occurs additional expenses for example bribe a policeman. We assume that he uses the whole income for his family. So there is zero retain earnings.
Financial Analysis of the Jhalmuri Business * Their investment is quite low and because of their risk adverse nature, their return, that is the average profits are also quite low. * All types of asset are financed by their own equity. * The Jhalmuri Wala’s have financed their business with their own capital. They managed their equity either from family or relatives. * They have no long term debt. One of the main reasons is that they cannot generate enough sales thus their net income is very limited. So they cannot repay the loans along with interests. As we mentioned earlier the financed generated from the business is used to buy fixed assets like – a bowl, a tool, a bucket, a mug etc and current assets like – inventories. Also they keep some cash for transactions purposes. * Their business period is counted on day-to-day basis. They make their purchases very early in the morning with their amount of savings taking several hours to recover the daily investments they have incurred, and eventually earn net cash at ending hours of their business. Thus the cash conversion cycle (CCC) is quite rapid for them. There are some risk factors in this business. For example in rainy days their sale goes down. Especially in the month of Ramadan sales goes down dramatically. In these circumstances they can shut the business down temporally or buy fewer inventories. * The interesting part of this business is sellers’ total sales volume is same all over the time. Indetails, a jhalmuri-wala sells Tk. 1000 at 5 year ago he also sells Tk. 1000 today. From this scenario, we can say that there is no growth for this business. If we consider Inflation for the same scenario, we can say that the business growth is negative.
