Group - IV

• Ishtiaque Ahmed 08102060

• Mashrur Rahman 08102075

• Jobaer Ahmed 08102096

• Imtiaz Ahmed Chowdhury 08102106

SME: Leather Products

Ray-house of leather is a leather products manufacturing & supplying company. It’s new in the leather products industry. It’s located at 4/1; Sher-E-Bangla road, Hazaribag, Dhaka-1209. It started its journey in 2006, and then it had only a factory which was used to sell processed leather. In 2010, it registered as a company and started a showroom which is also used as their office. In this showroom they keep various samples of finished leather products. Their initial investment was BDT 500000 tk. Now their investment is BDT 2000000 tk.

Background

Ray-House of Leather

Ownership StructureIt’s a partnership business. There are four partners. They are:

• Ms. Rahima Alam• Miss Srity• Md. Salim• Md. Mehedi Hasan

Each partner has equal investment and shares profit and loss equally.

Description of the Business

Ray-House of Leather is mainly manufacturer of leather products. The company sells various types of leather products like

Leather jacket Hand bag Ladies bag Belt Wallet etc.  They sell their products in local market. Specially in Rifles Square, Bashundhara City, Eastern Plaza etc. They take orders from retailers and delivers in given time. They also sell their products from their showroom.

The initial investment was BDT 500000 tk. The full amount of investment was their own investment and they didn’t take any loan. Now the company owns investment of BDT 2000000 tk.

Competition

Financing Structure

This industry is very much competitive. A huge amount of competition exists in this sector. They have lots of competitors around this arena. For this reason small companies like Ray needs to provide quality on demand.

Strengths & Weakness of the Company

Strengths• The company is located in a suitable place from where they can acquire raw materials.• Labor is also available in the factory area.• Provides quality products on demand.

Weaknesses•The main weakness if the company is strong competition. There are lots of competitors in this sector.•The company lacks of sufficient investments to export its products into international market.

Ray-House of leatherCash Flow Statement

For the monthly Ended Decevmber31, 2009

Details Amount(Tk) Amount(Tk)

Cash inflow from

Sales 1622500

Total Cash inflow 1622500

Cash outflow from

Selling expense

Rent(office) 6000

Rent(factory) 30000

Maintenance 16750

Total selling expense 52750

Admin expense

Labor 48000

Manager 25000

Chemist 50000

Total Admin expense 123000

Total Cash outflow 175750

Total Cash in hand 1446750

Ray-House of LeatherIncome Statement

For the monthly Ended December31, 2009Details Amount(Tk) Amount(Tk)

Sales 1622500Less: Cost Of Goods Sold 1342500

Gross Margin 280000Less: Selling & Admin Expense

Selling Expense

Rent(office) 6000 Rent(factory) 30000

Maintenance Cost(monthly) 16750Total Selling Expense 52750

Admin Expense

Labor(8*6000) 48000

Manager(1*25000) 25000 Chemist(1*50000) 50000

Total Admin Expense 123000

Total Selling & Admin Expense 175750

Net Operating Income 104250Less: Interest Expense 0

Net Income Before Tax 104250Less: Income Tax 0

Net Income 104250

Ray-House of LeatherBalance Sheet

For the monthly Ended Decevmber31, 2009Details Amount(Tk) Amount(Tk)

Assets

Current Assets

Cash 1446750

A/C receivable 400000

Inventory 100000

Total Current Assets 1946750

Property & Equipment

Machineries 225000

Equipment 50000

Total Property & Equipment 275000

Total Assets 2221750

Liabilities & Owner Equity

Liabilities

A/C payable 320000

Notes payable 110000

Interest payable 153000

Total Liabilities 583000

Owners Equity

Capital 1534500

Add: Net profit 104250

Total Owner Equity 1638750

Total Liabilities & Owner Equity 2221750

Credit AnalysisRay-house of leather is now manufacturing and supplying their finished products into local market. The owners of the company want to export their products into international market. For this, they need loan to expand their business. They need a loan of Tk. 1000000. They need this amount of loan for three (3) years at 12% monthly interest rate. To decide whether we will give them loan or not is based on the following calculation.

So, we have decided to give them loan of Tk. 1000000 with three (3) years payback period. They have to take this loan at 12% interest. They will give installment of Tk. 31112 per month.

Monthly income / Monthly installment ≥ 1.5Tk. 104250 / Tk. 31112 = 3.36

Hridoy leather store is a leather products wholesaler and retailer. It was established in 1995 and doing business in the leather products industry from last 15 years. It’s located at 121/B; Sher-E-Bangla road, Hazaribag, Dhaka-1209. They have only one outlet where they sell various types of finished leather products. Their initial investment was BDT 100000 tk. Now their investment is BDT 1000000 tk.

Background

Hridoy Leather Store

Mr. Md. Abdul Rahim is the owner of the store. He is the only person who invested while starting the business.

Ownership Structure

Description of the BusinessRay-House of Leather is mainly manufacturer of leather products. The company sells various types of leather products like

•Leather jacket•Sandel•Hand bag•Ladies bag•Belt•Wallet etc.

They sell their products in local market. Specially in Aarong, Rifles Square, Bashundhara City, Eastern Plaza etc. They take orders from retailers and delivers in given time. They also sell their products from their showroom.

This industry is very much competitive. A huge amount of competition exists in this sector. They have lots of competitors around this arena. For this reason stores like Hridoy leather store needs to provide quality on demand.

Competition

Financing Structure

The initial investment was BDT 100000 tk. The full amount of investment was own investment by the owner and he didn’t take any loan. Now he owns investment of BDT 1000000 tk.

Strengths & Weakness of the Company

Strengths• The store is located in a suitable place where finished leather products are available from factories.• Transportation is also available in the area.• Provides quality products on demand.

Weaknesses•The main weakness is strong competition. There are lots of competitors in this business.•The store lacks of sufficient investments to export its products into international market.

Hridoy Leather StoreCash Flow Statement

For the monthly Ended Decevmber31, 2009Details Amount(Tk) Amount(Tk)

Cash inflow from

Sales 1005000

Total Cash inflow 1005000

Cash outflow from

Selling expense

Rent 10000

Maintenance 3000

Total selling expense 13000

Admin expense

Labor 40000

Manager 20000

Total Admin expense 60000

Total Cash outflow 73000

Total Cash in hand 932000

Hridoy Leather StoreIncome Statement

For the monthly Ended December31, 2009

Details Amount(Tk) Amount(Tk)

Sales 1005000

Less: Cost Of Goods Sold 850250

Gross Margin 154750

Less: Selling & Admin Expense

Selling Expense

Rent 10000

Maintenance Cost(monthly) 3000

Total Selling Expense 13000

Admin Expense

Labor(4*10000) 40000

Manager(1*20000) 20000

Total Admin Expense 60000

Total Selling & Admin Expense 73000

Net Operating Income 81750

Less: Interest Expense 0

Net Income Before Tax 81750

Less: Income Tax 0

Net Income 81750

Hridoy Leather StoreBalance Sheet

For the monthly Ended Decevmber31, 2009

Details Amount(Tk) Amount(Tk)Assets Current Assets Cash 932000 A/C receivable 300000 Inventory 220438Total Current Assets 1452438Property & Equipment Machineries 50000 Furniture 40000Total Property & Equipment 90000Total Assets 1542438

Liabilities & Owner Equity Liabilities A/C payable 200000 Notes payable 100000 Interest payable 40688Total Liabilities 340688 Owners Equity Capital 1120000 Add: Net profit 81750Total Owner Equity 1201750Total Liabilities & Owner Equity 1542438

Ray-house of leather is now manufacturing and supplying their finished products into local market. The owners of the company want to export their products into international market. For this, they need loan to expand their business. They need a loan of Tk. 1000000. They need this amount of loan for three (3) years at 12% monthly interest rate. To decide whether we will give them loan or not is based on the following calculation

So, we have decided to give them loan of Tk. 1000000 with three (3) years payback period. They have to take this loan at 12% interest. They will give installment of Tk. 31112 per month.

Credit Analysis

Monthly income / Monthly installment ≥ 1.5Tk. 104250 / Tk. 31112 = 3.36