Table 12 return on i net income and cash flows the

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Table 12 : Return on Investment
113.9 Net Income and Cash flows The definition of cash flow known as the amount of cash which the company receives or gives out by the way of payments to creditors (Times, 2017). It also often to and analyse the liquidity position of the company and amount of cash in and cash out. Table 13: Net Income Table 14: Cash Flow As we can see in table 13, the net income shows negative trend in year 2 onwards. It proven that by the year 2, the company did not make any profit. Cash flow will also show a declining trend for the 5 years from table14. The 4thand 5thyear there will be negative cash flow. Net IncomeYear 1Year 2Year 3Year 4Year 5Total 5 yearsRsRsRsRsRsRsCash sales *2.4m brickes for 1st year16,800,00016,800,00016,800,00016,800,00016,800,00084,000,000Total Cash16,800,00016,800,00016,800,00016,800,00016,800,00084,000,000CostsVariable costs10,800,00011,124,00011,457,72011,801,45212,155,49557,338,667Total Fixed costs3,660,0003,769,8003,882,8943,999,3814,119,36219,431,437Finance costs480,000480,000480,000480,000480,0002,400,000Depreciation1,600,0001,600,0001,600,0001,600,0001,600,0008,000,000Total expenses16,540,00016,973,80017,420,61417,880,83218,354,85787,170,104Net Income / (Loss)260,000(173,800)(620,614)(1,080,832)(1,554,857)(3,170,104)Accumulated Net Income / (Losses)260,00086,200(534,414)(1,615,246)(3,170,104)(3,170,104)Net IncomeCash FlowsYear 1Year 2Year 3Year 4Year 5Total for 5 yearsRsRsRsRsRsRsEquity6,000,000----6,000,000Loan4,000,000----4,000,000Cash sales16,800,00016,800,00016,800,00016,800,00016,800,00084,000,000Total Cash26,800,00016,800,00016,800,00016,800,00016,800,00094,000,000CostsVariable costs10,800,00011,124,00011,457,72011,801,45212,155,49557,338,667Total Fixed costs3,660,0003,769,8003,882,8943,999,3814,119,36219,431,437Finance costs1,280,0001,280,0001,280,0001,280,0001,280,0006,400,000Fixed Assets8,000,000----8,000,000Depreciation------Total expenses23,740,00016,173,80016,620,61417,080,83217,554,85791,170,104Increase / (decrease) in cash flows3,060,000626,200179,386(280,832)(754,857)2,829,896Accumulated increase / (decrease) in cash f3,060,0003,686,2003,865,5863,584,7542,829,8962,829,896Cash Flows
124.Discussion 4.1Disadvantages First, we look at the routine expenses, in which we assumed that the building rent, administrative costs, office supply, electricity and miscellaneous cost increase by 3% annually. The first year showed routine expenses of Rs1140000 and is increased to Rs1174200 on the second year with a steady increase for the following 3 years. The total fixed cost is Rs6,052,415. The personnel costs also increase 3% annually as workers are expected to receive and increment for continuous work in a company. The first year shows total personnel cost of Rs2,520,000 and an accumulated personnel cost of Rs13,379,022. The total fixed cost for the first year is Rs3,660,000 which is the sum of routine expenses and personnel costs. The accumulated fixed cost for 5 years is Rs19,431,437. We assumed that the cost incurred to purchase the materials needed for production will have an increment of 3% annually. This is due to the usual increment requested by most producers. The cost for fly ash, gypsum, lime, sand, electricity and labour cost for Gupta will increase from the first year of Rs10,800,000 to the fifth year of Rs11,176,526. The 1styear’s cost per unit is Rs4.5 per unit, Rs4.635 in the 2ndyear, Rs4.774 in the 3rdyear, Rs4.917 in the 4thyear and finally Rs5.065 in the 5 year. This shows that due to the increment of variable cost, the cost per unit will increase annually. If the price of selling each brick maintains at Rs7 and the number of sales remains the same at 2.4million units, the gross profit margin will decrease as the variable and fixed cost increase.

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