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CHAPTER I
INTRODUCTION
1.1 Background With Competition in Nepalese Market, it is very difficult for a small service provider and sales concerns to operate within the extent of low budget and low economic growth in order to cope up with increasing in number of consumer and clients. What is being served to the client is based upon the needs and utility to be derived by them. Venus Automobiles and Spares parts basically focus on sales of automobiles and satisfy own self with good sum of profit derived from consumers. The visional and strategic mind developed an idea of replicating on private vehicle uses by public and old public transportation be replaced by new private automobiles established Venus Automobiles and Spares parts resulting to make a rigid decision on investment of 2-wheelers as motorcycle has always been the first early comfort choice for general people. Establishing Venus Automobiles and Spares parts was not only for revenue generation, but it was also focused to help stakeholders and other related parties to enhance the degree of confidence of services concerns of Nepal. Development of Automobiles services represents huge amount of investment, archives making it possible to analyze, interpret and assess individual and niches demands. It is believed to be one of the reasons behind exponential growth of service sector inside Nepal. (Source:http://Nepal/departmentoftransportmanagement/privateautomobiles.com/np) According to Nepal Automatic Dealer Association (NADA), until 2010, automobile sector was growing by around 15 percent annually. It has been recording average growth of 25 percent from 2010 onwards. In the last fiscal year, it was recorded as 40 percent growth in business. Hence, Vehicles and automobiles owned by general public are assessed by such sectors like Venus Automobiles and Spares parts and also it offers great opportunities for growing enterprises, both with respect of technological as well as services development. However, although many other challenges have continued to prevail, increase in sales amount to gain apportioned profit has always pinned up as a important managerial as well as financial aspect. This thesis reports the findings of a thorough study to establish the factors that have led to the success of Profit plan of it through Budget analysis, sales implication like BEP and MOS and profit earned in
regards of such sales and how such success factors can be applied in coming years for broader development and upliftment of the venture as well as other similar institutions focused on these types of Sales. (Source:http://yellowpagesnepal.com/nepal-automobile- dealers-association-nada/pvt/automobiles) 1.2 Introduction to Venus Automobiles and Spares Parts Pvt. Ltd. Venus Automobiles and Spares Parts Pvt. Ltd was established in 15th^ Paush, 2058 B.S under the supervision of Mr. Mukesh Yadav , a young man who set out on a journey with little beyond intelligence business, determination and dreams. He believed that people of city like Kathmandu will need private vehicle rather than public transportation for their daily work. Also as most of the people live in Kathmandu and nearby cities are medium class, he believed that motorcycle will be their first choice for their need of own vehicle. Venus automobiles and spare parts came into being a vision, one that avoided the easy paths to profitability, and sought instead for ways to make a contribution. A vision through a small mind and small opportunities has emerged Venus automobiles and spare parts as services as well as trade concerns. Mukesh Yadav, who have gained knowledge and skill in automobile operation for Morang Autoworks, Urlabari-7, Morang, Koshi, Nepal, found it easy to establish such ventures through small investment and handful of manpower. As a result, after almost 14years of it operation, Venus automobiles and spare parts has been at the position where Mr.Yadav wanted to reach. Now, it comprises a lot of chain of manpower working as a network to extend Venus automobiles and spare parts to much more extent and evenly a phase is expected to reach where small entrepreneurial venture can rely upon operation of Venus automobiles and spare parts. (source : Article of association, 2058) 1.2.1 Organizational Structure of Venus automobiles and spare parts An organization structure refers to the determination of organization system of the enterprise it determines the programs and procedures by which the administrative relations of an enterprise are defined and established. No activity of the organization can go out of this structure. As the policy of the enterprise determines the limits within which the enterprise has to work. In the same manner organization structure determines and defines the shape and size of the enterprise according to which the administrative and organization decisions have to be taken. It is also the framework of activities of the enterprise, it may also be considered as the map of the building to be constructed.
Ms. Jyoti Shrestha Custstomer Service (Showroom) Mr. Amrit Shaud Purchase & Sales Departmaet Ms. Salina Ghattani Purchase & Sales Departmaent Mr. Sagar Khadka Accounting and Finance (Showroom) Ms. Gita Subedi Custstomer Service (Workshop) Mr. Sanjeev Man Joshi Workshop Incharge Mr. Nabin Yadav Spare parts & inventory (Workshop) And workers and mechanics under workshop incharge are as follows: Mr. Santosh B.K Mr. Parash Chaudhary Mr. Shyam Das Singh Mr. Naren Majhi. Mr. GovindaRijal All these Managers, subordinates, and the mechanics of the organization are performing their job very well and are successful to attain the organizational objective. We can find a kind of cohesiveness among all the members of this organization .(Annual report : VASP 2016) 1.2.2 Vision, Mission and Objectives of Venus Automobiles and Spares parts Venus Automobiles has become one of the leading motorcycle trading concerns as it offers a comprehensive range of Bajaj brand motorcycles and its spare parts, more than 10 variants starting from 100 CC to 220CC. It has following vision, mission and objectives. To maintain customer satisfaction and relation To help in economic development of the country To decrease the problem of unemployment
To develop the small business sector in Nepal To help in maximum utilization of local resource To earn maximum profit for the existence of the org. 1.3 Statement of the Problem Venus Automobiles and Spares parts have adopted strategic vision to get attention target market to maximize sales and to reduce the uncertainties faced by them as fast as possible. Those vision should comprises actions and procedures to increase as much as consumer as expected. While presenting the facts about the enterprise operation in market, following queries are necessarily to be met based upon criteria: Does the internal control system maintained by Venus Automobiles and Spares parts can maintain budgetary analysis of required sales? Does the organizational structure and framework of it can forecast future sales resulting more profit? Do customers needs be satisfied efficiently and effectively? Do growth of enterprise is acceptable or not? 1.4 Objective of Study The main objective of the study is to investigate proper budgetary control and its implication in sale to earn profit of Venus Automobiles and Spare Parts. The Specific objectives are as follows: To Earn Profit forming budget as base for control of the venture To Organize relative framework for future forecast of sales To satisfy consumer through various means like post sales services, premature workshops To determine basis for growth of enterprise
1.7 Report Structure The study will be carried out in five different stages and procedures for the preparation of the project work report and it will be organized in the report in the following chapters: Chapter one: Introduction. It includes background, statement of the problem, objectives of the study, significance of the study, limitation of the study and organization of the remainder of the study. Chapter two: Literature review It includes conceptual review , empirical review and review of the related studies. Chapter three: Research methods It include research methodology, design, nature and source of data, data processing and analysis, terms, tools and technique of analysis financial tools. Chapter four : Results and findings. It includes presentation of data in tables and figures and their analysis and major findings of the study. Chapter five : Discussion and Conclusion. It includes discussions, conclusion and implications. Finally, references and appendices will also be presented at the end of the project work report.
CHAPTER II
LITERATURE REVIEW
2.1 Conceptual Review Kathmandu is a Capital of Nepal where every organizations and institutions are established. According to Central Bureau of Statistics (published Statistical Year Book 2016), Kathmandu Valley has 2,912,760+ population and around 1/3rd^ of population posses 2-wheelers inside Kathmandu. Hence huge number of user demands proportionate number of automobiles. Department of Transport Management has stated that, at present, around 19,500 automobiles are registered on an average every month. According to DoTM, a total of 1.99 million (1,995,404) vehicles were registered in the past fiscal year 2015 - 16. About 66.67% of registered vehicle are under 2-wheelers in Nepal. That implies around 1.18millions 2-wheelers are operated in Nepal and most of them are found in Kathmandu valley. Hence, 2-wheelers are referred as major income sources inside Kathmandu valley and it facilitates Venus automobiles and spare parts in such a way. (source: https://www.dotm.gov.np/en/2wheeler/np/ktm) 2.1.1 Conceptual Framework The aim of this study is to systematic and critical examination of Budgetary and sales control to aim on profit plan. The given figure established relationship between different variables.
Profit Plan
Budget
Sales
2.2 Review of Previous Works Theoretical review: Profit planning is the process of developing a plan of operation that makes it possible to determine how to arrange the operational budget so that the maximum amount of profit can be generated. There are several common uses for this process, with many of them focusing on the wise use of available resources. The actual process of profit planning involves looking at several key factors relevant to operational expenses. Putting together effective profit plans or budgets requires looking closely at such expenses as labor, raw materials, facilities maintenance and upkeep, and the budget of sales and marketing efforts. The major actor on the study and evaluation of profit planning of sales concerns are Standard Deviation and Coefficient of Variance. Thus, Standard deviation is a measure of how much a variable tends to swing. Variables that are stable have lower standard deviations than those that swing wildly. A stock whose price has varied between $8 and $10 all year will have a lower standard deviation than one that has touched $ several times over the last 12 months while also going as high as $12 on multiple occasions. To calculate standard deviation, you need to find the average value of the variable and compare how each value differs from the average. In case of a stock, this entails comparing the daily closing price from the average price over the course of the year. In another angle, coefficient of variance is the parameter used in comparing dispersion in distribution. It is the ratio between standard deviation and mean and is unit less. Bailey (2001) has described about the relationship between standard deviation and return forming as base for control. According to him, (French Economist and Mathematician) calculating rate of return and standard deviation is more challenging if one has no past data to rely on. If entrepreneur is planning to start a new venture, he/she cannot use past data. Instead, he/she should predict various potential profit figures. Most business owners start by estimating what they will earn in the most probable case, worst case and best case. This results in three rate of return figures. He/she can add a "disaster scenario" and a "miracle scenario," as there is no hard rule about the number of scenarios needed to calculate a standard deviation for a prospective investment. The availability of data, number of factors that influence the profit potential and the experience of entrepreneur in working with financial figures will determine how many scenarios he/she should draft before starting their calculations.
There is tons of review related to the study of profit planning of private enterprise. According to K. John (2003), the main motive of his study was to identify factors that possess direct relation with entity budget implication, on what schemes entity prefer to invest. For collecting qualitative as well as quantitative datas, he has used questionnaire methods under his study. On the other pace, he has even conducted direct interviews and one-to-one communication to obtain confirmation for getting datas. The final outcome of that thesis was irrespective of product plan, higher earning is made through proper planning of sales and its mixes based on Chinese Concept: “we sell what we produce”. Japanese Student and Business Enthusiast, A. Akio (2007) on his report, has mentioned Japanese concept of sale: “Sale of Qualitative product for high return”. This concept came in Japan in early 70s where production meant by better quality at high cost. Profit is earned through high sales on high cost with customer satisfaction. Profit is earned through better plan on high investment which would ultimately return on increase Gross Profit ratio in bases for net investment. He also identified the relevant factor that are likely to influence various cost in a manner that high increase in deviation of sales with low cost of goods earn more profit in long run. He found that automobiles have very high demands among youngsters who are willing to live a fashionable life. Hence in his study, he has shown that higher the investment on sales in low consumable cost, the higher were the return and vice versa. In this way, he conducted that profit planning in respect of budget and sale of private sale concern in Japan. In context of Nepal, Khatri (2010) has conducted a study on Dhaulagiri Autoshop Pvt. Ltd. The main objective of the study is to assess the general lending procedures of sales and revenue generation of Dhaulagiri Autoshop situated in Urlabari-6,Morang. She had used interview method with Staffs and CEO of that Autoshop for collecting primary and secondary data were collected from annual report and issued journals of that entity. She concluded that Dhaulagiri Autoshop has diversified its investment in different patterns of automobiles (2-wheelers) like bikes, scooter, mopeds, etc and has increased both : sales and growth of enterprise. Her major finding was to relate profit with respect of budgeted data and its deviation from what is expected and what has been achieved with the help of statistical tools such as co-variance, mean, median, mode and others. Mathieu (2008)’s paper is indeed thought-provoking and raises many questions for further study. His study of the relationship between size, strength and profit is thorough and is based on data painstakingly compiled in such a way as to eliminate the many shortcomings that so often characterize the data used in studies of profit by size of company. As he mentions, big companies must have some advantage over deviated pattern of sales and its mixes or else big companies would not allow themselves to get
profit ratio of autoworks is in the increasing trends up to 2012/13 and started to decrease. The average sales to purchase ratio of the company is 112.73%. It means there remains huge increment in sales but if purchase is increased in same ratio, huge profit shall be derived.In an average the projection of standard deviation to net profit of entity for the study period is 27.82%. Although the high ratio is the sign of sound profit but here the ratio in each fiscal year is more than 20% which is too huge for a small sales concern. It indicates that the profit fluctuates in the corporation, which shows that the profit per year increment is not sound as projected for company. The average sales collection period of the autowork during the study period has shown decreasing trends. The highest collection period is 76 days in the fiscal year 2013/14/and the lowest collection period is 29days in the fiscal year 2010/11. The average collection period of entity is 52 days with 11.59% of coefficient of variation which indicates the collection period is long enough in all fiscal year. Paudyal (2016) conducted a research on a motorcorps based on automobile company_._ The major motto of the study is to explore how sales and cost are managed in the motorcorps. The major objectives of the study were to examine the profit planning and sales motorcorps through ratio analysis. Cash budgets and earning of the motorcorps were also examined and analyzed. Finally profitability position and the cash flow statement based on annual report and financial statement were also assessed. Based on above study, it was found that cash and bank balance shown greater fluctuation in FY 2068,2069 and 2070 but in other remaining Fiscal Year, fluctuation was quite low in comparison to the previous years. Holding of optimum cash and bank balance is the rational cash management practice of a business firm. There is lower coefficient of variation of motorscorps which signifies that holding cash balance is highly consistence and stable. The trend line shows positive figure of cash balance in future. In case of gross profit ratio, the ratios in FY 2071 is near about 33.33% which is satisfactory and in ranging from 2068-2073 all of the ratios are below 28% which indicates that the company does not have a sound or satisfactory liquidity position. Proportion of Cash and Bank balance in its sales budget is very small and the cash balance held shown positive relation to the amount of current assets of entity. Average ratio of sales to purchase is 109.88%, which is very good as no idle resources are held. Coefficient of Variance of company in an average is 10.44. This report has provided as base for the company because those statistical findings were in a favored pace and hence it increased the confidence of stakeholders and shareholder since it has shown a positive longer run for a small investment entrepreneurship.
Bajagai (2015 ) has done analytical examination of an automation which was engaged on automobile business keeping basis for examination, analysis and comparison among sales and profit. The main objective of the examination was to compare profit with sales as well as cost. It helped to analyze the trend of In-out Ratio of Rajesh Automation. Also its major findings were based on to access and evaluate the pattern of deviation from actual and expected datas. Further, to compare the sales-purchase of entity, Bajagai made it easy since report included tools and technics to evaluate results. The major findings of a study of automation was how the company has extended its operation to increase sales and purchase on equal paces. On the base of stability, operating trading business of the automation is acceptable increasing trend. Standard deviation between expected sales and actual sales where very low that means resources are acceptable towards operation of sales concern. Both the buying as well as selling network has strong basis for operation inside to and outside from the automation. The main inclusion in profit planning of Rajesh Automation is comparison between standard deviation with respect to sales and earnings and coefficient of variance dealing with mean of all expected datas and actual datas and those datas are meaningfully assessed in every stages of operation. Dhungana (2008) has conducted her Master’s thesis on as study of to examine the cash and cost management practices in Nepal Electricity Authority through ratio analysis. Her major objective of the study was to examine and analyze the liquidity profitability position of the Nepal Electricity Authority. To analyze the profitability position of company, various financial as well as statistical tools were used. She further extended her procedure to examine the cash flow statement and other books of account of company. Finally, recommendation were given to the authority along with viable suggestions to cope up with cash and profit management keeping in the view of short comings in the enterprise. The major findings of the study are the poor cash and cost management. Liquidity position is dissatisfactory, Negative profitability of the company adds much to the worsening financial position of the company. The accumulated amount of account receivable which is increasing year by year denotes the inefficiency of the authority to collect its revenue in time. There is the absence of effective utilization of capital employed and liquidity position is also not satisfactory. Because of the absence of the competitors, authority has become monopolistic and, hence, it is not alert towards its possible threats and opportunities. Different statistical tools show the positives relationship with two variables like cash and sales, cash and account receivable, current assets and cash, current liabilities and cash.
CHAPTER III
RESEARCH METHODOLOGY
3.1 Introduction This chapter consists of the research design, nature, source and collection of data, data collection procedure and tools & technique of analysis. For reaching to the objective of the study, the applied methodology is used under this research report. It helps to focus and emphasize the useful and final meaningful points so that all concerned outcome can achieved from this study. The research methodology used in the present study is briefly mentioned below. 3.2 Research Design A well settled research design is necessary to fulfill the objective of the study. This study mainly concerned with historical research of VASP. Here, both primary and secondary data are used and collected study the profit planning of VASP. The relevant and needed data has been collected from various publications such as annual report of Venus Automobiles and Spare Parts Pvt. Ltd, NADA (Nepal Automobiles Dealer’s Association), Journals and periodicals issued in timely manner by VASP. The research design of this study is analytical as well as descriptive approaches. Basically this study uses a descriptive statistical analysis to describe, measure, compare, and classify the budgeting and profit planning of VASP. 3.3 The Population and Sample The research subject is about profit planning of VASP and in consonance with all other sales concerns and enterprise, trading concerns engaged in automobiles trading and sales and various data related to profit and budget of entity are included in the population of the study and among all of them VASP is taken for research purpose. Due to unavailability of data from all sectors, only sales and service concerns matters are chosen for study. Thus, finally VASP is expected to give possible outcome and chosen for the best result.
3.4 Sources of Data For this study, both primary and secondary data are used. Primary data: Primary sources are original materials on which research is based. They are firsthand testimony or direct evidence concerning a topic under consideration. They present information in its original form, neither interpreted nor condensed nor evaluated by other writers. These are collected by researcher as a fresh new search of related datas and theories to comply with them. The sources are : Questionnaire Photographs Interviews Correspondence Survey Experimental results Observation Secondary data: Secondary sources offer interpretation or analysis based on primary sources. They may explain primary sources and often uses them to support a specific thesis or argument or to persuade the reader to accept a certain point of view. Such works are one or more steps removed from the event—being written with the benefit of hindsight. The sources are : Newspaper articles Journals Internet Annual report Other sources 3.5 Data Collection Procedure Collecting data is the connecting link to the world of reality for the researcher. The data collection activity consists of taking ordered information from reality and transferring it into some recording system so that it can later be examined and analyzed for patterns.
𝑋̅ = Mean In this thesis work, however, while computing standard deviations, the above formula has been employed only once manually. For rest of the computations, Microsoft excels worksheet tools have been employed directly from computer. b. Coefficient of variance (C.V): Coefficient of Variance is the relative measure based on standard deviation and is defined as the ratio of the standard deviation to the mean expressed in percent. Coefficient of Variation (C.V) is given by C.V = σ X̅
× 100%
Where 𝜎 = Standard Deviation X = Variables The ratio σ x is called the coefficient of Standard deviation, C.V has no units, Distribution with lower C.V. is said to be less variable (or more consistent or more uniform) and the distribution with higher C.V is indicative of more Variable (or less consistent or less uniform) The limitation of using C.V. is that when the distribution being compared have negative observation, it provides unreliable way to compare variability across data sets. 3.7 Diagrams Diagram are the simplified drawing showing the appearance, structure, or workings of something; a schematic representation. These are the effective way of presenting and analyzing data. Various diagram used in these report are line diagram, pie chart and other tables. The line diagram represents the data by bars of equal width. The length of the line represents the given figures and width may be of any size. Those diagrams are described as below:
Line chart: A line chart or line graph is a type of chart which displays information as a series of data points called 'markers' connected by straight line segments. It is a basic type of chart common in many fields. Axes of line diagram represent equal interval of both time and amount. In this report, line diagram are presented for describing comparison between budgeted sales and actual sales and same for cost of automobiles. Bar Diagram: A bar diagram or graph is a chart that uses bars to show comparisons between categories of data. The bars can be either horizontal or vertical. Bar graphs with vertical bars are sometimes called vertical bar graphs. A bar graph will have two axes. One axis will describe the types of categories being compared, and the other will have numerical values that represent the values of the data. It does not matter which axis is which, but it will determine what bar graph is shown. Table: Tables are the fair and quick method of presenting and analyzing datas. It helps to summarizes finding in a practical visual manner that allows user to understand it in very basic level from zero to one basis. It is best method for data representation because it reduces effort of person who tries to obtain knowledge about the findings of report as it is made in a tabulated format. In this report, various table are prepared to present data such as sales amount, cost of automobiles, profit earned and so on. 3.8 Limitation Research is a complex process and it takes a lot of competencies and qualities of researcher as well as tools used by researcher. Professional as well as academic competencies of researcher are not enough if the tools and technics used are not upto the mark. There lies lot of limitation of tools used by researcher and those are described as below: Statistical tools are supposed to accept both qualitative as well as quantitative datas but most of tools are found to have ignored qualitative datas.
