Case Study: Starting a Small Business with Limited Funds
Meet Rahul, a college student with a knack for entrepreneurship. Rahul decided to use his saved pocket money of Rs. 5,000 to start a small online business. His idea was to sell mobile phone tempered glass through Flipkart, a popular online shopping platform. To begin, Rahul registered as a product-selling partner on Flipkart, paying Rs. 200 in cash for lifetime registration fees. Realising he needed a machine to cut large tempered glass sheets into the sizes required for various mobile phones, he purchased this machine on credit for Rs. 1,500 from Nagpur Machinery.
Next, Rahul bought 50 large sheets of tempered glass on credit for Rs. 3,000 from Manoj Materials, Nagpur. These sheets would serve as the raw material for his business. To ensure his product looked professional, Rahul purchased packing materials for Rs. 600 in cash. After producing and packing 100 tempered glass units, Rahul had Rs. 200 worth of packing materials left.
Rahul then began selling the tempered glass. He sold 25 units for Rs. 90 each, earning Rs. 2,250 in cash. He sold another 30 units for Rs. 80 each, earning Rs. 2,400, which he would receive on a later date as credit sales.
Now, let’s analyse Rahul’s business. In terms of cash spent, he used Rs. 200 for registration fees and Rs. 600 for packing materials, totaling Rs. 800. However, with Rs. 200 worth of packing materials remaining, the effective cost of packing materials used was Rs. 400. On credit, he purchased the machine for Rs. 1,500 and raw materials for Rs. 3,000, bringing his total credit purchases to Rs. 4,500. His revenue included Rs. 2,250 from cash sales and Rs. 2,400 from credit sales, amounting to a total revenue of Rs. 4,650. Out of the 100 units he produced, Rahul sold 55 units (25 on cash and 30 on credit), leaving him with 45 remaining units.
Now the Questions Are…
- How much profit did Rahul make from his sales?
- What is the current worth of Rahul’s business, considering his remaining stock, cash, and outstanding credit sales?
- How much cash does Rahul have now?