Business Planning and Feasibility (Project Report, Market Assessment)
Domain focus
This section covers Business Planning and Feasibility, including the project report and market assessment. The exam tests report structure, demand assessment, technical and financial feasibility, and break-even reasoning.
Core rules and concepts
- A project report covers promoter, product, market, process/technology, location, capacity, raw material, manpower, cost, means of finance, profitability and risks.
- Feasibility has four parts: market (who buys, price, competition), technical (process, capacity, utilities), financial (cost, revenue, cash flow, returns) and legal/environmental.
- Market assessment estimates demand, supply, the demand–supply gap, price and channels.
- Break-even quantity = Fixed cost ÷ (Selling price per unit − Variable cost per unit).
Worked example
A paper-bag unit has selling price ₹20, variable cost ₹12 and fixed cost ₹40,000 per month. Contribution per bag = ₹8. Break-even = 40,000 ÷ 8 = 5,000 bags per month. At 6,000 bags, margin of safety = 1,000 bags. Reasoning: only fixed cost is divided by contribution; variable cost changes with output. The report must also show working capital for stock and credit.
Traps that cost marks
Do not mix fixed and variable costs. Do not treat feasibility as only financial. Do not forget working capital and realistic demand. Do not present a report without a market assessment.