Analysis Of Telesmart Ltd And Suggestions To Increase Profitability

Cash Conversion cycle has been presented here-in-below:

Cash Conversion Cycle
Sl No	Particulars	2017 (Anon., 2017) Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	2016	2015 (Anon., 2015)	2014	2013 (Anon., 2013)
1	Inventory Turnover Period	58.36	60.57	59.95	60.05	63.34
2	Debtors Turnover period	32.03	30.71	31.41	36.15	43.46
3	Creditors Turnover Period	40.99	39.32	40.20	46.16	55.38
4	Cash Conversion Cycle	49.40	51.96	51.16	50.04	51.42

Note: Since data of purchase is not available, cost of sales have been taken into consideration.

Further, on analysis of Cash flow statement of past 2 years on may observe that cash flow from operating activity has shown an uptrend and has increased roughly by 5 Mio. Also, the same has been mainly on account of increase in receipt from customer. There has also been a significant increase in payment of expenses to employees. Further, one may also observe that cash and cash equivalent has increased.

Question 2

On analysis of the proposed suggestion given be respected personnel of the organisation, the following working has been obtained:

Profit point of view

Present Scenario
Sl no	Particulars	Per unit	Amount
1	Sales	5000
2	Selling Price	420
3	Variable Cost	144
4	Contribution	276
5	Contribution whole		1380000
6	Fixed Manufacturing Cost		460000
7	Variable Selling and Administrative Cost		180000
8	Fixed Selling and Administrative Cost		500000
9	Profit		240000

Suggestion 1
Sl no	Particulars	Per unit	Amount
1	Sales	6500
2	Selling Price	420
3	Variable Cost	172
4	Contribution	248
5	Contribution whole		1612000
6	Fixed Manufacturing Cost		460000
7	Variable Selling and Administrative Cost		234000
8	Fixed Selling and Administrative Cost		530000
9	Profit		388000

Suggestion 2
Sl no	Particulars	Per unit	Amount
1	Sales	4500
2	Selling Price	480
3	Variable Cost	144
4	Contribution	336
5	Contribution whole		1512000
6	Fixed Manufacturing Cost		460000
7	Variable Selling and Administrative Cost		162000
8	Fixed Selling and Administrative Cost		550000
9	Profit		340000

Suggestion 3
Sl no	Particulars	Per unit	Amount
1	Sales	6000
2	Selling Price	420/390
3	Variable Cost	144
4	Contribution	276/246
5	Contribution whole		1611000
6	Fixed Manufacturing Cost		460000
7	Variable Selling and Administrative Cost		216000
8	Fixed Selling and Administrative Cost		560000
9	Profit		375000

On the profit profit if one consider the best suggestion which maximises the profit of the group shall be suggestion 1 under which the profit has been maximised.

Break even point of view

Present Scenario
Sl no	Particulars	Per unit	Amount
1	Sales	5000
2	Selling Price	420
3	Variable Cost	144
4	Contribution	276
5	Variable Selling and Administrative Cost	36
6	Net Variable	240
7	Fixed Manufacturing Cost		460000
8	Fixed Selling and Administrative Cost		500000
9	Break even quantity		4000

Suggestion 1
Sl no	Particulars	Per unit	Amount
1	Sales	6500
2	Selling Price	420
3	Variable Cost	172
4	Contribution	248
5	Variable Selling and Administrative Cost	36
6	Net Variable	212
7	Fixed Manufacturing Cost		460000
8	Fixed Selling and Administrative Cost		530000
9	Break even quantity		4670

Suggestion 2
Sl no	Particulars	Per unit	Amount
1	Sales	4500
2	Selling Price	480
3	Variable Cost	144
4	Contribution	336
5	Variable Selling and Administrative Cost	36
6	Net Variable	300
7	Fixed Manufacturing Cost		460000
8	Fixed Selling and Administrative Cost		550000
9	Break even quantity		3367

Suggestion 3
Sl no	Particulars	Per unit	Amount
1	Sales	6000
2	Selling Price	420/390
3	Variable Cost	144
4	Contribution	276/246
5	Variable Selling and Administrative Cost	36
6	Net Variable	240/210
7	Fixed Manufacturing Cost		460000
8	Fixed Selling and Administrative Cost		560000
9	Break even quantity		4437.5

Suggestion 2 is best

Margin of Safety View point

Present Scenario
Sl no	Particulars	Per unit	Amount
1	Sales	5000
2	Selling Price	420
3	Break even quantity	4000
4	MOS Quantity	1000
5	Margin of safety sales		420000

Suggestion 1
Sl no	Particulars	Per unit	Amount
1	Sales	6500
2	Selling Price	420
3	Break even quantity	4670
4	MOS Quantity	1830
5	Margin of safety sales		768679.2

Suggestion 2
Sl no	Particulars	Per unit	Amount
1	Sales	4500
2	Selling Price	480
3	Break even quantity	3367
4	MOS Quantity	1133
5	Margin of safety sales		543840

Suggestion 3
Sl no	Particulars	Per unit	Amount
1	Sales	6000
2	Selling Price	420/390
3	Break even quantity	4438
4	MOS Quantity	1562
5	Margin of safety sales		656040

Suggestion 1 is best

Qualitative parameter

Suggestion 3 shall be best as the same is practical as discount under initial sales shall entice the customer and intense advertisement shall result in increased sales and the future sales can be made without discount. Thus, it shall be the most practical solution under the present scenario.

Question 3

Statement showing cost of production
Sl No	Particulars	Present Scenario	Scenario 1	Scenario 2	Scenario 3
1	Present Sales per year	72000	72000	72000	72000
2	Direct Material Cost	75	75	75	75
3	Direct Labour Cost	35	35	35	35
4	Variable Factory overhead	10	10	10	10
5	Fixed Factory over head	20
6	Variable selling and Admin cost	25
7	Fixed selling and Admin Cost	20
8	Cost of production	185	120	120	120
9	Additional cost on account of production being bottleneck				18.20
10	Total cost	185	120	120	138.20

Since profit data has not been provided, the contribution analysis has not been undertaken. Further, the additional cost on account of restricted production has been considered as bottleneck in scenario 3 and the additional cost of 65*7000 has been allocated over 25000 products.

Part 2 of question 2

If the production capacity had been 1,00,000 units company can think of long term vision and say yes to the present deal as the same shall expand the production capacity and economies of scale might also be achieved. Further, company will be able to pitch in a new customer and shall be able to make profit from it in the long run.

On social front, increased production creates positive image for the company in the form of employment generation and better market image. On economic front increase in profits over the long run and customer acquisition.

Further, I shall propose CEO of the company to charge dollar 120 per unit under the initial stage to acquire the customer and reap benefits of increased sales and profit in long run. The same shall be in line with the qualitative and quantitative requirements.

Anon., 2013. JB HI-FI.

Anon., 2015. JB HI-FI.

Anon., 2017. JB HI-FI

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