[go: up one dir, main page]
Scribd
Upload
882 views4 pages

Multi Tech Case Analysis

This document appears to contain numerical data and calculations related to analyzing the financial impact of different credit policies for two companies: MultiTech Ltd and Smooth Pens Ltd. For MultiTech, extending credit terms to more customer categories and increasing the cash discount period both increase net income. For Smooth Pens, increasing the cash discount percentage decreases net income while extending the cash discount period increases it. The document contains tables with sales, costs, investment, income and return calculations for each company under different credit scenarios.

Uploaded by

simplymesm
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
882 views4 pages

Multi Tech Case Analysis

This document appears to contain numerical data and calculations related to analyzing the financial impact of different credit policies for two companies: MultiTech Ltd and Smooth Pens Ltd. For MultiTech, extending credit terms to more customer categories and increasing the cash discount period both increase net income. For Smooth Pens, increasing the cash discount percentage decreases net income while extending the cash discount period increases it. The document contains tables with sales, costs, investment, income and return calculations for each company under different credit scenarios.

Uploaded by

simplymesm
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
You are on page 1/ 4

New Cont

20

20% Discount 2% 1% 1%

820 800 840 Pre Tax Income Tax ACP Credit Period ACP N ACP Old

0.7 0.7 0.7

0.7 0.5 0.3

401.8 280 176.4

40% 50 115.0685 16 35.94521 20 43.83562 -7.89041

8.036 2.8 1.764 5.236 -1.236 -0.4944

12%

-0.94685 8.547945 -0.28915

71.23288 Change in Net Income

1.036

Case Analysis: MultiTech Ltd Sr. 1 2 3 4 5 6 7 8 9 10 Particilaurs Sales Incremental Sales Average Collection Period Proportion of Credit Sales % CreditSales on Cash Disc. Cash Discount Term Bad Debt Cost Contribution Margin Tax Rate (1-t) Post Tax Cost of Capital STEP ONE: Contribution Incremental Sales Total Contribution Incremental Contribution STEP TWO: Cost Cash Discount Sales Cash Discount Cost Incremental Cash Disc. Cost Bad Debt Cost Incrmntl Oprtng Cost STEP THREE: Operating Income Operating Income After Tax Oprtng Income (1-Tax Rate) Base Case 800 nil 20 70% 50% 1% 12% 20% 60% 12% a Credit Std Unltd to Ctgry 3&4 850 50 20 70% 50% 1% 12% 20% 60% 12%

(in Rs Millions) b c Credit Prd Cash Dsct From 30 to 60 days 2/10 net 30 840 820 40 20 50 16 70% 70% 20% 70% 1% 2% NA NA 20% 20% 60% 60% 12% 12%

nil 160

50 170 10

40 168 8

20 164 4

280 2.80

298 2.98 0.18 6.00 6.18

118 1.18 -1.62 0.00 -1.62

402 8.04 5.24 0.00 5.24

3.83 2.30

9.62 5.77

-1.24 -0.74

STEP FOUR: Investments Total Invstement in Rcvbls Incremental Investment Cost of Incrmntl Invstmnt

44.44 5.33

47.22 2.78 0.33

116.67 72.22 8.67

36.44 -8.00 -0.96

STEP FIVE: Residual Income Residual Income Incremental ROI OpInc/ Incrtl Invst. Decision

1.96 82.6% Yes

-2.89 8.0% No

0.22 9.3% Yes

Case Analysis: Smooth Pens Ltd Sr. 1 1 1 2 3 4 5 6 7 8 9 10 Particilaurs Units Value Sales Revenue Incremental Sales Average Collection Period Proportion of Credit Sales % Sales on Cash Disc. Cash Discount Term Bad Debt Cost Contribution Margin Tax Rate (1-t) Post Tax Cost of Capital STEP ONE: Contribution Incremental Sales Total Contribution Incremental Contribution STEP TWO: Cost Cash Discount Sales Cash Discount Cost Incremental Cash Disc. Cost Bad Debt Cost Incremental bad debt cost Incrmntl Oprtng Cost STEP THREE: Operating Income Operating Income After Tax Oprtng Income (1-Tax Rate) Base Case 90,000 30 2,700,000 nil 30 100% NA 2% 30% NA 12% NA 12% a Credit Std 98,000 30 2,940,000 240,000 50 100% NA 3% 30% b Credit Prd c Cash Dsct 1/10 net xx 94,500 30 2,835,000 135,000 20 100% 60% 1% 1% 30% NA 12%

nil 810,000

240,000 72,000 #VALUE!

135,000 40,500

#VALUE! #VALUE!

#VALUE! #VALUE! #VALUE! 88,200 34,200 34,200

#VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE!

1,701,000 17,010 #VALUE! 28,350 (25,650) (8,640)

54,000 54,000

756,000

37,800 #VALUE!

#VALUE! #VALUE!

49,140 #VALUE!

STEP FOUR: Investments Total Invstement in Rcvbls Incremental Investment Cost of Incrmntl Invstmnt

225,000 27,000

408,333 183,333 22,000

#VALUE! #VALUE! #VALUE!

157,500 (67,500) (8,100)

STEP FIVE: Residual Income Residual Income 729,000 Incremental ROI OpInc/ Incrtl Invst. Decision

15,800 20.6% Yes

#VALUE! #VALUE! No

(540) #VALUE! Yes

You might also like