Profitability framework

Question 1

Describe the profitability framework?

Answer 1

Divide the framework into an issue tree, where profitability will depend on revenue, costs and investments.

Divide revenue into:

1. Revenue/ unit
2. Volume sold
3. Additional/alternative revenue

Divide cost into:
1. Cost/unit
—> variable cost
—> fixed cost
2. Volumes produced

Question 2

Common fix costs?

Answer 2

1. Rent
2. Maintainance
3. Labour
4. sometimes marketing, sales etc.

Question 3

Common variable costs?

Answer 3

1. Raw material
2. Transport
3. manufacturing cost
4. sometimes marketing, sales etc.

Question 4

Common investments?

Answer 4

1. New facilities
2. New machines
3. New technology

Question 5

Give an example of a value chain?

Answer 5

1. Raw material
2. Factory
3. Distribution
4. customers

Question 6

What to think about during question to produce domestic or abroad ?

Answer 6

1. Calculate for setting up a new factory or not?
2. difference in manufacturing cost
3. difference in transportation cost

Question 7

Advice

Answer 7

Don’t calculate what you don’t need.

e.g. comparing 2 markets don’t focus so much on the need but on the on the difference of cost between the versions

Question 8

What to think about when analyzing revenue?

Answer 8

Often if it’s a train or boat or plane or hotel, it will have a capacity but the capacity will not we 100% do not forget this

Question 9

What is breakeven?

Answer 9

The income that will make profit

Question 10

Hur beräknar man breakeven?

Answer 10

1.Antag försäljningsvolym x

KOSTNADER=
Fastkostnad+rödligkostnad*x

INTÄKT=
Pris*x

Sätt lika med varandra och lös ut x

Question 11

Hur beräknar man pay-off, pay-back?

Answer 11

grundinvestering/ekonomiska förbättringen investeringen kommer att bidra till varje år

Question 12

What to look for during financial analysis?

Answer 12

1. cashflow analysis
2. NPV
3. Balance sheet & income statement
4. financial ratios
5. cost accounting