ASSIGNMENT -1

BUSINESS SIMULATION

ANALYSIS ON FOUR-K

SUBMITTED TO-

Dr. Sharad Chaturvedi

SUBMITTED BY-

GROUP 1-4

Karan Valecha (71)

Karan Wadhwa (72)

Karan Mehta (70)

Kartik Yadav (73)

 Period 1

Company
Our company four K is having 1,80,000 Euro for lean management which was 1,60,000 Euro
in 0 period, and we are paying dividends with same rate of 8% as it was for period 0. We
haven’t installed any new machines for this period. The fixed costs have reduced to 9,97,500
from 10,00,000 Euro.

Sales (Home and Export)

Sales Price
Petra 168 238 CU

Quarto 210 290 CU

Rondi 270 360 CU

We decided to reduce the prices of Petra in home market from 170 to 168 and to increase in
export market from 240 to 238. The prices of Quarto were kept same in-home market and
export market. For Rondi also we have kept same prices. Results of these changes were: -

SALES Home Export

Petra 19,237 60,489

Quarto 26,208 69,959

Rondi 4,274 12,801

Irrespective of reducing prices for Petra there was a fall in its demand in home market from
20,000 to 19,237 in home but export market showed a gradual increase from 60,000 to
60,489. The reasons are Petra have reached its declining stage.

The demand for Quarto picked up after reducing its prices marginally, the demand increased
from 24,000 to 26,208 in home market and 64,000 to 69,959 in export market. Quarto is in its
growth reaching maturity so the market for it is picking up constantly.

Rondi is new product in the market so we kept same prices for it, and it showed an increase in
demand from 4000 to 4274 in home market whereas 12000 to 12801 in export market.
 Promotion Expenses

For Petra the promotion expenses were increased from 4,50,000 to 4,80,000 in home market
and from 10,50,000 to 11,00,000 in export market to increase its sales ad clear the previous
unsold stock.

For Quarto 7,20,000 to 7,50,000 in home market and 11,20,000 to 11,50,000 in export market
which have increased the sales for Quarto. Still the promotion wasn’t enough since there was
unsold stock at the end of period 1.

For Rondi we increased the promotion expenses from 7,00,000 to 7,50,000 in home market
and from 17,00,000 to 17,50,000 in export market since the product is new and it is important
to promote this product more.

Finance
The profit and loss account of our company is showing a loss of 11,00,059 Euros.

The reasons behind these losses are: -

o Overestimation of demand in export market and home market for Petra, Quarto
and Rondi
o Orders for bought in which could have been avoided.
o Insufficient demand for the product

The short-term liabilities have increased to 54,50,624 as a bank overdraft since we haven’t
sold the expected units and have incurred expenses on training, product technology, product
policy. Whereas the long-term liabilities accounts for 6,00,00,000 Euros.

Cash in hand

The company is having a cash on hand of 32,68,464 euros and includes a bank overdraft
allotted for 54,50,624 since the receipts were less as compared to outgoing expenses.

Liabilities to equity ratio is 114%

We have been allotted with an overdraft and the amount of brought in goods have increased.
The score for debt to equity ratio is coming out to be 9 out of 10 which is showing a great
position.

Purchasing
Purchasing of raw materials of Tika, Ulli, Varu and Wino has been decreased due to
increase in bought in goods. For this period, we purchased 324844, 184623, 197669 and
18310 respectively. The products have been purchased based on demand forecast to fulfil the
demand of buyers.
Production
The production depends on the quantity produced and rejection rate. We decided to increase
expenses on production technology from 3,20,000 to 3,50,000 and total quality management
from 2,70,000 to 3,00,000 and spent 2,10,000 euro on training of personnel which was
1,50,000 in period zero. The rejection rate for Petro was reduced to 3.93% from 4%, for
quarto 7.85% from 8% and for Rondi 9.82% from 10%.

As per balance scorecard there is a scope of improvement when it comes to rejection rate,
production quality which is showing 5 and 6 score respectively.

Balance Scorecard
Our balance scorecard is showing an average score of 6.15 and debt to equity ratio is on a
higher side which is 114%. Profit and loss a/c are showing losses due to which the score is
coming out to be 0 for period 1. The image of the company is having a score is 5 which
means there is a scope of improvement in product quality and training of personnel.

Period 2

Company
For period 2 we increased our lean management from 1,80,000 to 2,00,000 which further
reduced our fixed costs from 9,97,500 to 9,93,000 Euro. Since we were having losses for
period 1 so we kept our dividend rate fixed to 8% only.

Sales (Home and Export)

SALES PRICE

Petra 165 236 CU

Quarto 206 286 CU

Rondi 267 357 CU

We have reduced the prices for the products to increase the demand for these products since
the future forecast for the economy is down so in order to pump in more demand, we had to
reduce the prices which showed a massive growth in the demand for the products.

SALES Home Export

Petra 19,028 56578

Quarto 29,148 74,058

Rondi 4,716 13,803

Despite decreasing prices for Petra there was a fall in the demand for the product since Petra
is going down in the market at a fast pace and have hit its low.

For Quarto there was a pick in sales number and have increased our profits and there were no
unfilled orders too.

For Rondi there was a marginal increase in its demand in home market, but export market
responded well and there were no unfilled orders for this product too.

Promotion Expenses

For Petra the promotion expenses were increased from 4,80,000 to 5,00,000 in home market
and from 11,00,000 to 11,20,000 in export market to increase its sales ad clear the previous
unsold stock. But still there was no such response from the market and we still had unsold
stock for the next period.

For Quarto 7,50,000 to 7,70,000 in home market and 11,50,000 to 11,70,000 in export market
which have increased the sales for Quarto. Still the promotion wasn’t enough since there was
unsold stock at the end of period 1. But the sales were picked, and our profits also picked.

For Rondi we increased the promotion expenses from 7,50,000 to 7,70,000 in home market
and from 17,50,000 to 17,70,000 in export market since the product is new and it is important
to promote this product more. This promotion showed a marginal growth in the demand of
the product.

Finance
The profit and loss account of our company is showing a profit of 5,42,926 Euros.

The reasons behind these profits are: -

o Pumping in more demand by reducing prices.

o More expenditure on promotion, quality, production technology and trainings

Our Debt to equity ratio also reduced from 114% to 108% in this period since our company
was able to generate some profits.

Purchasing
Purchasing of raw materials of Tika, Ulli, Varu and Wino has been decreased due to
increase in bought in goods. For this period, we purchased 3,19,332, 2,14,034, 2,55,139 and
26,526 respectively. The products have been purchased based on demand forecast to fulfil the
demand of buyers. The orders for raw material required for Quarto and Rondi were increased
since we were expecting more demand for these products.

Also, there were bought in of 10,000 each for all these products.

Production
The production depends on the quantity produced and rejection rate. We decided to keep
expenses on production technology same to 3,50,000 and total quality management to
3,00,000 and spent 190,000euro on training of personnel. The rejection rate for Petro was
increased to 3.96% from 3.93%, for quarto 7.91% from 7.85% and for Rondi 9.89% from
9.83. The reasons to keep these expenses same was just because our company was incurring
losses in the period 1.

As per balance scorecard there is a scope of improvement when it comes to rejection rate,
production quality which is showing 7 and 6 score respectively.

Balance Scorecard
Our balance scorecard is showing an average score of 6.75 which was 6.15 in last period and
debt to equity ratio was on a higher side i.e. 114% in period 1 but have reduced to 108% in
this period. Profit and loss a/c are showing profits due to which the score is coming out to be
3 for period 2 which was 0 in last period. The image of the company is having a score is 5
which means there is a scope of improvement in product quality and training of personnel.

Period 3

Company
We kept Lean management to 2,00,000 euros only for this period and our fixed costs were
reduced to 9,89,400 and dividends were kept same at 8%.

Sales (Home and Export)

SALES PRICE

Petra 163 234 CU

Quarto 206 286 CU

Rondi 267 357 CU

We decided to reduce prices for Petra only for this period rest all the prices were kept
same since other products were doing well in the market
SALES Home Export

Petra 16,052 47,391

Quarto 29,465 74,517

Rondi 4,905 14,208

Petra’s demand kept on falling and the demand for Quarto shows an increase, but we were
still left for unsold stock of quarto and Petra but for Rondi demand exceeded our expectations
and there were some unfilled orders for Rondi which disrupted our brand image and half of
our customers went off.

Promotion Expenses

For Petra the promotion expenses were kept same to 5,00,000 in home market and to
11,20,000 in export market since product was showing no improvement.

For Quarto expenses were same 7,70,000 in home market and 11,70,000 in export market
since market for this product was already doing well. Still the promotion wasn’t enough since
there was unsold stock at the end of period 3. But the sales were picked, and our profits also
picked.

For Rondi we increased the promotion expenses from 7,70,000 to 7,90,000 in home market
and from 17,70,000 to 17,90,000 in export market since the product is new and it is important
to promote this product more. This promotion showed a marginal growth in the demand of
the product.

Finance
The profit and loss account of our company is showing a profit of 8,20,336 Euros.

The reasons behind these profits are: -

o Increasing expenses on promotion, quality, technology, training.

Our Debt to equity ratio also reduced from 108% to 115% in this period since our company
was able to generate some profits but those profits were not adequate to fulfill short term
liabilities.

Purchasing
Purchasing of raw materials of Tika, Ulli, Varu and Wino has been decreased due to
overproduction in last period. For this period, we purchased 2,03,992, 1,63,889, 2,10,560 and
30,444 respectively. The products have been purchased based on demand forecast to fulfil the
demand of buyers. Our aim was to first clear the previous unsold stock for Petra and quarto
and produce more of rondi since we were unable to fulfil some of the demand.

Production
The production depends on the quantity produced and rejection rate. We decided to keep
expenses on production technology same to 3,50,000 and total quality management to
3,00,000 and spent 2,10,000 euro on training of personnel. The rejection rate for Petro was
reduced to 3.93% from 3.96%, for quarto 7.85% from 7.91% and for Rondi 9.82% from 9.85.

As per balance scorecard there is a scope of improvement when it comes to rejection rate,
production quality which is showing 7 and 6 score respectively.

Balance Scorecard
Our balance scorecard is showing an average score of 7.31 which was 6.75 in last period and
debt to equity ratio was again on a higher side i.e. 115% in period 3. Profit and loss a/c are
showing profits due to which the score is coming out to be 8 for period 3 which was 3 in last
period. The image of the company is having a score is 5 which means there is a scope of
improvement in product quality and training of personnel.

Period 4

Company
We kept Lean management to 2,20,000 euros only for this period and dividends were kept to
9%.

Sales (Home and Export)

SALES PRICE

Petra 161 232 CU

Quarto 205 284 CU

Rondi 267 357 CU

We decided to reduce prices for Petra only for this period and prices of quarto was also
reduced a bit to sell unsold stock

SALES Home Export

Petra 11,201 33,012

Quarto 29,754 76,357

Rondi 6463 17995

We were unable to fulfil demand since we kept are planned production to the extent of
demand but due to some technical glitch our entries were not submitted in period 4 and were
same as of period 3.

Promotion Expenses
For Petra the promotion expenses were kept to 5,20,000 in home market and to 11,30,000 in
export market since product was showing no improvement.

For Quarto expenses were 7,90,000 in home market and 11,30,000 in export market since
market for this product was already doing well. Still the promotion wasn’t enough since there
was unsold stock at the end of period 3. But the sales were picked, and our profits also
picked.

For Rondi we increased the promotion expenses from 7,90,000 in home market and
17,90,000 in export market since the product is new and it is important to promote this
product more.

Finance
The profit and loss account of our company showed a loss of 5,33,814 Euros.

The reasons behind these losses were: -

o Insufficient production and the company were continued with same production in
period 3.

Our Debt to equity ratio also reduced from 115% to 111% in this period.

Balance Scorecard
Our balance scorecard is showing an average score of 7.07 which was 7.31 in last period and
debt to equity ratio was again on a higher side i.e. 111% in period 4. Profit and loss a/c are
showing loss due to which the score is still coming out to be 8 for period 3 which was 8 in
last period also. The image of the company is having a score is 5 which means there is a
scope of improvement in product quality and training of personnel.