As1 quants - Assigment 1 format with answers during that year Distinction was achieved PDF

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Assigment 1 format with answers during that year
Distinction was achieved...

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Financial Analysis of Quber

10/09/2019 Prepared by

Introduction The purpose of this report is to provide Quber an analysis of its financial performance, company total profit and the distribution of percentage towards drivers based on mathematical evidence. The report will serve as a documentation to find the most desirable business structure for the company to make the highest profit for the company and drivers.

The first section of the report will explore the pattern of the company net profit and relative percentage change from 2015 – 2018 and establish a trend for better understanding. The second section of the report will look at the financial viability of the company and see if the percentage cut for drivers and the company is viable. The third section of the report will analyse the potential profit and break-even amounts in terms of rides and change in cost.

The appendices will include all the mathematical findings to support the report. Appendix 1 will cover the revenue and percentage change of each year with calculations. Appendix 2 will cover the cash flow of the company with calculations. Appendix 3 will cover the break-even analysis.

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TSOPY008

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Report Revenue Increase From changes in Cost By examining the trend and changes from the cost from 2015-2018, we can see that they have experimented with lowing the cost in 2016 which this decreased their revenue. Their cost was $900,000. Their revenue dropped from $1,200,000 to $1,100,000. Furthermore, we can see that the higher cost there is the more revenue will be profited. Such as comparing 2017 and 2018 cost and revenue. Which is $1,250,000 and $1,356,000 respectively in terms of revenue. The cost is $1,000,000 and $1,100,000 respectively. The total number of rides did not have a huge impact as in 2017 there was more rides sold than to 2018 by one, but the revenue was increase by at least $106,000. From 2015-2018, the revenue has increased by 27.4%. Based on this information, we can see that there will be a further increase in total net profit in the coming years as this is the trend we can observe. Due to 2016 decrease in revenue, there is a negative value in the spark lines as before in 2015 Quber had higher revenue and cost than 2016.

Cash-Flow Analysis The present value of the $100,000 tip that the drivers received will be

$ 95,132.83 in

today’s value. The initial drivers cut was 70% where drivers would receive at least $234,500 as they cut but with the extra $100,000. By examining the goal seeking, we can see that the new cut would be 72% with at least $241,200 as an increase in pay. Since $100,000 goes the Quber. By examining the” New monthly Cash-flows” graph, the financial effect of the trial run for Quber can be seen clearly, with the initial outlay of $800,000. Quber will instantly earn $83,500 after the first month and will keep this trend steady over the 12 months period.

Break-Even Analysis Initially, the cost per ride is $25 and the profit that the company makes is 7$ and the drivers makes $18. To expand on this, Quber is required to sell at least 13922 rides to break even per month and drivers are required to sell at least 23 rides per month to break even. We can see the following

appendix 3 break-even graph to have a better understanding. Cost slowly increase but we can see that the revenue increases rapidly when more rides are sold. According to my analysis, for drivers to make an extra $5000 profit per month, they are required to complete 317 rides. Cost are already considered. As for the driver's petrol, for them to complete 308 rides and earn $5000 profit are done by changing the cost of petrol. Which is was initially $1 but now down to $0.53. Which this greatly impacts the break-even sum, since the cost is lower and yet drivers earn more, it lowers the break-even point. Therefore, they can earn extra profit easier than their initial point of how much a driver make.

Conclusion and Recommendation From the report, we can see that Quber is financially operating in a healthily state, with their rides and drivers cut. We can see that the revenue is increasing year after year. As for recommendation, I would encourage Quber to do the following: -Research the ride prices further in the trial period to see how it will affect the company profits -Negotiate with customers to see a reasonable price for the selling price of eat ride and adjust - Find better source of fuel to lower the price of the cost 

Appendix 1 – Revenue, Cost analysis Table 1: Summery Data of Quber per financial year Year Revenue

2015 1200000

2016 1100000

2017 1250000

2018 1356000

Cost

950000

900000

1000000

1100000

Ratio TPSY

24:19

11:9

5:4

339:275

Rides

60000

55000

75000

74000

Chart 1: Revenue, Cost and Rides

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Table 2: Net Profit ($) per financial year Year Net Profit

2014 208.3

2015 250

2016 200

2017 250

2018 256

Relative Percentage Change

N/A

20%

-20%

25%

2.4%

Calculation of table 2 Equation used: New value−Reference value =Relative change Reference value After finding the relative change, I then converted into percentage. 2014 Net Profit: 250−x =0.2 x x=208.33 The net profit for 2014 was around 208300. 2016 Relative Percentage Change: 200 −250 =−0.2 250 Converting into percentage:

−0.2=−20 %

2017 Relative Percentage Change: 250 −200 =0.25 250 Converting into percentage:

0.25=25 %

2018 Relative Percentage Change: 256 −250 =0.024 250 Converting into percentage:

0.024=2.4 %

Sparkline 1: Rides Sparkline 2: Net Profit

Sparkline 3: Relative % change

Appendix 2: Trial Phase Cash-flow The present value of the $100,000 from drivers that are promised to Quber at the end of 12 months is calculated by: P=M ( 1+i )−n −12 0.05 P=100,000 1+ 12 P=95132.83

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Table 3: Net Present Value

To find the Revenue per month, we use the excel formula of “=E3*E4”. This multiplies the total revenue with the percentage cut. To find the Cash flow monthly, we use the excel formula “=$E$5-$E$7”. This minus the initial outlay of every month with the Cash outflows of every month. To find NPV, we use the excel formula” =B2+NPV((E1/G1), B3:B14)” since its per annum compounded mouthy. Before Goal Seek

After Goal Seek

The new request percentage cut for the drivers would be 72%. A column chart below shows the monthly cashflow of QUBER associated with the increase in percentage cut for the drivers.

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Chart 2: Monthly expected Cash Flow

Appendix 3: Break even analysis Firstly, the break-even number of rides needed by the company per month can be calculated by: Fixed cost (f) = $960576/12 = $80048 Selling price (s) = $25*(1-0.72) = $7 Variable Cost (v) = $1+$0.25= $1.25 Break even equation used f x= s−v Calculation

80048 7−1.25 x=13922 x=

To break-even, the company needs at least 13922 rides per month. Next, the break-even number of rides needed a driver to complete each month can be calculated by: Fixed cost (f) = ($480 + $240 + $240 + ($50*12) + ($250*12)) / 12=$380 Selling price (s) = $25*0.72 = 18 Variable Cost (v) = $1 Break even equation used f x= s−v Calculation 380 x= 18−1 x=22.35 To break- even, each individual driver should complete at least 23 rides per month. Now to calculate the monthly income made by Quber, it can be calculated by: i=sx i=7∗13922 i=97454 Monthly income that Quber needs to make is $97454 to break-even.

To find the number of rides that’s required to make at least $5000 profit per month, we use the equation. Fixed price (f) = 380 Profit (P) = $5000 Selling price (s) = $18 Variable cost (v) = $1.25 P= ( s−v ) x−f 5000=( 18−1)x −380 5380=17 x x=316.47 You cannot do 0.47 ride therefore the total rides required to completed to make $5000 profit is 317 Rides. To adjust their petrol cost to achieve the same profit with only 308 rides, we can calculate it by: 5380 =17.47 308 Then we can use the income of drivers which is at $18 to finish the calculation. 18−17.47 =0.53

The contribution margin will be 0.53. The effect of change from the petrol cost will lower the break-even number at the company is spending lesser on petrol. Also, they are earning the same profit per month. Therefore, it will lower the break-even amount since the company is paying less for cost.

Chart 3: Break-even analysis Quber Break-even Anaylsis for Quber TSOPY008 $200,000.00 $180,000.00 $160,000.00 $140,000.00

Dollar ($)

$120,000.00 $100,000.00 $80,000.00 $60,000.00 $40,000.00 $20,000.00 $0 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 220 230 240 250

Number of customers Total Cost TPSY

Total Revenue TPSY

Chart 4: Break-even analysis Drivers Drivers Profit new/old TSOPY008 $7,000.00 $6,000.00

Dollar($)

$5,000.00 $4,000.00 $3,000.00 $2,000.00 $1,000.00 $0.00 ($1,000.00)

0

20

40

60

80 100 120 140 160 180

0 0 0 0 0 0 0 0 0 20 22 24 26 28 30 32 34 36

Rides Total Profit TPSY

Total Profit New TPSY

0 0 38 40...