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Table of Contents:
1.0: Introduction Page 2

2.0: Prioritization of Issues Page 2

3.0: Discussion of the Issues

3.1: Fault in the flying spaceships Page 3

3.2: Late Delivery of goods Page 5

3.3: Near-shoring to Voldania Page 6

3.4: Launching into the age group 9-11 Page 9

4.0: Ethical Issues Page 15

5.0: Conclusions Page 16

Appendix

1.0: SWOT Analysis Page 17

2.0: Prioritization Chart Page 18

3.0: Financials:

3.1: Cost Comparison between China and Voldania Page 21

3.2: Cost Comparison between Option 1 & Option 2 Page 23

3.3: Development Cost Breakdown of Apps Page 24

4.0: Ratio Analysis Page 25

1
1.0 Introduction
Jot started its business in 1998 with the joint effort of Jon and Tani Grun. The
company started small, but in 2003 its sales figure hit the €2mn mark. In the
following year, to price its product more competitively Jot started outsourcing all of its
manufacturing to China. Ever since then Jot started experiencing rapid growth, with
a revenue growth of 17.9% in 2011 alone.

A set of challenges has arisen for Jot which it needs to address immediately and
efficiently to ensure its growth in compliance with its 5-year plan.

2.0 Prioritization of Issues

There are few issues that Jot needs to take care of in order to sustain its business
profitably. In this competitive toy industry, differentiation (both product and brand
image) is key. The profitability and liquidity position of the company represents the
financial backbone of the firm and is crucial to our analysis. It is critical to address
issues swiftly and urgently to alleviate the potential risks to the firm. Keeping these in
mind, we prioritized the issues in regards to the financial and reputational aspect of
the firm, and the urgency of the issue.

According to the prioritization matrix(Appendix..2.0), we will discuss the issues in the

following order:

I. Fault in Flying spaceship

II. Late delivery of goods
III. Near-shoring in Voldania
IV. Launch into the age group 9-11

2
3.0 Discussion of the Issues

3.1: Fault in the flying spaceship

BACKGROUND
A fault in the design of the newly launched flying spaceship poses a fire risk for the
consumers. Already 12 complaints have been lodged and retailers are indignantly
upset. Shareholders are torn between writing off the product and continuing its
production.

INSIGHT
Overview of the toy:

I. Designed by a new recruit

II. Rushed to productions for the Christmas season
III. Highest priced toy for Jot till date. Sold for €40, where other Jot toys sold for
€38 max with the average price of Jot’s toys being €14
IV. Profit margin of almost 40% for Jot and 52.38% for retailers
V. Strong demand: If all 6000units are sold, it will account for 2.07% of total
revenue for 2012

Under the given circumstances Jot has two options: Write off the product or fix the
underlying problem and continue selling the product.

Option 1
Consequences of writing off the product(Appendix..3.2):

I. Minimum operational losses of €84,000 (sold, discount market), €144,000

(unsold, discount market)
II. Unable to recover its development cost of €200,000(Average cost) **
III. Loss of future sales
IV. Reduction in inventory reserve: € 84,000. If 6000 units are not sold at scrap
value then gross profit decreases by 0.173% in 2012.

3
Due to the presence of the write-off reserve, calculation under method 1 (sold on
discount market) doesn’t affect the gross profit, but if the faulty toys aren’t sold on
the discount market then the loss in inventory exceeds the amount reserved in the
write-off account (€20,000) and results in decrease in the gross profit.

Furthermore writing off the product will not be well received by retailers and
customers alike making it difficult for Jot to redeem its reputation as a high quality toy
manufacturer.

Option 2
By recalling the toy, Jot gets the opportunity to redeem its reputation among the
retailers through compensation. Additionally Jot should explain to the retailers the
reasons behind their mistake, a new designer and the toy being rushed to
production. Jot should try to convince the retailers of the financial gains from selling
the toy: a profit margin of 52.38%.

In order to redeem its reputation Jot can choose from two alternatives. Although
fixing the toy will be costly, contribution will still be positive (€6) and Jot will benefit
from selling the product. This will also help them recover part of its development
cost.

Alternative 1:

Recall and replace 1200 units: This will result in Jot making losses of €
19,200(Appendix...3.2).

Alternative 2:

Offer a discount on the 4800 units: If Jot can negotiate a deal with its retailers to
avail a discount of 15% (max) on the next 4800units; Jot can make a profit on the
remaining 4800 units. Additionally Jot can increase its discount to 25% (max) up to
which it would still be a better option than alternative 1(Appendix..3.2).

Recommendation:
Jot should refrain from writing off the product and chose the second alternative in
option 2 as it is more profitable for the firm, given it can negotiate a discount in the
range of 0-25%.

4
In the future Jot should conduct more rigorous inspections or hire external inspection
firms to lessen the probability of such errors. It should also put more emphasis on
employee supervision.

3.2: Late Delivery of goods

Background
One of Jot’s suppliers Gull is expanding and is rumored to be favoring clients with
higher margins, because of which it will be late in delivering 600 units.

Insight
This problem is two-fold and is inter-related. Hence, the decision at hand has to be
cohesive of the two problems. The decisions Jot can take are:

Not take action against Take action against supplier

supplier
Distribute evenly A B
Prioritize the big C D
retailers

 Decision A doesn’t seem wise as not taking any actions against the supplier
or letting them go with just a warning might encourage the supplier to continue
its current practice without the fear of retribution. Distributing the units evenly
means that neither Jot’s large retailers, nor its small retailers will be satisfied.
 Decision B provides with the most ethical of solutions as Jot is distributing all
the units evenly amongst its customers irrespective of what portion of the
market share the customers occupy. In addition, Jot will fine the supplier for
being unethical and prioritizing orders with larger margins.
 Option C, prioritizes Jot’s big retailers who make up 68% of the total buyers,
this action makes them content but not taking any strict action against its
supplier keeps the door open for future problems like this to arise.
 The last option at Jot’s hand, option D is the soundest decision from a
business perspective. Taking action against the supplier stops this problem

5
 from repeating while keeping the large retailers happy makes sure that Jot’s
largest customers are pleased with Jot. The problem with this decision is that
by taking this decision, Jot is doing something similar to what its supplier is
doing – prioritizing the big fish! This gives rise to an ethical dilemma which will
be discussed later.

Recommendations
Specifically for this case, Decision B seems to be the best way to go since a slight
business repercussion of 600 units can be dealt with but the accordance with ethics
is more important.

To avoid such complications in the future Jot can:

I. Keep better track of the production processes of its toys which inherently
means updating and integrating their IT system.
II. Introduce compensation fees in the contracts.

3.3: Near-shoring to Voldania

BACKGROUND
There is a proposal for Jot to shift part of its manufacturing from China to Voldania, a
country in Eastern Europe. A breakdown of the costs is available to aid us in our
analysis.

INSIGHT:
Focusing on the SWOT analysis(Appendix..1.0) we have analyzed this prospect from
a strategic, operational and financial viewpoint.

Strategic
Advantage:

I. Diversification: All of Jot’s outsourced manufacturers are located in China which

puts the company in a very susceptible position in terms of supply side shocks in
China. Transferring part of its production to another country will diversify Jot’s
supply chain and reduce the associated risks.

6
 II. Trade Policy: EU policies, provisions and Voldania’s government policy to
encourage overseas investment will benefit Jot in their operations.

Disadvantages:

I. Relationships with Suppliers: ‘Repeat’ business with the outsourced firms

means Jot has established a strong relationship with its suppliers. Shifting
production to another country will sever ties with those firms which can be
detrimental to Jot in the short-run.
II. Services of Auxiliary firms: China currently manufactures 86% of the world’s
toys signifying China’s dominance in the toy industry. Such a domineering figure
attracts a lot of auxiliary firms catering to the needs of the industry and facilitating
the production process.
III. Ease of access to components: Chinese manufactures have connections with
specialist firms supplying specialized components (ASIC). Their ease of access
to these components gives them an upper hand over their competitors in other
countries.

Operational
Advantage:

I. Capital Intensive: Production in Voldania will be more dependent on machines

leaving less room for any human errors.
II. Geographical advantage: The geographical location of Voldania ensures Jot
being able to transfer its goods to its warehouses more quickly. Decrease in
delivery time means Jot can risk accepting late orders.

Disadvantage

I. Uncertainty: Transferring production to a new country makes business risky,

because of no existing business ties, no knowledge of the local laws and
cultures, no assumption of the average delivery time and the quality of the
products produced.

7
Financial
Before diving into the breakdown of the costs due attention must be given to the
moral dilemma revolving around this issue. In order to ensure a smooth transition of
the production process to Voldania, Jot will have to pay a government official a
personal donation of €25000. Although this does not clearly fall into the definition of
‘bribe’ it is an issue worth debating. Therefore it is of utter importance that the
shareholders of Jot cooperate with each other and come up with a concerted
decision regarding this issue. This issue is discussed farther in the ethics section.

From a financial viewpoint it can be seen that transferring production to Voldania

reduces the total cost by almost € 411920(Appendix.3.1) in 5 years. Although initial
results are quite appealing, a closer look reveals that the manufacturing cost in
China is lower than in Voldania. The key in determining the total cost in China is the
delivery cost which accounts for almost 55% of total cost in year 1 only. It can be
seen that after shifting production to Voldania gross profit margin decreases by
0.80%, 1.14%, 1.32%, and 1.38%(Appendix..3.1) in the year 2013, 2014, 2015 and
2016 respectively. But due to a huge variance in the delivery costs between the two
countries, operating profit margin increases by 0.9%, 1.3%, 1.6% and
2%(Appendix..3.1) in the respective years.

34.00%
33.60%
33.50%
33.20%

33.00% 32.90%
32.60%
32.50%
32.22%

32.00% 31.80% 31.88%

31.76%

31.50%

31.00%

30.50%
2013 2014 2015 2016

Gross Profit (Old) Gross Profit (New)

8
 10.00%
9.00%
9.00% 8.40%
7.80%
8.00%
7.10% 7.00%
6.80%
7.00% 6.50%
6.20%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
2013 2014 2015 2015

Operating Profit (Old) Operating Profit (New)

According to Jot’s future plans to enter the Russian and Asian markets, Jot will need
to increase its production capacity to meet the additional demand. In order to exploit
the situation mentioned above Jot can keep its manufacturing firms in China to cater
for the Asian markets and hire other manufacturers in Voldania to supply some
goods to the European market. This will result in Jot benefiting from all the strategic
and operational advantages without foregoing any of the advantages it is currently
enjoying in China.

Recommendations
If the ethical issue is dealt with properly then it is better for Jot to shift its production.
If Jot plans to further invest in the Asian markets, we recommend keeping its
manufacturers in China due to low manufacturing costs.

3.4: Launching into the age group 9-11

Background

Alana Lotz is eager to invest in the ever-increasing smart phone app market and
wants us to conduct a suitability, acceptability and feasibility study.

9
INSIGHT
Industry Analysis:

Forrester Research, the market research company, estimates revenues from buying
and downloading apps on smart phones and tablets to reach $38 billion by 2015,
and they believe this is just the beginning. Currently there are two platforms
dominating the app industry, Apple App Store and Google Play. Earlier in the year
developers were complaining about Google Play and the lack of monetization on the
platform. Apple, on the other hand, redefined the app store model, and proved to be
highly successful in terms of monetization for developers.

Some major findings contrasting the two platforms are as follows:

16

14

12

10

8 iOS
Android
6

0
Daily revenue

10
 Brief comparison
iOS Android

54%

43% 42%

21%

Growth rate Breakeven

Due to the findings above we have limited our research to the Apple app store as
it offers more stability and more scope for amateur developers. Although cross-
platform developers are more safeguarded against the uncertainty of the industry,
they require a higher start-up cost and currently unsuitable for Jot.

Market Niche: Game apps for children

Market Analysis: Apps are an important and growing medium for providing
educational content to children, both in terms of their availability and popularity.

 Over 80% of the top selling apps in the Education category of the iTunes
target children.
 Significantly different market than television, video games and toys. Only
2% apps were based on well-known branded characters
 Apps for elementary aged children are most profitable: 20% developers
target this group, and 50% of the top sellers (Top 25) target elementary
aged kids.
 The percentage of apps for children has risen in every age category,
accompanied by decrease in apps for adults

11
Suitability

The app industry is very different from the toy industry. Venturing into the app
industry, offers more stability in terms of revenue as returns are not fixated on a
single quarter. But this is a completely new industry for Jot and it has no prior
experienced knowledge of this market. Thus to enter this market Jot can do either of
the 2 things:

I. Completely outsource the job to external app-designing companies who

charge a lot of money
II. Do the job themselves but Jot will need to hire a new breed of designers and
technicians to design the app

Both of these options entail a high cost which is not suitable for Jot at the moment.

Acceptability

This market niche, though risky, offers the greatest profit margin. Angry Birds with an
initial budget of €100,000 went on to gross€50mn.The game had been the number
one paid application on iTunes in over 68 countries, and had broken the half a billion
download barrier across platforms. Every day, 30 mn daily active users played a
collective 300 mn minutes. Revenues in 2011 reached 102 mn. But this is an
exceptional case and the following point must be noted:

I. One in three developers is below the app poverty line

II. For every developer succeeding, there are 20 who are struggling to
see noticeable sales
III. Runaway successes are rare, and developers chances at stellar
revenues are below 10%

Furthermore the project fails to breakeven in 4 years with a negative NPV value of (-
€39665.690)(Appendix..3.3).

12
Feasibility
Jot can finance the project in two ways, internally or externally. But before
conducting the feasibility study it must be noted that Jot will need to repay a loan of
€500,000 in 14 months and it needs to acquire sufficient funds for it.

Ratio analysis 1
1.65

1.6

1.55

1.5

1.45

1.4

1.35

1.3
Current ratio Acid test ratio

13
 Ratio analysis 2
90.00%
88.00%
86.00%
84.00%
82.00%
80.00%
78.00%
76.00%
74.00%
72.00%
70.00%
68.00%
Debtor to current asset Debtor to total asset

It is indicative from the tables above that the company is in a very strong liquidity
position. But it also shows debtors to current and total assets to be 87.83%,
75.59%(Appendix..4.0) respectively which puts the company in a risky position if
debtors fail to honor their payments in due time. Having little influence over retailers
puts Jot in a risky position in terms of an acute liquidity crisis.

Jot can also finance the project by over drafting its bank account but this will hamper
its ability to pay the upcoming loan.

Recommendations:
For our analysis we have followed a very modest approach using average values in
calculating the financial figures. But the potential is endless for Jot if they get that
lucky break through. But according to the statistics it is very risky for Jot to invest in
this industry given its financial position and the uncertainty of this industry. Thus we
recommend Jot to postpone this proposal for now.

14
 4.0 Ethical Issue
There are 3 main ethical issues confounding Jot’s employees:

I. Speeding up the application process: Grot, a Voldanian government

official in the inward investment division was quick to request a
€25,000 personal donation to help Jot’s application go through sooner.
This is absolutely unacceptable. Although it creates an operational
hindrance, Jot shouldn’t pay Grot any money or even negotiate a deal
with a corrupt person since this would hamper the company’s image
not to the customers but to the faithful employees Jot is proud of. Jot
can instead call the head of the inward investment division itself to give
the proposal directly or contact any other officer in the division who is
honest and would not want any ‘personal donation’. Jot can also offer
to donate a sum of money to any government run NGO in Voldania
instead, which would add to Jot’s CSR activity and would also create a
good tie with the Voldanian government thus speeding up the
application process.

II. Fixing the flying spaceship: The product’s glitch may cause a fire to
start in close proximity of a child. This glitch is entirely Jot’s fault,
through neglect in design and rush in manufacturing. Thus, Jot should
recall this product as soon as possible to remove the fire hazard and
definitely fix it before releasing it back to the market, since the well-
being of a person is much more important than financial gains.

III. Distributing the stock evenly: A supplier is late on delivering goods

because it’s rumored to be favoring companies with higher order
margins. Jot is now facing a dilemma in whether to distribute a portion
of its stock available amongst all its retailers or to give it to the 7 major
retailers and whether to fine the supplier or not. Even though Jot wants
to keep its major retailers content, prioritizing them would be slightly
hypocritical and thus unethical from Jot since it’s arguing on whether to

15
 fine the supplier or not over the exact same thing. Thus if Jot fines the
supplier then it should distribute the units evenly and fine the supplier:
the most ethical way. And if Jot distributes it goods to the major
retailers then it shouldn’t fine the suppliers because both essentially
took the same road of business gains rather than ethical ones.

5.0 Conclusions
According to our analysis, if Jot follows our recommendation then it would be able to
tackle problems better and have a better idea on the expansion of its product range.

16
APPENDIX
1.0 SWOT Analysis:
Strengths
-Superior electronic features
- Brand name synonymous for
QUALITY electronic products
-Loyal customer base for the consistent
products
-Has its own in-house team of designers -Still dependent mainly on loan finance
so has a control on the design
-Production Samples are reviewed by
Jot’s in house Quality Assurance team
located both in Europe in Asia, but not
USA
Opportunities
-In children of aged 9-11, the child
drives the buying decision, and is more
impressionable which makes them easy
to convince and this market is still
untapped so great room for
Weaknesses
-30% to 50% of the sales occur in the
4th quarter making the revenue of Jot
highly dependent
-Small range of 34 products aimed at
only 2 age groups
-Cash flow is negative in the 1st 2
quarters of the year
-All of Jot’s outsourced manufacturers
are in China so extreme dependency
-Jot doesn’t have agreement with
specialized suppliers of Jot toys’ many
electrical components like the ASIC
components; the manufacturers do
which makes Jot entirely dependent
on the manufacturers.
-Dependent on large retailers since
they harbor almost 68% of the total
sales.
Threats
-Sophisticated products like apps have
higher margins, thus contains more
risk
-Jot’s bank announced that it will be
unable to provide any farther long-time
17
 improvement finance
-30% to 50% of the sales occur in the - Technological Advances mean that
th
4 quarter which means massive the market of toys is shifting from
opportunity of revenue at that time generic toys to smartphone apps and
-Untapped Asian Market Jot has nothing in that area.
-CSR activities -The Labor rate of manufacturers are
inflating

2.0 Prioritization matrix

Explanation of Prioritization Matrix:

Issue Brand W1 Feasibility W2 Urgency W3 Credit Priority

Image 0.3 0.3 0.4
Near- 1 0.3 4 0.3 2 0.4 2.3 3
shoring in
Voldania

Fault in 4 0.3 2 0.3 4 0.4 3.4 1

flying
spaceship
Launching 2 0.3 1 0.3 1 0.4 1.3 4
of an app
Late 3 0.3 3 0.3 3 0.4 3.0 2
delivery

Explanation of the credits given:

 Brand Image: We considered four factors when we thought of brand image.

These factors are:

18
 - Superior electronic features Jot is famous for
-Quality assurance that Jot is synonymous with
-Innovative designs
-Loyal Customer Base
The flying spaceship was the top grossing product of Jot in 2010 and it got its
popularity because of its innovative design and its electronic features. Now if
the customers get to know its faulty and Jot isn’t taking any actions for it then
Jot stands to lose the customer’s loyalty. It will furthermore destroy the other 3
factors that give Jot its brand image, that is why we gave it 4 points, the
highest for the brand image. Next, if the poducts are delivered late to the
retailers and by extension the customers they will lose faith in the company
and brand image would be hampered. Thus we gave it 3 points. The
launching of a new app would simply add on to the already innovative arena
of Jot products that is why it was given 2 points. Moving on, the near-shoring
wouldn’t affect any factor for the brand image so it received the lowest point of
1.

 Feasibility: While considering feasibility we had 3 factors in mind:

-Liquidity of the company
-Profitability of the company
-Risk Profile of the issue
The feasibility of the near-shoring proposal is the highest because the cost-
control will entail increased savings for the company, which means the
company will be more liquid, it will have higher profit margins and since the
near-shoring will be done gradually the risk profile is quite low as well. Thus it
received 4 points. Moving on, the late delivery of the products means the
same amount of money inflow and outflow as before, so wouldn’t affect the
company much, but a chance of compensation highly increases its feasibility,
getting it 3 points. Then comes the fault in flying spaceship. The thing is, fixing
the glitch will be pricey, and the 1200 already in the market if recalled will
amount to a substantial loss. But if the toy is fixed, and it continues its gross
margin then its profitability is high with a lower risk profile, so it got 2 points.
The launch of a new app will require a lot of money investment in it meaning it
will reduce the liquidity of the company. Furthermore it has the highest risk

19
 profile and thus its profitability is also under scrutiny. For these reasons this
issue turned out to be the least feasible one.

Urgency: This is based on the other 2 factors:

-Brand Image
-Feasibility
Firstly, the fault in the flying spaceship will be severely detrimental to Jot’s brand
image and this fault entails a high possibility of a loss in the long-term and that is
why this issue should be addressed the most urgently (4 points). The late delivery
continues on with the same idea, but this time the higher detriment will be to the
feasibility of Jot, for if the products arrive late they may not be sold at all, resulting in
a 100% loss for Jot on those products. Moving on, the labor rates and the distribution
rates are ever inflating and so a decision needs to be made on the proposal for near-
shoring because it is a highly feasible solution, and outsourcing manufacturing in a
needy country like Voldania would improve the brand image. Lastly, the launch of
new app would improve brand image only but is not very feasible, and most
importantly it is not affecting the company right now, thus its urgency is the lowest.

20
3.0 Financials

3.1 Cost comparison between China and Voldania

Yearly Cost of Production ( unit price)
Voldania China
Year Manufacturing Delivery Total Manufacturing Delivery Total
1 4.21 1.2 5.41 2.45 3 5.45
2 4.255 1.272 5.527 2.576 3.18 5.756
3 4.301 1.348 5.649 2.717 3.371 6.088
4 4.348 1.429 5.777 2.875 3.573 6.448
5 4.395 1.515 5.91 3.052 3.787 6.839

Total Costs
1 252600 72000 324600 147000 180000 327000
2 425500 127200 552700 257600 318000 575600
3 602140 188720 790860 380380 471940 852320
4 782640 257220 1039860 517500 643140 1160640
5 966900 333300 1300200 671440 833140 1504580

Difference in cost (Total)

Manufacturing cost Delivery Cost Total cost
Voldania- China Voldania- China Voldania- China
105600 -108000 -2400
167900 -190800 -22900
221760 -283220 -61460
265140 -385920 -120780
295460 -499840 -204380
1055860 -1467780 -411920

21
5 year plan (New)

Extracts from Jot's 5 year plan

Plan Plan Plan Plan

2013 2014 2015 2016

Gross profit 4278.424 4866.239 5590.88 6471.36

Gross profit (new) 4172.824 4698.339 5369.120 6206.220

Profit Margin 31.80% 31.76% 31.88% 32.22%

Operating profit 928 1151.8 1420.22 1733.92

Operating profit 7.1% 7.8% 8.4% 9.0%

22
5 year plan (old)

Extracts from Jot's 5 year plan

Plan Plan Plan Plan

2013 2014 2015 2016

Revenue ?'000 13,124 14,791 16,840 19,260

Gross profit 32.6% 32.9% 33.2% 33.6%

Operating profit ?'000 820 961 1,137 1,348

Operating profit 6.2% 6.5% 6.8% 7.0%

Number of unit sales `000 977.5 1,102.0 1,240.0 1,405.0

3.2 Cost Comparison between Option 1 & Option 2

Option 1
Ethical Write-off ( no
discount market)
Revenue(6000*20): 120000 0
20-Max value
COGS 204000 144000
-84000 -144000

Option 2
Alternative 1

Revenue from remaining sales UNITS 144000

3600

COGS 3600 122400

Profit/ (Loss) 21600

COSG 1200 40800

Total profit/loss -19200

23
Alternative 2:
Revenue From 4800 units 192000

COGS ( 4800 units) 163200

Profit 28800

Profit after giving discounts:

192000*x=28800
x=28800/192000
x=0.15
x=15%

192000*x=48000 where
19200+28800=48000
x=48000/192000
x=0.25
x=25

3.3 Development Cost Break-down of App

BREAKDOWN OF REVENUE AND COST

Year 0 Year 1 Year 2 Year 3 Year 4

Revenue (3700 per app- 44400 50127.6 56594.060 63894.69419

month)
12.9% annual increase in
revenue

Initial App designing Cost 30000 0 0 0 0

24
 Development cost** 100000 0 0 0 0

Maintenance Cost (10% of 10000 10000 10000 10000

development cost)
Marketing Cost ( 10% of 13000 13000 13000 13000
total initial cost)
App store cost 99 99 99 99

23099 23099 23099 23099

Net cash Inflow 130000 21301 27028.6 33495.060 40795.69419

NPV 1 0.8929 0.7972 0.7118 0.6355

130000 19019.6629 21547.19992 23841.78399 25925.66366

**Development cost does not include designing cost.

Facts and figures taken from developereconomics.com

Initial cash inflow Discounting Factor NPV

12%
Year 0 Outlay -130000.000
Year 1 Net receipts 21301 0.8929 19019.663
Year 2 27028.6 0.7972 21547.200
Year 3 33495.06 0.7118 23841.784
Year 4 40795.694 0.6355 25925.664
Year 5
-39665.690

4.0 Ratio Analysis

Current ratio= 4628/2846=1.63

Acid test ratio={(4628-542)/2846} =1.44

Debtor to current asset= (40656/4628)*100=87.83%

Debtor to total asset= (4065/5378)*100= 75.59%

25