Exercises: Analysis of results

Explain what market research is and the difference between primary sources (own surveys and interviews) and secondary sources (already published statistics and reports), with one advantage of each type.

In a company's income statement, the following appear: sales $\$1\,800\,000$, purchases $\$800\,000$, wages $\$500\,000$, and other expenses $\$200\,000$. Calculate the profit or loss for the financial year and interpret its sign in one sentence.

The diagram compares a company's revenue and expenses over two years. Calculate the profit or loss for each year and explain what happened between them: why does the net result worsen if revenue increases?

In a survey of 200 people in a town, 64 state that they would pay for a door-to-door laundry collection service. a) Calculate the percentage of interested people. b) Reason what two additional questions you would ask before relying on this data to make an investment (price they would pay, frequency of use, how the sample was selected).

A company increased its revenue by 10% over two years, but its profit fell by half. Propose two possible explanations (increase in costs, decrease in prices to gain market share) and explain which items in the income statement you would inspect to confirm each one.

Profit margin on sales is calculated as $\text{margin} = \frac{\text{profit}}{\text{revenue}} \times 100$. Company A generates revenue of $\$4\,000\,000$ and makes a profit of $\$400\,000$; Company B generates revenue of $\$1\,600\,000$ and makes a profit of $\$240\,000$. a) Calculate the margin of each company. b) Reason which company is more efficient at turning sales into profit and why looking only at absolute profit can be misleading.

A company has total assets of $\$180,000$ financed with liabilities of $\$120,000$ (75 % of which are short-term) and equity of $\$60,000$. In the last financial year, it generated sales revenue of $\$150,000$ and total expenses of $\$140,000$. Its managing director states: «The year has been a resounding success: we have profits and equity is positive, so we can borrow another $\$40,000$ to open a branch». a) Refute the director's statement by jointly assessing the return on sales and the company's debt and liquidity structure. b) Justify what consequences taking out this new loan would have and propose two financial measures that the company should prioritize to clean up its balance sheet.

“Growing in sales is always good news for any company.” Refute this statement with reasoned arguments: a) Justify through which economic and financial mechanism a rapid increase in sales can lead to the technical bankruptcy or suspension of payments of a business (relate in your explanation the cash conversion cycle, working capital requirements, and the collection and payment structure). b) If you were the chief financial officer, which two balance sheet or treasury indicators would you monitor to detect this risk before a liquidity crisis occurs? Justify your answer.

Design a mini market research study to validate opening a zero-waste refill shop in your town: define the objective of the study, the sample (who to ask and how many), five key questionnaire questions, and how you would analyse the responses to make a decision.