Section A Dameo : Finance Element

Net Margin is the ratio of net profits to revenues of a company. It is used as an indicator of a company’s ability to control its costs and how much profit it makes for every dollar of revenue it generates. Net Margin is calculated using the formula: Net Margin = (Net Profit / Revenues ) * 100 Net margins vary from company to company with individual industries having typically expected ranges given similar constraints within the industry. For example, a retail company might be expected to have low net margins while a technology company could generate margins of 15-20% or more. Companies that increase their net margins over time generally see their share price rise over time as well as the company is increasing the rate at which it turns dollars earned into profits.

In order to calculate the breakeven point, we use the following equation and budget data:

Although the financial goal is to create profit, we need to calculate the breakeven point to get started.

This measures the relationship between net profits and sales of a firm. The net profit margin is indicative of management’s ability to operate the business with sufficient success not only to recover revenues of the period, the cost of merchandise or services, the expenses of operating the business and the cost of the borrowed funds, but also leave a margin of reasonable

Profit Margin: -This ratio relates the operating profit to the sales value (Walker, 2009). It tells us the amount of net profit per pound of turnover a business has earned.

Contribution Margin = (Unit selling price – unit variable cost) / unit selling price = ($9.00 – $2.60) / $9.00 = 0.7111 = 71.111%

The CEO of Dynamic Manufacturing was at a conference and talked to a supplier about a new piece of equipment for its production process that she believes will produce ongoing cost savings. As the Operations Manager, your CEO has asked for your perspective on whether or not to purchase the machinery.

In the case study, as the annual fixed cost is $6,000,000 and the contribution margin per event is $1,900. Therefore, the breakeven point is at the 3,158

Breakeven = fixed cost/margin = total dollar fixed costs/ unit selling price –unit variable costs

| This assesses a company’s financial durability by examining whether it is at least profitable enough to pay off its interest expenses.

A company's break-even point is the amount of sales or revenues that it must generate in order to equal its expenses. In other words, it is the point at which the company neither makes a profit nor suffers a loss. Calculating the break-even point (through break-even analysis) can provide a simple, yet powerful quantitative tool for managers. In its simplest form, break-even analysis provides insight into whether or not revenue from a product or service has the ability to cover the relevant costs of production of that product or service. Managers can use this information in making a wide range of business decisions, including setting prices, preparing competitive bids, and applying for loans.

1. One of the main arguments against companies choosing to cross-list is the cost of following regulations of foreign stock markets. This cost to cross-list may make it prohibitive for the company to list the stocks in the foreign market in the first place. In addition to the cost, the company may not wish to provide as much information as the particular exchange requires. This can be particularly true if a foreign firm is thinking of listing on a United States stock exchange, which has a high amount of regulation and information needed before the stock can be listed. Another main argument against companies choosing to cross-list deals with the ownership control level that may be changed by listing on other exchanges. Cross-listing on other exchanges adds foreign investors into the company, which does offer benefits. However, more foreign investors of a company also dilutes the percentage of investors in the corporation that are from the domestic country. The corporation may not wish to provide several benefits of improved company performance, such as dividends and return from a high future stock price, to a high degree of foreign investors. Instead, the corporation would choose not to cross-list, even though it does provide benefits, to keep a high percentage of the investors from the domestic country. This keeps any potential benefits from strong future performance of the company with domestic investors. It also prevents

Break Even Point in Units = (Total Fixed Costs + Target Profit) ÷ Contribution Margin

A logical place to begin the analysis is with the appropriateness of the acquisition price. Are the asset values sufficient to support the loan? Is the buyer overpaying?

There are two option for the company. First option is spend extra cost of €10 per unit to enhanced the protection of helicopter toys, so that the toys will send to customers in a safe condition. MyToys will have to spend extra €10 on remaining products which has 3,200 units before deliver to its customers. MyToys will have a profit of €19,200 (see Appendix 1) if the management choose this option.