1) Remote and Mainstream Food Retail Markets
Remote food markets are firms that have well-established operations in location that most players consider unfavorable. In these remote locations, companies confront less competition because not many people are will to invest and operate in such locations. However, transportation of commodities is very difficult because of the remote nature of the market, and hence transport cost increases the price of commodities, as well as the quality. The available product range is relatively lower than in the mainstream market because of the limitations mentioned in the above section. On the other hand, mainstream food retail markets are the directly the opposite of the former. These markets are established in highly populated areas with significant level of activity, particularly urban zones. These areas are supported by numerous businesses, which result in intense competition between rivals. Similarly, these zones can hold wide product range and quality to deal with fresh produce effortlessly. Best examples include garments, kitchenware, electronic apparatuses and supplementary brands for a similar product.
2) Financial Evaluation
Following a Common Size Analysis, the decrease of NWC's net profits is as a result of low profit margin lower net revenue. The marginal gross profit is the consequence of a rise in the cost of merchandise sold. In view of the figures, the gross profit of 2014 has a converse relationship with the percentage of Common Size Analysis. In respect to 2013, the gross profit has rose from $455,054 to $464,218 with the Common Size Analysis decreasing to 28.58% from 29.49%. Thusly, in outright terms, the gross profit of NWC was higher in 2014 than in 2013. In any case, NWC's profit margin is relatively lower in 2014. In connection to the case given, the rise in the cost of products sold could be because of the remoteness of the market, the domestic market inclinations and the high cost of shipping. From the examination, it appears that NWC is doing commendably in controlling its offering, administrative and operating costs. Notwithstanding the rise in sales in 2014, when contrasted with earlier year, there is an increment in operating and selling costs to $366,752 from $354,994 and there is a drop in the percentage of the Common Size Analysis to 22.58% from 23.00%. Accordingly, the net earnings on income have decreased to $62883 in 20134 from $64263 in 2014.
- Percentage of revenue growth = (1,624,400 less 1,543,125) divide by 1,543,125 product of 100% =(1,624,400-1,543,125)1,543,125 x 100% = 5.27%
- Percentage of cost growth = (1,160,182 less 1,088,071) divide by 1,088,071 product of 100% =1,160,182-1,088,071)1,088,071 x 100% = 6.63%
- Cost as a fraction percentage sales = 1, 160, 182 divide by 624,400 product of 100% =1, 160, 182)624,400 x 100% = 71.42%
- Return on sales = 1,624,400 less 1, 160, 1821 = 9,959,421
- Gross profit margin = 464,218 divided by 624,400 product of 100% = 28.58% =464,218 624,400 x 100% = 28.58%
- Operating profit margin = 97,466 divided by 624,400 product of 100% = 6% =(97,466 )624,400 x 100% = 6%
- Net profit margin = 62, 883 divided by 624,400 product of 100% = 3.87% =(62, 883)624,400 x 100% = 3.87%
- Percentage of Earnings growth = (62,883 less 64,263) divided by 64,263 x100% = -2.15% =(62, 883)624,400 x 100% = -2.15%
- Return on equity (%) Return on equity = 62,883 divided by 329,283 product of 100% = 19.10% =62,883 329,283 x 100% = 19.10%
- Current ratio = 315,840 divided by 150,229 = 2.1 =315,840 150,229 x 100% = 2.1
- Debt-equity ratio = (395,016) divided by 329,283 = 1.20 =395,016 329,283 x 100% = 1.20
NWC is a Canadian corporation operating food retail stores in different formats globally. The company deals in grocery products, such as organic and natural products, meat, bakery, delicacies, non-alcoholic and alcoholic beverages, frozen foods, household chemicals, and beauty products, among others. The net sales for NWC decreased significantly during 2014 fiscal year compared to the previous year, 2013. The rise evidenced during 2014 can be attributed to the general increase in cost of sales, as well as the shipping costs. The impact of such factors was offset partially by the adverse effects of inflation, attributable to rates of currency exchange and fuel. The company's aggregate revenue increased by 5.27% during the 2014 fiscal year. The results were an improvement from the 2015 fiscal year where the company recorded a rise in revenue. The total sales were affected positively by the positive sales, as well as e-commerce. The effect of the stated factor on the net sales during the 2014 fiscal year were offset partially by the adverse impact of the fluctuations in the rates of exchange of currency.
The rate of gross profit increased by 28.58% during the fiscal year, and the increase was as a result of improved margin in consumables, including the effects of savings in the procurement of merchandise and reduced cost of transportation, resulting from lower fuel costs. Similarly, the improved rate of gross resulted from enhanced inventory management. For 2014, the rise in total revenue was because of improved gross margin and adjustments in the merchandise mix in the various market segments, as well as a reduction in fuel prices positively impacted on the gross rate of 2015. Operating expenses increased by eighty-eight and ninety-one percent for the 2014 and 2015, respectively. The increases in 2014 could be attributed to the increase in cost of sales, which was a result of joint investment. The table shows a snapshot of the company's performance, which could be critical for the projection of future performance.
- Percentage of revenue growth 5.27%
- Percentage of cost 6.63%
- Cost as a fraction percentage sales 71.42%
- Return on sales 9,959,421
- Gross profit margin 28.58%
- Operating profit margin 6%
- Net profit margin 3.87%
- Percentage of Earnings growth -2.15%
- Return on equity 19.10%
- Current ratio 2.1
- Debt-equity ratio 1.20
Although there was a growth in revenue during the 2014 FY, profitability reduced relative to the performance 2013 FY. The decrease can primarily be attributed to lower net profit, going by the performance comparison between 2013 and 2014 FY. The marginal profit is as a result of the increasing cost of goods, well as low price of selling. The negative growth in earnings (- 2.5%) as ascertained is additionally concurs with the above observation. The operating profits for NWC dropped by 0.48 to 6% from 6.48% for 2013 and 2014 financial years despite the sales increases. By and large, NWC is not in a great financial position in terms of performance of 2013 and 2014 FYs.
3) Investment Fund Manager's Decision
The investment fund venture organization should keep on assessing NWC as a potential investment vehicle since its return on value is within the industry average and is relatively higher than that of its competitors. NWC can produce $19.10 for every dollar of value unlike Loblaw, which produces $0.40 for every dollar of value. Moreover, taking a gander at its arrival on deals, it is higher than industry normal and Loblaw; which means the organization has capacity to create benefits from its assets. NWC's present proportion is higher than the business average, showing more liquidity, and capacity to meet its obligation its rivals. Mutual fund expert observed the financial performance of possible target for investment, the NWC, and make possible recommendations. NWC is a food retailer operating in market that is currently underserved. The business owns store in various locations, and reported sales of 1.6 billion Canadian dollars in 2014. Twelve years following the initial push of NWC beyond Canada, the company's global sales amount to 35.8% of enterprise's service. While customer option and competition between rivals characterized the domestic market, the other markets were identified by high costs, minimal offerings, and high competition. The above evaluations depict the strength and success of NWC, its financial design and liquidity. Global operations should be the primary focus during evaluation. It can be noted that the revenue generated from international trade was not significant enough, particularly in Western and Northern Canada. When the goal is to expand operations past the domestic market, it would require additional capital to fund its operations. NWC offers advantages in flexibility and quality, including shorter lead and real-time response to demand within the market. The company has a local source for most of its materials even though a few are hand-selected from various markets to achieve an economical blend of excellence and costing. The inside-and-out market knowledge of the experts will be vital in understanding he true position of the company. The company had adopted forward-looking approaches when implementing exciting ideas. Such levels of creativity and innovation set it apart from others. Its future is bright as the healthy and close relationship with suppliers offers flexibility, credit arrangements, and response to unique customer needs.
Case 2: BW Manufacturing Company Overview
In light of the computations in Exhibit decreasing the price of Grill C to $75 with a 10,000 increment to volume will bring about a rise of $220.000 in the aggregate contribution. Despite it appearing that it may be a great arrangement, more in-depth analysis should be done before price reduction of Grill C. Since the organization produces in excess of one kind of flame broil, these numbers should be compared against each other to decide the general impact on the organization's finances when other business units are accounted. Several factors result in variations in the value and demand for a commodity. The price of grills and demand are affected by price changes, market conditions, tastes and preferences, income and advertisement costs. Price increases impacts negatively on the demand and demand curve. When the grills' prices go up, demand will diminish (move to the left). For instance, when the budget of a consumer can only support two grills and prices immediately go up, the purchasing power declines as well. It now costs more to buy grill as a result of the rise in the price of inputs. Additionally, suppliers will charge more for a single grill, which results in the decline in quantity purchased. Moreover, when the prices are down, one can afford more grills for the same amount of money, resulting in an increase in the quantity demanded. Productivity fundamentally refers to the grill's production costs. For instance, when efficient innovation methods are adopted, delivery of products at lower prices is expected, consumers will have higher disposable incomes to spend and hence high quantity demanded. The trend is visible when producers discover an easier way to make grill, which implies lower prices. A counter case is a government regulation in the corn trade, which could impact on quantity supplied and hence the increased demand. High demand means high prices that cause a reduction in the number of grill demanded.
The cost of a substitute can be important in relation to the quantity of grill demanded. For instance, burgers are a great substitution of grill, and when their prices are attractive, consumers can be dissuaded to consider that option. For producers, when the cost of corn rises, they will be compelled to find other economical options to sustain their businesses, such as the production of meat pie. The change will affect the supply of grill in the market resulting in a shortage. The deficit in quantity demanded forces the price to shoot up resultantly causing a hike in grill' prices. On the other hand, when the price of corn declines more producers will be attracted into the grill market,...
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