ROI (Return On Investment) Formula on fashion show A case study

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CONTENTS S. No. 1.1 1.2 1.3 Case study What is Return on Investment (ROI)? What is EBIT (Earnings Before Interest &Taxes)? CONTENTS PAGE NO. 1 3 3

1.1 CASE STUDY An organizing of fashion show can be tricky to organize or it can be very expensive if planning of organizing is not right. To organize a fashion show we need to keep many things in our mind like how to organize and how can we earn profit from this event etc. lets assume what are the expensive we have to bear for organizing this event and what would be the profit after finishing this event. For organizing fashion show we required: a) License: In fashion show we required some different types of licenses like playing music during ramp show, license for serve alcohols, license for organizing event etc. if we dont have these certain type of license than it can create big issues. So lets assume the cost of all licenses is Rs.10lacs (Investment) b) Venue: Venue is the place where people can reach easily and it should have space for gathering of maximum people. One more thing to keep our mind that the rent of that venue must be cheap enough. Lets assume the rent of venue is Rs. 5Lac. (Investment) c) Contact Local Designers: Ask if they would like to feature their designs at your fashion show, it is likely that many of them would appreciate the opportunity to get their designs seen and people will be more likely to turn up to an event with local designer then they will to one just featuring clothes of the high street. So lets assume 10 local designers shows their interest in this event. Fees for participating in this fashion show is: Rs.1lac per designer So Total Earning = 10 x 1 Lac = 10Lacs (Earning) d) Hire Models: Number of models is completely depending on the number of costumes, which we want to display in fashion show. And except these models we required one extra model that will be your show stopper. This show stopper can be any big model or can be any big celebrity. Big celebrity can be good decision for earning high profit from this event. So lets assume each model cost is around = Rs. 100,000/20 model cost = Rs. 100,000 x 20 = Rs. 20, 00,000/1 big celebrity cost = Rs. 50lacs Total model Cost = Rs. 70lacs (Investment) e) Make up & hair Designer: for this type of event we required some hair designer and make up men and women etc. Lets assume we hire 10 persons for this job. And each price is Rs.30000 for that event. So total cost = Rs. 10 x 30,000 = Rs. 300,000/- (Investment) f) Marketing & Printing Cost: to popular this fashion shows we need to do marketing. There is several method of marketing like print media, T.V. commercials, hording, banner, etc. So lets assume we have complete budget for marketing and printing tickets etc is: = Rs. 50lac (Investment)

g) Selling of Tickets: we have estimate the number of people come for watching this fashion shows is around 1,000. And the cost of ticket id depending on the position of seat. Like First 100 seats ticket price is: Rs.1000/Next 300 seats ticket price is Rs. 800/Next 300 seats ticket price is Rs. 600/Next 300 seats ticket price is Rs. 500/Lets assume all ticket has been sold Total earning from tickets is = 100 x 1000 + 300 x 800 + 300 x 600 + 300 x 500 = 100000 + 240000 +180000 + 150000 = Rs.670000/- (Earning) h) Decoration, Music, Drink, Other Cost: Final Step of organizing fashion show to bear cost of decoration, music, drinks, other human cost those will be there for helping to organize. Lets assume the total cost of all will be Rs. 20lacs (Investment). Product Sell: after the fashion show the organizer got the order of 2lac dress by multiple buyers and each dress final cost is around Rs.500/So the total sell is = 100000 x 200 = 20000000/= (Earning) Total Investment on this fashion shows is = 500000+1000000 +5000000+2000000 = Rs.15800000/Total investment = Rs.15800000/Total Earning is = =

+7000000

+300000

1000000 + 670000 + 20000000 Rs.21670000/-

Calculate ROI, EBIT ROI = (Gain from investment- Cost of Investment) x 100 Cost of investment : : = Rs. 21670000/Rs. 15800000/-

Gain from investment Cost of investment ROI

(21670000 - 15800000) x 100 15800000 = 37.15% Return On investment (ROI) Rs. 37.15%

EBIT EBIT = = 21670000 15800000 Rs. 5870000/-

EAT Lets assume the total tax is: 30% of the cost EAT = = = = (5870000 x 30) 100 1761000 5870000-1761000 Rs.4109000/-

1.2 What is Return on Investment (ROI)? Return on investment is the additional amount that you earned after investing some amount in a profitable business is call return on investment. Lets assume you have a certain amount of total investment and from that investment you produce a profit or return. The return divided by the total investment multiplied by 100 gives the percentage return. For Example: Invested money: Return Money: Profit: ROI = = Rs.100/- (Cost of investment) Rs.150/- (Gain from investment) Rs.150 -100 =Rs.50/(Gain from investment- Cost of Investment) Cost of investment (150 100) x 100 100 50 x 100 100 50%

= =

1.3 What is EBIT (Earnings Before Interest &Taxes)? A measure of a company's earning power from current running operations, equal to earnings before deduction of interest payments and income taxes is call EBIT (Earnings Before Interest & Taxes) EBIT = (Profit (Loss) + Total Cost) X (Tax)