1

Training program:
Subject:

Last Name/Surname: Garrido

Name: Ruben
ID/Passport:
Address:
Region:
Country:
Telephone:
E-mail:
Date:

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Q1.
Selling price per unit = €25
Variable cost per unit = €5
Fixed annual cost = €110000
a) THRSHOLD UNITS
¿ cost
Tℎresℎold Units=
sellingcost per unit – variable cost per unit
€ 110000
Tℎresℎold Units=
€ 25 −€ 5
€ 110000
Tℎresℎold Units=
€ 20
Threshold Units=5500
The ABC Company will cross the threshold at a volume of 5500 units. The business will
obtain profit after selling this many units.
b) DAYS AT WHICH BREAKEVEN IS ACHEIVED
Break-even units = 5500
Days in a year = 365
Units produced in a year = 20000
Break even Units
Number of days taken ¿ breakeven=
Total Units produced∈a year
Number of days ∈a year
5500
Number of days taken ¿ breakeven=
20000
365
5500
Number of days taken ¿ breakeven=
54.7945
Number of days taken ¿ breakeven=100.37 Days
In other words, if ABC Company produces 20,000 units, the company will reach its
break-even point in 100 days.
c) SALES VALUE OF THRESHOLD
Breakeven sales unit x S elling price per unit = SalesValue of Tℎresℎold
SalesValue of Tℎresℎold =5500 x € 25
SalesValue of Threshold=€ 137500

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Hence, the ABC Company's sales volume or turnover that corresponds to its
profitability threshold is €137,500.

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Q2.
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
Sales 350000 520000 540800 562400 584896

Variable 210000 309000 318270 327807.8 337634.12

cost

Fixed Cost 60000 61200 62424 63672.48 64945.92

Depreciation 35000 35000 35000 35000 35000

Profit before 45000 114800 125106 135919.72 147316

Tax
Tax 25% 11250 28700 31276.5 33979.93 36829

Profit after 33750 86100 93829.5 101936.79 110487

tax / Net
Cash flow

(Net casℎ flow) ( ¿ year 1 −5 ) −(Ca sℎOutflow)

Net absolute Return= ×100
CasℎOutflow
( 33750+86100+93829.5+101936.79+110487 ) − 200000
N et Return= ×100
200000
426103.29− 200000
Net Return= ×100
200000
226103.29
Net Return= × 100
200000
Net Return=1.1305 x 100
Net Absolute Return=113.051 %
Therefore, Derabel, S.A. Company's project will yield a net absolute return of
113.051%.

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Q3.
 LIQUIDITY RATIO
Bank + clients+ Closing Inventory
Liquidity Ratio=
suppliers+ Sℎort term loa ns
65+70+ 45
Liquidity Ratio=
30+65
180
Liquidity Ratio=
95
Liquidity Ratio=1.894
 ACID TEST RATIO
Banks+Clients
A cid Test Ratio=
Sℎort term loan+ Suppliers
70+65
Acid Test Ratio=
30+65
135
Acid Test Ratio=
95
Acid Test Ratio=1.42
 MARGIN ON SALES RATIO
( Sales− Cost of Goods sold)
×100=Margin on Sales Ratio
Sales
( 250000− 105000 )
×100=Margin on Sales Ratio
250000
145000
×100
250000
0.58 ×100=Margin on Sales Ratio

Margin on Sales Ratio=58 %

 INVESTMENT ROTATION
Sales
Investment Rotation=
( Debt Outstanding+ Sℎareℎolder equity )
250000
Investment Rotation=
( 105+65+125 )
250000
Investment Rotation=
295000

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Investment Rotation=0.847
 DEBT RATIO

Debt Ratio=
∑ of Asset
∑ of Liability
350
Debt Ratio=
105+ 65+30
350
Debt Ratio=
200

Debt Ratio=1.75
As per the ratios calculated, the following comparison can be deduced.:
The company has more liquid assets that can be converted into cash as needed, which
implies that the company is performing significantly better than the industry as a whole
in terms of liquidity ratio.
Company Industry
1.894 1.55

The company has more liquid assets other than stock than the industry average in
terms of the acid test ratio. This indicates that the business has enough liquid assets to
be able to convert current assets into cash as needed.
Company Industry
1.42 1.20
1q
The business is performing significantly better than the sector in terms of sales margin.
After subtracting the actual expenses, the profit margin outlook is somewhat more
favorable.
Company Industry
58% 21%

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The company's equity rotation is low compared to that of the overall economy. This
signifies that the business has challenges with capital and debt-based revenue
generation.
Company Industry
1.847 0.45

The company performs significantly better in terms of debt ratio because it can finance
most of its assets with equity than it can with liabilities.
Company Industry
1.75 1.25

When looking at the company's performance as a whole, it is clear that it did

exceptionally well in the areas of debt, profitability, and liquidity. To dominate the
market, it must, however, make improvements in the debt and investment ratio areas.

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Q4.
Discounting rate with inflation equals to discount rate plus one multiply by inflation rate
plus one.
Discounting rate = (discount rate + 1) (inflation rate +1)
(.08 + 1)(.03 + 1) = 1.1124
And hence, the discount rate will be 11.24%.
YEAR 0 YEAR 1 YEAR 2 YEAR 3
cash flows -2500000 1500000 3700000 4100000
PVF@11.24% 1
PV of Cash -2500000 1348436 2990059 2978523
flows
NPV 4817018
IRR 87%

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Q5.
a. AVERAGE STORAGE PERIOD
Average inventory
× 365= Average Storage Period
cost of annual purchase
9250
×365=Average Storage Period
105000

0.0880 ×365=Average Storage Period

Average Storage Period =32.15∨33 Days
b. AVERAGE PRODUCTION PERIOD
Annual production = €198,000
Production under development = €11000
Average inventory
Average Production Period= ×365
cost of annual purchase
11000
Average Production Period= × 365
198000
Average Production Period=0.0555× 365
Average Production Period=20.277∨21 Days
c. AVERAGE SALES PERIOD
( Average inventory ×365 days)
= Average sales period
Cost of Sales
(18500 ×365 days )
= Average sales period
198000
67520500
Average sales period
198000
Average sales period=34.103∨35 Days
d. AVERAGE COLLECTION PERIOD
Average debt balance
× 365 Average Collection period
Annual credit
17000
×365= Average Collection period
290000
0.05862 ×365=Average Collection period
Average Collection Period=21.39∨22 Days
e. AVERAGE PERIOD OF ECONOMIC MATURITY

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Calculation: Average period of economic maturity = Total repayments or total payments

A+B+C+D
Average period of economic maturity =33+21+35+22
Average period of economic maturity =111 day

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Q6.
Initial capital (PVI) = 2,000,000
The following amounts shows a four years' annual cash flow which equals to collections
minus payments
YEAR 0 YEAR 1 YEAR 2 YEAR 3 YEAR 4
Initial capital 2000000 0 0 0 0

Collections 0 4500000 5500000 6000000 4000000

Disbursements 0 3800000 4500000 5000000 3200000

Cash flow 2000000 700000 1000000 1000000 800000

IRR 26.08%

IRR = 26.08 %

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