king trade calculation | 9 Exercises

Application: Letters & Papers Bookstore

States :

The Lettres & Papiers bookstore, located in the heart of Paris, is considering adding a limited collection of rare books. To assess the potential profitability of this investment, the bookstore wants to calculate the return on investment (ROI) related to this new range. We provide you with the following data: the initial investment is €25, and the expected profit over one year is €000.

Work to do :

1. Calculate the return on investment (ROI) for the new line.
2. If the Bookstore aims for a 30% ROI, what should the new expected profit be?
3. How important is a high ROI for a business like Librairie Lettres & Papiers?
4. If the expected profit increases by 20%, what would the new ROI be?
5. Compare this ROI with that of a subsidiary of another company that invested €30 for a profit of €000. Which is more profitable?

Proposed correction:

1. The formula for ROI is: ROI = (Net Profit ÷ Initial Investment) x 100.
   Replacing, ROI = (€5 ÷ €000) x 25 = 000%.
   The Lettres & Papiers bookstore has a 20% ROI for this new range.

2. For a 30% ROI, we use the formula: ROI = (Net Profit ÷ Initial Investment) x 100.
   Replacing, 30% = (New Profit ÷ €25) x 000. So, New Profit = 100% x €30 ÷ 25 = €000.
   The new expected profit should be €7.

3. A high ROI indicates that the company is generating more revenue per euro invested, signaling an efficient use of its resources. This is crucial to maintain the profitability and competitiveness of the Bookstore.

4. With a 20% increase in profit, the profit becomes €5 x 000 = €1,20.
   The new ROI is: (€6 ÷ €000) x 25 = 000%.
   With this increase, the ROI increases to 24%.

5. The ROI of the other subsidiary is: (€9 ÷ €000) x 30 = 000%.
   Comparatively, the ROI of 30% is higher than that of the Bookstore, indicating that it is more profitable.

Formulas Used:

Title	Formulas
Return on investment (ROI)	(Net Profit ÷ Initial Investment) x 100
New benefit for target ROI	(Target ROI x Initial Investment) ÷ 100

Application: Tech Innovators

States :

Tech Innovators, a software development company based in Lyon, wants to introduce a new business management software to the market. The company has invested €150 in this project and expects sales to generate a profit of €000 over a year. Their main goal is to ensure that this investment is profitable.

Work to do :

1. Calculate the ROI of this project.
2. To achieve a 50% ROI, how much profit would have to be?
3. Discuss the implications of an ROI below 50% for the business.
4. Estimate the additional profit needed if the initial cost increases by 10%, but the company wants to maintain its ROI.
5. Compare the ROI with another area of ​​the business that spent €100 for a profit of €000. Which unit is more efficient?

Proposed correction:

1. ROI = (€45 ÷ €000) x 150 = 000%.
   The project shows an ROI of 30%.

2. For a 50% ROI, use: ROI = (Profit ÷ Initial Investment) x 100.
   So, 50% = (Profit ÷ €150) x 000. Profit = 100% x €50 ÷ 150 = €000.
   The profit should be €75 to achieve a 000% ROI.

3. An ROI of less than 50% would mean that the company is not reaching its expected profitability threshold, which could call into question the continuation of developments related to this software.

4. An initial cost increased by 10% becomes: €150 x 000 = €1,10.
   To maintain the same ROI, the calculation is: initial ROI x €165 ÷ 000 = €100.
   The company would need additional profit to reach €49, i.e. a higher net profit.

5. The other unit has a ROI = (€50 ÷ €000) x 100 = 000%.
   Compared to 30%, this one is more effective with a 50% ROI.

Formulas Used:

Title	Formulas
Return on investment (ROI)	(Net Profit ÷ Initial Investment) x 100
Profit for ROI threshold	(Target ROI x Initial Investment) ÷ 100

Application: Fashion and Elegance

States :

Mode et Élégance, a high-end clothing brand located in Bordeaux, decides to enter the fashion accessories market with a new handbag. The company invests €100 in this new line and expects to generate a profit of €000 in the first year.

Work to do :

1. Calculate the ROI for this handbag line.
2. If their goal is to double that ROI, what profit should they aim for?
3. Analyze the relevance of increasing the selling price to improve ROI.
4. And if production costs increase by 15%, how would that affect ROI?
5. Compare this project to a previous investment of €50 for a gain of €000. Which initiative is more profitable?

Proposed correction:

1. ROI = (€20 ÷ €000) x 100 = 000%.
   The initial ROI for bags is 20%.

2. To double the ROI, i.e. 40%, use: ROI = (Profit ÷ Investment) x 100.
   So, 40% = (Profit ÷ €100) x 000. Profit = 100% x €40 ÷ 100 = €000.
   They should aim for a profit of €40.

3. Increasing the selling price can increase net profit, thereby reducing the time needed to achieve the desired ROI, but this must be balanced with consumer reactions.

4. A 15% increase in production costs would bring total costs to around €115.
   The new ROI would be: (€20 ÷ €000) x 115 ? 000%.
   A decline means a new strategy is needed to compensate for the increased costs.

5. The previous project has a ROI = (€12 ÷ €000) x 50 = 000%.
   The previous project is more profitable with an ROI of 24% compared to 20%.

Formulas Used:

Title	Formulas
Return on investment (ROI)	(Net Profit ÷ Initial Investment) x 100
Double profit target	(ROI x Investment Equivalent) ÷ 100

Application: Flavors of the World

States :

Saveurs du Monde, a company specializing in exotic food products in Strasbourg, is evaluating the possibility of launching a new range of sauces. The required investment is €80 with a projected net profit of €000 after one year.

Work to do :

1. Determine the ROI for this new line of sauces.
2. For a 35% ROI target, what should the net profit be?
3. Appreciate the potential impact of higher than expected demand on ROI.
4. What to do in case of a 10% production cost increase to maintain the same ROI?
5. Is there a better alternative to investing if a competing project shows a 28% ROI?

Proposed correction:

1. ROI = (€24 ÷ €000) x 80 = 000%.
   The ROI for the sauce range is 30%.

2. To achieve an ROI of 35%, use: ROI = (Profit ÷ Investment) x 100.
   35% = (Profit ÷ €80) x 000. Profit = 100% x €35 ÷ 80 = €000.
   Net profit should be €28.

3. Stronger demand could increase sales, thereby increasing absolute net profit and improving ROI, enriching the profitability of the project.

4. With additional costs of 10%, the costs become €88.
   To preserve ROI: (30% x €88) ÷ 000 = €100.
   The increase in profit to €26 is necessary.

5. With a competitor ROI of 28%, the current project is better with its 30% ROI.

Formulas Used:

Title	Formulas
Return on investment (ROI)	(Net Profit ÷ Initial Investment) x 100
Benefit for target ROI	(Target ROI x Investment) ÷ 100

Application: Eco-Bike

States :

Eco-Vélo, an eco-mobility company from Lyon, is considering expanding its market by offering electric scooters. The initial investment is estimated at €200, while the expected profit for the first year is €000.

Work to do :

1. Calculate the ROI for launching this range of scooters.
2. What additional benefits are required to move towards a 40% ROI?
3. If market projections predict a doubling of sales, what impact could this have on ROI?
4. Determine the financial effect if initial costs increase by 20% without changing profits.
5. If an innovation leads to a 10% reduction in cost, how much would Eco-Vélo save? Would it have an impact on ROI?

Proposed correction:

1. ROI = (€60 ÷ €000) x 200 = 000%.
   The projected ROI is 30%.

2. To move to a 40% ROI, we use: ROI = (Profit ÷ Investment) x 100.
   40% = (Profit ÷ €200) x 000. Profit = 100% x €40 ÷ 200 = €000.
   It takes an additional €20 to reach it.

3. Doubling sales could exponentially increase ROI if the additional profit is much greater than the marginal costs required to expand

4. A 20% additional cost increases the investment to €240.
   New ROI = (€60 ÷ €000) x 240 = 000%.
   This change reduces the ROI to 25%.

5. A 10% cost reduction reduces the investment to €180.
   The saving is €20. The new ROI becomes: (€000 ÷ €60) x 000 = 180%.
   This increases the ROI to around 33,33%.

Formulas Used:

Title	Formulas
Return on investment (ROI)	(Net Profit ÷ Initial Investment) x 100
Additional profit required	(Target ROI x Investment) ÷ 100 – Current Profit

Application: Art & Light

States :

Art & Lumière, a lighting design company, has allocated €50 to develop a new designer lamp. Annual profits are forecast at €000, and the company wants to measure the financial viability of this initiative.

Work to do :

1. Calculate the ROI of the new designer lamp project.
2. For a target ROI of 32%, how much profit should they get?
3. If raw materials increase by 25%, how will this impact ROI if profits remain constant?
4. Determine the change in ROI if the project duration is reduced by a quarter, but profits increase proportionally.
5. Compared to another similar project, but planned at €70 for a net result of €000, which one has the most attractive ROI?

Proposed correction:

1. ROI = (€13 ÷ €000) x 50 = 000%.
   The ROI for the designer lamp is 26%.

2. Calculate the profit needed for a 32% ROI: ROI = (Profit ÷ €50) x 000.
   Profit = 32% x €50 ÷ 000 = €100.
   A profit of €16 is required.

3. With costs increasing by 25%, the investment is €50 x 000 = €1,25.

New ROI = (€13 ÷ €000) x 62 = 500%.
The ROI decreases significantly to around 20,8%.

4. If the duration is reduced by a quarter, but profits increase proportionally, this will not have a negative impact and can potentially lead to an increase in terms of comparative annual profitability.

5. The similar project has a ROI = (€17 ÷ €500) x 70 = 000%.
   The current ROI of 26% is slightly better than an ROI of 25%.

Formulas Used:

Title	Formulas
Return on investment (ROI)	(Net Profit ÷ Initial Investment) x 100
Target Profit for ROI	(Target ROI x Investment) ÷ 100

Application: Straps & Elastics

States :

Straps & Elastics, an SME specializing in the manufacture of elastic fabric items, is investing €30 in new equipment to improve its productivity. The additional revenue expected from this investment is €000 per year.

Work to do :

1. Calculate the ROI of this equipment investment.
2. In response to a 35% ROI target, estimate the additional annual revenue required.
3. What if the actual increase in income is €12 per year?
4. Analyze the effects if the depreciation period of the equipment is shortened, resulting in a proportional increase in revenue.
5. Compare this investment with another strategy that generated €8 on a €000 investment. Which option generates the best ROI?

Proposed correction:

1. ROI = (€9 ÷ €000) x 30 = 000%.
   The return on this investment is 30%.

2. For a 35% ROI: ROI = (Additional income ÷ €30) x 000.
   Additional income = 35% x €30 ÷ 000 = €100.
   A surplus of €10 is required annually.

3. Additional income of €12: ROI = (€000 ÷ €12) x 000 = 30%.

The ROI then reaches 40%, a favorable result.

4. By shortening the depreciation, even with an increased ratio, this could justify a strangeness by a better allocation of resources.

5. The alternative strategy has an ROI = (€8 ÷ €000) x 20 = 000%.
   The alternative strategy has a higher ROI at 40%.

Formulas Used:

Title	Formulas
Return on investment (ROI)	(Additional Income ÷ Initial Investment) x 100
Additional income for target ROI	(Target ROI x Investment) ÷ 100

Application: Patachoux Gourmands

States :

Patachoux Gourmands, a small artisan bakery, decides to offer a new range of specialized pastries. The investment for this launch is €12, with an anticipated return on sales of €000 over one year.

Work to do :

1. What is the ROI for this new range of pastries?
2. If the target ROI is 33%, what should the return on sales be?
3. What would it mean if the initial cost turned out to be 10% less?
4. Discuss the potential benefits of a promotional offer to increase ROI.
5. Evaluate this initiative compared to another previous investment proposal: €6 allowing a parallel profit of €000.

Proposed correction:

1. ROI = (€3 ÷ €600) x 12 = 000%.
   The ROI for these pastries is 30%.

2. To achieve a ROI of 33%: ROI = (Return on sales ÷ €12) x 000.
   Return on sales = 33% x €12 ÷ 000 = €100.
   Back expected to climb to €3.

3. With a 10% reduction in cost, initial cost = €12 x 000 = €0,9.

New ROI = (€3 ÷ €600) x 10 = 800%.
Fortunately, lower costs also improve ROI.

4. A promotion can attract new customers and increase sales, thereby increasing profit which by extension strengthens ROI.

5. The previous initiative has a ROI = (€2 ÷ €400) x 6 = 000%.
   The previous strategy has a better ROI with 40%.

Formulas Used:

Title	Formulas
Return on investment (ROI)	(Return on sales ÷ Initial investment) x 100
Return for target ROI	(Target ROI x Investment) ÷ 100

Application: Green Travelers

States :

Green Voyageurs, a young start-up specializing in sustainable tourism, plans to expand by introducing a personalized tour service. An investment of €100 is planned, with an expected net profit of €000 in the first year.

Work to do :

1. Calculate the ROI of personalized tours for Green Voyageurs.
2. If the startup is aiming for a 36% ROI, how much should the expected profit be?
3. What would happen if the actual profit reached €35 on an initial anticipation?
4. Discuss the importance of strategic partnerships to improve business ROI.
5. Compare the efficiency of this investment with another project requiring €80 for a gain of €000.

Proposed correction:

1. ROI = (€28 ÷ €000) x 100 = 000%.
   The expected ROI for this project is 28%.

2. To aim for an ROI of 36%, use: ROI = (Profit ÷ €100) x 000.
   Expected profit = 36% x €100 ÷ 000 = €100.
   Green Voyageurs should aim for a profit of €36.

3. An actual profit of €35 would result in an ROI of: (€000 ÷ €35) x 000 = 100%.

Which is very close to the optimal threshold.

4. Strategic partnerships can expand visibility, reduce costs and drive sales, contributing significantly to increased ROI.

5. The other project has an ROI = (€24 ÷ €000) x 80 = 000%.
   This investment is slightly better with a 30% ROI.

Formulas Used:

Title	Formulas
Return on investment (ROI)	(Net profit ÷ investment) x 100
Benefit for target ROI	(Target ROI x Investment) ÷ 100