• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Profitability and possible success of a mobile phone shop at a new location

Extracts from this document...

Introduction

Title: Profitability and possible success of a mobile phone shop at a new location To: Paco Bravo, Manager of Feria Fone SA From: Dennis Kirpensteijn Date: 14 July 2002 * Introduction This report is to advise Mr. Paco Bravo make a vital decision concerning his company. He owns various mobile phone shops in the south of Spain, in Estepona, the town centre of Malaga, etc. He is now considering the opening of another shop in the area between Malaga and Fuengirola, in Torremolinos, a town full of foreigners that move to Spain with a possible need to purchase a new mobile phone. The outcome of this report will show if it would be profitable to open the shop in that area, considering financial but also non-financial factors such as the existence of similar shops in the area, population, location of the shop, etc. The financial factors will be analysed by putting the financial information that is known already or has been predicted through a thorough ratio analyses process. * Research Question: Is a new shop in the Torremolinos area likely going to be successful and profitable? ...read more.

Middle

multiplied by 100, = 41, 7%= 42% Liquidity Ratios * Current Ratio: this basically shows what relationship there will be in between the current assets and the current liabilities. Current Ratio- Current assets divided by current liabilities, =2, 38 =2, 4 * Acid Test Ratio: this analyses the relationship between current assets and current liabilities not including stock as an asset, giving more reliable data than the current ratio. Acid Test Ratio- (Current Asset minus Stock) divided by Current Liabilities, = = 1, 19= 1, 2 Payback Period In order for the shop to be efficient, the payback period should not exceed an overall period of 4 years. The total amount invested in the shop is of 31,450,000 pesetas, and the expected average income every year is of 17,200,000 pesetas the first year; 17,400,000 pesetas the second year; 17,600,000 pesetas the third year and 17,800,000 pesetas the fourth year. Year 1: 31,450,000-17,200,000 = 14,250,000 Year 2: 14,250,000-17,400,000 = (1,350,000) As you can see, the shop is likely to be very efficient and successful, as the amount of money invested will be recovered in less than two years. ...read more.

Conclusion

The different ways are either, renting, buying or leasing the new location. Generally, the best way would be to rent the place with the option of buying it. This is therefore recommendable as, when the shop works well, then the location can be bought and counted as sure income with minimum expenditure on premises. If the business turns out not be profitable then the shop can simply be closed again and without having to carry the burden of trying to sell and maintain a property or fulfil a minimum leasing term, spending money in a useless project. It is also highly recommendable to consider the opening of the shop as soon as possible, taking the opportunity of the brilliant location of the shop. In order to fight and possibly decrease liquidity problems the solution would be to stock less phones and aim to keep the stock level at its minimum practising a JIT system of stocking, which would also be useful when considering the fast rate of change of technology where a completely new phone today might be worthless tomorrow. Really this is the only answer to Paco Bravo's problem, who would loose out by not setting up the shop, gaining not only money but also new clients and the satisfaction of current clients. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our University Degree Finance section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related University Degree Finance essays

  1. Real Estate Market in Spain

    Ergo, in Madrid and Barcelona cases, the increases of prices have been superior to 20% since 2003, while in smaller cities advancement did not go over the average of 16%. Historically, the prices changes have been more stable in smaller cities than in bigger ones, which means that a drop in the demand would induce main cities' prices to fall.

  2. Financial analysis of Wipro ltd. The ratio analysis of the company has been derived ...

    SCENARIO ANALYSIS 6.1. Business Unit Performance 6.2. Company Analysis 6.2.1. Share Holding Pattern FINDINGS * Though the sales has been continuously increased from past 3 years but the proportionate expenditure is also rising so overall not making any huge effect on net profit of this company.

  1. Financial Analysis

    A high ratio exerts a favorable financial influence through the reduction of financial leverage and/or increased return on equity. A high ratio operationally tends to reduce interest costs. 5.2.7 Fixed asset turnover: Fixed-asset-turnover ratio represents net sales divided by net property, plant, and equipment (PPE).

  2. Discuss arguments for and against the UK's minimum wage policy. Under what conditions is ...

    The income and substitution effects counter-balance each other so that the net effect is insignificant. It is generally assumed that the substitution effect dominates amongst the lower income workers whereas as the high end of the income

  1. OUTLINE OF BUSINESS PLAN - opening a caf.

    Coffee Findings; * More female buy coffee and go for the different types of coffee offered in cafes * Male buy regular coffee rather than buying the other variations * Regular coffee is sold increasingly in the morning with breakfast * Coffee drinkers are more likely to stay and drink in.

  2. The aim of this investigation is to explore the feasibility of opening a designer ...

    * Differentiation: This is where a business tries to make a product or provide a service that is seen as unique by customers. For example, a business may add special features or USP's to their products to give the goods or services a distinctive identity.

  1. Development of new financial instruments

    funds), money market accounts, securities, mutual funds, certificates of deposit, short-term commercial paper, treasury bills, bonds of the central agencies, and savings bonds . Often these tools are purchased to "build out" on time free money and earn them some income until you select suitable long-term instruments, in other words,

  2. Merchant Banking-100 marks project

    Business of an honest merchant banker spreads with geometrical propagation when he shares the thoughts of his clients with sympathetic gestures and offers pragmatic suggestions without greed or favours. Very often, rude, intemperate and indifferent disposition or blunt out burst withdraw fortunate business opportunities forever.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work