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8/7/2019 Finance Dilemma
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LOGOLOGO
HorlicksA GlaxoSmith Kline Company
Analyzed B
y
Pradeep Kumar
Rishi Lakhanpal
Shyam Krishnan
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Why dilemma
Introduction of new products like FOODLES ,
NUTRIBAR , etc.
Huge expected growth in sales of theseproducts that is by 20% next year.
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Brief Histor y of The Company
2009 2008 2007 2006
Sales (net of excise duty)192,150.23 154,175.44 139,550.50 121,018.80
Profit before Depreciation, Amortisation and Tax3,95,88.46 3,27,66.31 28,861.40
23,327.40
Less: Depreciation 37,41.81 37,34.34 3,888.80 3,810.30
Less: Amortisation of:
Patents and Trade Marks 4,60.62 4,60.62 460.60 460.60
Profit Before Tax3,53,86.03 2,85,71.35 24,512.00 19,056.50
Less: Provision for Tax
Current Tax1,39,50.00 1,00,80.00 8,450.00 6,215.00
Deferred Tax -17,59.61 -10,69.61 -678.60 -353.30
Adjustment of Previous Years-2,61.37 1,62.73 -1.90 -2.50
Fringe Benefit Tax1,78.73 5,65.00 475.00 504.00
1,21,07.75 97,38.12 8,244.50 6,363.20
Profit After Tax 23278.28 18833.23 16,267.50 12,693.30
12.11% 12.22% 11.66% 10.49%
Source @ Horlicks Annual Report
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Cash Conversion Cycle
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Case in Consideration
� Lowering the credit limit by ½ month(resulting in 2.5% loss on expected
sales)
� Allowing a cash discount of 2% while lowering the credit period by one
month(expected sales doesn¶t change, 25% of total sales expected to be
on cash)
� Allowing a cash discount of 1.5%(expected sales increase by further 2%)
Next year we are expecting 20% increase in sales with respect to which
We are considering tightening our credit terms.
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Case 1
Approx Sales 230580.28 230580.28
2.5 % loss in revenue 5764.507 5764.507
Approx Sales after 2.5% Loss on Sales 224815.773 224815.77
Credit Sales(75% of total Sales) 168611.8298 168611.82
Profit 1686.11 ( 1%) 843.05(.5%)
Gross Loss -4078.388703 -4921.44
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Case 2
Approx Sales 230580.28 230580.28
75% 172935.21 172935.21
2 % cash discount 3458.70 3458.70
Total Revenue 169476.50 169476.50
Profit 4236.91(2.5%) 1694.76(1%)
Gross (Profit/Loss) 778.20 -1763.93
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Case 3
Approx Sales 230580.28 230580.28
2% increase 4611.60 4611.60
Profit increase 553.39 553.39
75% 1763939.91 176393.91
1.5% discount 2645.90 2645.90
Gross Loss -2092.51 -2092.51
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Most favourable
After analysing and taking into account
all factors and in present scenerio we would
prefferably move forward with the decision of allowing a cash discount of 2% while lowering
the credit period by one month.
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Impact on marketing
We will emphasise less on our credit terms
Marketing more about cash discount of 2%
which is quite heavy considering the FMCGsector and volume of transaction.
Take steps to create pull demand which will
force dealers to stick with our product by
mens of massive advertisement and
promotions.
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Impact on logistics
Will have to improve whole mechanism of
supplying by reducing the cycle time.
Take steps to make it even more costeffective.
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Implication on HR policy
As company is looking forward for growth of
20% in sales so it would be shared with
employees by providing increment.
More efforts will be taken to improve
relations with our distributors by providing
more financial benefits .
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LOGOLOGO