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LG (Electronics) ,: Total 102260

- XYZ Marketing is a distributor for electronics, mobile, home appliance, and small appliance companies including LG, Samsung, Whirlpool, and Kenstar. - The question calculates the ROI for XYZ's distribution of LG products in August 2020. - Key figures for LG in August 2020 include a net investment of Rs. 44.6 lakhs and a net income of Rs. 0.93 lakhs. - Based on this, the calculated ROI for XYZ's distribution of LG products is 2.09% per month, or 25.02% annually.

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102 views2 pages

LG (Electronics) ,: Total 102260

- XYZ Marketing is a distributor for electronics, mobile, home appliance, and small appliance companies including LG, Samsung, Whirlpool, and Kenstar. - The question calculates the ROI for XYZ's distribution of LG products in August 2020. - Key figures for LG in August 2020 include a net investment of Rs. 44.6 lakhs and a net income of Rs. 0.93 lakhs. - Based on this, the calculated ROI for XYZ's distribution of LG products is 2.09% per month, or 25.02% annually.

Uploaded by

Ben Hiran
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1)Calculate the ROI of the distributor given below: (10)

XYZ Marketing is in the distribution business of LG(Electronics),Samsung (Mobiles),Whirlpool(Home


appliances), Kenstar(Small appliances).The Distributor has deployed funds from his own sources.

Principal Revenues Margins CD


LG(Electronics), 1.75 Crore 7.5% 2.75%
Samsung (Mobiles 0.85 Crore 13% 3.5%
Whirlpool(Home appliances) 1.75 Crore 2.5% NIL
Kenstar (Small appliances). 0.55 Crore 5% NIL
Expenses/Month
Electricity-Rs. 30,500
Telephones-Rs.14,280
Admin. & Support Staff-Rs.30,500
Rent-Rs.18,000
Conveyance-Rs.8980
Total = 102260
Calculate the ROI of LG(Electronics), for the Month of August 2020.
Opening Stock-19.50 Lakhs
Receivables-16.5 Lakhs
Credit Notes pending from the Co 2.50 Lakhs
Stock in Transit- 7.25 Lakhs
Secondary sales- 18 Lakh(Primary sales=Secondary sales)
Outstanding with LG electronics-Nil
Secondary Schemes-1.5%
TAB (Quarterly+Annually)-0.75%
GST-13.5%.
Make reasonable assumptions.

August 2020
Investments:

Opening Stock (Starting of the month : 26.75


Value)

Add : Purchase from LG (Value) 16.75


Receivables from the Market 15.35
(Value)
Credit Notes due from LG 2.5
(Value)

Less : Secondary Sales for the month 16.75


(Value)
O/s with LG
Net Investment 44.6
Income :

Sales Margin for the Month (On 1.25


Secondary Sales Value)

Add: Cash Discount from LG (Value) 0.41


TAB (Quarterly + Annually) 0.11
Secondary Schemes (Value) 0.05
Gross Income 1.82
Less: Administrative Expenses 0.37
Indirect Expenses (Related to Business) 0.52
Less interest on borrowings

Net Income 0.93

Formula for ROI = Net Income


Net Investments
Opening Stock at the beginning of the month
Opening stock + Stock in transit = 19.5+7.25 = 26.75
Basic purchase value including GST=18*7.5/107.5=1.25 ie16.75(18-1.25)

Net Purchase Value excluding GST (x ) = 16.75 *13.5 /113.5+ (GST 13.5%) =1.99
16.75-1.99=14.76
Receivable= =16.5*7.5/107.5=15.35
Net Income margin = 18 – 16.75
= 1.25
Add CD @ 2.75% = (2.75% * 14.75) = 0.41

Add TAB @ 0.75% * 14.75 = 0.11

Add Scheme @ ( 20% of 1.5% of16.75) = 0.05


Why only 20% scheme is retained? Balance scheme is passed onto retailers.

Note: The investments and expenses should be strictly restricted to the business of the distributor with
LG

Total Revenues = 175 + 085 + 175 . + 055 = 490


Proportionate Expenses of LG (175. /490.) * 1.022 = 0.37

Subtract Interest @ 14%(Why 14%) = ((14/12) * 44.6) / 100 = 0.52

ROI =Net income =0.93* 100


Net investment 44.6

= 2.09 % per month


ROI = 2.09 * 12 = 25.02% per year

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