OCR Business studies F297 - SHL Pre- Release 2014/2015

I think they will receive 25% of net profit as they are buying 25% of the business. They can't receive all of it because it's not 100% their business.

Posted from TSR Mobile

Yeah that's what I thought.. But then the payback period would be over 17 years, which seems unrealistic

Reply 61

r-t

22

Original post by T-g

Yeah that's what I thought.. But then the payback period would be over 17 years, which seems unrealistic

Mardidi is a new business I believe so it will probably take some time before Mardidi starts earning some real revenue in the U.S. and the U.K. given it has no UK presence. Go with your gut feeling and forget what your teacher or anyone else says. They won't be marking the paper and the markers will probably be looking for analysis and evaluative points and won't even know the case study tbh.

Posted from TSR Mobile

Reply 62

jakecre8

3

They will need to thouroughly understand the case study. If they didn't, you could use very little application.

Okay, cheers guys!

So is the Accounting Rate of Return not the same, as they're only receiving 25%?

My teacher suggested talking about the figures as they are, and then questioning their legitimacy as am evaluation point. I'm unsure which way to go about it, although there's plenty of other things to talk about to get the marks, the figures are pretty important.

Reply 65

T-g

Original post by EFRobbo

So is the Accounting Rate of Return not the same, as they're only receiving 25%?

My teacher suggested talking about the figures as they are, and then questioning their legitimacy as am evaluation point. I'm unsure which way to go about it, although there's plenty of other things to talk about to get the marks, the figures are pretty important.

If we said that they receive only 25% of this net profit, then wouldn't the ARR and payback be impossible to work out? Seeing as we haven't been given the data for after 5 years? My teacher said just work out the ARR and payback of the whole net profit and then divide/times it by 4 (to represent 25%) but that seems wrong as we can't assume that same trend will continue.
And yeah In any conclusion about it, I'd say that we aren't given enough information about profit figures and whether they represent the 25% or not

Reply 66

jakecre8

3

Well by purchasing a 25% stake will give them a 25% share of profit. I do not have the figures, but if I remeber correcly, they're buying it for $2.5m. The fourth year or the last one on the table is $4m . I think that the ARR is reasonable.

Reply 67

r-t

22

Original post by jakecre8

Well by purchasing a 25% stake will give them a 25% share of profit. I do not have the figures, but if I remeber correcly, they're buying it for $2.5m. The fourth year or the last one on the table is $4m . I think that the ARR is reasonable.

They're buying it for $5m.

Posted from TSR Mobile

Reply 68

stresso

4

Hi guys, just a quick question. In general, by increasing the number of franchises, does this allow the franchisor to ultimately benefit from economies of scale (by greater quantity of orders from suppliers), or does each franchisee have to order directly from the agreed supplier and hence has no benefit to the franchisor (with regards to economies of scale)? Thanks

Reply 69

r-t

22

Original post by stresso

Hi guys, just a quick question. In general, by increasing the number of franchises, does this allow the franchisor to ultimately benefit from economies of scale (by greater quantity of orders from suppliers), or does each franchisee have to order directly from the agreed supplier and hence has no benefit to the franchisor (with regards to economies of scale)? Thanks

Increasing the number of franchises allows the franchisor to benefit from economies of scale. This is due to all the franchisees probably ordering from the same supplier meaning the franchisor will benefit from lower unit costs because they're making bulk orders.

Posted from TSR Mobile

Reply 70

stresso

4

Original post by r-t

Increasing the number of franchises allows the franchisor to benefit from economies of scale. This is due to all the franchisees probably ordering from the same supplier meaning the franchisor will benefit from lower unit costs because they're making bulk orders.

Posted from TSR Mobile

Great, thank you. So I imagine that SHL would order bulk supplies to keep stored in their warehouse facility, until needed by a former franchisee? Because not necessarily will all stores require restocking at the same time, right?

Reply 71

r-t

22

Original post by stresso

Great, thank you. So I imagine that SHL would order bulk supplies to keep stored in their warehouse facility, until needed by a former franchisee? Because not necessarily will all stores require restocking at the same time, right?

Yes most probably. Given that manufacturing takes 60 days and delivery takes 28 days they would probably order more in advance to avoid low stock and delays. And I assume not all franchisees will require restocking at the same time because obviously stock depends on the demand of the area they're set up in or close competitors, weather etc which will be different for each franchisee and therefore affect when they restock.

Posted from TSR Mobile

Reply 72

stresso

4

Original post by r-t

Yes most probably. Given that manufacturing takes 60 days and delivery takes 28 days they would probably order more in advance to avoid low stock and delays. And I assume not all franchisees will require restocking at the same time because obviously stock depends on the demand of the area they're set up in or close competitors, weather etc which will be different for each franchisee and therefore affect when they restock.

Posted from TSR Mobile

Sounds good :smile:

Thanks for your replies.