Simple computation of the return on investment lesson.

1. Financial Analysis
By: Reynaldo Balisong Dacuag Baldo

2. What is a price?
What is profit?
What is Return on
Investment(ROI)?
How will ROI be helpful in the
business?

3. Pricing
Price- usually defined as the sum
of money that a willing buyer and a
willing seller agree to exchange for
goods or services in a normal
business transaction.

4. Pricing objectives
To achieve a target return on
investment
To help generate cash flow
To help the survival of the business

5. Pricing change as a result of the
interaction between the market
forces of supply and demand
Law of supply and demand

6. Variable Cost
Fingerlings
Feeds
Electricity
Fixed Variable Cost
Interest on capital
Depreciation
Labour
Lease

7. Pricing approach
𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 =
𝑐𝑜𝑠𝑡 (𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑎𝑙)
𝑐𝑜𝑠𝑡 % 𝑜𝑓 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒
Example:
Production cost= 20.00
Mark-up price= 20%

8. 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 =
𝑐𝑜𝑠𝑡 (𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑎𝑙)
𝑐𝑜𝑠𝑡 % 𝑜𝑓 𝑠𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒
=
20
0.80
=25

9. Profit
A financial gain, the difference
between the amount earned and
the amount spent in buying,
operating, or producing something.

10. Example
Variable cost- 3,400
Fixed varibale cost- 7,960
Quantity of Production(tilapia)-
2,000kg

11. Total Expenses = Variable cost + Fixed Variable cost
= 3,400 + 7,960
= 11, 360pesos
Operational cost = Total expenses/ total no. of yield
= 11,360pesos/ 2000 kg.
=5.68 pesos/kg

12. selling price = operational cost/ cost % of selling
price
= 5.68/ 0.50
=11.36 pesos
Total sales = selling price x no. of yield
=11.36 pesos x 2,000 kg
= 22,720 pesos

13. Profit = total sales - total expenses
= 22,720.00 - 11,360.00
= 11,360.00

14. Return on Investment(ROI)
a performance measure used to
test the efficiency of an investment.

15. Formula:
Return on Investment = (profit/ total expenses) x 100
= (11,360/ 11,360) x 100
= 1 x 100
= 100%

16. Sample Problem
Variable cost
fingerlings- 2000pcs @1.50
feeds- 50,000.00
Fixed variable cost
labour- 3 @ 2,500
interest on capital- 50,000 x 5%

17. Harvested product- 490 kgs.
Compute for the following:
Total expenses
Production cost
Selling price
Total sales
Profit
ROI

18. Financial record keeping
Monitor the progress of the business
prepare your financial statements
identify source of receipts
keep track of deductible expenses

19. Questions?
What is the difference between profit and
return on investment(ROI)?
What is the implication of high return on
investment(ROI)?

20. Problem Solving:
Fingerlings cost- 2500 pcs @ 1.50
feeds cost- 55,000
labour- 4 @ 2500
interest n capital- 50000 @ 5%
Harvested product- 625kgs.

21. Solve for the following:
Expenses
Sales
Selling price
Profit
ROI

22. Thank you!!☺