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To calculate the mains indicators of the proper functioning of our company is important to know

the amount of total income, outcomes, working capital and the indicators of success of the
company.

Year 2013 2014 2015 2016 2017

Incomes 312900 371315 384210 399900 416400

Costs 62900 86315 94210 104900 106400

Working capital 130000 175000 180000 155000 160000

Gross Profit 250000 285000 290000 295000 310000

Taxable Profit 231100 255685 258890 262200 273800

Net Profit 184880 194320,6 196756,4 220248 229992


Tabel 1 The main indicators of the activity of the firm. Sourse: Own development

Year 2013 2014 2015 2016 2017


Production costs 30000 45000 50000 55000 60000
Formation expenses 300 0 0 0 0
Development costs 1500 1000 1000 3000 1000
Taxes 18900 29315 31110 32800 36200
Rents 6000 6000 6100 6100 6200
Expenditure on
machinery 5000 5000 6000 6000 3000
Consultancy in the
technological process 1000 0 0 1500 0
Logo and brand 200 0 0 500 0
Total costs 62900 86315 94210 104900 106400
Tabel 2 The structure of costs. Sourse: Own development

Year 2013 2014 2015 2016 2017


Income Tax 46220 61364,4 62133,6 41952 43808
Social Security 12500 14535 14790 15340 16120
Health Insurance 16250 18525 18850 19175 17050
Unemployment fund 1250 1425 1450 1475 1550
Pension Fund 39500 45030 45820 46610 48980
VAT 5000 5600 6000 6200 6500
Total taxes 120720 146479,4 149043,6 130752 134008
Tabel 3 The structure of the taxes. Own development
Figure 1: The structure of total taxes in 2013

Figure 2: The structure of total taxes in 2014

Figure 3: The structure of total taxes in 2015

Figure 4: The structure of total taxes in 2016


Figure 5: The structure of total taxes in 2017

Year Income tax Social Health Unemploym Pensio VAT


security insuran ent fund n fund
ce
2013 20% 5% 6,50% 0,50% 15,80 24%
%
2014 24% 5,10% 6,50% 0,50% 15,80 22%
%
2015 24% 5,10% 6,50% 0,50% 15,80 20%
%
2016 16% 5,20% 6,50% 0,50% 15,80 20%
%
2017 16% 5,20% 5,50% 0,50% 15,50 19%
%
Tabel 4 Fees provided by law for every year. Source: Law 31/1990

Romanian fiscal law provides the next rule of calculating the Net Profit:

Net Profit = Taxable Income Income tax;

Income Tax = Profit Tax Rate * Taxable Profit = Profit Tax Rate * (Total Income - Total
Expenses - Non-Taxable Income + Non-deductible Expenses);

Taxable Profit = Gross Profit - (Social Security+Health Insurance+ Unemployment fund+


Pension fund);

1.Cash Flow
Cash flow= Working capital- Total taxes

Year 2013 2014 2015 2016 2017


Working capital 130000 175000 180000 155000 160000
Total taxes 120720 146479,4 149043,6 130752 134008
Cash flow 9280 28520,6 30956,4 24248 25992
Tabel 5 The value of cash flow for each following year. Source: Own development
Figure 6: The evolution of Working Capital, Total Taxes and Cash Flow for each following year.

2.Oportunity cost
The initial investment in the company was 70 000 euro, untill the 5 years the company achieve
the value of Net Profit equal with 229992 euro, that mean that the company gains 159992 euro
producing and trading essencial oils.
Net Profit Initial Investment = Returns;
Returns = 229992 70000 = 159992(euro);
While if investors decided to place the money in a bank in condintions of 0.25% per year they
would have achieve the amount of 70879,38 m.u., that means that in 5 years they gains 879,38
m.u.
Sf= So(1+ q/100%)^n;
Sf- final amount of money;
So- initial sold;
q- rate of deposit;
n- number of years;
Sf=70000(1+0.0025)^5=70879,38 (m.u.);
Returns = Final amount - Initial Investment;
Returns = 879.38 (m.u.);
In this case is absolutely clear that the returns of investment in producing essencial oils is much
more than the money placement in a bank.
3.Returns on investment
For determinate the viability of the project for each following year a used next
formula:

Incomes after investment Amount of the Investment


ROI= 100
Amount of Investment

Year 2013 2014 2015 2016 2017


Incomes 184880 194320,6 196756,4 220248 229992
Investment 62900 86315 94210 104900 106400
ROI 194% 125% 109% 109% 116%
Tabel 6 The rates of viability of the project for each year

Figure 2: The evolution of ROI untill 5 years

The total rate of viability of the project is:

Incomes after Investment (2013)Initial Investment (2017)


ROI ( total )= 100
Initial Investment ( 2013 )

22999270000
ROI ( total )= 100 =228,56
70000

NB! In both formula I used as a Incomes after Investment the Net Profit for each folowing year
which can be reinvest in next stage of production and the as a Initial Investment the total amount
of all costs for economical activity of the company.
4.Net Present Value
In the next table is represent the total amount of all inflows( incomes) and of all outflows(costs).
The diference between these 2 values is the Net Present Value.
Year 2013 2014 2015 2016 2017
Inflows 312900 371315 384210 399900 416400
Outflows 62900 86315 94210 104900 106400
Net present Value 250000 285000 290000 295000 310000
Tabel 7 The Net Present Value for each following year

Figure 3: The evolution of the Net Present Value for each following year.

5. Internal rate of returns


Starting from the dates of the next tabel and the financil formula from Excell IRR we
determinated the internal rate of returns during of 5 years.

Initial Investment -70000


Monetary flux(2013) 250000
Monetary flux(2014) 285000
Monetary flux(2015) 290000
Monetary flux(2016) 295000
Monetary flux(2017) 310000
Internal Rate of return 367%

Also

Internal rate of return (IRR) is a metric used in capital budgeting measuring the profitability of
potential investments. Internal rate of return is a discount rate that makes the net present value
(NPV) of all cash flows from a particular project equal to zero. IRR calculations rely on the same
formula as NPV does.
The following is the formula for calculating NPV:

where:

Ct = net cash inflow during the period t

Co= total initial investment costs

r = discount rate, and

t = number of time periods

To calculate IRR using the formula, one would set NPV equal to zero and solve for the discount
rate r, which is here the IRR. Because of the nature of the formula, however, IRR cannot be
calculated analytically, and must instead be calculated either through trial-and-error or using
software programmed to calculate IRR.

6. Payback
Proceeding from that fact that the initial investment was 70000 m.u. and the net profit in first
year is 184880 m.u., the payback period is less than 1 year, more exactly over 8 months. Not
considered the Time Value of Money.