Name: __________________________

Date: __________________________

Hour: __________________________

ILIA STATE UNIVERSITY

BUSINESS CASE
This Business case discusses various areas of the company's business activities. You are required
to answer questions regarding each area of activity in a written form. Questions are formulated
at the end of each task.

I. Investments / Finances/ Statistics

Georgian company "Georgian Yogurt" examines the possibility of expanding production in 2017 within
the framework of a three-year project and enter the Ukrainian market with a new brand of kids’ yogurt.

The company must invest 2 million Laris to produce new brand of yogurt. The company estimates that
this investment will generate following additional cash flows over the next three years with
corresponding probabilities (you should assume, that cash flows are independent of each other across
years, i.e. company’s cash flow in a given year is independent of company’s cash flows in other years).

1st Year 2nd Year 3rd Year

Probability Cash Inflow Probability Cash Inflow Probability Cash Inflow

500,000 1,000,000 1,000,000

0.4 0.2 0.7
Lari Lari Lari
800,000 1,200,000 900,000
0.3 0.3 0.2
Lari Lari Lari
1,100,000 1,500,000 700,000
0.3 0.5 0.1
Lari Lari Lari

The owners of the company will implement this project if expected return on investments is at least 20
percent.

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Question #1: Based on the information provided, please make all necessary calculations and assess
whether the company owners should invest 2 million Laris in this new project.

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 II. Financial Accounting and Financial Analyses
The company "Georgian Yogurt" needs to invest 2 million Laris in order to release new brand of yogurt.
Investment Company "LUC Investments" became interested in the project of "Georgian Yogurt" and
started negotiations stating that in the case of agreement, "LUC Investments" will invest 2 million Laris
as a new partner.

“LUC Investments” hired your consulting company to prepare a statement of financial position of the
“Georgian Yogurt” company and recommend whether it is financially reasonable to invest money in
the “Georgian Yogurt” company.

The following information is known about the company "Georgian Yogurt"(amounts are indicated in
million Lari).

2013 2014 2015 2016

Balance Sheet

Total Assets 6.9 7.5 8.7 9.9

Long-term Assets 4.7 5.0 5.5 5.9

Land 2.1 2.1 3.1 3.1

Machinery and Equipment 1.8 1.7 1.5 1.4

Other long-term Receivables 0.8 1.2 0.9 1.4

Current Assets 2.2 2.5 3.2 4.0

Cash and Cash Equivalents 0.3 0.2 0.1 0.2

Short-term Receivables 0.8 1.0 1.4 1.8

Raw Materials 0.9 1.0 1.3 1.3

Inventories 0.2 0.3 0.4 0.7

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Equity 2.1 2.1 3.1 3.0

Shareholder’s Equity 0.7 0.7 0.7 0.7

Reserved Capital 0.5 0.5 0.5 0.5

Revaluation Reserve - - 1.0 1.0

Retained Earnings 0.9 0.9 0.9 0.8

Current liabilities 1.6 2.3 2.7 3.8

Short-term Loans 0.7 0.8 1.7 2.5

Payables to Suppliers 0.9 0.8 1.0 1.1

Short-term Bonds - 0.7 - 0.2

Long-term liabilities 3.2 3.1 2.9 3.1

Long-term Loans 2.7 2.6 2.4 2.4

Long-term Bonds 0.5 0.5 0.5 0.7

Additional Financial Information

Cash Flow from Operating Activities 20.1 25.2 24.3 21.1

Annual Profit Tax 0.6 0.7 0.5 0.2

Net Income 3.4 4.6 3.1 -0.1

Annual Interest Expense 0.4 0.8 0.9 1.1

Dividends Paid 3.4 4.6 3.1 -

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Question #2: Please calculate main financial ratios for "Georgian Yogurt"(for example, ROE, ROA,
quick liquidity ratio, absolute liquidity ratio or any other ratio you think is relevant) and evaluate the
dynamics of their development across years. Also, please describe possible developments that may have
taken place in the company from 2013 to 2016. What impact would these developments have on
company’s financial position? Finally, based on provided information, what recommendation would
you give to “LUC Investments”?

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III. Marketing
The company "Georgian Yogurt" has decided to produce a new product, "Kids Yogurt from Georgia",
and export it to Ukraine. The company needs to assess Ukrainian market and plan marketing activities.

Question #3: Please define company’s new target audience. Who are you going to sell your products
to? Why should they buy your products? What benefits will they receive, both tangible and intangible?
Describe a picture of the customer.

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Question #4: According to your target audience description and competitive advantage, prepare short
promotional program for your new product and market. Namely, describe how you will communicate
(what kind of communication channels you will use) to your target market. Also, define roughly the
message you will deliver through these channels.