The sales

managers
Dilemma
Created by
Adarsh Roy
Mitin Tarafdar
Akancha Kasera
Aashray Sharma

Sales  568
Working Capital
Turnover ratio
Standard
The Turnover ratio is
high compared with the
standard turnover ratio
which indicates that the is
company is over trading
and storing less stock
which can lead to out of
stock situation, Which
also indicates that the
working capital is low so
the company has a low
investments
Sri Ent Kanahiya
Main Line  New Line Main Line  New Line
752 884 1112
13 90 46 86
43.69 8.36 19.22 12.93
25 10 25 10
The Turnover ratio The Turnover ratio is low The Turnover ratio is
is low compared compared with the standard high compared with
with the standard turnover ratio which indicates the standard turnover
turnover ratio which that the is company is trading ratio which indicates
indicates that the is less, Which also indicates that the that the is company is
company is trading working capital is high so the over trading and
less, Which also company has a High investments storing less stock
indicates that the which can lead to out
working capital is of stock situation,
High so the Which also indicates
company has a High that the working
investments capital is low so the
company has a low
investments
 Gross 17.6 37.6 27.6 44.4
Profit

Sales  568 752 884 1112

Gross Profit/Sales 3.1 5.0 3.1 4.0

Standard 3% 5% 3% 5%

The gross profit ratio
for sri enterprise is higher
than the standard ratio for
main line which
interprets that they are
producing more
efficiently and are
generating profit over its
costs.
The gross profit ratio The gross profit ratio Here the gross
here clearly indicates for sri enterprise is profit is lower
that the company is higher than the standard than the desirable
matching with the ratio for main line which standards which
desirable standards interprets that they are indicates that the
which means it is producing more distributor isn't
generating profit and efficiently and are efficiently
the company is generating profit over its generating profits
effective. costs. over time 

Operating Expense
Sales  568
Operating Expenses / Sales
Standard
Here the operating
expense is higher than
the standard norms
which indicates that the
overall net profit
decreases and they need
to cut costs like salaries,
travelling and rent
expense etc.
Sri Ent Kanahiya
15.6 33.2 25.6 38
752 884 1112
2.74 4.4 2.89 3.4
2% 3% 2% 3%
Here the operating Here the operating Here the operating
expense is higher expense is higher than expense is higher than
than the standard the standard norms the standard norms
norms which which indicates that the which indicates that
indicates that the overall net profit the overall net profit
overall net profit decreases and they need decreases and they
decreases and they to cut costs like salaries, need to cut costs like
need to cut costs travelling and rent salaries, travelling and
like salaries, expense etc. rent expense etc.
travelling and rent
expense etc.
 Working Capital 13 90 46 86

Ratio of own/Total Capital 38.46 28.89 19.57 18.60

employed

Standard 20% 20% 20% 20%

This indicates that This indicates This indicates This indicates that
the distributor is that the new that the main line the new line is not
using its investments line is is not effectively effectively generating
effectively to effectively generating profit profit from its
maintain and protect generating from its existing existing capital
the long term profit profit from its capital
and market share existing
capital.
 Sri Ent Kanahiya

Average Stock Level 4.498 18.930 9.910 20.022

inventory 7 39 24 61

Sales  568 752 884 1112

Average Receivables 6 31 22 25

Sales  568 752 884 1112

Standard 10 days 20 days 10 days 20 days

Sri Enterprise is Here also the stock The distributor is The stock level is
keeping low stock level is not  kept up to keeping low stock there which matches
which means it is the standard norm and level compared to with the standard
overtrading. hence it is overtrading the standard and level which means
in the new line too. hence it is there is situation of
overtrading. stock out.
Sales  568 752
Average Receivables 6 31
Average Credit to Retailers 4 15
(days)
Standard (days) 5 10
Sri Enterprise is giving As the products are new,
low credits to retailers, It is important to give
this might effect the long payback time.
business as some Although Sri Enterprise is
retailers may want long giving higher credits in
time to payback. comparison to main line
products, but it is still low
in comparison to
standard.
884 1112
22 25
9 8
5 10
Distributor is giving Distributor is not making
higher credits so extra efforts to sell the
borrowings are more new line products as his
credit system is almost
similar to main line
products
Thank
you