Transcript
ID:19-099Md.Mojurul Ahsan
About British American Tobacco Bangladesh
born in 1910
In 1998, BAT was transformed as a global identity
Employing more than 1,350 people
Most widely recognized brands in country
Sourcing, Production, Distribution & Consumers
• Sourcing
Partnership with farmers
houses state of the art
manufacturing facilities
Other sources-
wholesalers, retailers.
Sourcing, Production, Distribution & Consumers (cont’)
• Product
Benson & Hedges
John Player
Gold Leaf
Pall Mall
Capstan
Star
Derby
Hollywood
Sourcing, Production, Distribution & Consumers
• Product(array of brands-according to price segments)
Premium• Benson and Hedges
high• John Player Gold Leaf, Pall Mall, Capstan
Medium• star
Low• Derby Hollywood
Fixed & Variable Cost
• A fixed cost is a cost that does not change with an increase or decrease in the amount of goods or services produced or sold
Figure Figure 1: Fixed Cost
• A variable cost is a corporate expense that varies with production output
Figure 2 Variable cost
Sadia Salsabila JerinID:19-095
Total cost
Figure 3: Total Cost
Division of Fixed Cost
Discretionary fixed cost• Advertising campaigns• Employee training• Investor relations• Public relations • Research and
development activities for specific products
Committed fixed cost• difficult to adjust• planning horizon—
more than on year• required to make future
payments
Why Are Committed Fixed Costs the Most Difficult to Change
Long-term Operation Strategy Considerations
Operating Leverage & Financial Leverage
Operating leverage is a measurement of the degree to which a firm or project incurs a combination of fixed and variable costs.
Financial leverage is the degree to which a company uses fixed-income securities such as debt and preferred equity
High and Low Operating Leverage
Figure 4: Effect of high & low OL on EBIT
ID:19-101SHOHEL HOSSAIN
Degree Of Operating Leverage & Degree of Financial Leverage ( DOL & DFL)
Degree of Total Leverage (DTL)
Break-even Point
Figure 5: Break-even point
Margin of Safety
Figure 6: Margin of safety
Effect of Operating Leverage on a Company's Profits
Figure 7: associated risk with operating leverage
Syed Shadab Mahbub19-097
BATBC | Income Statements 2010-’15Particulars 2010
(lacs)2011(lacs) 2012
(lacs)2013 (lacs)
2014 (lacs)
2015 (lacs)
Sales Volume
22245.746
25404.8998
30400 36942.8108
42749.0904
48448.8955
Gross Profit 7470.347 9813.326 11525.12 13724.107 16309.771 18682.383
Operating expenses
3145.629 4530.369 4612.418 4219.739 4775.119 5481.856
Depreciation
627.605 768.565 948.318
Operating profit
4324.718 5282.957 6912.702 9504.368 11536.652 13200.527
Profit 2878.589 2550.591 3941.64 4924.127 6281.922 5874.074
EPS 47.98 42.51 65.694 81 104.7 97.43
AdjustmentsAverage WPPF as a % of OP 5%
Average VC as a % of sales 59%
Average fixed operating costs 4851.60
Average fixed financing costs 89.68
Degree of Operating LeverageParticulars 2010 2011 2012 2013 2014 2015
Contribution margin
8,071.85
9,218.15 11,030.61 13,404.67 15,511.47 17,579.64
Degree of operating leverage
1.93 1.36 1.28 1.22 1.19 1.16
MD ZARIF IBNE ARIF19-093
Degree of financial leverage
2010 2011 2012 2013 2014 2015Degree of financial leverage 1.028648 1.020969 1.014728 1.010597 1.008485 1.007096Degree of total leverage 2.578402 2.155354 1.811467 1.583843 1.467474 1.390975Operating break even 14921.66 14921.66 14921.66 14921.66 14921.66 14921.66Financial breakeven 15197.49 15197.49 15197.49 15197.49 15197.49 15197.49
Effect of DOL, DFL on EPS and EBIT
% increase in operating profit=%increase in sales* DOL
% increase in Net income = %increase in Operating profit* DFL
% increase in Net income = %increase in sales* DTL
Breakeven and Fixed cost
Higher the amount of fixed cost more units need to be sold to reach the level of breakeven.
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Breakeven graphsales Logarithmic (sales) fixed cost total cost
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