What
is personal financial analysis?
Financial analysis is the process of
assessing the performance and appropriateness of firms, projects, budgets, and
other financial activities. Financial analysis is commonly used to determine if
a business is stable, solvent, liquid, or lucrative enough to merit monetary
investment. As a result, while evaluating and analyzing from an individual
standpoint, we must consider if the item is edible enough to merit a monetary
value for consumption.
What
is retail and wholesale price
A substantial portion of the commerce done
in our world consists of purchasing items and then reselling them to someone
else for a profit. When we establish pricing or determine how effective those
prices will be in fulfilling a company’s profit goals, mathematics is
unavoidably involved. Therefore, we’ll look at some of the most common
mathematical metrics and methods for setting and evaluating pricing or
financial analysis. We’ll stick to the common convention that the price that a
firm pays for an item is referred to as the wholesale price or cost. The retail
price is the price at which a company sells an item. The retail price is the
ultimate price at which a product is sold to customers, also known as end-users
or consumers. That is, those buyers do not purchase the goods to resell them, but
rather to consume them. Retail pricing is distinct from manufacturer and
distributor prices, which are determined from one seller to the next throughout
the supply chain. In competitive, free markets, the retail price is established
by the ultimate seller or retailer after considering costs as well as supply
and demand circumstances.
Financial analysis of
cost known as “Markup”
Markup based on cost is a typical
way for determining an item’s selling price; hence, markup is the price
difference between the selling and purchasing price. This technique is simple
and corresponds to how most people think about establishing pricing. With this
approach, we simply take the item’s cost and add a preset percentage of the
item’s cost, i.e., profit margin. Assume ABC Bike Wala can purchase a certain
type of bicycle for Rs 4,500 and utilizes a 50 percent markup based on cost.
Fifty percent of Rs 4,500 is (0.50) x 4,500 = Rs 2,250, thus putting this on
results in a selling price of Rs 4,500 + Rs 2,250 = Rs 6,750.
Finding the selling price in this
manner is not difficult, but we can make things much easier. A 50% markup
indicates that every Rs 1.00 of cost becomes Rs 1.00 + Rs 0.50 = Rs 1.50 of
selling price. As a result, a Rs 4,500 cost becomes a Rs 4,500 (Rs 1.50) = Rs
6,750 selling price. Using this reasoning helps us to discover the selling
price with less effort and will also pay off more handsomely in some of the
subsequent issues. This may be summed up in a FORMULA Markup Based on Cost:
P = C (1 + r)
where P represents the
SELLING PRICE,
C represents the COST
and r represents the PERCENT
MARKUP
Finding cost and/or
Rupee amount markup
If we know the selling price and the
markup percentage, we can work backward to get the cost. This is demonstrated
in the following example. Assume the price of Dal Mash in Karachi is Rs 114/KG.
The cost-based markup is 6.5 percent. Determine (a) the cost of Dal Mash and
(b) the markup in the Rupee term.
(a)
Working
from our formula, we get: P = C (1 + r)
Rs 114 = C
(1.065)
C = Rs
107.04/KG
(b)
To
find the dollar amount of the markup we can subtract Rs 114 – Rs 107.04 to get
Rs 6.96. We could also have got this by multiplying (0.065) (Rs 107.04) = Rs
6.96.
A word of caution
When utilizing percentages, we must
be mindful about what the percentage is of. The 6.5 percent markup, in
this case, was calculated as a percentage of the cost, not the selling
price. It is easy to miss this and calculate the markup by calculating (0.065)
(Rs 114) = Rs 7.41, which is wrong. In reality, this would overestimate the
markup by Rs 0.45! When performing these kinds of computations, it is critical
to ensure that you are applying the % to the correct object.
Regulatory
pricing
The Karachi division of the Office of the Commissioner maintains a website with regulation pricing for everyday
necessities like groceries, fruits, meat, milk, poultry, vegetables, and
bakeries. For example, the wholesale market list price of Dal Mash (A-category)
is Rs 117/KG, whereas the retail market price is Rs 124/KG. By modifying the
markup formula P = C (1+r), we may obtain the markup percentage r = (P/C) – 1.
The main advantage of calculating
the markup in percentage is that you can easily evaluate the range, for
example, groceries prices range between 5.3 percent and 6.5 percent, so instead
of memorizing the wholesale prices and retail price long list, it is quite
handy to remember that they range between 5.3 percent and 6.5 percent and if
anyone charging more than 6.5 percent, you can report to the Commissioner
office.
I hope that financial analysis of regulatory pricing will assist you in acting logically while purchasing daily consumables.