SECR ASSIGNMENT

for the case

Cafes Monte Bianco: Building A Profit Plan

BY –

18PGP238 – PRASAD RATHI

GROUP D
Q1. Profit Plan

Profit Wheel
Variables - Sales, Profits and Operating Expenses
Income Statement
All figures in Thousand Lira 2001
Revenue
Private Brands Sold 6000000*8800 5,28,00,000

Cost of Goods Sold 6000000*7153 4,29,18,000

Additional Depreciation (due to

capacity increase) 6000000000/15 4,00,000
Savings in Fixed Costs 7,81,000

Gross Margin 1,02,63,000

Marketing Expenses 0
R&D Expenses 3328130000*.25 8,32,033
Selling Expenses 3574710000*.35 12,51,149
Admin. Expenses 4752000000*.5 23,76,000
Interest Expenses 38,25,000

Profit 19,78,819
Taxes (@40%) 7,91,528
Net Profit 11,87,291

Sales have reduced in 2001 due to reduced sale of private label. Operating expenses and
fixed costs also reduced. All this resulted in reduction of net profit.

Cash Wheel
Variables – Account Receivables and Operating Cash
 Free Cash Flow to Firm
January February March April May June July August September October November December
Opening Balance 11,21,450.00 13,81,321.28 18,28,950.57 25,53,275.85 28,52,675.13 32,11,366.42 32,63,715.70 32,37,008.98 31,21,364.27 33,51,589.55 42,04,380.83 49,58,352.12

Cash Inflow
Sales 37,48,800.00 47,52,000 62,30,400 39,60,000 42,76,800 26,40,000 22,17,600 17,42,400 35,90,400 69,16,800 63,88,800 63,36,000

Cash Outflow
Marketing Expenses 0 0 0 0 0 0 0 0 0 0 0 0
R&D Expenses 69,336.04 69,336.04 69,336.04 69,336.04 69,336.04 69,336.04 69,336.04 69,336.04 69,336.04 69,336.04 69,336.04 69,336.04
Selling Expenses 1,04,262.38 1,04,262.38 1,04,262.38 1,04,262.38 1,04,262.38 1,04,262.38 1,04,262.38 1,04,262.38 1,04,262.38 1,04,262.38 1,04,262.38 1,04,262.38
Admin. Expenses 1,98,000.00 1,98,000 1,98,000 1,98,000 1,98,000 1,98,000 1,98,000 1,98,000 1,98,000 1,98,000 1,98,000 1,98,000
Interest Expenses 3,18,750.00 3,18,750 3,18,750 3,18,750 3,18,750 3,18,750 3,18,750 3,18,750 3,18,750 3,18,750 3,18,750 3,18,750
Variable Cost 30,47,178.00 38,62,620 50,64,324 32,18,850 34,76,358 21,45,900 18,02,556 14,16,294 29,18,424 56,22,258 51,93,078 51,50,160
Taxes (@40%) 65,960.63 65,960.63 65,960.63 65,960.63 65,960.63 65,960.63 65,960.63 65,960.63 65,960.63 65,960.63 65,960.63 65,960.63

ADD :
Fixed Cost Saved 65,083.33 65,083.33 65,083.33 65,083.33 65,083.33 65,083.33 65,083.33 65,083.33 65,083.33 65,083.33 65,083.33 65,083.33
Depriciation 2,49,475.00 2,49,475.00 2,49,475.00 2,49,475.00 2,49,475.00 2,49,475.00 2,49,475.00 2,49,475.00 2,49,475.00 2,49,475.00 2,49,475.00 2,49,475.00

Cash in Hand 13,81,321.28 18,28,950.57 25,53,275.85 28,52,675.13 32,11,366.42 32,63,715.70 32,37,008.98 31,21,364.27 33,51,589.55 42,04,380.83 49,58,352.12 57,02,441.40

Assets Liabilities

Account
Cash 57,02,441.40 Payable 53,44,739.07

Raw Material 26,92,800.00 Credit Line 2,50,00,000.00

Finish Goods 11,48,400.00

Long Term
Account Receivable 5,86,666.67 Debt 1,60,00,000.00
Property, Plant,
Equipment 4,83,74,000.00 Equity 91,65,869.00

Depreciation 29,93,700.00

5,55,10,608.07 5,55,10,608.07

There is an assumption that there is no finished good or raw material inventory and that all bills
are paid on time.

ROE Wheel

Gross
ROE Margin

0.13
2001 13% 19%

0.21
2000 21% 41%
The Return on Equity has decreased with the switch to all private label strategy. Hence the
strategy of 2000 seems to better.

Q.2 Recommendations:
Below are the recommendations for Mr. Salvetti:
 Continue with mixed strategy of private label and premium labels
 The net profit and ROE has reduced due to all private label production and hence it is
not viable
 If the plan is to continue with only private label, then it must be identified that how
many more private brands can be catered to maintain or increase revenue of mixed
strategy
 Reduction of credit period from 90 days should also be explored
 Since the sales got reduced, a way to increase selling price or capacity must be
explored