Financial analysis of regulatory pricing in Karachi

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.