Comparing Repeat Sales (6-8)

The KFC project has a positive NPV of $123, indicating that it is expected to generate profits. The critical path of the project is shown in Illustration 7. The project's cash flows trend line is illustrated in Illustration 5. Gantt chart for the project is presented in Illustration 6.

BUSINESS DECISON
MAKING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Creation of plan for primary and secondary data.............................................................1
1.2 Sampling techniques.........................................................................................................2
1.3 Questionnaire to measure customer preference in terms of price....................................2
TASK 2............................................................................................................................................4
2.1 Creation of information for decision making by the managers........................................4
2.2 Analysis of data................................................................................................................5
2.3 Measures of dispersion.....................................................................................................5
2.4 Calculation of quartile and percentile..............................................................................6
TASK 3............................................................................................................................................8
3.1 Conclusions on the basis of questionnaire results............................................................8
3.2 Trend line for forecasting KFC cash flows....................................................................10
3.3 Covered in PPT...............................................................................................................11
3.4 Formal business report...................................................................................................11
TASK 4..........................................................................................................................................12
4.1 Use of information processing tools...............................................................................12
4.2 Critical path method.......................................................................................................13
4.3 Use of financial tools......................................................................................................13
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INDEX OF TABLES
Table 1: Calculation of Mean, median and mode of KFC from 2011-15........................................4
Table 2: Percentage change in cash flows from FY 2011-15..........................................................5
Table 3: Calculation of standard deviation......................................................................................5
Table 4: Calculation of quartile for FY 2011-15.............................................................................6
Table 5: Calculation of percentile for FY 2011-15..........................................................................6
Table 6: Calculation of correlation..................................................................................................7
Table 7: Average rate of return on KFC project............................................................................13
Table 8: NPV of KFC project........................................................................................................13
Table 9: Calculation of payback period of KFC project................................................................14
Table 10: Calculation of IRR of KFC project................................................................................14
ILLUSTRATION INDEX
Illustration 1: People priority on price over quality.........................................................................8
Illustration 2: People opinion about age and price preference.........................................................8
Illustration 3: People opinion about relevance on income level and their price preference...........9
Illustration 4: People opinion about price reduction by KFC on its products.................................9
Illustration 5: Trend line of KFC cash flows.................................................................................10
Illustration 6: Gantt chart of the project.........................................................................................12
Illustration 7: Critical path of the project.......................................................................................12

INTRODUCTION
KFC is one of largest restaurant chain in the world. This report is prepared to create a
broad understanding about the statistical tools. In this report these tools are applied on cash flows
of KFC and the results of statistical tools are interpreted. Correlation, standard deviation, quartile
and percentile are also calculated and interpreted. At the end of the report, project evaluation
techniques are described in detail. In order to create a deep understanding of thee techniques,
their practical applications are discussed. In this regard, calculations are done and their results
are interpreted in a proper manner. Apart from this, information processing tools like
management information system, transaction processing system and decision support system are
explained in detail and their uses are also described in this report.
TASK 1
1.1 Creation of plan for primary and secondary data
Primary data refers to the data that is not collected by anyone and it has not been
published in any books, journal and magazine etc. On contrast to it, secondary data is a fact or
figure which had been collected by someone else and is published in newspaper, journal and
magazines. Collection of both primary and secondary data is necessary for the company if it is
planning to conduct any sort of research on topic that is related to specific discipline. Secondary
data is related to past and it indicates the situation which was prevalent in the earlier years in
respect to topic of the research (Hu, Zhang and Liang, 2009). In other words it can also be said
that, from analysing secondary data researcher gets an overview of the past scenario. On the
other hand, there is a primary data which is used to collect facts and figures relevant to current
scenario. By analysing and applying statistical and research tools on the collected data,
researcher and top management comes to know about the current trends on the topic on which
research was conducted. The other benefit that secondary data gives to the researcher is that, it
develops his understanding about past scenario (Secondary data. 2013). He uses understanding of
the situation for preparing a questionnaire. Thus, collection of both primary and secondary data
is imperative to ensure that, hard work on research will lead to desired results to the researcher
and the mangers.
1

1.2 Sampling techniques
For getting a better result on the research it is necessary that, researcher must collect
research data from the suitable respondents. If same does not happen then, researcher will not get
an optimum result on the research and managers will certainly take wrong decisions regarding
product manufacturing or marketing (Laitinen and Saarti, 2012). Thus, it is imperative for the
researcher to collect right respondents. In order to avoid mentioned mistakes researcher use
sampling techniques that helps them in collecting most suitable sample of the respondents.
Following are the techniques which can be used for this purpose.
1. Simple random sampling- In this method, sampling units are taken randomly by the
researcher from the given population. This method is employed when researcher do not
need specific category of the people as their respondent.
2. Stratified random sampling- In this method, whole population is divided into several
strata's and sample units which are taken from these sub division of population on
random basis (Simon and Cao, 2012). This method is used when response is needed from
the people that belong to different geographical areas and income level.
3. Cluster sampling- Under this method, entire population is divided on the basis of
homogeneous groups. After classifying entire population a sample is taken from these
clusters on random basis.
1.3 Questionnaire to measure customer preference in terms of price
Name
Age:
 20- 40 age
 40-60 age
 60-80 age
Gender
 Male
 Female
 Transgender
Marital status
 Married
 Unmarried
2

 Divorced
What is your income level?
 500-1500
 1500-2500
 2500-3500
 3500- 4500
While making purchase decision do you give priority to price over quality?
 Yes
 No
Do you think that with increase in age people prefer to consume cheaper fast food items?
 Yes
 No
Do you think that income level has some relevance with your pricing preference?
 Yes
 No
How many times in a year you visit KFC restaurant?
 5 times
 10 times
 15 times
 More than 15 times
Do you think KFC charge a high price for its fast food items?
 Strongly agree
 Agree
 Somewhat agree
 Disagree
 Strongly disagree
In case of high price do you like to visit KFC restaurant?
 Yes
 No
Do you think KFC should reduce price of its products.
 Strongly agree
3

 Agree
 Somewhat agree
 Disagree
 Strongly disagree
Give your feedback regarding services and products of KFC restaurant.
TASK 2
2.1 Creation of information for decision making by the managers
Table 1: Calculation of Mean, median and mode of KFC from 2011-15
Cash flows
2011 23289
2012 22047
2013 17042
2014 19333
2015 25214
Mean 21385
Median 22047
Mode N/A
1. Mean- It reflects the average of particular variable for a specific time period (Yang and
Yang, 2004). It indicates the value around which values of the specific variable revolve in
particular duration. Mean value of cash flow of KFC gives an overview about its sales
from 2011-15. On the basis of mean, value management of KFC can easily monitor
fluctuation and can take sound decisions regarding escalating in its cash flows.
2. Median- Median indicates the value which falls in middle of values of the variables
(Epley, 2012). On the basis of this value, whole scenario is divided into two parts and
manager can analyse the scenario of cash flows before and after median value.
3. Mode- It reflects the value which is repeated in the entire data (Kao, Wu and Su, 2011).
In table, answer of mode is zero because there is no repetitive value in the said table.
4

2.2 Analysis of data
1. Mean- In above table mean value of the cash flows of sales in 2011-15 is 21,385. It is the
value around which KFC earn cash flows in all years that fall in the mentioned duration.
On comparison of mean value with cash flow of 2015 it is find out that, KFC manages to
breach out its boundary of mean value of cash flows. In terms of percentage, the cash
flow of 2015 plunged by 17% in comparison to mean cash flow. From this fact again it is
clear that, KFC breaks the level of mean cash flow in 2015 and give outstanding
performance in its business.
2. Median- Median value of KFC cash flows from 2011-15 is 22,047. If we look at scenario
of cash flows from FY 2011-12 it is clearly evident that, sales of KFC declined by 5%.
On the other hand, on the basis of movement of cash flows from 2012-15 sharp decline
and escalation in cash flows is observed. On the basis of analysis of both scenarios,
management gets a clear message that it successfully elevates its cash flows and brings
consistency in growth of its profitability.
Table 2: Percentage change in cash flows from FY 2011-15
Years Cash flows Percentage change
2011 23289
2012 22047 -5.33%
2013 1704 -22.70%
2014 19333 13.44%
2015 25214 30.42%
3. Mode- Mode of KFC cash flows is zero due to non repetition in value of its cash flows in
2011-15 (Epley, 2012). If similar value comes again and again it is matter of concern for
the management. But same not happen, due to this reason value of mode is zero.
2.3 Measures of dispersion
It is through measures of dispersion that distribution of data over a period of time can be
analysed. The measures of dispersion indicate the degree to which average or central tendency
values can deviate in future. The different measures of dispersion for the cash flows of KFC
have been estimated underneath.
5

Table 3: Different measures of dispersion
Standard Deviation 3232.532057
Sample Variance 10449263.5
Range 8172
As per the table presented above, it is seen that the value of standard deviation for cash
flows is estimated at 3233, sample variance is estimated at 10449264 and range at 8172. As per
the values estimated, it can be said that the values are moderately dispersed over a period of
time. The mean and median value for cash flows is estimated respectively at 21385 and 22047.
The central tendency value is expected to deviate by 3233 that is estimated at standard
deviation. This in turn indicates that the cash flows for KFC are stable in nature. The company
is expected to achieve steady growth in upcoming years. However, the central tendency can
moderately disperse in near future. The organization is generating appropriate amount of cash
flows on annual basis. It is through continuous increase in business revenues that the
organization is able to achieve stable growth.
Table 4: Calculation of standard deviation
Years Cash flows
2011 23289
2012 22047
2013 17042
2014 19333
2015 25214
Standard deviation 3232.5320570723
Interpretation- Standard deviation indicates the movement in value of the specific variable
in comparison to the mean value (Standard deviation. 2015). Wide or narrowness in standard
deviation value may be a sign of good or danger which depends on values of the variable and
their up and down trend. In case of positive or upside trends in cash flows the larger the standard
deviation it is better for an organization. Standard deviation of the firm is positive means that
company cash flows are above average cash flow value. It is be considered good. But if we look
at table it can be seen that cash flows fluctuate steadily. Hence, firm needs to take certain steps
in order to increase its cash flow.
6

2.4 Calculation of quartile and percentile
Table 5: Calculation of quartile for FY 2011-15
Years Cash flows
2011 23289
2012 22047
2013 17042
2014 19333
2015 25214
Q1 19333
Q2 22047
Q3 23289
Interpretation- It divides the entire data into three parts and indicates the trend in cash
flows of KFC in 2011-15 in these mentioned parts (Quartiles. 2015). As per these quartiles
values it is evident that, cash flows of KFC steadily increases from 2011-15.
Table 6: Calculation of percentile for FY 2011-15
Years Cash flows
2011 23289
2012 22047
2013 17042
2014 19333
2015 33214
P1 19333
P2 22047
P3 22985
7

Interpretation- Quartile and percentile both is same thing and their results are also same
but way of calculation in terms of both statistical parameters is varied. Hence, interpretation is
also same of results of mentioned statistical tools.
Table 7: Calculation of correlation
Sales Net profit
2011 23289 5389
2012 22047 4788
2013 17042 3866
2014 19333 4582
2015 25214 6677
Correlation 0.9387515231
Interpretation- Correlation indicates the extent to which two variables are correlated with
each other (Statistical correlation. 2015). Here, correlation of KFC sales and profit is 0.93 which
is nearby to one. This reflects that, these two variables are highly correlated and fluctuation in
sales will bring same change in value of net profit. It can also be said that, magnitude of change
in both variables will be same if value of any one variable fluctuate in upcoming time period. It
should be also noted that, value of correlation always lie between -1 to +1. Zero indicates there is
no correlation between two variables and value between 0 and 1 states e positive correlation or
vice-versa. One or value nearby indicates that, there very high correlation between variables and
value -1 or near to -1 indicates that variables are highly negatively correlated with each other.
TASK 3
3.1 Conclusions on the basis of questionnaire results
While making purchase decision do you give priority to price over quality?
8

Interpretation- In research it has been find out that, majority of respondents give priority
to price over quality of the fast food products. Out of 50 respondents, 30 respondents give
priority to the price and 20 people give priority to quality. This response came from people due
to several reasons. Some of these reasons may be UK unemployment rate. However, this rate is
declining steadily currently also same is very high. Therefore, people are giving due importance
to the price over quality.
Do you think that with increase in age people prefer to consume cheaper fast food items?
Illustration- According to consumer behaviour concept, with the increase in age people
consumption pattern also changes. In order to check relevancy of price and age of people their
opinion are taken through questionnaire. In research, out of 50 people sample, 40 people agree
that, with increase in age people like to buy cheaper fast food items
9
40
10
Yes
No
Illustration 2: People opinion about age and price preference
Yes No
0
5
10
15
20
25
30
35
Column B
Illustration 1: People priority on price over quality

Do you think that income level has some relevance with your pricing preference?
Interpretation- Income to large extent affects the price people specially when
unemployment rate is high and GDP is very low. Out of sample of 50 respondents 35 says that,
there is a very high relevancy on income level and price preference. However, 15 respondents
think that, there is not any sort of correlation between these two.
KFC must reduce price of its products.
Illustration- Out of sample of 50 people 15 are strongly agree on the fact that KFC must
reduce price of its products followed by 15 respondents that are also agree on same. Only 5
respondents are to some extent agree on price reduction by KFC. Apart from this 10 people think
10
15
15
5
10
5
Strongly agree
Agree
Somewhat agree
Disagree
Highly disagree
Illustration 4: People opinion about price reduction by KFC on its products
Yes
No
0 5 10 15 20 25 30 35 40
35
15
Column F
Illustration 3: People opinion about relevance on income level and their price preference

that KFC do not need to make changes in its product price followed by 5 respondents that strictly
think that KFC must not make any sort of reduction in its products price.
3.2 Trend line for forecasting KFC cash flows
Interpretation- From the chart it is clear that, in upcoming years some pressure on sales
can be seen due to poor economic condition and higher unemployment rate. However, in the
chart it is also seen that, in 2015 KFC earn a good cash flow and also breach the level of cash
flow that is reflected by the trend line. So, in future same trend can be seen but there is a little
possibility of same as reflected by the trend line movement that is below 25,000 at the end of
chart.
3.3 Covered in PPT
3.4 Formal business report
To
The Board of Directors: KFC
Status: Confidential
Date: 10- August-2015
Introduction- This report is prepared on analyzing cash flows of KFC. For evaluating KFC
cash flows various statistical tools are applied on it. .
Methods- In order to conduct research in a proper manner both primary and secondary data is
11
1 2 3 4 5
0
5000
10000
15000
20000
25000
30000
Column C
Linear (Column C)
Illustration 5: Trend line of KFC cash flows

collected by the researcher. In this report, various statistical tools are applied on cash flows of
the KFC for analysis purpose. In respect to this statistical methods like mean, median and mode
are applied on data along with correlation and standard deviation which are also calculated and
relevant results are interpreted.
Findings- On the basis of the calculation it is find out that, KFC increase its cash flow and in
2015 and a sharp escalation in cash flow has been observed. There is a very high correlation
between sales and profit of KFC. Therefore, change in sales will bring same modification in
profit of KFC. On the other hand, standard deviation also increases for the firm due to increase
in cash flow in 2015. This is a good symbol of growth in revenue and it also emerges an
expectation that KFC will be able to achieve same growth rate in revenue in upcoming years.
Conclusion- On the basis of above calculations it is concluded that, trend line is below 25,000.
So, on the basis of trend line it is expected that, profit of KFC may decline in upcoming years.
However, with recovery in UK economy same expectation or forecast may prove wrong.
Results of all statistical tools show that cash flows of KFC are increased. Therefore, it is
strongly expected that, same will enhance in the upcoming years.
TASK 4
4.1 Use of information processing tools
Today, business has become more complex and firms are diversifying into the new
business. In order to perform operations in a proficient way it is imperative to use IT technology.
Currently, whether business is small or medium scale, every entrepreneur is advocating the use
of information processing tools in their business. These tools are used in several departments like
inventory, finance and logistics etc. Some of the information processing techniques that are
widely used by the business firms are as follows.
1. Management information system- It is a system which collects and stores the data and
by processing them it provides valuable information to them (Karanja and Zaveri, 2013).
On the basis of this information management of the firm can take sound business
decisions.
2. Transaction processing system- It is a system in which all kind of financial transactions
are entered by the purchase department. These data are collected and processed as well as
information regarding the same is made available to the managers on demand.
12

3. Decision support system- This tool is used by the managers to take tough decisions. For
this purpose, simulation is used in which virtual situation is prepared and DSS by
processing the data make available possible outcome of the virtual situation (Walter,
2007). On the basis of these outcomes, managers take sound business decisions.
4.2 Critical path method
Illustration 6: Gantt chart of the project
Ill
ustration 7: Critical path of the project
Interpretation- This method indicates the maximum time that project needs to complete. This
technique helps the manager in ensuring that project will be completed on time.
4.3 Use of financial tools
Average rate of return
13

Table 8: Average rate of return on KFC project
Project
Initial investment 100000
1 30257
2 36308
3 43570
4 52284
5 62741
Total return 225160
Average return 45032.00
ARR 45.03
Interpretation- ARR indicates the average return that KFC will earn on specific project if
investment is made on the same (Berg, 2001). ARR of this project is 45.03% which seems to be
good figure from the return on investment point of view.
NPV (Net present value)
Table 9: NPV of KFC project
Project
Initial investment 100000 PV @ 10% Present value
1 30257 0.909 27503.613
2 36308 0.812 29482.096
3 43570 0.731 31849.67
4 52284 0.659 34455.156
5 62741 0.593 37205.413
Total cash inflow 160495.948
100000
14

NPV 60495.948
Interpretation- NPV of project indicates the present value of the project after deducting initial
investment value from the present value of the cash flows (Nils, O.E., 2010). NPV of KFC
project is positive and its value is 60,485 which is impressive figure. So on the basis of result of
this parameter, this project is profitable for KFC.
Payback period method
Table 10: Calculation of payback period of KFC project
Cash flows Project
Initial investment -100000
1 30257 -69743
2 36308 -33435
3 43570 10135
4 52284 62419
5 62741 125160
Payback period 63692
1.7542139473
Interpretation- From the results of payback period method it is clear that, project will recover its
initial investment amount within one year and seven months. Hence, project is profitable for the
firm.
IRR (Internal rate of return)
Table 11: Calculation of IRR of KFC project
Project
Initial investment -100000
1 30257
2 36308
15

3 43570
4 52284
5 62741
IRR 29.91%
Interpretation- IRR indicates the actual return that firm earns on its investment which is same
and is done on specific project. Rate of return is positive and satisfactory. Hence, project is
beneficial for the firm.
CONCLUSION
On the basis of this report it is concluded that, firms must use statistical tools to measure
each and every financial aspect of their business. This must be done because these tools from
various angles analyzes particular thing. For this purpose, various tools like mean, median,
mode, standard deviation, correlation and quartile can be used. Before selecting any project,
firms must use project evaluation techniques that help managers in selecting most viable project
for the firm. Due to selection of wrong project firm may face financial crisis in its business. In
order to avoid such a situation, it is strongly recommended to use project evaluation techniques.
16

REFERENCES
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Hu, Y, Zhang, Z. and Liang, W., 2009. Efficiency of primary schools in Beijing, China: an
evaluation by data envelopment analysis. International Journal of Educational
Management. 23 (1). pp. 34 – 50.
Kao, C, Wu, C. and Su, P., 2011. Which mode is better for knowledge creation?. Management
Decision. 49(7). pp. 1037 – 1060.
Karanja, E. and Zaveri, J., 2013. A comprehensive review of survey‐based research in MIS.
Journal of Systems and Information Technology. 15(2). pp. 159 – 188.
Laitinen,M. and Saarti, J., 2012. A model for a library‐management toolbox: Data warehousing
as a tool for filtering and analyzing statistical information from multiple sources. Library
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Nils, O.E., 2010. In search of project substance: how do private investors evaluate projects?.
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Simon, F. D. and Cao, C., 2012. Examining China's science and technology statistics: a
systematic perspective. Journal of Science and Technology Policy in China. 3(1). pp. 26
– 48.
Walter W.C., 2007. An ANN‐based DSS system for quality assurance in production network.
Journal of Manufacturing Technology Management. 18(7). pp. 836 – 857.
Wilkens, A. K, Heck, L. J. and Cochran, J. S., 2006. The effects of mean reversion on alternative
investment strategies. Managerial Finance. 32(1). pp. 14 – 38.
Yang, F. and Yang, M., 2004., Economic statistical process control for over‐adjusted process
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Quartiles. 2015. [Online]. Available through: <
https://www.mathsisfun.com/data/quartiles.html>.[Accessed on 10th August 2015].
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