Maximising Profits during Low Season in Tai Pan: An Analytical Approach

This research proposal aims to find a solution to Tai Pan's lack of customers during the low season. The investigation will use financial and marketing segments of the business, including break-even analysis, financial statement and ratio analysis, and SWOT analysis. The methodology employed will be secondary research and an interview with Tai Pan. The main results and findings include profitability ratios, liquidity ratios, and investment ratios. The analysis and discussion will focus on financial statements and ratio analysis.

Research Proposal
Research question: How to maximise profits during the low season in Tai Pan?
Suggested Analytical Tools
 Break-even analysis
This will help me calculate how much revenue is needed compared to costs to run the
business.
 Financial statement and ratio analysis
This can help as there can be methods for the business to cut costs. Which helps the business
maximise profits whilst not losing quality as the business is expected to have a high standard
for their food and service.
 SWOT Analysis
It is a high level strategic planning model that helps organisations to identify that an
organisation is doing well and where it can improve, both from internal and external
prospectus
Rationale
Tai Pan has been suffering a lack of customers during the lower seasons where there are some
days where the restaurant is empty. 1Therefore, to cut costs and maximise profits, Tai Pan
should do something to receive an adequate amount of revenue to keep the business running.
I will be carrying out this investigation, helping the business to find the best way to
accomplish this.
Methodology
To carry out this investigation, I will be using the financial and marketing part of the business
with some other factors to prove the investigation. An interview will be needed to conduct the
research and some information from the business to calculate the costs of the business and the
profits if I am allowed to. The marketing segment of this investigation is to suggest which
strategies used to attract customers and what has to be done to this 2. To collect the
information, I would need to contact the business to see when they are available and arrange
a meeting with them. Finally, to gather the information I collect, I would create a document
of all the information I receive and create a spreadsheet if any figures come up in the process.
Difficulties
There are many problems that can occur during this investigation; such as permission to get
profits and cost since they are a Private Limited Company, and if so, I would have to use
1 Luo, D. and et. al., 2015. The application of stable isotope ratio analysis to
determine the geographical origin of wheat.Food chemistry.174. pp.197-201.
2 Dehnavi and et. al., 2015. A new hybrid model using step-wise weight assessment
ratio analysis (SWARA) technique and adaptive neuro-fuzzy inference system
(ANFIS) for regional landslide hazard assessment in Iran.Catena.135. pp.122-148.

marketing strategies to attract clients instead of finding a way of expanding the business
which can limit my solution to their issue. However, it came to my mind that there may be
biased sources when gathering information but there shouldn’t be any as I will be gathering
quantitative information where the business cannot choose a favouring side to the problem.

Action Plan
Tasks Aug Sep Oct Nov Dec Jan F
e
b
1 Come up with a
business
2 Create a research
question
3 Start research proposal
4 Commence research
5 Introduction
6 Writing report
7 First draft
8 Work on draft
9 Final submission

Research Project

Table of Contents
Research Proposal.................................................................................................................1
Research Project....................................................................................................................4
Table of Contents...................................................................................................................5
Executive Summary................................................................................................................ 6
Introduction............................................................................................................................. 7
Methodology Employed..........................................................................................................8
Main Results and Finding.......................................................................................................9
Analysis and Discussion.......................................................................................................13
(a) Financial statements and ratio analysis......................................................................13
(b) Break even analysis: .................................................................................................16
(c) SWOT Analysis...........................................................................................................17
Conclusion and recommendation.........................................................................................20
Reference and bibliography..................................................................................................21

Executive Summary
To maximise the profit of Tai Pan Chinese restaurant, three analytical tools is used.
By using break even analysis, company can achieve its desired units to maximise its profits
and also by using SWOT analysis technique company can find its strengths, weakness,
opportunities & threats to take advantage of these in profit maximisation. Tai Pan uses the
ratio analysis tool to identify the key areas where it is required to do more concentration for
increasing the overall profits. By applying these three analytical tools, a company can achieve
desired target in lean season also by removing wasteful activities of business.

Introduction
Company name: Tai Pan
Tai Pan is a Chinese restaurant located in southern Spain. It was founded in 1982, being one
of the first Chinese restaurants to open in Marbella, Spain.
The business is currently facing a downfall of customers in the past years during the low
season, as there are not many tourists during winter months. Therefore, to keep the business
up and running they would need a new strategy to keep the cash flow up 3. Having the
restaurant be open every day has its costs and they need a specific amount of people coming
per night to break-even. There are some nights where there are no customers in the restaurant,
meaning that they are losing revenue.
Thus, this is the reason I am carrying out this investigation, as I want to help them find a
solution to this problem. I will be finding out a way for Tai Pan to maximise their profits
during the low season. To do this, I will be using the financial and marketing segments of
business; as I think that they would need to attract more local customers and make the
customers have a reason to dine there, meaning that Tai Pan has something special to its food
that no other competitor has.
3 Trivedi and et. al., 2016. Gas chromatography-mass spectrometry based isotopic
abundance ratio analysis of biofield energy treated methyl-2-napthylether
(Nerolin).American Journal of Physical Chemistry.4(5). pp.80-86.

Methodology Employed
This investigation will primarily use secondary research as the financial statements of
the business are needed to carry out my research. I will organise an appointment with Tai Pan
to carry out an interview of what I am investigating and if I need any additional information I
would send them an email to get what I need. I decided to use these methods to obtain the
information I need as the interview will allow me to ask any additional questions I have in
mind and it is easier to contact them as there will not be any miscommunication or problems
when trying to reach them 4. An email is also good as it is quick and easy to respond to and
will not take any time trying to organise a time where both the business and I can meet.
The business tools I will be using to conduct this investigation are break-even analysis
and financial statement and ratio analysis. The break-even analysis will allow me to figure
out how much income compared to cost is needed for Tai Pan to not lose revenue and
increase it instead 5. Financial statement and ratio analysis is used to evaluate Tai Pan’s
operating and financial performance, such as its efficiency, liquidity, profitability and
solvency; which then allows me to show the business on ways to increase profit.
The collection of data should be reliable as the business wouldn’t give me false
numbers when they have a problem to be resolved in addition the information I will be
gathering are quantitative, therefore, it will not be biased as it will be facts that the business is
giving me 6.
4 Petruzzo and et. al., 2015. Outcomes after bilateral hand allotransplantation: a
risk/benefit ratio analysis.Annals of surgery.261(1). pp.213-220.
5 Morano, P. and Tajani, F., 2017. The break-even analysis applied to urban renewal
investments: a model to evaluate the share of social housing financially sustainable
for private investors.Habitat International.59. pp.10-20.
6 Dehnavi and et. al., 2015. A new hybrid model using step-wise weight assessment
ratio analysis (SWARA) technique and adaptive neuro-fuzzy inference system
(ANFIS) for regional landslide hazard assessment in Iran.Catena.135. pp.122-148.

Main Results and Finding
The results and the finding of the Tai Pan that are to be understand with the help of
ratios and charts mentioned below in order to improve its sales in off seasons 7.
1) Profitability Ratios:
 Gross Profit Ratio: Gross Profit / Sales * 100
2016-17 2017-18
972 / 1036 *100 1164 / 1295 *100
93.82% 89.88%
0.87
0.88
0.89
0.9
0.91
0.92
0.93
0.94
2016-17 972 / 1036 *100
2017-18 1164 / 1295 *100
 Net Profit Margin Ratio: Net Profit / Sales * 100
2016-17 2017-18
437 / 1036 * 100 175 / 1295 * 100
42.18% 13.51%
7 Morano, P. and Tajani, F., 2017. The break-even analysis applied to urban renewal
investments: a model to evaluate the share of social housing financially sustainable
for private investors.Habitat International.59. pp.10-20.

0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
2016-17 437 / 1036 * 100
2017-18 175 / 1295 * 100
(2) Liquidity Ratios:
 Current Ratio: Current Assets / Current Liabilities
2016-17 2017-18
842 / 550 625 / 764
1.53:1 0.82:1
 Quick Ratio: Quick Assets / Current Liabilities.
2016-17 2017-18
813 / 550 583 / 764
1.48:1 0.76:1
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2016-17 842 / 550
2017-18 625 / 764

(3) Investment Ratios:
 Return on Equity: Profit after tax / Net worth *100
2016-17 2017-18
362 / 1481 * 100 91 / 1340 * 100
24.44% 6.79%
 Return on Assets: Net Profit / Total Assets * 100
2016-17 2017-18
340 / 3683 * 100 53 / 3786 * 100
9.23% 1.40%
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2016-17 813 / 550
2017-18 583 / 764
0
0.05
0.1
0.15
0.2
0.25
2016-17 362 / 1481 * 100
2017-18 91 / 1340 * 100

Analysis and Discussion
Analysis and discussion can be done by :
(a) Financial statements and ratio analysis
Income Statements of Tai Pan for the year ended 30.06.2017 and 30.06.2018
( € in million)
2016-17 (€) 2017-18 (€)
Revenue 1036 1295
Cost of revenue 64 130
Gross Profit 972 1164
Operating expenses:
Sales, general and administration expenses 627 739
Other operating expenses 90 107
Total Operating expense 717 846
Operating Income 255 318
Interest expense 29 43
Other income (expense) 211 -100
Income before tax 437 175
Provision for income tax 75 84
Net Income available for common shareholders 362 91
other -22 -38
Net Income 340 53
Balance Sheet of Tai Pan as at 30.06.2017 and 30.06.2018
(€ in million)
2016-17 (€) 2017-18 (€)
Assets:
Current Assets:
Cash:
Cash and cash equivalent 652 362
Short term investment 76 83
Total Cash 728 444
Receivable 72 85

Prepaid Expense 29 42
Other current assets 13 53
Total Current Assets 842 625
Non-Current Assets:
Property, plant and equipment:
Gross property, plant and equipment 29 40
Accumulated Depreciation - -
Net property, plant and equipment 29 40
Equity and other long term investments 90 414
Goodwill 2172 2014
Intangible assets 500 539
Deferred income taxes 32 29
Other long term assets 18 126
Total Non-Current Assets 2841 3161
Total Assets 3683 3786
Liabilities And Stockholder's Equity
Current Liabilities:
Short term debt 38 81
Accounts payable 192 12
Deferred income tax 18 38
Deferred revenue 266 357
Other current liabilities 36 276
Total Current Liabilities 550 764
Non-Current Liabilities:
Long term debt 930 1219
Deferred tax liabilities 115 124
Pensions and other benefits 8 11
Minority interest 559 297
Other long term liabilities 39 31
Total Non-Current Liabilities 1652 1682
Total Liabilities 2202 2446
Stockholder's Equity:

Common stock 252 269
Other equity -32 -92
Retained earning 1225 1124
Accumulated other comprehensive income 37 39
Total Stockholder's Equity 1481 1340
Total Liabilities And Stockholder's Equity 3683 3786
For understanding the above financial statements of Tai Pan, it is necessary to
calculate and analyses various ratios like profitability ratios, investment ratios and liquidity
ratios 8. Calculations of various key ratios are as follows:
(1) Profitability Ratios:
 Gross Profit Ratio: Gross Profit / Sales * 100
2016-17 2017-18
972 / 1036 *100 1164 / 1295 *100
93.82% 89.88%
Interpretation: Gross profit ratio means percentage of gross profit in terms of sales. It
is used to evaluate the operating performance of the business of the company. Gross profit
ratio will be considered good if company maintain its gross profit ratio throughout its life. Tai
Pan has gross profit ratio of 93.82% in 2016-17 and 89.88% in 2017-18, there is decrease in
gross profit ratio by approximately 4% from 2016-17 to 2017-18 because cost of revenue is
increased in 2017-18, therefore, company have to have to make efforts to decrease its cost of
sale.
 Net Profit Margin Ratio: Net Profit / Sales * 100
2016-17 2017-18
437 / 1036 * 100 175 / 1295 * 100
42.18% 13.51%
Interpretation: Net profit ratio margin ratio means a ratio of net profit to sales. There
is huge decline in net profit ratio in 2017-18 as compare to 2016-17. Tai Pan will have to take
it as a serious concern and try to improve its net profit ratio by decreasing its indirect
expenses. This huge decline in net profit margin ratio will create a negative image of
company in the mind of prospective and present investor.
(2) Liquidity Ratios:
 Current Ratio: Current Assets / Current Liabilities
2016-17 2017-18
842 / 550 625 / 764
8 Lee, M. and et. al., 2017. A break-even analysis and impact analysis of residential
solar photovoltaic systems considering state solar incentives.Technological and
Economic Development of Economy, pp.1-25.

1.53:1 0.82:1
Interpretation: Current ratio measures company ability to pay its obligation. Ideal
current ratio is 2:1. Tai Pan have 1.53:1, current ratio in 2016-17 which is lower than the
standard current ratio of 2:1 but in 2017-18 its current ratio is decline to 0.82:1 due to
decrease in current assets and increase in current liabilities which is a huge concern for Tai
Pan and therefore, management have to take serious steps to improve its current ratio.
 Quick Ratio: Quick Assets / Current Liabilities.
2016-17 2017-18
813 / 550 583 / 764
1.48:1 0.76:1
Interpretation: Quick ratio measures company ability to use its near cash to retire its
current liabilities quickly. Ideal quick ratio is 1:1. Tai Pan have 1.48:1 quick ratio in 2016-17
which decreased to 0.76:1 in the year 2017-18 which is an concern for Tai Pan and therefore,
management have to take steps to improve its quick ratio.
(3) Investment Ratios:
 Return on Equity: Profit after tax / Net worth *100
2016-17 2017-18
362 / 1481 * 100 91 / 1340 * 100
24.44% 6.79%
Interpretation: Return on equity means earning percentage for equity shareholders.
Tai Pan have 24.44% of return on equity in the year 2016-17 which reduced to 6.79% in year
2017-18. Therefore company have to improve its return on equity in order to build
confidence in their shareholders.
 Return on Assets: Net Profit / Total Assets * 100
2016-17 2017-18
340 / 3683 * 100 53 / 3786 * 100
9.23% 1.40%
Interpretation: Return on assets means earning percentage for for company on its
total assets. Tai Pan have 9.23% of return on total assets in the year 2016-17 which reduced
to 1.40% in year 2017-18. Therefore, company have to improve its return on total assets
because it will reduce the worth of the company.
(b) Break even analysis:
It is a technique which is widely used by the management accountant and production

management 9. Total variable costs and the fixed costs are compared with the total sales
revenue for determining the level volume of sales, sales value or production at which
business is on a point where it makes neither a profit nor a loss. This point is known as break-
even point.
Break-even point (in value) = Fixed cost / profit volume ratio
where, profit volume ratio means contribution / sales * 100
Break-even point (in units) = Fixed cost / contribution per unit
For Tai Pan :
Sales : June, July, August and half September = 10000 * 107 days = 1070000
Off season sales= 3000 * 258 days = 774000
Total Sales = € 1844000
Variable cost : June, July, August and half September = 5000 * 107 days = 535000
Off season sales= 3000 * 258 days = 774000
Total Sales = € 1309000
Fixed Cost (Assume) = € 400000
profit volume ratio = contribution / sales * 100
( 1844000 – 1309000 ) / 1844000 * 100
29.01 %
Break-even point (in value) = Fixed cost / profit volume ratio
= 400000 / 0.2901
= € 1378834
Therefore, from the above break even analysis it is concluded that Tai Pan have
break-even point at € 1378834, where it has no profit and no loss. This is very much close to
the actual sales, so it recommended to the company to improve its sales in the off season by
reducing the variable cost. Sales volume can be improve in off seasons if company reduce its
selling price of the products and by doing effective cost management to reduce the variable
cost per unit 10.
(c) SWOT Analysis
It is a high level strategic planning model that helps organization to identify that it is
doing well and where it can improve, both from internal and external prospectus 11. A SWOT
analysis of Tai Pan restaurant company is as follow:
9 Ekelund, U.and et. al., 2016. Does physical activity attenuate, or even eliminate, the
detrimental association of sitting time with mortality? A harmonised meta-analysis
of data from more than 1 million men and women.The Lancet.388(10051). pp.1302-
1310.
10 Kaplan, A., 2017.The conduct of inquiry: Methodology for behavioural science.
Routledge.
11 Bohari, A.M., Hin, C.W. and Fuad, N., 2017. The competitiveness of halal food
industry in Malaysia: A SWOT-ICT analysis.Geografia-Malaysian Journal of
Society and Space.9(1).

Strengths:
It is a first element of SWOT analysis. In this, Tai Pan company should analysis its
key strengths such as:
 Identify the things company does well.
 Qualities that gives a company a competitive advantage.
 Internal sources such as skilled, knowledgeable staff.
 Tangible assets such as intellectual properties, capital etc.
Weakness:
Once company has figured out your strengths, it is the time to self-assess the
weakness of company itself 12. Which include:
 Identify the things company lacks as compared to competitors.
 Identify the critical resources which are limited.
 Identify the things that other companies do better than Tai Pan.
Opportunities:
In this step, company shall figure out the opportunities for the growth of business that
are existed in external environment 13. Opportunities for the company includes the following:
 Understand market for specific products to make more demand.
 Company shall make profit if there a few competitors in the market.
 Having the emerging need for company's products or services.
Threats:
In this step, company shall asses its threats existed in external environment to reduce
12 Niederwieser, D. and et. al., 2016. Hematopoietic stem cell transplantation activity
worldwide in 2012 and a SWOT analysis of the Worldwide Network for Blood and
Marrow Transplantation Group including the global survey.Bone marrow
transplantation.51(6). p.778.
13 Blockeel, C. and et. al., 2016. A fresh look at the freeze-all protocol: a SWOT
analysis.Human reproduction.31(3). pp.491-497.

the impact of these threats on the operations of Tai Pan 14. Some of these threats are as
follows:
 Emerging competition in the market.
 Changes in the regulatory environment.
 Reduces demand of the products of company in the market.
14 Bull, J.W., and et. al., 2016. Strengths, Weaknesses, Opportunities and Threats: A
SWOT analysis of the ecosystem services framework.Ecosystem Services.17. pp.99-
111.

Conclusion and recommendation
From the above report, it is concluded that a company can maximize its profits by
applying analytical tools. There are various tools available such ratio analysis, break-even
point analysis and SWOT analysis etc. By calculating ratios for the company based on
financial statements, a company can compare its results with its competitors and accordingly,
improve its operations to compete competitors 15. It is concluded that with the help of break-
even analysis, a company can evaluate its contribution in terms of fixed cost so that it can
produce that quantities of products to achieve the situation where company has no profit and
no loss. A company can achieve is desired profits by using margin of safety in break-even
analysis. SWOT analysis is very useful to any company to assess its current condition and
can take benefits to form the future as company's desire 16.
15 Weber, M., 2017.Methodology of social sciences. Routledge.
16 Bompa, T.O. and Buzzichelli, C., 2018.Periodization-: theory and methodology of
training. Human Kinetics.

References
Luo, D. and et. al., 2015. The application of stable isotope ratio analysis to determine the
geographical origin of wheat.Food chemistry.174. pp.197-201.
Dehnavi and et. al., 2015. A new hybrid model using step-wise weight assessment ratio
analysis (SWARA) technique and adaptive neuro-fuzzy inference system (ANFIS) for
regional landslide hazard assessment in Iran.Catena.135. pp.122-148.
Trivedi and et. al., 2016. Gas chromatography-mass spectrometry based isotopic abundance
ratio analysis of biofield energy treated methyl-2-napthylether (Nerolin).American Journal of
Physical Chemistry.4(5). pp.80-86.
Petruzzo and et. al., 2015. Outcomes after bilateral hand allotransplantation: a risk/benefit
ratio analysis.Annals of surgery.261(1). pp.213-220.
Morano, P. and Tajani, F., 2017. The break-even analysis applied to urban renewal
investments: a model to evaluate the share of social housing financially sustainable for
private investors.Habitat International.59. pp.10-20.
St-Hilaire and et. al., 2016. Break-even analysis for a green crab fishery in PEI,
Canada.Management of Biological Invasions.7(3). pp.297-303.
Lee, M. and et. al., 2017. A break-even analysis and impact analysis of residential solar
photovoltaic systems considering state solar incentives.Technological and Economic
Development of Economy, pp.1-25.
Ekelund, U.and et. al., 2016. Does physical activity attenuate, or even eliminate, the
detrimental association of sitting time with mortality? A harmonised meta-analysis of data
from more than 1 million men and women.The Lancet.388(10051). pp.1302-1310.
Bohari, A. M., Hin, C. W. and Fuad, N., 2017. The competitiveness of halal food industry in
Malaysia: A SWOT-ICT analysis.Geografia-Malaysian Journal of Society and Space.9(1).
Niederwieser, D. and et. al., 2016. Hematopoietic stem cell transplantation activity
worldwide in 2012 and a SWOT analysis of the Worldwide Network for Blood and Marrow
Transplantation Group including the global survey.Bone marrow transplantation.51(6).
p.778.
Blockeel, C. and et. al., 2016. A fresh look at the freeze-all protocol: a SWOT
analysis.Human reproduction.31(3). pp.491-497.
Bull, J.W., and et. al., 2016. Strengths, Weaknesses, Opportunities and Threats: A SWOT
analysis of the ecosystem services framework.Ecosystem Services.17. pp.99-111.
Kaplan, A., 2017.The conduct of inquiry: Methodology for behavioural science. Routledge.
Weber, M., 2017.Methodology of social sciences. Routledge.
Bompa, T.O. and Buzzichelli, C., 2018.Periodization-: theory and methodology of training.
Human Kinetics.
Dehnavi and et. al., 2015. A new hybrid model using step-wise weight assessment ratio
analysis (SWARA) technique and adaptive neuro-fuzzy inference system (ANFIS) for
regional landslide hazard assessment in Iran.Catena.135. pp.122-148.