Business Strategy Game

In: Business and Management

Submitted By Denisedoolhof
Words 1258
Pages 6
Financial Analysis AMBITIOUS

Robert Blaauw 0801654
Denise Doolhof 0785802
Remco Taal 0801584
Class CEV3
Strategic Business game
Commissioned by Mr Wijnia
Study Commercial Economics
Institute for commercial management
Rotterdam University
Rotterdam, April 1st 2010
EARNINGS PER SHARE

At the beginning of the game in year 10 Ambitious had earnings per share (EPS) of $ 2.50. In year 11 the EPS drastically dropped to $ 0.72. This was because the net profit that year was only $ 7,202. Since 10.000 shares were emitted, the price per share was $ 0.72. It appeared that supply was higher than demand. This was reflected in our price against that of our competitors. Ambitious was left with unsold stock and that was not good for the net profit. In year 12, the share subsequently rose to $ 3.94. Compared with the previous year, the net profit rose from $ 7,202 to $ 39,400. This was partly because Ambitious had limited stocks over year 11 and consequently sold more shoes. In year 13, for the first time, the company started selling in the private label market and shares increased to $ 4.65. Also on the Wholesale and Internet market everything sold and Ambition even sold a part of their old stock. The EPS could have been higher, but the company invested a small part in additional capacity. In year 14 the growth of earnings per share rose to $ 5.40.
In this year Ambitious has celebrity appeal for the first time and has invested in a new plant in Latin-America. The expectation was that the earnings per share would decrease in year 15. This has happened. The share has dropped to $ 4.87 because Ambitious made use of the extra capacity and wanted to sell as much as possible and did not cut back on marketing expenses. Prices are lower this year because Ambitious wanted to sell all its stock.

RETURN ON EQUITY

Return on equity (ROE) is…...

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