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CONFIDENTIAL QUESTION 4 (20 MARKS] Pricing strategy refers to method companies use to price their products or services. Almost all companies, large or small, base
CONFIDENTIAL QUESTION 4 (20 MARKS] Pricing strategy refers to method companies use to price their products or services. Almost all companies, large or small, base the price of their products and services on production, labor and advertising expenses and then add on a certain percentage so they can make a profit. A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, amongst others. It is targeted at the defined customers and against competitors. REQUIRED: a) Provide FOUR (4) type of pricing strategies that widely used by companies. (4 marks) b) Discuss any TWO (2) of the pricing strategies listed in (a). (4 marks) Gento Lid operates as a retailing division in a company. The investment centre's financial information for the past two years is presented as follows: Year 2021 Year 2020 RM RM Fixed assets (net book value) 413,600 330,350 Current assets 121,430 111,040 Current liabilities 89,010 104,730 Stock of finished goods 62,120 89,300 Trade debtors 76,500 77,290 Trade creditors 34,120 44,600 Sales 616,300 499,840 Purchases 340,100 231,550 Cost of sales 234,590 189,200 Net profit 282,980 140,930 Assume that 1 year = 365 daysCONFIDENTIAL REQUIRED: a) Calculate the following ratios for both Year 2021 and Year 2020: i) Quick (Acid Test) (2 marks) ii) Receivables collection period (rounded to whole days) (2 marks) iii) Payables settlement period (rounded to whole days) (2 marks) iv) Inventory holding period (number of times) (2 marks) v) Net Profit Margin (%) (2 marks) vi) Net asset turnover (number of times) (2 marks)
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