Edtech Quarterly Margins and One-Time Expense
A small edtech firm reports the following for the last four quarters, in ₹ lakh. Q1: revenue 48, expenses 36. Q2: revenue 60, expenses 45. Q3: revenue 54, expenses 43.2. Q4: revenue 72, expenses 50.4. The founder wants a one-page note for an investor meeting. She asks you to compare profit margins, identify the quarter with the largest percentage-point improvement in margin over the previous quarter, and test a claim that “Q4 revenue grew 20% over Q3 while expenses grew only 10%.” She also warns that a one-time ₹3 lakh marketing expense was included in Q4 expenses; without it, Q4 expenses would have been ₹47.4 lakh. The investor deck must use rounded margins to one decimal place and must not compare quarters with different accounting treatments without flagging it.
1. Compute profit margin for each quarter to one decimal place, including the adjusted Q4 figure.
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Profit = revenue − expenses. Q1: 48 − 36 = 12; margin = 12/48 = 25.0%. Q2: 60 − 45 = 15; margin = 15/60 = 25.0%. Q3: 54 − 43.2 = 10.8; margin = 10.8/54 = 20.0%. Q4 reported: 72 − 50.4 = 21.6; margin = 21.6/72 = 30.0%. Q4 adjusted, excluding the one-time ₹3 lakh marketing expense: expenses = 47.4; profit = 72 − 47.4 = 24.6; margin = 24.6/72 = 34.166…%, which rounds to 34.2%. The deck should show both 30.0% reported and 34.2% adjusted, with a note on the accounting difference.
2. Which quarter had the largest percentage-point improvement in margin over the previous quarter?
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Using reported margins: Q1 to Q2 is 25.0% − 25.0% = 0.0 percentage points. Q2 to Q3 is 20.0% − 25.0% = −5.0 points. Q3 to Q4 is 30.0% − 20.0% = +10.0 points. So Q4 has the largest improvement on reported figures. Using adjusted Q4 margin, Q3 to Q4 is 34.2% − 20.0% = +14.2 points, which is even larger. The deck must state which basis is used; otherwise the comparison mixes accounting treatments.
3. Test the founder’s claim that Q4 revenue grew 20% over Q3 while expenses grew only 10%.
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Revenue growth: (72 − 54)/54 = 18/54 = 33.3%, not 20%. Reported expense growth: (50.4 − 43.2)/43.2 = 7.2/43.2 = 16.7%, not 10%. Adjusted expense growth, excluding the one-time ₹3 lakh marketing expense: (47.4 − 43.2)/43.2 = 4.2/43.2 = 9.72%, which is approximately 10%. So the 10% expense figure fits only the adjusted basis, while the 20% revenue figure is wrong on either basis; actual revenue growth is 33.3%. The claim should be corrected and the one-time expense flagged.