Birla Institute of Technology & Science Pilani

Distance Learning Programme Division M.S (Consultancy Management) First Semester 2011-2012 Financial and Accounts Assignment-2

Q1

Study and analyze Balance Sheet and Profit and Loss Accounts of your Company or any other Company of your choice and compare the performance Of the selected company for the year 2010-2011with that of 2009-2010 and Advice if Company could take any Steps to improve its profitability. Please Attach a copy Of the Profit & Loss Account as also that of Balance sheet with Your answer.

Q-2

Select the relevant figures from the Balance Sheet and Profit and Loss Account Of the selected Company to determine the fixed costs, variable costs, Contribution and Break Even Point. You can make reasonable assumptions About fixed or Variable costs incase sufficient in formation is not available in These statements. The assumptions made in answering this question should be Clearly spelt out

Q-3

Three Projects have been given to you for evaluation. After tax cash flows for These Projects are given below. Period 0 1 2 3 4 Project A (10000) 2800 3000 4000 4000 Project B (18000) 6500 6500 6500 6500 Project C (30000) 6000 10000 12000 16000

Evaluate these Projects on the basis of following techniques and advice which Project should be accepted presuming discounting rate at 12% Payback Period Average rate of return Net Present value Benefit Cost Ratio

Internal Rate of return Which Project should be accepted and Why? PV Factors are as follows Year 1 2 3 4 Q-4 M/S ABC has the following Capital structure: Rs. In Millions Equity Capital (2.5 million Shares of Rs 10 at par) 13% Preference shares (50000 of Rs100 at par) Reserves and Surplus 14%Debentures (150,000 of Rs 100 at par) Book Value Market Value 25 45 5 4.5 15 ? 15 14.50 60 64.00 PV factor at 12% 0.893 0.797 0.712 0.636

The expected dividend per share is Rs.1.40 The dividend per share is expected to grow at the rate of 8 % for ever Preference shares are redeemable after 5 Years, whereas debentures are redeemable After 6 years. The tax rate is 50 percent. Calculate the weighted average cost of Capital by book weights as well as by market weights Q-5 On the basis of the following information, determine the magnitude of working Capital required by ABC engaged in the manufacture of Tricycles a) The Performa cost shows that the various elements of cost bear the Under mentioned relationship to the Selling Price Materials, Parts and Components 40% Labor 30% Overheads 10% b) Production in 2011 is estimated to be 60,000 Tricycles c) Raw Materials, Parts and Components are expected to remain In store for an average period of one month before issue to production d) Finished goods are likely to remain in the warehouse for two months on an average before being sold and delivered to the customers e) Each unit of production will be in process for half a month on an average

f) Half of the sales are likely to be on credit. The debtors to be allowed two months credit from the date of Sales g) Credit period allowed by the Suppliers of Raw Materials, Parts and Components is one month h) The lag of payments to labor is one month. i) 50% of the overheads consists of salaries of Non Production Staff j) Selling price will be Rs.2000 per tricycle k) Allow 20% to your computed figure for buffer cash and Contingencies l) Assume that Sales and Production follow a consistent pattern Q-6 XYZ have obtained the following data concerning the average working capital Cycle for other Companies in the same industry: Raw Material Stock Turnover Credit Received Work in Progress Turnover Finished Goods Turnover Debtors Collection Period 20 days 40 days 15 days 40 days 60 days -----------175 days

Using the following data, calculate the current working Capital Cycle of XYZ and briefly comment upon it vis- a- vis other companies Rs. In000 Sales Cost of Production Purchase Raw Material Stock Work in Progress Finished Goods Stock Creditors Debtors 3000 2100 600 Opening Balance Closing Balance Opening Balance Closing Balance Opening Balance Closing Balance Opening Balance Closing Balance Opening Balance Closing Balance 70 90 90 80 200 160 80 100 400 300

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